As filed with the Securities and Exchange Commission on September 2, 2025.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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NEPTUNE INSURANCE HOLDINGS INC.
(Exact name of registrant as specified in its charter)
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Delaware |
6411 |
33-4189588 |
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(State or other jurisdiction of incorporation or organization) |
(Primary standard industrial |
(I.R.S. employer |
400 6th Street S, Suite 2
St. Petersburg, Florida 33701
(727) 202-4815
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
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Trevor Burgess
Chief Executive Officer
Neptune Insurance Holdings Inc.
400 6th Street S, Suite 2
St. Petersburg, Florida 33701
(727) 202-4815
(Name, address, including zip code, and telephone number, including area code, of agent for service)
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Copies to:
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Michael J. Sullivan James D. Evans Mark Mushkin Albert Vanderlaan Orrick, Herrington & Sutcliffe LLP 405 Howard Street San Francisco, CA 94105 (415) 773-5700 |
Joseph A. Hall Pedro J. Bermeo Davis Polk & Wardwell LLP New York, NY 10017 United States (212) 450-4000 |
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act ☐
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. The selling stockholders may not sell these securities until our registration statement filed with the U.S. Securities and Exchange Commission is declared effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state or jurisdiction where the offer or sale is not permitted.
PROSPECTUS (Subject to Completion)
Issued , 2025
Shares

Neptune Insurance Holdings Inc.
CLASS A COMMON STOCK
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This is the initial public offering of shares of Class A common stock of Neptune Insurance Holdings Inc. and no public market currently exists for our shares.
The selling stockholders identified in this prospectus are offering shares of our Class A common stock. We will not be selling any shares in this offering and will not receive any of the proceeds from the sale of our Class A common stock being sold by the selling stockholders. We anticipate that the initial public offering price will be between $ and $ per share.
Upon completion of this offering, we will have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share. Holders of our Class A common stock and Class B common stock vote together as a single class on all matters, except as otherwise set forth in this prospectus or as required by applicable law. Each outstanding share of Class B common stock is convertible into one share of Class A common stock and will convert automatically upon the occurrence of certain events. See “Description of Capital Stock — Class A Common Stock and Class B Common Stock — Conversion.” Outstanding shares of Class B common stock will represent approximately % of the voting power of our outstanding capital stock immediately following this offering (or approximately % of the total combined voting power of our outstanding common stock if the underwriters exercise in full their option to purchase additional shares of our Class A common stock). Upon completion of this offering, our Chief Executive Officer and Chairman of our Board of Directors, Trevor Burgess, will beneficially own approximately % of the voting power of our outstanding voting securities (or approximately % of the voting power of our outstanding voting securities if the underwriters exercise in full their option to purchase additional shares of our Class A common stock) and we will be a “controlled company” within the meaning of the listing rules of the NYSE. As a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements, and you will not have the same protections as those afforded to stockholders of companies that are subject to such governance requirements. See “Management — Controlled Company Exemption” and “Risk Factors — Risks Relating to our Organizational Structure — We are a ‘controlled company’ within the meaning of the NYSE rules and, as a result, qualify for, and will rely on, exemptions from certain corporate governance requirements that provide protection to the stockholders of companies that are subject to such corporate governance requirements.” We are an “emerging growth company” as defined under the federal securities laws. See “Prospectus Summary — Implications of Being an Emerging Growth Company.”
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We are applying to list our Class A common stock on the NYSE under the symbol “NP.” Investing in our Class A common stock involves risks that are described in the “Risk Factors” section beginning on page 28 of this prospectus.
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PRICE $ A SHARE
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(1) See the section titled “Underwriting” for a description of the compensation payable to the underwriters.
The selling stockholders have granted the underwriters the right to purchase up to an additional shares of Class A common stock from the selling stockholders to cover over-allotments, if any.
At our request, the underwriters have reserved % of the shares of Class A common stock to be offered by the selling stockholders under this prospectus for sale, at the initial public offering price, to directors, officers, employees, business associates and related persons of Neptune. See the section titled “Underwriting — Directed Share Program” for additional information.
Neither the Securities and Exchange Commission nor any other regulatory body have approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of Class A common stock against payment in New York, New York on or about , 2025.
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Joint Book-Runners
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Morgan Stanley |
J.P. Morgan |
BofA Securities |
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BMO Capital Markets |
Goldman Sachs & Co. LLC |
Evercore ISI |
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Deutsche Bank Securities |
Keefe, Bruyette & Woods A Stifel Company |
Mizuho |
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Piper Sandler |
Raymond James |
TD Securities |
Co-Manager
Dowling & Partners Securities LLC
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_______________________
Unless the context requires otherwise, the words “we,” “us,” “our,” the “Company,” and “Neptune” refer to Neptune Insurance Holdings Inc. and its subsidiaries, taken as a whole, “Neptune Holdings” refers only to Neptune Insurance Holdings Inc., and “Neptune Flood” refers only to Neptune Flood Incorporated. For purposes of this prospectus, unless the context otherwise requires, the term “stockholders” shall refer to the holders of our Class A common stock and Class B common stock.
We have not, and the selling stockholders and the underwriters have not, authorized anyone to provide you with additional information or information that is different from or to make any representations other than those contained in this prospectus or in any free-writing prospectus prepared by or on behalf of us to which we may have referred you in connection with this offering. We, the selling stockholders and the underwriters, take no responsibility for, and can provide no assurances as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations, and future growth prospects may have changed since that date.
Through and including , 2025 (the 25th day after the date of this prospectus), U.S. federal securities laws may require all dealers that effect transactions in our common stock, whether or not participating in this offering, to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to any unsold allotments or subscriptions.
For investors outside the United States, neither we, the selling stockholders nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any such free-writing prospectus outside the United States.
i
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
“Neptune,” “Neptune Flood,” “Triton,” the Neptune stylized design logo, and our other registered or common law trademarks, trade names, and service marks appearing in this prospectus are our property. Solely for convenience, our trademarks, trade names, and service marks referred to in this prospectus appear without the ®, ™ and ℠ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and trade names. This prospectus contains additional trademarks, trade names, and service marks of other companies that are the property of their respective owners.
ii
NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS
This prospectus contains certain financial measures, including Adjusted EBITDA and Adjusted EBITDA margin, that are not required by, or prepared in accordance with, U.S. generally accepted accounting principles. We refer to these measures as “non-GAAP” financial measures. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for our definitions of these non-GAAP measures, information about how and why we use these non-GAAP measures and a reconciliation of each of these non-GAAP measures to its most directly comparable financial measure calculated in accordance with GAAP.
This prospectus also includes certain key performance indicators, including revenue per employee, Adjusted EBITDA per employee, premium in force, policies in force, policy retention rate, premium retention rate, organic revenue, organic revenue growth, and written premium, that Neptune’s management regularly reviews in managing its business to evaluate its business and operations, guide decision-making, measure progress and understand growth and retention, and ultimately help drive profitability. Organic revenue and organic revenue growth are common non-GAAP financial measures reported by others in the insurance industry. We use “organic revenue” and “organic revenue growth” in this prospectus to facilitate investors’ understanding of our operating performance and comparison with our peers. However, as of the date of this prospectus and for the relevant periods presented herein, we have not completed any relevant acquisitions or divestitures, therefore our organic revenue and organic revenue growth reflect our total revenue and total revenue growth, respectively, as determined in accordance with GAAP. For definitions of these key performance indicators, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Performance Indicators.”
iii
This prospectus contains estimates and information concerning our industry, our business, and the market for our products and solutions, including our general expectations of our market position, market growth forecasts, our market opportunity, and size of the markets in which we participate, that are based on industry publications, surveys, and reports that have been prepared by independent third parties. This information involves assumptions and limitations, and you are cautioned not to give undue weight to these estimates. Although we have not independently verified the accuracy or completeness of the data contained in these industry publications, surveys, and reports, we believe the publications, surveys, and reports are generally reliable, although such information is inherently subject to uncertainties and imprecision. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications and reports.
The source of certain statistical data, estimates, and forecasts contained in this prospectus are the following industry publications or reports that have been prepared by independent third parties:
• Federal Emergency Management Agency, “FEMA Exercises Borrowing Authority for National Flood Insurance Program,” February 10, 2025 (accessed on May 25, 2025);
• National Association of Insurance Commissioners, Tableau dashboard (accessed on May 25, 2025);
• Congressional Budget Office, “Federal Spending for Flood Adaptations,” September 30, 2024 (accessed on May 25, 2025);
• First Street ®, “First Street Foundation releases new data disclosing the flood risk of every home in the contiguous U.S.,” June 29, 2020 (accessed on May 25, 2025);
• Federal Emergency Management Agency, OpenFEMA Dataset: FIMA NFIP Redacted Policies — v2 (accessed on May 25, 2025);
• U.S. Government Accountability Office, “Flood Insurance: FEMA’s New Rate-Setting Methodology Improves Actuarial Soundness but Highlights Need for Broader Program Reform,” July 31, 2023 (accessed on May 25, 2025);
• Federal Emergency Management Agency, “National Flood Insurance Program Continues to Pay Interest on its Treasury Debt,” October 24, 2023 (accessed on May 25, 2025);
• Federal Emergency Management Agency, Risk Rating 2.0 (accessed on May 25, 2025);
• California Department of Insurance, “Earthquake Premium and Policy Count Data Call, Summary of 2023 Residential Totals” (accessed on May 25, 2025);
• United States Census Bureau, QuickFacts: California (accessed on May 25, 2025); and
• United States Government Accountability Office, “Better Planning and Analysis Needed to Address Current and Future Flood Hazards,” October 2021 (accessed on May 25, 2025).
iv
“2019 Stock Plan” means the stock plan adopted by Neptune Flood on April 23, 2019, and approved by the stockholders of Neptune Flood on April 24, 2019.
“2024 Credit Agreement” means that certain Credit Agreement, dated as of June 13, 2024, by and among Neptune Flood, the other loan parties party thereto from time to time, the lenders party thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent.
“2025 Amended and Restated Credit Agreement” means the Amended and Restated Credit Agreement, dated as of April 10, 2025, by and among Neptune Holdings, Neptune Flood, the other loan parties party thereto from time to time, the lenders party thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent.
“2025 Plan” means our 2025 Equity Incentive Plan.
“AGI” means artificial general intelligence, which refers to the hypothetical ability of an intelligent computer to understand or learn any intellectual task that a human being can. AGI is a theoretical stage in AI development that has likely not yet been achieved.
“AI” means artificial intelligence. As discussed herein, the term “AI” refers to the broad discipline concerned with developing systems capable of performing tasks that traditionally require human intelligence (including, but not limited to, natural language understanding, pattern recognition, complex problem-solving, and decision-making) while “machine learning” refers to a subset of AI that concentrates on enabling computers to learn from data and enhance their performance over time without explicit programming for each specific task. In other words, AI represents the overarching field dedicated to the development of intelligent systems, while machine learning constitutes one of the primary methodologies for realizing this objective. The Company’s Triton and Poseidon platforms each utilize “machine learning” models to conduct predictive analysis on prospective underwriting results and generate pricing and coverage determinations. As we continue to advance and refine our Triton and Poseidon systems, we intend to continue to leverage both AI and machine learning. See also “ML”.
“Amended and Restated 2019 Stock Plan” means the 2019 Stock Plan, as amended and restated on each of May 8, 2023, and November 10, 2023.
“API” means application programming interface.
“ASC” means accounting standard codification.
“Biggert-Waters Act” means the Biggert-Waters Flood Insurance Reform Act of 2012.
“Bonus Plan” means our Incentive Bonus Plan, which was adopted by our board of directors on , 2025.
“Bregal Sagemount” means Bregal Sagemount Management, L.P.
“BSIV” means BSIV Hold 102, LP.
“CAGR” means compound annual growth rate.
“capacity provider” means an insurance carrier or reinsurance company that partners with a managing general agent to underwrite, manage, and take insurance risk related to insurance policies.
“CCPA” means the California Consumer Privacy Act, as amended by the California Privacy Rights Act.
“Charles River Data” means Charles River Data LLC.
“Class B Equity Exchange Agreement” means the equity exchange right agreement to be entered into between the Company and Trevor Burgess, our Chief Executive Officer and Chairman of our board of directors, which gives Mr. Burgess a right (but not an obligation) to require us to exchange any shares of Class A common stock received by Mr. Burgess upon the exercise, vesting, and/or settlement of certain equity awards held by Mr. Burgess for an equivalent number of shares of Class B common stock.
v
“Class B Exchange Agreement” means the exchange agreement to be entered into among the Company, Mr. Burgess and entities affiliated with Mr. Burgess, pursuant to which, upon the Effective Time, all of the outstanding shares of our Class A common stock beneficially owned by Mr. Burgess as of the Effective Time will be exchanged for an equivalent number of newly issued shares of our Class B common stock.
“Class B Stock Exchange” means the exchange of all of the outstanding shares of Class A common stock beneficially owned by Mr. Burgess as of the Effective Time for an equivalent number of newly issued shares of our Class B common stock in accordance with the Class B Exchange Agreement.
“Code” refers to the Internal Revenue Code of 1986, as amended.
“Congress” means the United States Congress.
“DGCL” means the Delaware General Corporation Law.
“Dodd-Frank Act” means the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“E&S” means excess and surplus.
“Effective Time” means the time of effectiveness of the filing of our amended and restated certificate of incorporation, to be in effect upon the consummation of this offering, with the Secretary of State of the State of Delaware.
“EGC” means an emerging growth company, as defined in the JOBS Act.
“ESPP” means our 2025 Employee Stock Purchase Plan.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“FASB” means the Financial Accounting Standards Board.
“FDIC” means the Federal Deposit Insurance Corporation.
“FDPA” means the Flood Disaster Protection Act of 1973.
“FEMA” means the Federal Emergency Management Agency.
“FINRA” means the Financial Industry Regulatory Authority.
“fiscal year” means the fiscal year ended December 31, and references throughout this prospectus to a given fiscal year are to the twelve months ended on that date.
“FTC” means the United States Federal Trade Commission.
“FTV Capital” means FTV Management Company, L.P. and/or its affiliates (including its investment vehicles).
“GAAP” means U.S. generally accepted accounting principles.
“GLBA” means the Gramm-Leach-Bliley Act.
“insurance carrier” means a company that issues, underwrites, manages, and takes economic risk related to insurance policies.
“insurance program” means a structured arrangement with one or more insurance carriers designed to offer specific types of insurance coverage.
“IRS” means the United States Internal Revenue Service.
“JOBS Act” means the Jumpstart Our Business Startups Act of 2012.
“Jumpstart” means Jumpstart Insurance Solutions.
“KPI” means a key performance indicator.
“MGA” means a managing general agent.
vi
“ML” means machine learning, which is a subset of AI that concentrates on enabling computers to learn from data and enhance their performance over time without explicit programming for each specific task. Machine learning algorithms employ statistical models and computational techniques to analyze data, discern patterns, and generate predictions or decisions. The principal objective of machine learning is to construct systems that can autonomously improve through experience, thereby facilitating accurate predictions or decisions when presented with new data. The Company’s Triton and Poseidon platforms each utilize “machine learning” models to conduct predictive analysis on prospective underwriting results and generate pricing and coverage determinations. See also “AI”.
“NAIC” means the National Association of Insurance Commissioners.
“NFIP” means the National Flood Insurance Program.
“NYSE” means the New York Stock Exchange.
“policyholder” means the individual owner or named insured listed on an issued policy.
“Poseidon” means Neptune’s proprietary policy management platform.
“Pre-IPO 2025 Plan” means the Amended and Restated 2019 Stock Plan, as assumed by Neptune Holdings and amended and restated as of April 10, 2025.
“Pre-IPO Stockholders Agreement” means the amended and restated stockholders agreement, by and among Neptune Flood and certain of its stockholders party thereto, dated as of May 10, 2023, as amended.
“R&D” means research and development.
“reinsurance company” or “reinsurer” means a company that provides coverage to an insurance company through a reinsurance agreement. The reinsurer agrees to cover certain losses incurred by the insurer in exchange for reinsurance premiums, while the insurer continues to issue policies to policyholders.
“SEC” means the United States Securities and Exchange Commission.
“SFHA” means Special Flood Hazard Area, as designated by FEMA.
“TPAs” means third-party administrators.
“U.S. Treasury” means the United States Department of the Treasury.
“Triton” means Neptune’s proprietary underwriting engine.
“Voting Threshold Date” means the first date falling after 11:59 p.m. (Eastern Time) on the date on which the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our then-outstanding Class A common stock and Class B common stock entitled to vote generally in the election of directors.
“whole board of directors” means the total number of authorized directors on the board of directors of the Company, whether or not there exist any vacancies in previously authorized directorships.
“written loss ratio” means a ratio, expressed as a percentage, of, (i) for any given period of time, (1) the losses actually incurred (or expected to be incurred) for observed events during that period on all policies written during that period, to (2) the aggregate amount of premiums written on policies that became effective during that period or, (ii) for any given catastrophic event (1) the losses incurred (or expected to be incurred) in connection with that event, to (2) the aggregate amount of premiums written on policies in force as of the event date.
“written premium” means the total premium we placed with insurance programs during a reporting period, less “return premiums” refunded to policyholders due to cancellations, endorsement of policies, or otherwise.
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This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in our common stock. You should carefully consider, among other things, our audited consolidated financial statements and unaudited interim condensed consolidated financial statements and related notes and the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Some of the statements in this prospectus are forward-looking statements. See “Special Note Regarding Forward-Looking Statements.”
Our Mission
Our mission is to create a smarter, more resilient insurance platform powered by AI, data science, and technology, enabling insurers to deploy capacity with confidence and delivering instant access to coverage for policyholders and agents.
Company Overview
Neptune is a leading, high-growth, highly profitable, data-driven managing general agent that is revolutionizing the way homeowners and businesses protect against the growing risks of flooding. We offer a range of easy-to-purchase residential and commercial insurance products — including primary flood insurance, excess flood insurance, and parametric earthquake insurance — distributed through a nationwide network of agencies. Neptune does not take any balance sheet insurance risk or have claims handling responsibility relating to the policies we sell. We underwrite and administer the issuance of insurance policies on behalf of a diverse panel of insurance and reinsurance companies, whom we refer to as capacity providers, that manage both this risk and the associated claims handling. From day one, we have built our business on a foundation of advanced data science and AI, leveraging proprietary ML algorithms, which has led to superior underwriting results, outsized growth, recurring revenue, and robust margins, including delivering a lifetime written loss ratio of just 24.7% to our capacity providers from our inception through June 30, 2025. In addition, for the year ended December 31, 2024, we achieved 40.6% organic revenue growth, 29.0% net income margin, and 60.4% Adjusted EBITDA margin and for the six months ended June 30, 2025, we achieved 32.3% organic revenue growth, 30.2% net income margin and 59.3% Adjusted EBITDA margin.
Neptune was founded to solve the inefficiencies and poor product-market fit we saw in the traditional flood insurance market, which we believe represents a significant and underpenetrated opportunity. According to the American Housing Survey and the Energy Information Administration, there are over 100 million residential and commercial buildings in the U.S., many of which face flood risk, yet only a small fraction are covered by flood insurance. Today, the largest provider of flood insurance in the United States — and the holder of the majority market share — is the National Flood Insurance Program, a U.S. government-run entity and our main competitor. We believe purchasing insurance from the NFIP is relatively burdensome and time-consuming for policyholders and agents, and that its limited product offerings often fail to meet policyholder needs. In addition, the NFIP has historically received substantial government subsidies that have enabled it to limit premiums to rates that have been challenging for private flood insurance providers to compete with, a dynamic that is shifting with the NFIP’s recent introduction of its “Risk Rating 2.0” pricing model, discussed in more detail below. Private market participation has also historically been constrained by regulatory barriers, a lack of innovation expertise, and limited access to sufficient claims and performance data to optimize pricing and underwriting decisions. We believe that Neptune’s position as the first scaled private flood platform, including the years of claims and performance data that we have generated through our operations, provides a key early-mover advantage in addressing all of these challenges and disrupting the industry.
With Neptune’s use of AI, our technology platform, and our data-driven approach, we believe we have delivered the promise of disrupting the insurance industry. Not only have our innovation efforts delivered vastly improved policyholder and agent experiences through the ease-of-use of our proprietary underwriting (Triton) and policy management (Poseidon) platforms, we have also demonstrated superior risk selection and underwriting through our top-tier financial performance and sustained growth. Utilizing AI and ML algorithms with no human underwriters, Neptune has redefined how flood insurance can be underwritten, creating value for policyholders and agents while producing consistent, long-term positive returns for our insurance and reinsurance partners. Further, as the NFIP moves away from its historical subsidized pricing model, we believe our Triton platform, backed by
1
years of proprietary data derived from our business operations, positions us to optimize pricing determinations and compete for existing NFIP policyholders in a way that would be challenging for a new entrant to replicate until it is able to generate, or otherwise gain access to, comparable claims and performance data.
Technology and data science are the foundation of Neptune’s business model, driving our three core pillars:
• Our Underwriting Engine: Our entirely digital underwriting engine, Triton, uses advanced technology, including proprietary AI and ML models, without any human underwriters, to assess risk with speed and precision. Powered by predictive analytics and loss estimation, Triton has enabled Neptune’s policies to consistently outperform the NFIP in written loss ratio despite 21 landfall hurricanes — including four of the ten largest flood events in U.S. history — taking place since Neptune’s founding.
• Our Risk Relationships: Our risk relationships are built on performance and trust, and we currently have 33 capacity providers, including 26 reinsurance providers, backing 7 distinct insurance programs to help minimize concentration risk while delivering consistent returns. In turn, the accuracy of our risk assessment and our precision pricing have delivered hundreds of millions of dollars of underwriting profit for our capacity providers since inception, leading to high rates of capacity renewals and increases in committed capacity.
• Our Distribution: Our distribution strategy is primarily focused on deep partnerships across agencies with tens of thousands of agents who benefit from the ease-of-use of our automated underwriting platform, seamless API integrations, instantaneous bindable quotes and proprietary Agent Portal. We believe this is a meaningful departure from industry norms and makes our approach to distribution attractive to the agents we work with.
The three pillars above interlock, creating a powerful and reinforcing loop. Unlike traditional insurance underwriting that historically relied on humans, static models, and infrequent adjustments, we leverage an iterative approach that allows us to consistently and rapidly integrate new data and models into our underwriting engine, thereby refining our processes and adapting to evolving market and environmental conditions. As our models constantly evolve and improve, they are able to deliver superior results that minimize losses for our capacity providers, which in turn grant us additional underwriting capacity. With more capacity available, we can offer coverages our policyholders want, enhancing the ability for our agency partners to easily sell policies while expanding our distribution and reach. The resulting increase in quoted and bound policies provides us with access to more data, enhancing the predictive capabilities of our underlying models.
We operate as an MGA, with a highly attractive, recurring, fee-based revenue model derived from two primary sources: commissions paid by capacity providers, and fees paid by policyholders. Commissions are calculated as a negotiated percentage of premium for each policy. As of June 30, 2025, our average commission rates have increased by more than 4% since 2018, as capacity providers continue to recognize our superior underwriting performance. Given our high retention rates to date, we believe that we have a high degree of visibility into our future revenue streams. For example, for the six-month period ended June 30, 2025, our eligible policy and premium retention rates at renewal were 85.8% and 98.9%, respectively.
As of December 31, 2018, the end of our first full year of operations, we had $4.4 million of premium in force with one insurance program. As of December 31, 2024, we have achieved remarkable growth. Since 2018, our premium in force has increased at a CAGR of 99% to $277.6 million as of December 31, 2024. For the year ended December 31, 2024, we generated $119.3 million in revenue, $34.6 million in net income, and $72.1 million in Adjusted EBITDA. This translates to $2.3 million in revenue per employee and $1.4 million in Adjusted EBITDA per employee, a 29.0% net income margin and a 60.4% Adjusted EBITDA margin. In addition, for the six months ended June 30, 2025, we generated $71.4 million in revenue, $21.6 million in net income, and $42.4 million in Adjusted EBITDA, which translates to a 30.2% net income margin and a 59.3% Adjusted EBITDA margin. For the twelve months ended June 30, 2025, we generated $136.7 million in revenue, $45.3 million in net income, and $82.4 million in Adjusted EBITDA, which translates to $2.5 million in revenue per employee and $1.5 million in Adjusted EBITDA per employee, a 33.1% net income margin and a 60.3% Adjusted EBITDA margin. Our Adjusted EBITDA margin has consistently exceeded 50% over the past four years, thanks to the operational leverage inherent in our technology-first business model. Notably, our organic revenue for the year ended December 31, 2024, increased by $34.4 million, or 40.6%, year-over-year, primarily due to the increased number of renewals in our portfolio and an active 2024 hurricane season. For the year ended December 31, 2024, we also generated net cash provided by operating activities of $49.9 million. As of June 30, 2025, we had negative book value per share due to
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our history of paying dividends to our stockholders, which have been financed through a combination of debt and redeemable, convertible preferred stock financings and cash flows generated from our business operations. Since inception, we have made dividend payments to our stockholders totaling approximately $605 million.

Our Unique, Data-Driven Approach
Data science is our guiding principle, driving innovation that we believe enables us to deliver fast and accurate insurance solutions that are policyholder-centric, more efficient for our agents, and that deliver consistent underwriting profits for our capacity providers.
Our internally-developed and proprietary technology platforms include Triton, our underwriting engine, and Poseidon, our policy management system, which are closely integrated and easy to use. The key features of our data science approach that underpin our platforms include:
• Precise Pricing Models: Our models leverage advanced ML and data analysis to evaluate flood risks at the individual property level. By incorporating real-time data, including from geospatial mapping as well as predictive analytics, we deliver competitive, risk-adjusted pricing that reflects the unique risk of each property. The precision of this data-driven approach empowers us to offer instant underwriting decisions and bindable quotes at scale, with a level of intention and sophistication in our risk selection that we believe sets us apart in the industry and that results in a high degree of predictability in our business outcomes.
• Automation and Efficiency: We operate with the mantra of “automating everything.” We constantly focus on reducing manual processes across our operations and enabling our team to concentrate on more complex and high-value tasks.
• Scalability: Our emphasis on automation in our technology infrastructure allows us to process tens of thousands of quotes daily, providing the scale necessary for rapid growth and market expansion without a proportional increase in headcount.
• Agility: Our platform has demonstrated a great degree of flexibility, seamlessly incorporating new perils and geographies over time in response to the evolving needs of policyholders and agency partners.
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• Ease of Use: Our platforms are designed with a focus on simplicity and accessibility. Agents and policyholders can obtain quotes, purchase policies, and manage policyholder coverage in just minutes through our streamlined online interface. In many cases, the creation of a Neptune quote is automatic and instantaneous for agents via our API, allowing seamless cross-sell opportunities alongside standard home and business insurance quotes. This ease of use and quote-to-issue process differentiates Neptune from traditional insurance providers and has been a key driver of our success.
Triton and Poseidon were built entirely in-house by our Neptune Engineering Group. These platforms are powered by ML models centered around our vast proprietary datasets, which are developed and maintained by the in-house Neptune Data Science Group and are generated from data collected through the operation of our business, including quote requests, the policies we have bound, and the losses incurred on the policies we have sold. Triton processes over 20,000 quotes on a typical day. As of June 30, 2025, Triton has provided approximately 29.7 million quotes, underwritten 11.9 million properties, and bound 1.1 million policies across the U.S. since inception, providing Neptune with what we believe is the largest flood insurance sales and claims database outside of the NFIP.
Our systems continually update and constantly learn and improve from the expansive datasets generated by our daily operations, helping us stay ahead of the curve in understanding flood risk. In June 2025, we released the 514th product version of our underwriting model, demonstrating our commitment to continued improvements.
From a risk selection perspective, we believe our focus on data science has allowed us to provide a more accurate estimate of likelihood of loss across our portfolio compared to the industry. This has allowed us to deliver superior written loss ratios for our capacity providers. Despite navigating some of the largest flood disasters in U.S. history, our Triton underwriting platform has delivered a lifetime written loss ratio of just 24.7% from our inception through June 30, 2025. For example, in 2024, Hurricane Helene devastated parts of Florida and North Carolina as the fourth most expensive flooding event in NFIP history. The written loss ratio on that storm for policies sold by Neptune was 18% while the NFIP announced a written loss ratio of between 163% and 188%. At the time of the storm, we had approximately 74,000 policies in force in the affected states of Florida, North Carolina, and Tennessee.
In 2024, we also implemented an ML-driven renewal optimization model, which has had a measurable impact on policy retention rates. This model enabled more precise identification of policyholders at risk of non-renewal and allowed for targeted engagement strategies, driving an increase in policy retention from 82.9% for the six months ended June 30, 2024, to 85.8% for the six months ended June 30, 2025.
Altogether, our data science capabilities underpin the stability of our earnings to date, driving a premium retention rate of our policies in a renewal term that has exceeded 97% for each of the last 4 years. As our business grows, this strong retention rate has resulted in a larger share of our portfolio consisting of tenured policyholders. As of June 30, 2025, 68.5% of our premium in force was associated with policies in a renewal term, and these policies accounted for 62.9% of our policies in force.

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Our Industry
Our Market Opportunity
We operate in the large and growing flood insurance market. According to FEMA, flooding is the most common and costly natural disaster in the U.S., causing damages that exceed $40 billion annually according to the Congressional Budget Office, and is expected to continue to grow with progressing climate change. Despite the growing risk, flood insurance penetration remains low.
In the U.S., there are more than 100 million residential and commercial buildings, and we believe more of these buildings are likely to be at risk of flooding than is currently identified by FEMA. According to First Street’s First National Flood Risk Assessment, in 2020 there were approximately 22 million buildings at risk of flooding and over 14 million buildings at risk of substantial flooding over the following 30 years. However, only approximately 9 million buildings are identified by FEMA as being within Special Flood Hazard Areas — regions with 1% or higher annual probability of flooding. Properties in SFHAs with federally backed mortgages are required by the FDPA and related regulations to have flood insurance. Yet FEMA has noted that flood maps that underlie the SFHA designations are outdated and require extensive updates, as they do not currently take into account key types of precipitation. This was highlighted during Hurricane Harvey (2017) when, despite lower flood insurance penetration rates than in SFHAs, 68% of reported claims in Harris County were outside SFHAs according to Harris County Flood Control District.
Outside SFHAs, we estimate that flood insurance uptake in general is inadequate, with only approximately 2% of properties being covered by flood insurance, representing vast underinsurance and what we believe is a significant and untapped addressable market for our products. Even in high-risk states such as Florida, Texas, and Louisiana, combined residential penetration is below 13% according to NFIP Residential Penetration Rates as of January 2, 2025. We believe this gap in flood insurance coverage, together with the limited designation of SFHAs, creates significant financial vulnerabilities for millions of American home and business owners and lenders and presents a substantial opportunity for innovative private-sector insurance solutions like Neptune.
NFIP Challenges and Developments
Historically, the flood insurance market offered limited options, as regulated lending institutions were required to accept only policies underwritten by the NFIP to satisfy mortgage requirements. In 2012, however, Congress passed the Biggert-Waters Act, mandating that lenders also accept private flood insurance policies if written on an NFIP-equivalent form. Despite this regulatory opening, to date, the NFIP has continued to dominate the market, as private insurers have lacked the expertise, innovation, and access to historical claims data necessary to profitably underwrite flood risk. In addition, the NFIP historically received substantial government subsidies that enabled it to limit premiums to rates that were challenging for private flood insurance providers to compete with, a dynamic that is shifting with the NFIP’s recent introduction of “Risk Rating 2.0,” discussed in more detail below.
Today, the NFIP insures approximately 3.7 million properties and collects approximately $4.1 billion in annual premiums, with an average annual premium of $1,100 per policy according to FEMA. We believe the NFIP falls short in meeting the evolving needs of homeowners and businesses. For decades, its policies have provided low coverage limits that often fail to address the true costs of rebuilding. Moreover, the process of purchasing NFIP coverage can be slow and cumbersome for both policyholders and agents, in contrast to the instantaneous and accessible Neptune quote-to-issue process.
Operational and financial challenges have also persisted throughout the NFIP’s history. We believe these issues stem from its subsidized and rudimentary pricing methodology, which has frequently failed to accurately reflect the underlying risk of policies. As a result, the NFIP has accumulated substantial financial losses, currently owing $22.525 billion to the U.S. Treasury, accruing approximately $2 million in daily interest according to FEMA and the Congressional Research Service.
In 2021, the NFIP launched Risk Rating 2.0, a new pricing methodology aimed at better aligning premiums with the risk profile of a given property. Under Risk Rating 2.0, most policyholders will experience annual rate increases of up to 18%, the maximum allowed under congressional caps, until their premiums reach full risk-based levels. The U.S. Government Accountability Office estimates that approximately $27 billion in additional subsidies will be required for the NFIP portfolio between 2022 and 2037 due to these price caps. While this subsidized pricing
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model historically allowed the NFIP to price policies at rates that limited our ability to compete for those policies, as subsidies phase out under Risk Rating 2.0, we expect the gap between NFIP rates and actual risk costs to narrow, positioning Neptune to offer more affordable coverage to approximately 50-60% of current NFIP policyholders, representing approximately 50-70% of the NFIP’s premium base.
We believe the NFIP’s legacy pricing model, cumbersome processes, and limited coverage have created significant market dislocation and inefficiencies, resulting in a compelling opportunity for private flood insurers like Neptune to capture market share.
Industry Tailwinds
We believe there are several additional structural shifts that will continue to drive opportunities in the flood insurance market broadly and for private providers such as Neptune, including:
• Increased Demand Driven by Growing Natural Disaster and Flood Damage: As climate change intensifies, areas with low perceived flood risk today (e.g., non-coastal regions) could face increased frequency and intensity of flooding due to additional rainfalls and storms. As climate change continues to intensify, associated with increasing severity of storms and resulting losses, we expect the demand for flood insurance to increase. Additionally, more areas with severe inland flooding could be designated as mandatory flood insurance zones for policyholders with federally-backed mortgages.
• Underlying Housing Market Backdrop: The housing market significantly influences property and flood insurance sales, as a substantial portion of policies are purchased during home acquisitions or refinancings. If housing market activity were to increase, a revitalized housing market would likely also stimulate growth in the property and flood insurance sector, presenting opportunities for insurers to expand their policyholder base and enhance market share. At the same time, with housing prices increasing above the rate of inflation, the NFIP coverage limit of $250,000 — which was first implemented in 1994 and has remained static since — grows more outdated each year, prompting policyholders to look to the private market for excess or replacement coverage. We believe that Neptune, with its advanced technology, policyholder and agent-first approach, coverage limit of over $7,000,000 for residential properties, and innovative products, can be at the forefront of capitalizing on this potential growth, were it to materialize, and closing the insurance gap.
Our Business Model
Our team’s energy is focused, every day, on advancing the three pillars of our business: underwriting, risk relationships, and distribution.

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Underwriting
Our automated underwriting engine, Triton, is at the core of everything we do. Our use of the latest ML technology, advanced data science, AI, and behavioral economics allows us to execute key underwriting tasks — including risk selection, accurate risk pricing, aggregation management, and carrier assignment — in less than two seconds. This combination of speed and precision provides robust scalability and enables us to process high volumes of quotes and policies efficiently while maintaining industry-leading performance. We have no human underwriters and 100% of our underwriting is performed instantaneously by our Triton engine.

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(1) We had approximately 27,021 policies in force in states with flood insurance claims related to Hurricane Ida.
(2) We had approximately 51,562 policies in force in states with flood insurance claims related to Hurricane Ian.
(3) We had approximately 102,426 policies in force in states with flood insurance claims related to Hurricane Helene.
(4) We had approximately 80,266 policies in force in states with flood insurance claims related to Hurricane Milton.
Our underwriting engine has delivered positive results, including a lifetime written loss ratio of just 24.7% from our inception through June 30, 2025. This performance has spanned some of the largest flooding disasters in U.S. history — including four of the ten largest flooding events in U.S. history, as measured by NFIP insured loss: Hurricane Ida (2021), Hurricane Ian (2022), Hurricane Helene (2024), and Hurricane Milton (2024). By contrast, from 2018 to 2024, the NFIP has delivered an 86% written loss ratio according to FEMA and the U.S. property and casualty industry in general has seen an average written loss ratio of 54% according to NAIC statutory data.
Our underwriting philosophy is generally built around three fundamental principles:
• Risk Selection: Our approach to risk selection is driven by data science and informed by what we believe is the most comprehensive claims dataset in the private flood insurance market, generated predominantly from our operations to date. With over a quarter billion dollars in paid claims across our portfolio since inception, and our extensive analysis of industry claims and performance data, we have developed deep insights into identifying and managing properties with the highest probability of flood losses.
We believe we can evaluate property-specific risks with exceptional accuracy. Our proprietary models identify the characteristics and factors most likely to contribute to large-scale losses, allowing us to focus on selecting risks that align with the risk tolerances of our capacity providers. This granular approach helps us avoid adverse selection and has allowed us to deliver consistent, positive underwriting results. It has also allowed us to provide quotes for 95% of all submissions, optimizing the identification of properties with the highest probability of flood losses.
Through ongoing analysis of claims data and continuous refinement of our underwriting models, we ensure that our risk selection process remains sophisticated and nimble. By focusing on selecting the right risks, we aim to deliver value to both our capacity providers and our policyholders while maintaining a sustainable and profitable portfolio.
• Pricing: Our pricing is a sophisticated, data-driven process that incorporates advanced ML and behavioral economics to ensure accuracy and market competitiveness. Rather than relying on static or simplistic pricing models, we use a proprietary technology-driven framework to evaluate the
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unique characteristics of each property and its risk profile. Our pricing methodology is informed by a combination of flood risk data, customer behavior, and market dynamics. Behavioral economics plays a crucial role in determining how customers perceive and value coverage, and incorporating customer behavioral factors into our methodology enables us to tailor pricing to increase adoption while maintaining underwriting integrity. By understanding not only the risk, but also the behavior of customers, we believe we can optimize premium structures to drive growth and retention.
Unlike traditional insurance underwriting, our pricing does not depend on manual adjustments or broad risk groupings. Instead, it is dynamically informed by hundreds of data points to assess factors such as property characteristics, geographic exposure, and historical loss data. This property-specific, data-first approach allows us to quickly offer fair and competitive pricing while aligning with the risk tolerance of our capacity providers and continuously improving the accuracy of our Triton underwriting system.
• Aggregation Management (Disaggregation): Our approach to aggregation management is a key differentiator that sets us apart from industry norms. Traditional underwriting and risk assessment methods often rely on generalized risk aggregation based on administrative boundaries, such as states or counties, which serve as crude proxies for exposure to catastrophic events. In contrast, we have developed a patented technology that enables us to manage maximum loss scenarios at the individual property level through an analysis that uses radial circles to assess policy concentration in any given area in real time. This advanced methodology, which we refer to as “disaggregation,” allows us to optimize risk exposure in real time and align each policy with the specific risk appetite of our capacity providers.
By moving beyond man-made legacy geographic boundaries, we can more effectively distribute exposure to minimize concentration risk while focusing on the actual drivers of loss, such as property-specific vulnerability to flood. This precision also allows us to confidently underwrite in high-cost insurance markets, including hurricane-prone areas, while continuously informing and refining our pricing models to remain both responsive and data-driven.
Our disaggregation framework also leverages real-time data to adjust exposure dynamically as policies are written. This sophisticated approach enables us to manage risk with precision, so we maintain our capacity providers’ confidence in our ability to deliver consistent, positive underwriting performance. Through our patented technology and innovative methodology, we not only provide accurate risk management for our capacity providers but also ensure long-term scalability and sustainability for our business.
Risk Relationships
Neptune does not take any balance sheet insurance risk or have claims handling responsibility relating to the policies we sell. We currently contract with 7 distinct insurance programs, which are supported by 26 reinsurance providers, all of whom collectively provide underwriting capacity for the policies we sell. We refer to this panel of global insurers and reinsurers as our “capacity providers,” who bear all of the balance sheet insurance risk associated with our underwriting. Although we do not directly contract with the reinsurance providers who support our insurance programs, we engage and cultivate relationships with them, and the superior written loss ratios and underwriting results we are able to deliver on the policies we sell incentivizes these reinsurance providers to provide underwriting capacity in support of our insurance programs.
Over the past 7 years, we have built and expanded a panel of 33 capacity providers, including some of the largest insurance and reinsurance companies in the world. The strength and reputation of our capacity providers underscores the market’s confidence in our ability to deliver consistent results and manage risk effectively. Our insurance carriers are high-quality international insurers with A.M. Best ratings of A- or higher and our 26 reinsurance providers, supporting 7 distinct insurance programs, diversify our risk across both program structures and ultimate risk takers. As of June 30, 2025, our largest capacity provider accounted for 18.8% of our dollar-one premium risk. In addition, all of our insurance programs are eligible to write policies in all 50 states and Washington D.C. This approach mitigates concentration risk on both a financial and geographic basis, provides stability for both our business and our capacity providers, and ensures our portfolios remain resilient with access to ample future capacity to meet our growth objectives.
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The relationships we have cultivated with our capacity providers are built on transparency, trust, and our unwavering commitment to delivering value. A key driver of our success is the availability of detailed data and insights, paired with our ability to deliver results with speed and efficiency. We provide real-time access to performance metrics, maintain an open and continuous dialogue with our capacity providers, and consistently exceed expectations with profitable underwriting results.
We have also delivered consistent and substantial premium growth for our capacity providers and our proven performance has been instrumental in driving partner confidence and growth and engagement with additional reinsurers who may wish to provide underwriting capacity for our insurance programs. Through the exceptional written loss ratios experienced by our capacity providers on policies sold by Neptune, driven by the dynamic, risk-adjusted pricing and coverage decisions made by our Triton platform, we have been able to deliver superior returns, even through some of the largest flooding events in U.S. history. As a result, we have delivered hundreds of millions of dollars of underwriting profits for our capacity providers since inception and have delivered underwriting profitability to every capacity provider in every contract year. These outcomes are a testament to our platform capabilities and our success has led to an increase in the average commission paid to us by our capacity providers of more than 4% between 2018 and June 30, 2025.
These results, combined with our ability to provide actionable insights, have attracted new capacity providers and strengthened relationships with existing ones. Our proven underwriting results have also generated meaningful goodwill with our existing capacity providers, allowing us to enhance and develop our product offerings efficiently to respond to agent and policyholder needs.
The following information showcases the expanding nature of our capacity relationships since inception.

Distribution
Our distribution strategy is built to maximize market reach and provide seamless access to our innovative flood insurance products with diversification across distribution partnerships. Leveraging a hybrid distribution model, we utilize strong agency partnerships across the insurance industry and complement those with direct-to-customer sales to drive efficiency, reach, and scale.
Agent and Broker Partnerships: The cornerstone of our distribution network is our deep relationships with insurance agents and brokers. Over 96% of our policy sales are driven by these partnerships, which as of June 30, 2025, include more than 19,000 unique agency codes that have bound a policy through Neptune and over 81,000 unique agency codes that have run a quote through our Triton platform.
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Since inception, we have been able to grow our distribution network tremendously and uninterruptedly. For example, as of June 30, 2025, 19,919 cumulative agency codes have bound a policy with Neptune, an increase of 23% from 16,238 as of June 30, 2024.

We believe that Neptune delivers significant value to agents through a combination of ease of use, a superior product-market fit, high availability — made possible by our quoting of 95% of all submissions — and our ability to deepen agents’ relationships with policyholders. Historically, agents have had to undergo NFIP training and engage in the cumbersome NFIP quoting process to sell flood insurance policies. With Neptune, agents can leverage our user-friendly Agent Portal to quickly enter customer data and receive instantaneous quotes, which they can relay in real-time, thereby democratizing the sale of flood insurance. To further enhance the agent experience, we have developed deep technology integrations with many of our agency partners through API links directly into their quoting systems, allowing them to quickly quote and bind flood policies alongside homeowner policies and provide comprehensive solutions for their customers. In addition, our Agent Portal provides our agents with up to date, data-driven insights about flood risk in the geographies where a quote is being sought, empowering our agents to drive further demand for our products at the time of each quote. Through these innovations, our platform enables agents to grow their business by enhancing the overall value of the policyholder relationship, while offering a product that seamlessly fits the needs of both agents and policyholders. This in turn drives increasing adoption and higher conversion rates.
We believe our deep relationships with high quality agencies are critical in maintaining our early-mover advantage. Our agency partners include carriers with large captive agent forces, wholesalers, agency networks, flood specialists, and small, independent, family-owned agencies. Our ability to offer an alternative product that better fits many customers’ needs has resonated with our agents and has been essential to driving over 60.0% of our sales in “non-mandatory flood zones” over the last two years. Furthermore, our policies in force are highly diversified across a network of high-quality agents, without any material concentration risk or reliance on individual agencies or agents. As of June 30, 2025, our largest agency partner contributed approximately 8.9% of our total policyholder base. We maintain a robust pipeline of potential agencies interested in partnering with Neptune, while our in-house sales team continually nurtures existing relationships, supporting strong alignment with our agency partners and mutual growth. Our agency relationships are deeply entrenched at the agent level and play an active role in both converting NFIP policyholders to Neptune and winning new customers to the flood insurance market to enable our continued expansion.
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Neptune Internal Agency: 2.0% of our policies in force as of June 30, 2025, were attributed to our in-house agency, with a team of licensed agents managing a growing number of quotes from our website and a select few of our distribution partners. These agents are also licensed to distribute NFIP policies in certain rare cases where policies do not meet Triton’s underwriting criteria.
Direct-to-Customer Sales: 1.3% of our policies in force as of June 30, 2025, were attributed to our direct-to-customer channel. Our easy-to-use online interface allows prospective customers in select states to quote, bind, and manage policies directly. This option complements our agency partnerships and provides ease of access for all property owners seeking flood insurance solutions. We support our online interface with our third-party agencies and in-house agency able to assist when required or to otherwise finalize the sales process.
In addition to driving scalability and flexibility, as we rapidly expand into new markets and introduce additional products, our distribution infrastructure is critical in reinforcing our data advantage. Our distribution and referral partners submit over 20,000 quotes to Triton on a typical day, with approximately 29.7 million lifetime quotes and 1.1 million binds from inception through June 30, 2025. All these quotes (whether or not they lead to binds) and binds fold into and grow our proprietary dataset, allowing us to continually build the competitive advantage provided by our platform.
The following information illustrates the cumulative quotes and binds on our Triton and Poseidon systems since inception in 2018.

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In addition, below is a chart demonstrating the roles we, our capacity providers, and our distribution partners play in the flow of data and payments, and the role our capacity providers and distribution partners play in the flow of claims from policyholders:

Our Products
We offer a range of innovative insurance products designed to address the needs of residential and commercial property owners facing flood and other natural disaster risks. As of June 30, 2025, across all of our insurance product offerings, residential properties accounted for 88.1% of our premium in force and commercial properties accounted for the remaining 11.9%. Our flagship primary residential flood insurance product accounted for 86.0% of our premium in force as of June 30, 2025. In addition to the base policy, we offer enhanced protection through expanded coverage options, making our flood insurance product a superior coverage alternative to the NFIP. We also offer an excess flood insurance product, which we introduced in 2024, which made up 2.7% of our premium in force as of June 30, 2025, and which is available to both residential and commercial property owners. Both our primary and excess flood insurance products are structured around the NFIP form and can be used to supplement or fully replace existing NFIP coverage, as needed. In addition to our flood insurance products, we offer a parametric earthquake insurance product, launched following our acquisition of Jumpstart in September 2021. While currently less than 1% of our portfolio, this product allows us to collect data and expertise that we believe will allow us to eventually diversify into other perils and address additional unmet insurance needs.
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Our Geographic Presence
We operate nationwide and actively mitigate our concentration risk by expanding and diversifying our portfolio across the country. As of June 30, 2025, Florida, Texas, and Louisiana accounted for only 49% of our policies in force, compared to a much heavier exposure of 60% for the NFIP according to the NFIP.

The Neptune Advantage
We believe that Neptune’s competitive advantage is driven by the three core pillars of our business model (underwriting engine, risk relationships, and distribution) and is extended by the following:
• Technology and Data-First Culture: Technology is at the heart of our capabilities and success, enabling us to deliver innovative, efficient, and optimized insurance solutions in a simple and accessible way. As of June 30, 2025, 42% of our 60 employees were on our technology development team, with our proprietary and internally-developed underwriting and policy management systems forming the backbone of our operations.
• Our technology infrastructure is built to support rapid expansion into new markets and product lines. Whether adapting to regulatory changes, adding capacity relationships, or launching new offerings like our excess flood product, our systems are designed to support growth without compromising speed or reliability. We operate on a fully digital, cloud-based computing infrastructure. Leveraging cloud computing allows us to rapidly scale our underwriting, policy management, and analytics capabilities in response to market demand. This infrastructure provides seamless remote access for our distributed workforce, enhancing system reliability, and ensuring that our data science and ML models can process vast amounts of information with minimal latency.
• Our technology ecosystem is strengthened by our ML models and predictive analytics developed by the Neptune Data Science Group. These models use vast datasets from our operations, as well as geospatial mapping and real-time risk assessments, along with our proprietary data on the high volumes of transactions effected on our systems, to evaluate flood risks at the individual property level with precision. This enables us to provide instant underwriting decisions and dynamic, risk-adjusted pricing for both residential and commercial properties, allowing us to provide coverage with exceptional accuracy that incumbents and other players struggle to do.
• We are committed to continuously refining and expanding our technology capabilities. Through constant innovation, we ensure our platforms remain at the cutting edge of the insurance industry, empowering us to stay ahead of market trends and deliver value to our capacity providers, agents, and policyholders.
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• Early-Mover Advantage in a Large, Evolving Market Dominated by the NFIP: As the first entrant in the private flood insurance market with substantial scale and geographic presence, we have accumulated proprietary datasets through our operations that continuously improve our predictive technology, designed innovative products that we believe better suit evolving customer demand, and developed an extensive distribution network with trusted relationships that ensures broad reach across the market. We believe this measurable competitive edge positions us to capture greater market share as the industry evolves following anticipated long-term structural shifts driven by NFIP risk re-rating, climate change, and growing housing demand.
• Trusted Relationships with Capacity Providers: Through seven challenging storm seasons, we have delivered underwriting profit to each of our capacity providers annually. This has enabled our capacity providers to deliver consistent and predictable capacity to support our current and expected growth. Additionally, as a result of our performance, our capacity providers have awarded us greater flexibility to underwrite and bind policies, a contrast to industry norms where binding authority is typically set on stricter negotiated limits and criteria. This flexibility allows us to control product design, risk aggregation, and capacity allocation, and allows us to respond to opportunities and needs from agents and our policyholders in an agile manner, continuing to reinforce our competitive advantage.
• Robust Track Record of Financial Performance with Strong Visibility into Future Earnings: We have consistently outperformed our internal expectations, demonstrating a disciplined and reliable approach to growth. Through 21 landfall hurricanes, we have delivered positive underwriting results and maintained strong loss performance. This operational consistency has translated into substantial revenue and Adjusted EBITDA growth since inception. Our business is supported by a high degree of recurring revenue and predictable renewal patterns, providing strong visibility into revenue growth and profitability. For example, for the six months ended June 30, 2025, 70% of our revenue was derived from renewal business.
• Disciplined Leadership Team: We are a founder-led organization, with a unified strategic vision, focused on delivering superior outcomes for our stakeholders. Our disciplined approach to risk management and optimization has led to us being profitable since our second year of operation. Our lean organizational footprint of 60 employees as of June 30, 2025, allows us to prioritize efficiency, scalability, and flexibility in our operations, driving industry-leading profitability per employee.
Our Growth Strategy
The opportunities for growth in the Neptune portfolio are both broad and deep. We believe we will continue to maintain strong revenue growth based on:
• Growth Across Existing Products and Geographies: We believe the U.S. primary and excess flood insurance markets present immense growth opportunities for Neptune. Despite our significant achievements and expanding scale to date, based on data from NAIC and NFIP, we estimate that we currently account for just 6-7% of the U.S. primary residential flood insurance market, with an even smaller share of both the excess flood market, which we entered in 2024, and the commercial flood market. This leaves substantial room for growth, given the current insurance gap, increased market awareness of flood risk, and evolving market conditions, particularly around anticipated developments related to the NFIP’s implementation of Risk Rating 2.0. In addition, we believe our distribution strategy, which is primarily focused on deep partnerships across agencies with tens of thousands of agents, facilitates increased awareness of both our products and flood risk among our agents and prospective policyholders, through the ease-of-use of our automated underwriting platform, seamless API integrations, instantaneous bindable quotes, and proprietary Agent Portal. In many cases, the creation of a Neptune quote is automatic and instantaneous for agents via our API, facilitating easy cross-sell opportunities alongside standard home and business insurance quotes. In addition, our Agent Portal provides our agents with up to date, data-driven insights about flood risk in the geographies where a quote is being sought, empowering our agents to drive further demand for our products at the time of each quote. Through these innovations, we believe our platform enables agents to grow their business by delivering added value to the policyholders, while creating further awareness in support of our growth strategy.
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• Ability to Scale with Limited Incremental Cost: Our technology infrastructure is built to support rapid expansion, allowing us to scale our business using the same cost structure without requiring us to incur material additional capital expenditures. We operate on a fully digital, cloud-based computing infrastructure, which we can leverage to rapidly scale our underwriting, policy management and analytics capabilities in response to market demand. This infrastructure provides seamless remote access for our distributed workforce, enhancing system reliability, and ensuring that our data science and ML models can process vast amounts of information with minimal latency. Further, because our entirely digital underwriting engine, Triton, uses advanced algorithms, without any human underwriters, to assess risk with speed and precision, we are able to price, quote, and bind additional policies at scale without any significant expansions to our employee base. As a result, while many of our general and administrative (“G&A”) costs are expected to scale with the size of our business (for example, as the number of policyholders increases, customer support and cloud hosting costs may rise), we do not believe that growing our business or the number of policies we sell will require any material changes to our cost structure. We intend to continue to implement new technology from time to time, which we intend to build and maintain using our existing technology development team, including our Neptune Engineering Group and Neptune Data Science Group, to further improve efficiency and scalability.
• Expansion of Product Offerings: We have continued to innovate and broaden our product offerings to capitalize on market trends and growth opportunities. In 2024, we launched an excess flood insurance product designed to address a critical gap in coverage for policyholders who remain with the NFIP. Many NFIP policyholders are unable to transition fully into the private market due to the economic benefit provided by substantial government subsidies that limit their premiums. Our excess flood product allows these policyholders to maintain their NFIP coverage while purchasing additional protection from Neptune, providing more comprehensive protection for their homes and families. Growth within this market represents a meaningful opportunity. With our innovative primary flood product and rapidly growing excess flood offering, we are well-equipped to serve both residential and commercial property owners, providing them with comprehensive and affordable coverage. As climate change likely continues to increase the frequency and severity of flooding events, including in areas that have not historically been considered flood prone, we believe increased awareness of flood risk among the general public can drive further demand for Neptune products. As a result, we remain focused on leveraging technology and delivering tailored solutions to meet the evolving needs of our policyholders. These market dynamics play directly to Neptune’s strengths and reinforce our ability to grow market share. Additionally, as part of our commitment to addressing long-standing market gaps and expanding our product portfolio, we are actively exploring opportunities in additional perils beyond flood. We are exploring the option of adding an indemnity earthquake product in California, where there is a material insurance gap for earthquake coverage, with approximately 89% of buildings uninsured. We expect an indemnity earthquake product would provide true value to policyholders by addressing shortcomings in the options currently available on the market, including long-term affordability and ease of purchase. The development of an indemnity earthquake product would build on the expertise gained from our acquisition of Jumpstart and would respond to the growing demand from both policyholders and our agency partners for comprehensive earthquake protection. By leveraging our proprietary technology platform and underwriting capabilities, we believe we are well-positioned to develop new insurance solutions that deliver value to policyholders and close protection gaps in underserved markets.
• International Expansion: Flooding is a pervasive and growing global challenge, yet the flood peril remains inadequately understood and underinsured in many countries around the world. Across the globe, millions of residential and commercial properties face significant and rising flood risks, often without sufficient insurance coverage to protect property owners from financial loss. In most international markets, flood insurance penetration is minimal, with many regions relying on outdated risk models, government-backed programs, or ad hoc relief efforts to address flooding events. These approaches often leave property owners exposed to significant financial vulnerabilities, particularly as climate change likely exacerbates the frequency and severity of flood events globally. This underinsurance may create an opportunity for Neptune to expand into international markets and provide innovative, data-driven flood insurance solutions to property owners in need. Leveraging our proprietary technology platform, advanced underwriting capabilities, and experience in the U.S. market, we believe we are uniquely positioned in the coming years to enter international markets and address the gaps left by traditional insurance providers. We expect our scalable technology infrastructure, built for rapid deployment, would enable us to adapt quickly to the regulatory requirements and unique risk profiles of different countries.
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• Inorganic Growth Opportunities: From time to time, we may supplement our long-term organic growth with strategic acquisitions, focused on gaining expertise or expanding and complementing our existing portfolio. In recent years, we have completed a notable intellectual capital focused acquisition of Jumpstart, a leading parametric insurance company, and expanded our expertise through the strategic hiring of the employees of Charles River Data, a Boston-based data science consulting firm.
Potential Challenges
There are also a number of factors that we believe could present challenges to our strategic plans or limit our ability to grow our business, including:
• Adverse NFIP Developments: The flood insurance market is highly competitive, with the NFIP holding approximately 90% of the market share. As the dominant provider, the NFIP benefits from strong federal backing and widespread consumer recognition. Its significant market presence and subsidized pricing in certain areas create challenges for private insurers, including Neptune, to compete effectively. If the NFIP’s implementation of Risk Rating 2.0 is tolled or delayed or Congress elects to continue to subsidize the NFIP consistent with historic levels, it could limit our potential growth opportunities relating to existing NFIP policyholders. In addition, adjustments to the NFIP’s pricing, coverage options, or underwriting guidelines could also significantly alter the competitive landscape. Although we believe purchasing insurance from the NFIP is relatively burdensome and time-consuming for policyholders and agents, and that its limited product offerings often fail to meet policyholder needs, if the NFIP were to lower premiums, simplify its processes, or increase its coverage options, we could face increased difficulty in retaining or growing our policyholder base.
• Continued Weakness in the Housing Market: Our performance and ability to issue new policies and retain existing policies is closely tied to home sales, economic activity, construction costs, household income, and employment levels, as well as commercial property markets. Elevated mortgage rates and declining affordability have recently strained the housing market, leading to a decrease in first-time homebuyers and overall housing market activity. As of January 2025, the average rate on a 30-year fixed mortgage in the U.S. had risen to over 7%, marking its highest level since mid-2024. While this average rate has since decreased below 7%, this surge has contributed to a decline in home sales, with existing home sales in 2025 projected to be at the lowest level since 1995. Elevated mortgage rates, together with higher home prices, can create affordability challenges, particularly for first-time buyers. For example, the National Association of Home Builders estimates that in 2023, when mortgage rates on a 30-year fixed mortgage rose from 6.25% to 6.5%, nearly 1.3 million households were priced out of the market for a median-priced home. Continued weakness or a further decrease in housing market activity, particularly in areas where flood coverage is needed, due to adverse economic conditions or other factors, could result in a decline in the home insurance industry and reduction in the sale of our policies, reduced renewal rates, and increased cancellations of existing policies, as many flood insurance purchases are driven by mortgage requirements and a substantial portion of our flood insurance policies are purchased during home acquisitions or refinancing.
• Access to Top Talent: Our success depends, in large part, on our ability to attract and retain talent, which may be difficult due to the intense competition in our industry and the technology industry generally for key employees with demonstrated ability. We rely on a team of highly skilled engineers, data scientists, and other technical professionals who are responsible for the development, enhancement, and maintenance of our proprietary technology. This team’s expertise in ML, geospatial analysis, and data modeling is vital to ensuring our ongoing success and our ability to remain competitive. The financial services and technology industries are highly competitive, and the demand for talented professionals in fields such as data science and ML often exceeds supply. The loss of key technical talent or critical members of our engineering and data science team, or any inability to hire additional talent as the needs of our business may require, could impair our ability to refine our risk assessment capabilities, address evolving market needs, or respond effectively to competitive pressures.
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Risk Factor Summary
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks highlighted in the section titled “Risk Factors” immediately following this prospectus summary before making an investment decision. We may be unable for many reasons, including those that are beyond our control, to implement our business strategy successfully. Some of these risks are:
• Our business may be harmed if one or more of our relationships with capacity providers are terminated or are reduced, if we fail to maintain good relationships with such capacity providers, if we become dependent upon a limited number of capacity providers, or if we fail to develop new capacity provider relationships.
• Our distribution model depends on third-party agents and brokers, and any failure by those agents and brokers to consistently promote our products or the loss of any key agent or broker relationships could adversely affect our business.
• Rapid advancements in AI, including the development of AGI, and ML technologies could increase competition and disrupt our business model.
• Errors in underwriting or data modeling could harm our reputation, competitive position, and financial results.
• Reliance on cloud computing exposes us to technological disruptions and potential risks.
• We are highly dependent on the services of our senior management team, including our Chief Executive Officer.
• We rely on data, technology, and intellectual property, as applicable, from third parties for our pricing models, underwriting engine, and other products, the unavailability or inaccuracy of which could limit the functionality of our products and disrupt our business, and which may also impose limitations on our ability to commercialize our products.
• Our business is dependent upon information processing systems. Cybersecurity events, data breaches, cyberattacks, or other similar incidents, as well as defects, interruptions, or other failures, with respect to our or our vendors’ information processing systems and data may hurt our business, damage our reputation, negatively impact policyholder retention and capacity provider relationships, and expose us to financial and legal liabilities.
• Failure to seek, obtain, maintain, protect, defend, or enforce our intellectual property rights, or allegations that we have infringed, misappropriated, or otherwise violated the intellectual property rights of others, could harm our reputation, ability to compete effectively, financial condition, and business.
• The insurance business is extensively regulated, and changes in regulation may reduce our profitability and limit our growth.
• Compliance with insurance licensing requirements for MGAs and E&S lines agencies and individual producers is critical to our operations, and any failure to maintain required licenses could disrupt our business.
• We are subject to evolving laws and regulations on data privacy, data protection, and cybersecurity, which can be complex and conflicting. We may face investigations, fines, and sanctions as a result of our or our service providers’ or partners’ actual or perceived failure to comply with such laws and regulations and incur increased operational costs in order to ensure future compliance.
• Changes in accounting principles and financial reporting requirements could impact our consolidated results of operations and financial condition.
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• We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business.
• The concentration of our share ownership with those stockholders who held our stock prior to this offering, including our executive officers, directors, and holders of more than 5% of our capital stock, may limit your ability to influence corporate matters.
• We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for, and will rely on, exemptions from certain corporate governance requirements that provide protection to the stockholders of companies that are subject to such corporate governance requirements.
• We are a holding company, and our only material asset is our equity interest in Neptune Flood. As a result, we depend on the ability of our subsidiaries to pay dividends and make other payments and distributions to us in order to meet our obligations.
• There is no existing market for our common stock, and we do not know if one will develop, which may cause our Class A common stock to trade at a discount from its initial offering price and make it difficult to sell the shares you purchase.
• The dual class structure of our common stock has the effect of concentrating voting control with our Chief Executive Officer; this will limit or preclude your ability to influence corporate matters.
• Some provisions of Delaware law and our amended and restated certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the value of our Class A common stock.
If we are unable to adequately address these and other risks we face, our business, results of operations, financial condition, and prospects may be adversely affected.
Corporate Structure
Neptune Flood was incorporated in Delaware on February 10, 2017. Neptune Holdings was incorporated in Delaware on March 20, 2025, to implement a holding company organizational structure for Neptune Flood. We refer to this transaction as our “corporate reorganization.”
Immediately prior to our corporate reorganization, Neptune Holdings was a direct, wholly-owned subsidiary of Neptune Flood, and Neptune Insurance Merger Sub Inc., a Delaware corporation (“Merger Sub”), was a direct, wholly-owned subsidiary of Neptune Holdings. Both Neptune Holdings and Merger Sub were organized for the sole purpose of implementing our corporate reorganization. On April 10, 2025, Merger Sub merged with and into Neptune Flood, with Neptune Flood continuing as the surviving corporation. Each issued and outstanding share of common stock of Neptune Flood was converted into one share of common stock of Neptune Holdings and each issued and outstanding share of convertible preferred stock of Neptune Flood was converted into one share of convertible preferred stock of Neptune Holdings. The separate corporate existence of Merger Sub ceased and all the issued and outstanding shares of Neptune Holdings owned by Neptune Flood were automatically canceled and retired.
As a result of our corporate reorganization, each stockholder of Neptune Flood became a stockholder of Neptune Holdings, holding the same proportional ownership and voting power as of immediately prior to our corporate reorganization, and Neptune Flood became a direct, wholly-owned subsidiary of Neptune Holdings. The certificate of incorporation and bylaws of Neptune Holdings were amended and restated to be substantially identical to those of Neptune Flood as of immediately prior to our corporate reorganization. The corporate reorganization was accounted for as a transaction between entities under common control, and accordingly, there was no change in the basis of the underlying assets and liabilities.
In connection with our corporate reorganization, Neptune Holdings assumed the Amended and Restated 2019 Stock Plan and amended and restated it in its entirety. We refer to the Amended and Restated 2019 Stock Plan, as so amended and restated in connection with our corporate reorganization, as the Pre-IPO 2025 Plan. Neptune Holdings also assumed Neptune Flood’s obligations under the Pre-IPO Stockholders Agreement that was entered into in connection with the convertible preferred stock financing of Neptune Flood in May 2023 as well as certain common
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stock and restricted stock purchase agreements and certain indemnification agreements. The assumption of these agreements did not result in any changes to the terms, conditions, or fair value of the shares. The other liabilities of Neptune Flood were not assumed by Neptune Holdings in our corporate reorganization and therefore continue to be obligations of Neptune Flood, and the assets of Neptune Flood were not transferred to Neptune Holdings and continue to be assets of Neptune Flood.
The following diagram depicts our organizational structure as of the date of this prospectus, giving effect to our corporate reorganization. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within our organizational structure:

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The following diagram depicts our organizational structure immediately following this offering and the application of the net proceeds from this offering assuming an initial public offering price of $ per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus) and no exercise of the underwriters’ option to purchase additional shares of Class A common stock. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within our organizational structure:

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* Stockholders that acquire Class A common stock in connection with this offering.
(1) After giving effect to the completion of the Class B Stock Exchange, assuming no exercise of Mr. Burgess’s rights to exchange shares of Class B common stock for Class A common stock under the Class B Equity Exchange Agreement. If Mr. Burgess exercises his rights under the Class B Equity Exchange Agreement with respect to all equity awards subject to such agreement, % of our outstanding stock and % of our outstanding voting power will be held by Mr. Burgess and entities affiliated with Mr. Burgess, % of our outstanding stock and % of our outstanding voting power will be held by pre-IPO Class A common stockholders (other than Mr. Burgess and entities affiliated with Mr. Burgess), and % of our outstanding stock and % of our outstanding voting power will be held by public Class A common stockholders that acquire Class A common stock in connection with this offering.
Corporate Information
Our principal executive offices are located at 400 6th Street S., Suite 2, St. Petersburg, Florida 33701, and our telephone number is (727) 202-4815. Our website address is www.neptuneflood.com. Our website and the information contained therein or connected thereto are not incorporated into this prospectus or the registration statement of which it forms a part.
Channels for Disclosure of Information
Following the completion of this offering, we intend to announce material information to the public through filings with the SEC, the Investor Relations page of our website located at www.investors.neptuneflood.com, the Newsroom page of our website located at www.neptuneflood.com/newsroom, press releases, public conference calls, and webcasts.
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The information disclosed through these channels could be deemed material. Accordingly, we encourage investors, the media, and others to monitor these channels and to review the information disclosed through them.
Any updates to the list of disclosure channels we use will be posted to the Investor Relations page of our website. Information contained on or accessible through any of the foregoing channels is not incorporated by reference into this prospectus.
Implications of being a Controlled Company
Upon completion of our initial public offering, our Chief Executive Officer and Chairman of our board of directors, Trevor Burgess, will beneficially own approximately % of the voting power of our outstanding voting securities (or approximately % of the voting power of our outstanding voting securities if the underwriters exercise in full their option to purchase additional shares of our Class A common stock) and we will be a “controlled company” within the meaning of the listing rules of the NYSE. As a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements, and you will not have the same protections as those afforded to stockholders of companies that are subject to such governance requirements. See “Management — Controlled Company Exemption” and “Risk Factors — Risks Relating to our Organizational Structure — We are a ‘controlled company’ within the meaning of the NYSE rules and, as a result, qualify for, and will rely on, exemptions from certain corporate governance requirements that provide protection to the stockholders of companies that are subject to such corporate governance requirements.”
Implications of being an Emerging Growth Company
As a company with less than $1.235 billion in revenues during our last completed fiscal year, we qualify as an “emerging growth company” as defined in the JOBS Act. For as long as we remain an EGC, we may take advantage of specified reduced reporting requirements and other burdens that are otherwise applicable generally to public companies. These reduced reporting requirements include, but are not limited to:
• Reduced obligations with respect to financial data requiring us to present only two years of audited financial statements (instead of three years), in addition to any required unaudited interim financial statements, with correspondingly reduced Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure in our initial registration statement;
• an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act;
• an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding a supplement to the auditor’s report providing additional information about the audit and the financial statements;
• reduced disclosure about our executive compensation arrangements in our periodic reports, registration statements, and proxy statements;
• an exemption from the requirements to obtain nonbinding advisory votes on executive compensation (“Say-on-Pay”) or stockholder approval of any golden parachute arrangements; and
• extended transition periods for complying with new or revised accounting standards.
We will remain an EGC until the earliest to occur of: (i) the end of the first fiscal year in which our annual gross revenues are $1.235 billion or more; (ii) the end of the first fiscal year in which we are deemed to be a “large accelerated filer,” as defined in the Exchange Act; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; and (iv) the end of the fiscal year during which the fifth anniversary of this listing occurs. We may choose to take advantage of some, but not all, of the available benefits under the JOBS Act. We are electing to use the extended transition periods available under the JOBS Act for complying with new or revised accounting standards, and we currently intend to take advantage of the other exemptions discussed above. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock.
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The Offering
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Class A common stock offered by the selling stockholders |
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Class A common stock to be outstanding after this offering |
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Class B common stock to be outstanding after this offering |
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Total Class A common stock and Class B common stock to be outstanding after this offering |
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Underwriters’ option to purchase additional shares of Class A common stock offered by the selling stockholders |
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Use of proceeds |
We will not receive any proceeds from the sale of Class A common stock by the selling stockholders in this offering. See “Use of Proceeds.” |
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Controlled company |
After this offering, assuming an offering size as set forth in this section, we expect to be a “controlled company” within the meaning of the applicable listing rules of the NYSE. See “Management — Controlled Company Exemption.” |
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Voting rights |
Upon completion of this offering, we will have two authorized classes of voting common stock, Class A common stock and Class B common stock. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Holders of Class A common stock and Class B common stock vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless otherwise required by law or specified in our amended and restated certificate of incorporation to be in effect upon the consummation of this offering. Upon the completion of this offering, our Chief Executive Officer and Chairman of our board of directors, Mr. Burgess, will beneficially own all of the outstanding shares of Class B common stock and will collectively beneficially own approximately % of the total combined voting power of our outstanding common stock (or approximately % of the total combined voting power of our outstanding common stock if the underwriters exercise in full their option to purchase additional shares of our Class A common stock). As a result, current and future holders of the outstanding shares of Class B common stock will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change of control transaction. See “Description of Capital Stock — Class A Common Stock and Class B Common Stock — Voting Rights” for more information. |
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Conversion and related rights |
Our Class A common stock is not convertible into any other class of shares. Our Class B common stock is convertible into shares of our Class A common stock on a one-for-one basis at the option of the holder. In addition, each share of Class B common stock will automatically convert into one share of Class A common stock upon the occurrence of certain events described in “Description of Capital Stock — Class A Common Stock and Class B Common Stock — Conversion.” |
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Dividend policy |
We currently anticipate that we will retain our future earnings to repay debt and to finance the operation and expansion of our business and do not anticipate declaring or paying any cash dividends on our capital stock in the foreseeable future. Therefore, there can be no assurance that we will pay any dividends to holders of our common stock, or as to the amount of any such dividends. Any future determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend upon, among other factors, our financial condition, operating results, earnings, current and anticipated liquidity and capital requirements, plans for expansion, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by Delaware law, general business conditions, and any other factors that our board of directors deems relevant in making such a determination. See “Dividend Policy.” |
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Directed Share Program |
At our request, the underwriters have reserved % of the shares of Class A common stock to be offered by the selling stockholders under this prospectus for sale, at the initial public offering price, to directors, officers, employees, business associates, and related persons of Neptune. Except for any shares acquired by our directors and officers, shares purchased pursuant to the directed share program will not be subject to lock-up agreements with the underwriters. The number of shares of Class A common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. See “Underwriters — Directed Share Program” for additional information. |
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Risk factors |
Investing in our Class A common stock involves a high degree of risk. See “Risk Factors” beginning on page 28 and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our Class A common stock. |
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Proposed NYSE ticker symbol |
“NP” |
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The number of shares of our Class A common stock and Class B common stock to be outstanding after this offering is based on shares of Class A common stock and shares of Class B common stock outstanding as of , 2025, respectively, assuming the completion of the Class B Stock Exchange, and excludes:
• shares of our Class A common stock issuable upon the exercise of stock options outstanding as of , 2025, with a weighted average exercise price of $ per share;
• shares of our Class B common stock issuable in exchange for (i) shares of our Class A common stock issuable upon the exercise of stock options held by Mr. Burgess and outstanding as of , 2025, with a weighted average exercise price of $ per share, and (ii) shares of Class A common stock issuable upon settlement of the IPO Grants expected to be made to Mr. Burgess, as described elsewhere in this prospectus, in each case pursuant to the Class B Equity Exchange Agreement, as described in more detail below;
• shares of our Class A common stock reserved for future issuance under the Pre-IPO 2025 Plan as of , 2025, of which shares of our Class A common stock are issuable upon the exercise of stock options granted after , 2025, with a weighted average exercise price of $ per share; and
• shares of our Class A common stock reserved for future issuance under our 2025 Plan, including shares of Class A common stock to be issued thereunder in respect of the IPO Grants and shares of Class A common stock reserved for future issuance under our ESPP, which plans will become effective in connection with this offering, as more fully described in “Executive Compensation — Employee Benefit Plans.”
Following the completion of this offering, and pursuant to the Class B Equity Exchange Agreement, Mr. Burgess shall have a right (but not an obligation) to require us to exchange any shares of Class A common stock received by Mr. Burgess upon the exercise, vesting, and/or settlement of certain equity awards held by Mr. Burgess for an equivalent number of shares of Class B common stock. As of the date of this prospectus, there were shares of our Class A common stock subject to equity awards held by Mr. Burgess that may become exchangeable for an equivalent number of shares of our Class B common stock following this offering.
Except as otherwise indicated, all information in this prospectus assumes:
• an initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus;
• a -for- stock split of our capital stock that was effected on , 2025;
• the filing and effectiveness of our amended and restated certificate of incorporation and amended and restated bylaws immediately prior to the completion of this offering, which includes the authorization of our Class A common stock and Class B common stock and the reclassification of all shares of our common stock outstanding as of , 2025, into shares of our Class A Common Stock;
• the automatic conversion of all 4,185,000 outstanding shares of our convertible preferred stock outstanding as of , 2025, into an aggregate of shares of Class A common stock immediately prior to the completion of this offering;
• the occurrence of the Class B Stock Exchange as of the Effective Time;
• no exercise or cancellation of outstanding options subsequent to , 2025; and
• no exercise by the underwriters of their over-allotment option to purchase up to an additional shares of our Class A common stock from the selling stockholders.
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Summary Consolidated Financial Data
The following tables summarize our consolidated financial data. We have derived the summary consolidated statement of operations data for the years ended December 31, 2023 and 2024, from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary condensed consolidated statements of operations data for the six months ended June 30, 2024 and 2025, and the summary condensed consolidated balance sheet data as of June 30, 2025, from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. These unaudited quarterly results of operations have been prepared on the same basis as our audited consolidated financial statements included elsewhere in this prospectus. You should read the following summary consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.
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Years Ended December 31, |
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($ in thousands) |
2023 |
2024 |
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Revenues: |
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Commissions and fees |
$ |
84,870 |
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$ |
119,299 |
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Operating expenses: |
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Agent commissions |
$ |
26,014 |
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$ |
35,317 |
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Employee compensation and benefits |
$ |
4,347 |
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$ |
4,752 |
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General and administrative |
$ |
6,896 |
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$ |
7,757 |
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Amortization expense |
$ |
2,182 |
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$ |
3,027 |
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Total operating expenses |
$ |
39,439 |
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$ |
50,853 |
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Income from operations |
$ |
45,431 |
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$ |
68,446 |
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Other income (expense): |
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Interest income |
$ |
308 |
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$ |
880 |
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Interest expense |
$ |
(21,326 |
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$ |
(17,520 |
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Loss on extinguishment of debt |
$ |
(556 |
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$ |
(5,426 |
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Income tax expense |
$ |
5,971 |
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$ |
11,788 |
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Net income |
$ |
17,886 |
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$ |
34,592 |
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Six Months Ended June 30, |
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($ in thousands) |
2024 |
2025 |
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Revenues: |
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Commissions and fees |
$ |
53,976 |
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$ |
71,419 |
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Operating expenses: |
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Agent commissions |
$ |
16,157 |
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$ |
21,676 |
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Employee compensation and benefits |
$ |
2,418 |
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$ |
2,933 |
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General and administrative |
$ |
3,729 |
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$ |
8,107 |
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Amortization expense |
$ |
1,425 |
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$ |
1,786 |
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Total operating expenses |
$ |
23,729 |
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$ |
34,502 |
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Income from operations |
$ |
30,247 |
|
$ |
36,917 |
|
||
|
Other income (expense): |
|
|
|
|
||||
|
Interest income |
$ |
423 |
|
$ |
416 |
|
||
|
Interest expense |
$ |
(10,632 |
) |
$ |
(8,269 |
) |
||
|
Loss on extinguishment of debt |
$ |
(5,426) |
|
$ |
— |
|
||
|
Income tax expense |
$ |
3,725 |
|
$ |
7,505 |
|
||
|
Net income |
$ |
10,887 |
|
$ |
21,559 |
|
||
25
|
($ in thousands) |
As of |
||
|
Cash and cash equivalents |
$ |
11,697 |
|
|
Fiduciary receivables |
$ |
4,927 |
|
|
Total assets |
$ |
80,947 |
|
|
Total current liabilities |
$ |
82,367 |
|
|
Debt, less current portion |
$ |
277,349 |
|
|
Total liabilities |
$ |
359,716 |
|
|
Years Ended December 31, |
Six Months Ended June 30, |
|||||||||||||||
|
($ in thousands) |
2023 |
2024 |
2024 |
2025 |
||||||||||||
|
Net cash provided by operating activities |
$ |
18,647 |
|
$ |
49,926 |
|
$ |
20,271 |
|
$ |
22,964 |
|
||||
|
Net cash used in investing activities |
$ |
(4,030 |
) |
$ |
(3,713 |
) |
$ |
(1,724 |
) |
$ |
(1,884 |
) |
||||
|
Net cash used in financing activities |
$ |
(9,866 |
) |
$ |
(42,468 |
) |
$ |
2,579 |
|
$ |
9,307 |
|
||||
Key Performance Indicators
Neptune’s management regularly reviews certain KPIs, including the following key metrics, to evaluate our business and operations, guide decision-making, and measure progress. We utilize a variety of operational metrics to understand growth, retention, and ultimately drive profitability. The table below identifies certain of our KPIs for the year ended December 31, 2023, as compared to the year ended December 31, 2024, and for the six months ended June 30, 2024, as compared to the six months ended June 30, 2025:
|
Years Ended December 31, |
|||||||||||
|
($ in thousands) |
2023 |
2024 |
Change |
||||||||
|
Premium in force (year-end) |
$ |
204,118 |
|
$ |
277,595 |
|
36.0 |
% |
|||
|
Policies in force (year-end) |
|
166,739 |
|
|
220,964 |
|
32.5 |
% |
|||
|
Policy retention rate (full year)(1) |
|
82.4 |
% |
|
84.3 |
% |
1.9 |
pp |
|||
|
Premium retention rate (full year)(1) |
|
97.9 |
% |
|
97.1 |
% |
(0.8 |
)pp |
|||
|
Written Premium |
$ |
201,561 |
|
$ |
273,917 |
|
35.9 |
% |
|||
|
Organic revenue |
$ |
84,870 |
|
$ |
119,299 |
|
40.6 |
% |
|||
|
Organic revenue growth(1) |
|
36.6 |
% |
|
40.6 |
% |
4.0 |
pp |
|||
|
Revenue per employee |
$ |
1,886 |
|
$ |
2,294 |
|
21.6 |
% |
|||
|
Adjusted EBITDA per employee |
$ |
1,077 |
|
$ |
1,387 |
|
28.8 |
% |
|||
|
Six Months Ended June 30, |
|||||||||||
|
($ in thousands) |
2024 |
2025 |
Change |
||||||||
|
Premium in force (period-end) |
$ |
236,701 |
|
$ |
317,972 |
|
34.3 |
% |
|||
|
Policies in force (period-end) |
|
188,342 |
|
|
244,964 |
|
30.1 |
% |
|||
|
Policy retention rate (six months)(1) |
|
82.9 |
% |
|
85.8 |
% |
2.9 |
pp |
|||
|
Premium retention rate (six months)(1) |
|
95.2 |
% |
|
98.9 |
% |
3.7 |
pp |
|||
|
Written Premium |
$ |
125,442 |
|
$ |
165,544 |
|
32.0 |
% |
|||
|
Organic revenue |
$ |
53,976 |
|
$ |
71,419 |
|
32.3 |
% |
|||
|
Organic revenue growth(1) |
|
38.0 |
% |
|
32.3 |
% |
(5.7 |
)pp |
|||
|
Revenue per employee (LTM)(2) |
$ |
2,082 |
|
$ |
2,464 |
|
18.3 |
% |
|||
|
Adjusted EBITDA per employee (LTM)(2) |
$ |
1,217 |
|
$ |
1,493 |
|
22.7 |
% |
|||
____________
(1) Year-over-year changes in percentages are reported in percentage points (pp).
(2) For the twelve months ended June 30, 2024 and 2025, respectively.
For definitions of premium in force, policies in force, policy retention rate, premium retention rate, written premium, organic revenue, organic revenue growth, revenue per employee, and Adjusted EBITDA per employee, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Performance Indicators.” For further discussion on our calculation of Adjusted EBITDA, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures.”
26
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared in conformity with GAAP, we use certain financial measures, including Adjusted EBITDA and Adjusted EBITDA margin that are not required by, or prepared in accordance with, GAAP. We refer to these measures as “non-GAAP” financial measures. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for our definitions of these non-GAAP measures, information about how and why we use these non-GAAP measures and a reconciliation of each of these non-GAAP measures to its most directly comparable financial measure calculated in accordance with GAAP. The table below identifies certain of our non-GAAP financial measures for the year ended December 31, 2023, as compared to the year ended December 31, 2024, and for the six months ended June 30, 2024, as compared to the six months ended June 30, 2025:
|
Years Ended December 31, |
|||||||||||
|
($ in thousands) |
2023 |
2024 |
Change |
||||||||
|
Net income |
$ |
17,886 |
|
$ |
34,592 |
|
93.4 |
% |
|||
|
Adjusted EBITDA |
$ |
48,437 |
|
$ |
72,099 |
|
48.9 |
% |
|||
|
Adjusted EBITDA margin(1) |
|
57.1 |
% |
|
60.4 |
% |
3.3 |
pp |
|||
|
Six Months Ended June 30, |
|||||||||||
|
($ in thousands) |
2024 |
2025 |
Change |
||||||||
|
Net income |
$ |
10,887 |
|
$ |
21,559 |
|
98.0 |
% |
|||
|
Adjusted EBITDA |
$ |
32,029 |
|
$ |
42,363 |
|
32.3 |
% |
|||
|
Adjusted EBITDA margin(1) |
|
59.3 |
% |
|
59.3 |
% |
0.0 |
pp |
|||
____________
(1) Year-over-year changes in percentages are reported in percentage points (pp).
27
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our audited consolidated financial statements and our unaudited interim condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our Class A common stock. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also impair our business, financial condition, results of operations, and growth prospects.
Risks Relating to our Business and Industry
Our business may be harmed if one or more of our relationships with capacity providers are terminated or are reduced, if we fail to maintain good relationships with such capacity providers, if we become dependent upon a limited number of capacity providers, or if we fail to develop new capacity provider relationships.
Neptune does not assume any balance sheet insurance risk or claims handling responsibility relating to the policies we sell, and our business depends on a carefully selected network of capacity providers that assume such balance sheet insurance risk for those policies. This risk-taking structure is fundamental to our business model and operational efficiency. Our ability to offer competitive insurance products and maintain our market position is also contingent upon the relationships with these capacity providers. Any adverse impact on these relationships or the overall financial health of our network of capacity providers could reduce our overall insurance capacity and could have an adverse effect on our financial condition and results of operations. We currently have 33 capacity providers, including 26 reinsurance providers backing 7 distinct insurance programs. Our contractual relationships are sometimes unique to us, but they are typically non-exclusive and terminable on short notice by either party for any reason. In many cases, capacity providers can also amend the terms of our agreements unilaterally on short notice. If we are unable to maintain profitable portfolios for our capacity providers or if our relationship with them is undermined for any reason, capacity providers may be unwilling to provide insurance capacity to us, or our insurance carriers may seek to amend our agreements with them. This could happen for various reasons, including for competitive or regulatory reasons, because of an insurance carrier’s reluctance to distribute their products through our platform, because they decide to rely on their own internal flood insurance providers or products or elect not to insure or reinsure flood risk generally, or because they decide not to distribute insurance products in individual markets, in certain geographies, or altogether. Conditions in the broader insurance and reinsurance markets can also influence the capacity of our providers. If our capacity providers were to experience liquidity problems or other financial difficulties, we may not be able to sell additional policies or renew existing ones and could encounter significant adverse impacts on our financial condition and results of operations. If any of our key capacity providers decide to terminate or reduce their relationship with us, we may face difficulties in securing alternative insurance capacity from other providers on similar terms, which could negatively impact our ability to offer insurance products and retain policyholders. Similarly, our business could be harmed if we fail to develop new capacity provider relationships to ensure a diversified portfolio of capacity providers that support our business.
In the future, whether as a result of the termination of capacity provider relationships, capacity provider consolidation or otherwise, it may become necessary for us to partner with and derive a greater portion of our revenues from a reduced and more concentrated number of capacity providers if and as our business and the flood and general insurance industry evolve, which would increase our dependence on a smaller number of capacity providers. As a result, we may become more vulnerable to adverse changes in our relationships with such capacity providers. This could reduce the volume of policies we are able to underwrite. The termination, amendment, or consolidation of our relationships with our capacity providers could harm our business, financial condition, and results of operations.
The overall financial health of our network of capacity providers is important to our success. Widespread, catastrophic flood events, such as hurricanes or severe inland flooding, could strain the financial resources of our capacity providers, reducing their ability to meet claim obligations or remain profitable. This, in turn, could lead capacity providers to reduce the capacity they allocate to flood insurance or could cause them to demand higher premiums, pay lower commissions, impose stricter underwriting criteria, or exit the flood insurance market as they choose to prioritize more profitable or less risky lines of insurance. This could result in reduced capacity or support
28
for our flood insurance products, potentially limiting our ability to underwrite new policies or renew existing ones. Any such changes could impact our ability to offer competitive policies and secure adequate coverage for policyholders, which could expose us to reputational harm, increased regulatory scrutiny, and operational disruption and which may have a material and adverse effect on our business.
The termination or reduction of any of these key relationships could lead to a significant loss of sales and adversely affect our financial performance. It could also disrupt our operations and require us to invest additional resources in finding and establishing new partnerships; replacement capacity for our capacity providers may not be immediately available or could come at less favorable terms, leading to increased costs and reduced competitiveness. If we are not able to effectively manage our relationships with our capacity providers, resulting in the loss of one or more key capacity providers or a significant reduction in their capacity, our business, financial condition, results of operations, growth potential, reputation in the market, and ability to sustain our business could be materially and adversely impacted.
Our distribution model depends on third-party agents and brokers, and any failure by those agents and brokers to consistently promote our products or the loss of any key agent or broker relationships could adversely affect our business.
The third-party agents who generate the majority of our policy sales operate within a diverse network that includes independent agents, brokers, and referral partners. Our insurance agent and broker partners drive over 96% of our policy sales, supported by our in-house sales team and technology integrations. This distribution model exposes us to meaningful third-party risks relating to agent prioritization, agent attrition and sales productivity and competition within distribution channels, as well as regulatory and reputational risks. Third-party agents have discretion over which flood insurance products they recommend to customers. If our agents choose to prioritize offerings from the NFIP or other flood insurance providers due to familiarity, perceived reliability, or regulatory incentives, or shift their focus to competing private flood insurance providers based on superior pricing, more attractive commission structures, enhanced coverage options, or for any other reason, our ability to generate new policies may be adversely affected. Similarly, a decline in agent productivity, whether due to reduced customer activity, economic factors, or lack of engagement with our products could materially reduce our revenue, and insufficient training or support for agents could result in fewer policies sold or misrepresentation of our offerings. Agents who fail to comply with regulatory standards, whether by misrepresenting policy terms or engaging in unethical practices, could also expose us to legal liabilities and reputational harm, and increased regulatory scrutiny resulting from third-party agent misconduct could lead to fines, operational disruptions, or a loss of market credibility.
Finally, high turnover among independent agents or changes in agent affiliations can lead to disruptions in our distribution network. Our ability to compete effectively depends on maintaining strong relationships with the agents distributing our products and providing them with compelling reasons to prioritize Neptune products, such as delivering a strong agent and policyholder-focused experience. Furthermore, our ability to retain and attract new agents to distribute our products to new customers may be influenced by our existing agent and policyholder relationships. We cannot be certain that any loss of a significant agent or broker relationship or the loss of business from any significant group of policyholders would be replaced by relationships with or other business from other agency partners or policyholders, existing or new. If a substantial number of agents cease to represent Neptune or choose to represent alternative MGAs due to more competitive commissions, technology, responsive support, or any other factor, our ability to generate new policies and maintain policyholder relationships would be adversely impacted. Any significant disruption in these relationships could materially and adversely affect our business, financial condition, results of operations, and growth prospects.
Rapid advancements in AI, including the development of AGI, and ML technologies could increase competition and disrupt our business model.
Neptune relies on proprietary AI-driven technology, including our Triton platform, to assess risk, underwrite policies, and maintain a competitive advantage in the flood insurance market. In addition, we rely on AI for certain business uses, including, for example, to help generate code and code tests. Rapid advancements in AI, including the development of AGI, could present significant challenges to our business model.
29
For example, AGI — if developed — and other advancements in AI could accelerate the pace of innovation, requiring us to make continuous and costly upgrades to our proprietary systems and technologies to maintain our competitiveness. AI (and possibly future AGI) technologies can also democratize access to advanced ML tools, enabling competitors to rapidly develop capabilities similar to ours. This could reduce the effectiveness of our intellectual property protections and diminish our ability to differentiate in the market. Such advancements could also lower the barriers to entry in the flood insurance market, allowing competitors to leverage new AI and AGI technologies to replicate or surpass the capabilities of our proprietary technology, potentially offering more accurate risk assessments, lower prices, or enhanced customer experiences, which could erode our competitive advantage and reduce our market share. The development of AGI could also fundamentally alter the flood insurance industry by enabling unprecedented levels of automation, personalization, and predictive accuracy. If AGI-driven solutions redefine customer expectations or market standards, our existing technology and business model could become outdated or obsolete. Further, the widespread adoption of AGI may introduce unforeseen challenges in integrating new technologies, adapting workflows, or managing compliance with evolving regulations. These disruptions could negatively affect our operations, policyholder relationships, and financial performance. The rapid and unpredictable development of further advancements in AI, AGI, and related technologies and any failure to adapt to these advancements could materially and adversely impact our competitive position, business, financial condition and results of operations. See also “— The regulatory framework for AI technologies is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations; to the extent any such laws or regulations apply to our business, or existing laws and regulations are interpreted in ways that would affect the use of AI in our business, we may need to implement additional standards or practices to remain compliant and the operation of our business could be adversely affected.”
The regulatory framework for AI technologies is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations; to the extent any such laws or regulations apply to our business, or existing laws and regulations are interpreted in ways that would affect the use of AI in our business, we may need to implement additional standards or practices to remain compliant and the operation of our business could be adversely affected.
The regulatory framework for AI and similar technologies and automated decision-making is changing rapidly. It is possible that new laws and regulations will be adopted in the United States and in non-United States jurisdictions, or that existing laws and regulations may be interpreted in ways that would affect the operation of our products and solutions and the way in which we use AI and similar technologies. We may not be able to adequately anticipate or respond to these evolving laws and regulations, and, to the extent we expand our business to more jurisdictions, we may need to expend additional resources to adjust our offerings in certain jurisdictions if applicable legal frameworks are inconsistent across jurisdictions. Moreover, because these technologies are themselves highly complex and rapidly developing, it is not possible to predict all of the legal or regulatory risks that may arise relating to our current or future use of AI and such technologies. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition, and results of operations.
As the use of AI becomes more prevalent, we anticipate that it will continue to present new or unanticipated ethical, reputational, technical, operational, legal, competitive, and regulatory issues, among others. In addition, public and regulatory focus on ethical use and data privacy concerns regarding AI could lead to reputational damage if we fail, or are perceived to fail, to align with societal expectations or regulatory standards relating to the use of AI. Such scrutiny may result in financial or other penalties and may also erode customer trust, which is crucial for our brand and long-term success. As such, we expect that our incorporation of AI in our business will require additional resources, including the incurrence of additional costs, to develop and maintain our products and features to minimize potentially harmful or unintended consequences, to comply with applicable and emerging laws and regulations, to maintain or extend our competitive position, and to address any ethical, reputational, technical, operational, legal, competitive, or regulatory issues that may arise as a result of any of the foregoing.
Further, a number of aspects of intellectual property protection in the field of AI are currently under development and there is uncertainty and ongoing litigation in different jurisdictions as to the degree and extent of protection warranted for AI and relevant system input and outputs. If we fail to obtain protection for our intellectual property rights within our AI technologies, or later have our intellectual property rights invalidated or otherwise diminished, our competitors may be able to take advantage of our research and development efforts to develop competing products that could adversely affect our business, reputation and financial condition. See also “— We utilize AI in a significant manner, which could expose us to liability or adversely affect our business.”
30
Errors in underwriting or data modeling could harm our reputation, competitive position, and financial results.
Our underwriting success relies heavily on the accuracy and performance of our AI-powered Triton platform. Triton’s performance is inherently dependent on the quality of the data it processes and the algorithms driving its decision-making.
Triton’s advanced modeling relies in part on data from external sources. Inaccuracies, delays, disruptions, or other inadequacies in these data sources could lead to flawed risk assessments or mispriced policies. In addition, errors in the Triton ML model’s training process, biases in its underlying data, or flaws in the algorithm’s design could result in systemic inaccuracies. For example, “overfitting” of our model (i.e., where the model focuses on the specific details it was trained on but is unable to perform well with new data), or underestimating rare but severe events could lead to suboptimal pricing or coverage decisions, and errors or inefficiencies in Triton’s risk selection could result in us offering policies that are less attractive than those of our competitors. If policyholders perceive that our pricing or coverage is inferior, it could lead to lower renewal rates and diminished market share.
Further, as an AI-driven system, Triton’s complex algorithms may lack transparency, making it challenging to identify or correct errors before they cause significant issues. This opacity could complicate efforts to explain or defend pricing and coverage decisions to regulators, insurers, reinsurers, or policyholders, potentially leading to legal or reputational challenges. Additionally, if our cloud computing or third-party data providers change their terms of service, restrict access, or cease operations, it could impact Triton’s ability to function effectively. See also “— We utilize AI in a significant manner, which could expose us to liability or adversely affect our business.”; “— We rely on the efficient, uninterrupted, and secure operation of complex information technology systems and networks to operate our business. Any significant system or network disruption due to an actual or perceived breach in the security of our or our vendors’ information technology systems could have a negative impact on our reputation, regulatory compliance status, operations, sales, and operating results.”; “— Reliance on cloud computing exposes us to technological disruptions and potential risks.”; and “— Reliance on third-party service providers for critical operations, such as payments and mailing, exposes us to operational and reputational risks.”
Triton’s ability to evaluate flood risks and set pricing is critical to our ability to compete with the NFIP and private flood insurance providers. If Triton’s effectiveness were impaired and our policies were to generate higher-than-expected losses, it could negatively impact our relationships with our capacity providers and could result in a reduction in insurance capacity and damage to our reputation as a reliable MGA. This, in turn, could lead to significant operational and financial consequences for us and result in a material and adverse effect on our business, financial condition and results of operations.
Any such significant issues with Triton or our other products could harm our relationships with partners and standing in the marketplace and have a material and adverse effect on our business, financial condition and results of operations.
We utilize AI in a significant manner, which could expose us to liability or adversely affect our business.
We rely on AI to make decisions in connection with the generation of insurance policies. Our significant use of AI exposes us to various risks, such as damage to our reputation, competitive position, and business, legal and regulatory risks and additional costs. For example, AI has been known to produce false or “hallucinatory” inferences or output, and certain AI uses ML and predictive analytics, which can create inaccurate, incomplete, or misleading content, unintended biases and other discriminatory or unexpected results, errors, or inadequacies, any of which may not be easily detectable by us or any of our related service providers. Accordingly, while AI and ML systems may help us generate more tailored pricing and underwriting determinations with respect to a given policyholder, if the content, analyses, or recommendations produced by the AI and ML systems used in our Triton and Poseidon platforms are, or are perceived to be, deficient, inaccurate, biased, unethical or otherwise flawed, our reputation, competitive position, and business may be materially and adversely affected. For further information on how these risks apply to our Triton platform, see “— Errors in underwriting or data modeling could harm our reputation, competitive position, and financial results.”
Additionally, if any of our employees, contractors, consultants, vendors, or service providers use any third-party AI-powered software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure or incorporation of our confidential information into publicly available training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect, and enforce our intellectual property or confidential information, harming our competitive position and business. Any output created by us using AI tools
31
may not be subject to copyright protection, which may adversely affect our intellectual property rights in, or our ability to commercialize or use, any such content. In the United States, a number of civil lawsuits have been initiated related to the foregoing and other concerns, any one of which may, among other things, require us to limit the ways in which our AI systems are trained and may affect our ability to continue to develop our AI-powered platforms. To the extent that we do not have sufficient rights to use any of the data or other material or content used in or produced by the AI tools we employ, or if we experience cybersecurity incidents in connection with our use of AI, it could adversely affect our reputation and expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, data protection and cybersecurity, publicity, contractual, or other rights. Further, our competitors or other third parties may incorporate AI into their products, offerings or underwriting assessment more quickly or more successfully than us, which could impair our ability to compete effectively.
Reliance on cloud computing exposes us to technological disruptions and potential risks.
Our reliance on cloud computing infrastructure introduces several key risks that could impact our operations and competitive advantage. Any disruption, outage, or degradation in cloud computing performance — whether due to cyberattacks, technical failures, natural disasters, or other unforeseen events — could impair our ability to operate. Such incidents could result in operational delays, policyholder dissatisfaction, and reputational harm.
Our ability to handle growing volumes of policy data and transactions also depends on the reliability and capacity of cloud computing providers. If they fail to meet our evolving performance requirements, we may experience slow response times, decreased efficiency, or service interruptions, potentially affecting policyholder satisfaction and agent productivity. Our reliance on third-party cloud computing providers also means we have limited control over their operations, pricing, and service terms. Changes in pricing structure or contractual terms could increase our costs, while any service degradation or failure on their part could disrupt our operations. Transitioning to an alternative cloud provider, if required, could involve significant time, cost, and operational risk.
Any such disruption in our platform’s performance due to cloud-related limitations, or failure to maintain our technological edge, could adversely impact our ability to compete effectively as rapid advancements in AI and insurance technology solutions enable our competitors to develop similar or alternative platforms or services. See also “— Rapid advancements in AI, including the development of AGI, and ML technologies could increase competition and disrupt our business model.”
Any significant issues with our cloud infrastructure could materially and adversely affect our business, financial condition and results of operations. See also “— We rely on the efficient, uninterrupted, and secure operation of complex information technology systems and networks to operate our business. Any significant system or network disruption due to an actual or perceived breach in the security of our or our vendors’ information technology systems could have a negative impact on our reputation, regulatory compliance status, operations, sales, and operating results.”
Reliance on third-party service providers for critical operations, such as payments and mailing, exposes us to operational and reputational risks.
We depend on third-party service providers for critical functions such as processing policyholder payments and mailing policy documents and notices. Technical failures, cyberattacks, or financial instability affecting our third-party vendors could interrupt their ability to provide services. Delays or errors in payment processing could harm policyholder trust, while issues with mailing policy documents could result in missed policyholder notifications. Failures by third-party vendors to meet service expectations or comply with regulatory standards could also be attributed to Neptune, resulting in reputational harm, regulatory scrutiny, or financial penalties. In the event of any such issues, identifying and transitioning to alternative providers, if necessary, would require significant time, cost, resources, operational risk, and could lead to temporary disruptions. Any disruption, failure, or performance issues involving these third-party providers could adversely affect our ability to operate efficiently, maintain policyholder satisfaction, and comply with regulatory requirements, which could have a material and adverse effect on our business, financial condition, and results of operations.
32
Claims handling by third parties, including insurance carriers and TPAs, could negatively impact our reputation and result in litigation risks.
As an MGA, we neither assume insurance risk nor have claims-handling authority. Instead, the responsibility for adjudicating claims lies with the insurance carriers that underwrite the policies we sell. These carriers frequently rely on TPAs to process and manage claims on their behalf. While this model allows us to focus on policy issuance and distribution, it exposes us to reputational and operational risks tied to claims handling.
The timeliness and fairness of claims processing are critical to maintaining policyholder trust. Policyholders may not fully understand that Neptune does not handle claims directly, leading to confusion or misplaced blame when issues arise. Similarly, any operational issues at the TPAs delivering claims services for our insurance carriers, such as insufficient staffing, inadequate training, or technical failures, could impact the speed and quality of claims resolution, and any misaligned priorities between the TPAs and our insurance carriers could also exacerbate delays or disputes, further eroding policyholder trust. If a TPA or our insurance carriers deny claims, process them slowly, or fail to meet policyholder expectations, policyholders may associate claims dissatisfaction with Neptune, regardless of our lack of direct involvement in the claims process, and we may face reputational harm which can, among other things, reduce policyholder retention and deter new policy sales. In addition, disputes over claims decisions can result in lawsuits involving policyholders, insurance carriers, TPAs, and, indirectly, Neptune as an MGA. We are not responsible for claims adjudication and are indemnified by our insurance carriers for claims-related litigation matters, but our association with the policies sold can result in legal costs, regulatory scrutiny, and reputational damage. These risks are exacerbated during catastrophic events, which often lead to heightened claims activity and increased likelihood of litigation. While we actively collaborate with our insurance carriers and their TPAs to ensure high standards in claims handling, we cannot guarantee that all claims will be processed in a manner consistent with the expectations of our policyholders and negative experiences or lawsuits related to claims handling could materially and adversely affect our business, financial condition, and results of operations.
An overall decline in the housing market or general economic conditions could have a material adverse effect on the financial condition and results of operations of our business.
Our performance and ability to issue new policies and retain existing policies is closely tied to home sales, economic activity, construction costs, household income, and employment levels, as well as commercial property markets. The demand for flood insurance generally rises as the overall level of household income increases and generally falls as household income decreases, affecting both premium volume and policy count, which would impact our revenue and financial condition. In addition, home and business owners often purchase flood insurance at the time of the purchase of a home or commercial property, and major slowdowns in the residential or commercial housing market could impact our ability to generate new business.
Elevated mortgage rates and declining affordability have recently strained the housing market, leading to a decrease in first-time homebuyers and overall housing market activity. As of January 2025, the average rate on a 30-year fixed mortgage in the U.S. had risen to over 7%, marking its highest level since mid-2024. While this average rate has since decreased below 7%, this surge has contributed to a decline in home sales, with existing home sales in 2025 projected to be at the lowest level since 1995. Elevated mortgage rates, together with higher home prices, can create affordability challenges, particularly for first-time buyers. For example, the National Association of Home Builders estimates that in 2023, when mortgage rates on a 30-year fixed mortgage rose from 6.25% to 6.5%, nearly 1.3 million households were priced out of the market for a median-priced home. A decrease in housing market activity, particularly in areas where flood coverage is needed, due to adverse economic conditions — caused by inflation, tariffs, rising interest rates, geopolitical tensions, recessionary pressures, or other factors — could result in a decline in the home insurance industry and reduction in the sale of our policies, reduced renewal rates, and increased cancellations of existing policies, as many flood insurance purchases are driven by mortgage requirements (homeowners with a mortgage in FEMA-designated high-risk SFHAs must obtain coverage) and a substantial portion of our flood insurance policies are purchased during home acquisitions or refinancing.
Economic downturns can also impact our existing policyholder base. Economic conditions influence consumer behavior and spending patterns. During periods of economic uncertainty or recession, consumers may prioritize other expenses over purchasing or renewing flood insurance or other E&S lines. This shift in consumer priorities can lead to a decrease in demand for our products, further impacting our sales and revenue. Homeowners facing financial difficulties may choose to cancel existing insurance policies, modify their coverage, or not renew the policies they hold with us,
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leading to lower renewal rates. Economic stress can also result in lower property values, which in turn can reduce the premiums we collect on existing policies. This reduction in premium income could adversely affect our revenue and profitability. Additionally, financially stressed homeowners may be more likely to file claims, and the cost of claims may rise if economic conditions, including impacts from recent tariffs, lead to increased repair and rebuilding costs. As we rely on our carrier partners to provide insurance capacity and assume the associated risk, if the incurred losses exceed any carrier’s loss tolerance, we risk their reduction or withdrawal as a risk-taking partner to Neptune.
In addition, economic downturns can strain our distribution network and affect the operations and financial health of our partners, potentially leading to a reduction in their productivity or even their exit from the flood insurance market. Agents may also experience reduced customer activity, limiting their ability to sell Neptune products. This would limit our ability to reach new policyholders and maintain existing ones, thereby affecting our overall sales. Any prolonged economic downturn and long-term loss could strain our financial resources, requiring us to invest additional capital to maintain operations and support our distribution network. This could lead to increased borrowing and higher interest expenses. As a result, any extended decline in the housing market or any overall economic downturn could materially and adversely affect our business, financial condition and results of operations.
We may be negatively affected by the cyclicality of the markets and industry in which we operate.
The insurance market in which we operate has historically been cyclical based on the underwriting capacity of the insurance carriers, general economic conditions, state regulatory responses to market conditions, the timing of hurricane and storm season and other natural disasters, and other social, economic, and business factors. In a period of decreasing insurance capacity or higher than typical written loss ratios across an insurance segment or segments, insurance carriers may raise premium rates. This type of market frequently is referred to as a “hard” market. In a period of increasing insurance capacity or lower than typical written loss ratios across an insurance segment or segments, insurance carriers may reduce premium rates, and business might migrate away from the E&S lines market and into the admitted market. This type of market frequently is referred to as a “soft” market. Our results of operations are affected by this cyclicality of the market. The frequency and severity of natural disasters and timing of significant flood risks, other catastrophic events (such as hurricanes), social inflation, and reductions or increases in insurance capacity can affect the timing, duration, and extent of industry cycles for the product lines we distribute. These catastrophic events can lead to significant losses for capacity providers, prompting them to adjust their risk tolerances. Such conditions can adversely affect our relationships with our capacity providers and could result in a reduction in insurance capacity which could lead to significant operational and financial consequences for us. Additionally, the unpredictability of severity, timing, or duration of these cycles makes it challenging to predict the related responses of insurance carriers and regulators and forecast their impact on our business operations and financial performance. In addition, if our capacity providers experience liquidity problems, insolvency, or other financial difficulties, or do not timely provide required information to us, we could encounter the loss of capacity provider partners, which could lead to reduced capacity and a reduction in our ability to sell our insurance products to our policyholders. These conditions may adversely affect our revenue and make it difficult for us to accurately predict our future results, which could harm our business, financial condition, and results of our operations.
Because the revenue we earn on the sale of certain insurance products is based on premiums and commission rates set by capacity providers, any reductions, volatility, or adverse trends in these premiums or commission rates could adversely impact our revenue and profitability.
The majority of our revenue is derived from commissions set by the capacity providers that underwrite the policies we sell. These commissions are typically calculated as a fixed percentage of the premiums charged to policyholders, making our financial performance sensitive to changes in commission rates year-over-year. As a result, any decline in commission rates, whether driven by market conditions, carrier profitability, or regulatory changes, could materially and adversely affect our business. Capacity providers may face financial challenges stemming from increased claims activity, catastrophic events, rising reinsurance costs, or regulatory changes and, in response, may look to reduce commission rates to manage expenses or may reassess their underwriting profitability, which could also lead to pricing adjustments, tighter underwriting criteria, or reductions in commissions. In addition, economic downturns that result in downward pressure on policy premiums may decrease our commission-based revenue.
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Because commissions represent a key source of our income, any reduction in the amounts of these commissions could require us to identify alternative revenue streams, reduce operating expenses, or accept diminished profitability. In addition, failure to effectively adapt to changes in commission structures could hinder our ability to execute our growth strategy and maintain our competitive position in the flood insurance market. Any such impacts could have a material adverse effect on our business, financial condition and results of operations.
Competition in our industry may be intense, including from the NFIP, and if we are unable to compete effectively, then our ability to grow and maintain market share and financial results may be negatively affected.
The flood insurance market is highly competitive, with the NFIP holding approximately 90% of the market share. As the dominant provider, the NFIP benefits from strong federal backing and widespread consumer recognition. Its significant market presence and subsidized pricing in certain areas create challenges for private insurers, including Neptune, to compete effectively. In addition, the private flood insurance market is becoming increasingly competitive, with new entrants and existing players seeking to capture market share. If capacity providers adjust their commission structures to align with competitive pressures or incentivize other MGAs or distributors, we may face reduced commission rates or less favorable terms. Changes in federal or state regulations governing insurance commissions could also cap or reduce allowable commission rates. The NFIP and private competitors could expand market share more rapidly or compete more effectively through innovation, pricing strategies, or expanded distribution networks. Some of these competitors may have greater financial resources, established reputations, or strategic partnerships, which could enable them to attract policyholders or agents at our expense. Competition in this market is driven by, among other things, pricing, technology and regulatory changes, reputation, coverage options, agent preference, and innovation. For example, the NFIP’s subsidized premiums in certain areas and the potential for competitors to undercut prices can limit our ability to compete solely on cost. Alternatively, customers may perceive the NFIP as a safer or more affordable option, even in cases where private insurance offers superior coverage. Adjustments to the NFIP’s pricing, coverage options, or underwriting guidelines could also significantly alter the competitive landscape. If the NFIP were to lower premiums or simplify its processes, private insurers, including Neptune, may face increased difficulty in retaining or growing their policyholder base. In addition, our competitors could differentiate themselves by offering unique or expanded policy features, which could appeal to customers seeking more tailored solutions. If other private insurers utilize advanced technologies or data-driven approaches to provide faster, more accurate risk assessments or enhanced customer experiences, such competitors could challenge our position as a leader in providing private flood insurance, and any inability to match or exceed such offerings could reduce our competitiveness. Finally, independent agents and brokers who distribute Neptune’s policies also represent other insurers, including the NFIP and private competitors. Agents may prioritize insurers that offer higher commissions, simpler processes, or perceived customer benefits, impacting Neptune’s ability to maintain its distribution network. See also “— Our distribution model depends on third-party agents and brokers, and any failure by those agents and brokers to consistently promote our products or the loss of any key agent or broker relationships could adversely affect our business.” The highly competitive nature of the flood insurance market could result in pricing pressures, reduced policy retention, increased marketing cost, or difficulty acquiring new policyholders. If we are unable to effectively compete with the NFIP or other private insurers, our market share, revenue growth, financial condition, and results of operations could be materially and adversely affected.
Increased commission requirements from our distribution partners could have an adverse impact on our profits.
The majority of our policy sales are generated through third-party distribution agents and brokers, who play an important role in generating sales and expanding our market reach. Most of our revenue is a function of premium volume (policy sales) and commission rates. If our distribution partners increased their commission requirements for any reason, our financial performance could be adversely affected. Several factors could lead to an increase in such commission expenses, including competitive pressures in the market, market conditions, and regulatory changes. Agents and brokers have the flexibility to promote multiple insurance providers, including both private insurers and the NFIP. To remain competitive, we may need to increase commission rates, bonuses, or incentives to retain and attract high-performing third-party partners. In addition, economic downturns or reductions in consumer demand for flood insurance could prompt agents and brokers to negotiate higher commissions to offset lower policy volumes. Finally, future regulations or industry standards could require insurers to adjust commission structures, which may
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lead to higher payout obligations. Any increase in commission expenses would have an adverse effect on our margins and, if we are unable to offset higher commission costs through pricing adjustments or operational efficiencies, our business, financial condition, and results of operations could be materially and adversely impacted.
We are highly dependent on the services of our senior management team, including our Chief Executive Officer.
The continued success of our business is highly dependent on the expertise and leadership of our senior management team, including Mr. Burgess, our Chief Executive Officer, Chairman of our board of directors, and our largest stockholder, who has been the driving force behind our success since Neptune’s inception. Mr. Burgess has played, and continues to play, a critical role in shaping our strategic direction, fostering key relationships with capacity providers and distribution and agency partners, and driving innovation within our business and the flood insurance industry. Mr. Burgess and our senior management team’s extensive experience in finance, insurance, and technology has been instrumental in our growth and market differentiation. The unexpected loss of Mr. Burgess or other members of our senior management team could disrupt our operations and impact our ability to continue executing our business strategy with the same level of effectiveness. Finding a successor with a comparable vision and capability to maintain the momentum and direction that Mr. Burgess and our senior management team have established for us would present a substantial challenge. Furthermore, Mr. Burgess’ departure could lead to instability within Neptune, potentially affecting the morale and productivity of our team, which has been crucial in our rapid growth and innovation. The potential uncertainty surrounding such a leadership transition could also undermine confidence among our policyholders, partners, and investors as well as other stakeholders who are integral to our continued success and expansion, and any perceived weakening of our leadership could be exploited by our competitors. As a result of their instrumental role in our business, if Mr. Burgess or other members of our senior management team were to discontinue their service to Neptune due to death, disability, or for any other reason, our business, financial condition, results of operations, and growth prospects could be adversely affected.
We may not be able to attract and retain the key employees and highly skilled people we need to support our business.
Our success depends, in large part, on our ability to attract and retain talent, which may be difficult due to the intense competition in our industry and the technology industry generally for key employees with demonstrated ability. We rely on a team of highly skilled engineers, data scientists, and other technical professionals who are responsible for the development, enhancement, and maintenance of our proprietary technology. This team’s expertise in ML, geospatial analysis, and data modeling is vital to ensuring our ongoing success and our ability to remain competitive. The loss of key technical talent or critical members of our engineering and data science team could impair our ability to refine our risk assessment capabilities, address evolving market needs, or respond effectively to competitive pressures and could disrupt operations, delay strategic initiatives, and undermine our relationships with capacity providers, agents, and policyholders. Replacing such individuals may require substantial time and resources, and there is no assurance that we could identify suitable candidates with comparable expertise. We also rely on employees with specific licenses. The departure of key licensed individuals could immediately impact our ability to place new business or service existing policies in affected states until we can obtain new individual licenses.
The financial services and technology industries are highly competitive, and the demand for talented professionals in fields such as data science and AI development often exceeds supply. To attract and retain top talent, we must offer competitive compensation, benefits, and growth opportunities or we could be required to replace certain critical employees or hire contractors to fill highly skilled roles while vacant. Rising costs in these areas could increase our operating expenses, while failure to maintain a strong leadership team or technical workforce could impede growth and innovation. Any disruption to our talent pool of key personnel or failure to attract and retain key employees could materially and adversely affect our business, financial condition, results of operations, and growth prospects.
Reliance on the Neptune brand is critical to our success, and any failure to maintain or enhance our brand or damage to our reputation could adversely impact our business.
Our brand is a cornerstone of our business, and our reputation is a key factor in attracting policyholders, capacity providers, agents, and other partners. Maintaining a strong and trusted brand is essential to our competitive positioning and long-term success. A weakened brand or damage to our reputation could result in reduced demand for our products, decreased agent engagement, less favorable terms from capacity providers or less desire by
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capacity providers to partner with us, or challenges in partnering with other key service providers. A decline in brand recognition or policyholder trust could also hinder our ability to stand out in the marketplace and make us less attractive to current and prospective employees relative to our competitors, particularly given the intensely competitive market for highly skilled employees.
Negative publicity and unfavorable opinions or reviews from policyholders, whether related to claims handling, policy terms, policyholder service, underwriting practices, data security breaches, the use of our technology for illegal or objectionable applications (including AI and ML applications that present ethical, regulatory, or other issues), or any other factors could erode trust in the Neptune brand. Also, while we do not have any claims-handling authority, negative experiences related to claims handling or policyholder service could also result in complaints, reduced policyholder retention, or unfavorable online reviews. Delays, denials, or disputes in claims adjudication by TPAs or reinsurers could also be attributed to us, harming our relationships and public image. In addition, issues such as system outages, data breaches, or errors in underwriting and pricing could undermine trust in our brand and products, and any investigations, fines, or lawsuits could damage our reputation with existing policyholders, capacity providers, agents, and other stakeholders as well as our ability to obtain new policyholders, capacity providers and agents. Further, media coverage of any perceived shortcomings, such as allegations of unethical practices, discrimination, or unfair pricing, could erode confidence in our company. Any such adverse impacts on our brand or reputation could lead to decreased policyholder loyalty, reduced policy sales, and challenges in retaining agent and capacity provider relationships.
Moreover, repairing our brand and reputation in the case of any adverse event may be difficult, time-consuming, and expensive. Our failure to quickly respond to and address, or the appearance of our failure to respond to and address, corporate crises and other issues that give rise to reputational risk could significantly harm our brand and reputation, which could result in loss of trust from our policyholders, third-party partners, and employees and could lead to an increase in litigation claims and asserted damages or subject us to regulatory actions or restrictions.
Maintaining and enhancing our brand also requires ongoing investment in marketing, technology, and policyholder experience. If these efforts fail to produce the desired results or if competitors outperform us in brand perception, it could limit our growth opportunities. The loss of confidence in, or any failure to maintain or enhance, the Neptune brand or our reputation could materially and adversely affect our ability to attract and retain policyholders, agents, and partners, thereby negatively impacting our business, financial condition, results of operations, and growth prospects.
In addition, third parties’ use of trademarks and branding similar to ours could materially harm our business or result in litigation or other expenses. We may not be able to adequately prevent such practices, which could harm the value of our business, result in the abandonment, dilution, or invalidity of trademarks associated with our business and adversely affect our results of operations or our financial condition. Heightened competitive pressures that result in a loss of policyholders or a reduction in revenues or revenue growth rates, or failure to successfully maintain, defend, enforce, and enhance our brand and substantial expenses in attempts to maintain, defend, enforce and enhance our brand, could have a material adverse effect on our business, financial condition, and results of operations. See also “— Failure to seek, obtain, maintain, protect, defend, or enforce our intellectual property rights, or allegations that we have infringed, misappropriated, or otherwise violated the intellectual property rights of others, could harm our reputation, ability to compete effectively, financial condition, and business.”
Our rapid growth may place significant demands on our resources, systems, and personnel, which could adversely impact our business.
We have experienced rapid growth since our inaugural full year of operations in 2018. Our continued success depends on our ability to effectively manage and sustain this growth and our efforts to expand our operations, policyholder base, and geographic reach can place significant demands on our resources, systems, and personnel.
For example, rapid growth may outpace our existing technical infrastructure, technology, and processes, leading to inefficiencies, delays, or operational disruptions. Inadequate systems to manage policy issuance or agent or policyholder support could harm our reputation and policyholder satisfaction. Growth may also require attracting, hiring, and retaining skilled employees, including engineers, data scientists, and policyholder service representatives,
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and increased competition for talent in the technology and financial services industries may make it challenging to expand our workforce if needed to support our expansion. See also “— We may not be able to attract and retain the key employees and highly skilled people we need to support our business.”
Further, if we expand into new markets, the complexity of complying with diverse regulatory requirements and managing relationships with agents, capacity providers, and third-party vendors in those markets will increase. Failure to adequately scale operations to address these complexities could limit our ability to grow effectively. If we are unable to manage the demands of our growth effectively, it could result in operational inefficiencies, policyholder dissatisfaction, and financial challenges, which could materially and adversely impact our business, financial condition, results of operations, and growth prospects.
If we cannot maintain our corporate culture as we grow, our business may be harmed.
We believe that our culture, including our management philosophy, has been a critical component to our success and that our culture creates an environment that drives and perpetuates our overall business strategy, innovation, efficiency, and employee satisfaction. We have invested substantial time and resources in building our team and we expect to continue to hire as our business expands. As we grow and mature, we may find it difficult to maintain the valuable aspects of our culture. Rapid growth can lead to changes in organizational structure, increased complexity in operations, geographical dispersion, and the need to integrate new employees who may not be familiar with our cultural values. If we are unable to effectively communicate and instill our culture in new hires, or if the pressures of growth lead to a dilution of our cultural principles, our business may suffer.
Any failure to preserve our culture could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively, achieve efficiency, and execute on our business strategy. If we are unsuccessful in recruiting, hiring, training, managing, and integrating new employees, or retaining our existing employees, or if we fail to preserve the valuable aspects of our culture, it could materially impair our ability to attract and support new capacity providers, agent and broker partners, and policyholders, all of which would materially and adversely affect our business, financial condition, and results of operations.
If we are unable to successfully launch additional products or expand our product offerings, including into new domestic and international markets, it may impact our ability to continue to grow revenue.
In the future, we may choose to expand our product offerings, including into international markets. Introducing new insurance products and new or existing product offerings into new markets would allow us to diversify our revenues, attract a broader policyholder base, and increase policyholder retention. Our ability to successfully develop and launch such initiatives is subject to several risks and challenges, including market demand and adoption, regulatory approvals and compliance, competition, operational and technical challenges, and reinsurance and capital constraints.
The success of any new initiative depends on policyholder demand, agent adoption, and overall market conditions. If our new initiatives fail to attract sufficient policyholders or fail to gain traction among distribution partners, they may not generate the revenue we expect. Expanding into new insurance products and new geographies may require approval from state, federal, or other applicable regulators in such geographies, which can be a lengthy and complex process. In addition, established insurers and new market entrants may already offer similar products or introduce competing solutions, making it more difficult for us to differentiate our offerings and gain market share, and any delays, denials, or regulatory changes could also hinder our ability to bring new products to market.
Developing and launching new products and new or existing product offerings into new markets may also require enhancements to our proprietary technology, underwriting models, and policyholder service capabilities. Any shortcomings in these areas could limit the effectiveness of new offerings. New insurance products would also require support from new or existing insurance and reinsurance partners, and if we are unable to secure such additional support or new partnerships on favorable terms or at all, our ability to introduce new products or to enter into new geographies may be limited.
Additionally, when we look to expand our business internationally, we may encounter different regulatory regimes and heightened competition, whether from governmental or other private insurers, that could increase pricing pressures or inhibit our ability to implement our initiatives. As a result, we may not be able to adapt quickly enough to foreign regulatory requirements, certain markets may offer uniquely different risk profiles that we have
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not previously encountered, local insurers, distribution channels, and regulatory bodies may be unwilling to partner with us, and our experience in the U.S. market may not translate to allow us to effectively compete in international markets. See also “— Changes to the E&S lines regulatory landscape, or a requirement for Neptune to file admitted rates, could have a detrimental impact to our sales, innovation, and ability to grow.”
If we are unable to successfully develop, launch, and scale new products or to expand into new geographies, our ability to generate additional revenue and sustain growth and our business, financial conditions, and results of operations may be materially and adversely affected.
Business or asset acquisitions and dispositions may expose us to certain risks.
We have made acquisitions in the past and may pursue further acquisitions or other strategic transactions, including dispositions and joint ventures, in the future. The completion of any business or asset acquisition or disposition is subject to certain risks, including those relating to the receipt and terms and conditions of required regulatory approvals, including any financial accommodations required by regulators, our ability to satisfy such terms, conditions, and accommodations, the occurrence of any event, change, or other circumstances that could give rise to the termination of a transaction, and the risk that parties may not be willing or able to satisfy the conditions to a transaction. As a result, there can be no assurance that any business or asset acquisition or disposition will be completed as contemplated, or at all, and no assurance regarding the expected timing of the completion of the acquisition or disposition.
Once we complete acquisitions or dispositions, there can be no assurance that we will realize the anticipated economic, strategic, or other benefits of any transaction. For example, the integration of businesses or employees we acquire may not be as successful as we anticipate, or there may be undisclosed risks present in such businesses. Acquisitions involve a number of risks, including operational, strategic, financial, accounting, legal, compliance, and tax risks, including difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing policyholders of the acquired entities, difficulties in integrating acquired technologies or systems, unforeseen liabilities that arise in connection with the acquired businesses, or unfavorable market conditions that could negatively impact our expectations for the acquired businesses, as well as difficulties in integrating and realizing the projected results of acquisitions and managing the litigation and regulatory matters to which acquired entities are party. Such difficulties in integrating an acquired business may result in the acquired business performing differently than we expected (including through the loss of policyholders) or in our failure to realize anticipated expense-related efficiencies. Risks resulting from future acquisitions may have a material adverse effect on our results of operations and financial condition.
Similarly, dispositions of a business also involve a number of risks, including operational and technology risks of data loss, loss of talent, and stranded costs, which could potentially have a negative impact on our business, results of operations, financial condition, and liquidity. In connection with a business or asset disposition, we may also acquire a concentrated position in securities of the acquirer as part of the consideration, which would subject us to risks related to the price of equity securities and our ability to monetize such securities. In addition, with respect to certain dispositions, we could be subject to restrictions on our use of proceeds. If we fail to realize the benefits of any disposition, our business, financial condition, and results of operations may be adversely affected.
Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, reputational harm, or legal liability.
Our operations are dependent upon our ability to protect our personnel and technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. Should we experience a local or regional disaster or other business continuity problem, such as an earthquake, hurricane, terrorist attack, pandemic, protest or riot, security breach, cyberattack or other similar incident, power loss, telecommunications failure, or other natural or man-made disaster, our continued success will depend, in part, on the availability of our personnel and the proper functioning of computer, telecommunication, and other related systems and operations. We could potentially lose key executives, personnel, and policyholder data, or experience material adverse interruptions to our operations or delivery of services in a disaster recovery scenario. Such disruption could also result in significant financial losses arising from the inability to process new policies or renew existing ones in
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a timely manner. Our inability to successfully recover should we experience a disaster or other business continuity problem, could materially interrupt our business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm, damaged policyholder relationships, or legal liability.
Risks Relating to Data, Intellectual Property and Cybersecurity
We rely on data, technology, and intellectual property, as applicable, from third parties for our pricing models, underwriting engine, and other products, the unavailability or inaccuracy of which could limit the functionality of our products and disrupt our business, and which may also impose limitations on our ability to commercialize our products.
We use data, technology, and intellectual property licensed from unaffiliated third parties in certain of our products and we may license additional third-party data, technology, and intellectual property in the future. Any errors, delays, or defects in this third-party data, technology, and intellectual property could result in errors that could harm our brand and business. In addition, licensed data, technology, and intellectual property may not continue to be available on commercially reasonable terms, or at all. If data providers were to terminate their relationship with us, reduce the quality or quantity of data provided, or experience operational disruptions, our ability to accurately underwrite policies could be compromised, which may lead to increased insurance risk, higher written loss ratios, and reduced profitability. Also, should any third party refuse to license its proprietary information to us on the same terms that it offers to our competitors or enter into exclusive contracts with our competitors, we could be placed at a significant competitive disadvantage. Disputes may arise between us and our licensors regarding the data, technology, and intellectual property licensed to us under any license agreement, including disputes related to:
• the scope of rights granted under the license agreement and other interpretation-related issues;
• our compliance with reporting, financial, or other obligations under the license agreement;
• the amounts of royalties or other payments due under the license agreement;
• whether and the extent to which we infringe, misappropriate, or otherwise violate intellectual property rights of the licensor that are not subject to the license agreement;
• our right to sublicense applicable rights to third parties;
• our right to transfer or assign the license; and
• the ownership of intellectual property and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.
In addition, if regulatory bodies impose stringent requirements on the use and validation of third-party data in underwriting processes and the data provided by our vendors do not meet regulatory standards, we could face fines, penalties, or other regulatory actions. Any changes in regulations that affect the use of third-party data could require us to modify our underwriting models and processes, potentially increasing our operational costs and impacting our profitability.
Further, the loss of our right to use any of this data, technology, and intellectual property, whether due to such third parties failing, being acquired, pivoting their product offerings, or other circumstances, could result in delays in producing or delivering affected products until equivalent data, technology, or intellectual property is identified, licensed, or otherwise procured and integrated. Our business would be disrupted if any data, technology, and intellectual property we license from others were either no longer available to us or no longer offered to us on commercially reasonable terms. In either case, we would be required to either attempt to redesign our products to function with data, technology, and intellectual property available from other parties or to develop these components ourselves, which would result in increased costs and could result in delays in product sales and the release of new product offerings. Alternatively, we might be forced to limit the features available in affected products. Any of these results could harm our business, results of operations, and financial condition.
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Our business is dependent upon information processing systems. Cybersecurity events, data breaches, cyberattacks, or other similar incidents, as well as defects, interruptions, or other failures, with respect to our or our vendors’ information processing systems and data may hurt our business, damage our reputation, negatively impact policyholder retention and capacity provider relationships, and expose us to financial and legal liabilities.
Our business is highly dependent upon the effective operation of our information processing systems. We also rely on these systems throughout our business for a variety of functions, including collecting, processing, and storing sensitive personal, financial, and policyholder data. Despite the implementation of security and back-up measures, our computer systems and those of our partners and third-party service providers may in the future be vulnerable to system failures, physical or electronic intrusions, computer viruses, social engineering, phishing, software bugs, ransomware, malware, infiltration by unauthorized persons, fraud, usage errors by their respective professionals, theft or misuse, break-ins or other attacks, programming errors, and similar disruptive problems. This is, in part, due to the increased sophistication of such cyberattacks and cyber incidents, the introduction of new technologies, and the continued expansion of the use of internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions. The failure of these systems for any reason could cause significant interruptions to our operations, which could result in a material adverse effect on our business, results of operations, and financial condition. See also “— We rely on the efficient, uninterrupted and secure operation of complex information technology systems and networks to operate our business. Any significant system or network disruption due to an actual or perceived breach in the security of our or our vendors’ information technology systems could have a negative impact on our reputation, regulatory compliance status, operations, sales, and operating results.”
We also have arrangements in place with our partners and other third-party service providers through which we share and receive information. Our reliance on our vendors and other third-party service providers increases our exposure to cybersecurity risks outside of our direct control, which could also expose us to risk of loss, litigation, and potential liability. For example, we may have limited insight into the data privacy or cybersecurity practices of third-party vendors and providers, including as it relates to our AI algorithms. Also, even if our own security measures remain intact, cyberattacks, data breaches, security incidents, malicious internet-based activities, or other incidents or failures at one of our vendors or third-party service providers could compromise our systems and data. Further, in such a circumstance, we may not receive timely notice of, or sufficient information about, the breach or other incident or failure, or be able to exert any meaningful control of or influence over how and when the breach or other incident or failure is addressed. Any theft, loss, or misappropriation of, or access to, policyholders’ or other proprietary data, or other breach of our third-party service providers’ and vendors’ information technology systems, could disrupt our operations, damage our reputation, result in fines, legal claims, or proceedings, including regulatory investigations and actions, liability for failure to comply with privacy and information security laws, or otherwise result in loss of revenue, fraudulent transactions, loss of policyholders, transaction errors, processing inefficiencies, service reliability, and increased costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. Further, the costs of mitigating cybersecurity risks may be significant, including, but not limited to, retaining the services of cybersecurity providers; compliance costs arising out of existing and future cybersecurity, data protection and privacy laws and regulations; and costs related to maintaining redundant networks, data backups, and other damage-mitigation measures. Moreover, the mere perception of a security breach involving us or any part of the insurance services industry, whether or not true, could also damage our business, operations, or reputation or otherwise expose us to potential liability.
Technology continues to expand and plays an ever-increasing role in our business. While it is our goal to safeguard information assets from physical theft and cybersecurity threats, there can be no assurance that our information security will detect and protect information assets from these ever-increasing risks. Information assets include both information itself in the form of computer data, written materials, knowledge, and supporting processes, and the information technology systems, networks, other electronic devices, and storage media used to store, process, retrieve, and transmit that information. As more information is used and shared by our employees, partners and policyholders, both within and outside our company, cybersecurity threats, such as ransomware, phishing, or distributed denial-of-service attacks, become expansive in nature. A cybersecurity event could occur that would cause damage to our reputation with our policyholders and other stakeholders and could have a material adverse effect on our business, results of operations, and financial condition. Such cyberattacks could disrupt our proprietary technology or other critical systems. This could hinder our ability to underwrite policies or support our partners, policyholders, and agents, leading to financial losses and operational downtime. Confidentiality, integrity, and availability of information are essential to maintaining our reputation, legal position, and ability to conduct our
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operations. Furthermore, as a company subject to privacy and data protection regulations such as the CCPA and the GLBA, any cybersecurity incident could also result in noncompliance penalties, regulatory scrutiny, and lawsuits. See also “— We are subject to evolving laws and regulations on data privacy, data protection, and cybersecurity, which can be complex and conflicting. We may face investigations, fines, and sanctions as a result of our or our service providers’ or partners’ actual or perceived failure to comply with such laws and regulations and incur increased operational costs in order to ensure future compliance” and “— Improper disclosure of confidential, personal, or proprietary data, whether due to human error, misuse of information by employees or vendors, or as a result of security breaches, cyberattacks, or other similar incidents with respect to our or our vendors’ systems, could result in regulatory scrutiny, legal liability, or reputational harm and could have an adverse effect on our business or operations.” Our cyber liability insurance may not be sufficient to protect against all losses we may incur if we suffer significant or multiple attacks. Similarly, while in some cases a service provider may have agreed to indemnify us for certain costs, such indemnifying service provider may refuse or be unable to uphold its contractual obligations.
We rely on technologies to provide services to our policyholders. Policyholders require us to issue our policies in a secure manner, either electronically through our internet website or through direct electronic data transmissions. Accordingly, we invest resources in establishing and maintaining electronic connectivity with policyholders and, more generally, in technological advancements. In addition, if our information technology systems are inferior to our competitors’, existing and potential policyholders may choose our competitors’ products over ours. Our business would be negatively impacted if we are unable to enhance our platform when necessary to support our primary business functions, including to match or exceed the technological capabilities of our competitors. We cannot predict with certainty the cost of maintaining and improving our platform, but failure to make necessary improvements and any significant shortfall in any technology enhancements or negative variance in the timeline in which system enhancements are delivered could have an adverse effect on our business, results of operations, and financial condition. In addition, a natural or man-made disaster or a pandemic could disrupt public and private infrastructure, including our information technology systems. See also “— Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, reputational harm, or legal liability.”
We rely on the efficient, uninterrupted, and secure operation of complex information technology systems and networks to operate our business. Any significant system or network disruption due to an actual or perceived breach in the security of our or our vendors’ information technology systems could have a negative impact on our reputation, regulatory compliance status, operations, sales, and operating results.
While we manage some of our information technology systems and some are outsourced to third parties, all information technology systems are potentially vulnerable to damage, breakdown, or interruption from a variety of sources, including but not limited to cyberattacks, ransomware, malware, security breaches, theft or misuse, unauthorized access or improper actions by insiders or employees, sophisticated nation-state and nation-state-supported actors, natural disasters, terrorism, war, telecommunication and electrical failures, or other compromise. We are at risk of attack by a growing list of adversaries through increasingly sophisticated methods. Because the techniques used to infiltrate or sabotage systems change frequently, we may be unable to anticipate these techniques or implement adequate preventative measures.
We can make no assurances that we will not experience cyberattack or that we will be successful at protecting Neptune from cyberattacks. Any such incident or resulting or other misuse of data could harm our reputation, lead to legal exposure, divert management attention and resources, increase our operating expenses due to the employment of consultants and third-party experts and the purchase of additional security infrastructure, and/or subject us to liability, resulting in increased costs and loss of revenue. Further, our reliance on cloud computing infrastructure introduces several key risks that could impact our operations and competitive advantage. In particular, our ability to handle growing volumes of policy data and transactions depends on the reliability and capacity of cloud computing providers. Any disruption, outage, or degradation in cloud computing performance — whether due to cyberattacks, technical failures, natural disasters, catastrophic events, terrorism, or other unforeseen events — could impair our ability to operate. Such incidents could result in operational delays, policyholder dissatisfaction, and reputational harm. In addition, if our cloud computing providers fail to meet our evolving performance requirements, we may experience slow response times, decreased efficiency, or service interruptions, potentially affecting policyholder satisfaction and agent productivity. Any such disruption in our platform’s performance due to cloud-related limitations, or failure to maintain our technological edge, could adversely impact our ability to compete effectively.
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See also “— Reliance on cloud computing exposes us to technological disruptions and potential risks.” In addition, any remediation efforts we undertake may not be successful. The perception that we do not adequately protect the privacy of information of our employees, partners, or policyholders could inhibit our growth and damage our reputation.
If we are unable to maintain and upgrade our system safeguards, we may incur unexpected costs and certain aspects of our systems may become more vulnerable to unauthorized access. Cyberattacks and security breaches that affect our partners and policyholders could adversely affect our ability to deliver our products and otherwise conduct our business and could put our systems at risk.
We have implemented various measures to manage our risks related to system and network security and disruptions, but a security breach or a significant and extended disruption in the functioning of our information technology systems could damage our reputation and cause us to lose policyholders, adversely impact our operations and operating results, and require us to incur significant expense to address and remediate or otherwise resolve such issues. In order to maintain the level of security, service, compliance, and reliability that our policyholders and applicable laws require, we may be required to make significant additional investments in our information technology systems on an ongoing basis.
Infringement, misappropriation, dilution, or other violations of our intellectual property or other proprietary information by third parties could harm our business.
We believe our intellectual property has significant value and is critical to our competitive advantage and market position. Our underwriting engine, Triton, and our policy management system, Poseidon, were built entirely in-house and form the backbone of our operations. Our Triton platform incorporates patented features. Both platforms’ proprietary algorithms enable us to evaluate flood risk with precision and efficiency. Similarly, our advanced ML models and predictive analytics tools, developed entirely in-house, are essential to our ability to provide instant, accurate underwriting decisions and competitive pricing. These models are built and maintained exclusively within Neptune, ensuring we maintain full control over their development and evolution. If third parties were to infringe upon, misappropriate, or otherwise violate these systems and models, or if our proprietary technology or processes were compromised or became publicly accessible, it could compromise our ability to offer differentiated products and services in the flood insurance market, diminish the value of our brand, undermine our competitive position, reduce our market shares, and adversely affect our business, particularly against well-funded competitors or emerging flood insurance companies.
The effectiveness of intellectual property protections, such as patents, trademarks, and copyrights, depends on the legal systems of the jurisdictions where we operate. If we expand our operations into additional jurisdictions, including internationally, certain regions may have limited or inconsistent enforcement, or otherwise fail to provide the same level of protection of our proprietary and confidential information as do the laws of the United States, increasing the risk of unauthorized use or disclosure, infringement, misappropriation, or other violation of our intellectual property, even if contractual restrictions exist surrounding use of our intellectual property. Additionally, we cannot guarantee that future patent, copyright, trademark, or service mark registrations for any pending or future applications will issue, or that any registered patents, copyrights, trademarks, or service marks will be valid, enforceable, sufficiently broad in scope, or provide adequate protection of our intellectual property and other proprietary rights. The United States Patent and Trademark Office requires compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent and trademark registration process and after a registration has issued. For example, there are situations in which noncompliance can result in abandonment or cancellation of a trademark filing, resulting in partial or complete loss of trademark rights in the relevant jurisdiction. If this occurs, our competitors might be able to enter the market under or acquire identical or similar brands, trademarks, service marks, or other intellectual property or other proprietary rights, or otherwise violate or diminish the value of our trademarks and our other intellectual property and proprietary rights. Failure to adequately protect our intellectual property rights could damage our brand and impair our ability to compete effectively.
Even where we have effectively secured statutory protection for our trademarks and other intellectual property, our competitors and other third parties may infringe on, misappropriate, or otherwise violate our intellectual property, which could weaken our competitive position and erode our market share. Detecting and addressing intellectual property infringement may require costly litigation or enforcement actions, with no guarantee of
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favorable outcomes, and, in the course of litigation, such competitors and other third parties may attempt to challenge the breadth of our rights or ability to prevent others from using similar marks or designs or invalidate our intellectual property. If such challenges were to be successful, having less ability to prevent others from using similar marks or designs may ultimately result in a reduced distinctiveness of our brand in the minds of consumers. Defending or enforcing our trademark rights, branding practices and other intellectual property could result in the expenditure of significant resources and divert the attention of management, which in turn may materially and adversely affect our business and operating results, even if such defense or enforcement is ultimately successful. Even though competitors occasionally may attempt to challenge our ability to prevent infringers from using our marks, we are not aware of any challenges to our right to use.
Furthermore, as we continue to innovate and expand, there is a risk that third parties may assert claims that our proprietary technology or other aspects of our business infringe on their intellectual property rights. Defending against such claims, even if unfounded, could result in costly litigation, operational disruptions, or the need to modify or cease using certain technologies. An unfavorable ruling could lead to monetary damages or licensing fees, negatively impacting our financial position.
Failure to seek, obtain, maintain, protect, defend, or enforce our intellectual property rights, or allegations that we have infringed, misappropriated, or otherwise violated the intellectual property rights of others, could harm our reputation, ability to compete effectively, financial condition, and business.
Our success and ability to compete depends in part on our ability to seek, obtain, maintain, protect, defend, and enforce our intellectual property rights, including with respect to our proprietary technology and our brand. To protect our intellectual property rights, we rely on a combination of trademark laws, copyright laws, patent protection, trade secret protection, confidentiality agreements, and other contractual arrangements with our affiliates, employees, policyholders, strategic partners, and others. It is our policy to enter into agreements containing obligations of confidentiality with each party that has or may have had access to proprietary information, know-how or trade secrets owned or held by us, including confidentiality and invention assignment agreements with our employees, consultants, and contractors. Such protective steps may be ineffective or inadequate to deter infringement, misappropriation, or other violations of our proprietary information or other intellectual property. For example, our competitors and other third parties may design around our intellectual property, independently develop similar or superior intellectual property, or otherwise duplicate or mimic our platform or products in a manner that does not violate our intellectual property rights, such that we would not be able to successfully assert our intellectual property rights or other proprietary rights against them. In addition, we may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Policing unauthorized use of our intellectual property is difficult, expensive, and time-consuming, and we may be required to spend significant resources to monitor and protect our intellectual property rights. Failure to protect our intellectual property adequately could harm our reputation and affect our ability to compete effectively.
In addition, even if we initiate litigation against third parties such as suits alleging infringement, misappropriation, or other violations of our intellectual property, we may not prevail. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Additionally, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. An adverse determination of any litigation proceedings could put our intellectual property at risk of being invalidated or interpreted narrowly and could put our related intellectual property at risk of not issuing or being canceled. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. Any of the foregoing could adversely affect our business, financial condition, and results of operations. See also “— Infringement, misappropriation, dilution, or other violations of our intellectual property or other proprietary information by third parties could harm our business.”
Our trademarks are valuable assets that support our brand and perception of our platform and products and distinguish our platform and products from those of our competitors. We have registered or applied to register many of these trademarks. Third parties may also oppose our trademark applications or otherwise challenge our use of such trademarks, and our trademarks may be circumvented or declared generic. Further, there can be no assurance
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that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks. Third parties may file for registration of trademarks similar or identical to our trademarks, thereby impeding our ability to build brand identity and possibly leading to market confusion. Moreover, third parties may file first for our trademarks in certain countries. If they succeed in registering or developing common law rights in such trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to develop brand recognition in those jurisdictions. If we are unable to protect our trademarks as well as our internet domain names in the United States or in other jurisdictions in which we may ultimately seek to operate, our brand recognition and reputation would suffer, we would incur significant re-branding expenses, and our results of operations could be adversely impacted.
Moreover, third parties may challenge, invalidate, or circumvent our intellectual property and other proprietary rights, or otherwise assert rights therein or ownership thereof, including through administrative processes or litigation, and we may be unable to successfully resolve any such conflicts in our favor or to our satisfaction. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management. Furthermore, third parties may assert intellectual property-related claims against us, including claims of infringement, misappropriation, or other violation of their intellectual property, which may be costly to defend, could require the payment of damages, legal fees, settlement payments, royalty payments, and other costs or damages, including treble damages if we are found to have willfully infringed certain types of intellectual property, and could limit our ability to use or offer certain technologies, products, or other intellectual property. Any intellectual property claims, with or without merit, could be expensive, take significant time, and divert management’s resources, time, and attention from other business concerns. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. Any of the foregoing could adversely affect our business, financial condition, and results of operations. Furthermore, successful challenges against us could require us to modify or discontinue our use of technology or business processes where such use is found to infringe, misappropriate, or otherwise violate the rights of others, or require us to purchase licenses from third parties, which may not be available on commercially reasonable terms, or at all. Even if a license is available to us, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, or we may be required to pay significant licensing payments or royalties, which would increase our operating expenses, or require us to redesign our platform or other products, or functionality therein, any of which could adversely affect our business, financial condition, and results of operations.
Improper disclosure of confidential, personal, or proprietary data, whether due to human error, misuse of information by employees or vendors, or as a result of security breaches, cyberattacks, or other similar incidents with respect to our or our vendors’ systems, could result in regulatory scrutiny, legal liability, or reputational harm and could have an adverse effect on our business or operations.
We maintain confidential, personal, and proprietary information relating to policyholders and agents, including their names, addresses, phone numbers, and emails. We are subject to laws and regulations relating to the collection, use, retention, security, and transfer of this information. These laws apply to transfers of information among our affiliates, as well as to transactions we enter into with third-party vendors. Any improper disclosure, data breach, or failure to comply with privacy and data protection laws could expose us to significant risks, including regulatory penalties, legal liabilities, and reputational damage. Cybersecurity breaches, such as computer viruses, unauthorized parties gaining access to our information technology systems, and similar incidents could disrupt the security of our internal systems and business applications, impair our ability to provide our products to our policyholders and protect the privacy of their data, compromise confidential business information, or result in intellectual property or other confidential or proprietary information being lost or stolen, including partner, policyholder, employee, or company data, which could harm our competitive position or otherwise adversely affect our business. Cyber threats are constantly evolving, which makes it more difficult to detect cybersecurity incidents, assess their severity or impact in a timely manner, and successfully defend against them.
We maintain policies, procedures, and technical safeguards designed to protect the security and privacy of confidential, personal, and proprietary information. Nonetheless, we cannot eliminate the risk of human error or guarantee our safeguards against employee, vendor, or third-party malfeasance. It is possible that the steps we follow, including our security controls over personal data and training of employees on data security, may not prevent improper access to, disclosure of, or misuse of confidential, personal, or proprietary information. Policyholders,
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agents, and partners trust us to protect their data. Moreover, while we strive to publish and prominently display privacy policies that are accurate, comprehensive, and compliant with applicable laws, rules, regulations, and industry standards, we cannot ensure that our privacy policies and other statements regarding our practices will be sufficient to protect us from claims, proceedings, liability, or adverse publicity. If our public statements about our use, collection, disclosure, and other processing of personal information — whether made through our privacy policies, information provided on our website, press statements, or otherwise — are alleged to be deceptive, unfair, or misrepresentative of our actual practices, we may be subject to potential government investigations and enforcement actions, including by the FTC or relevant state attorneys general. Any incident involving improper disclosure or misuse of confidential, personal, or proprietary information — whether due to cyberattacks, internal errors, or third-party service provider failures — could erode confidence in our brand, create legal exposure, subject us to legal liability, reduce policyholder retention, and attract negative media attention. See also “— Our business is dependent upon information processing systems. Cybersecurity events, data breaches, cyberattacks, or other similar incidents, as well as defects, interruptions, or other failures, with respect to our or our vendors’ information processing systems and data may hurt our business, damage our reputation, negatively impact policyholder retention and capacity provider relationships, and expose us to financial and legal liabilities” and “— We rely on the efficient, uninterrupted, and secure operation of complex information technology systems and networks to operate our business. Any significant system or network disruption due to an actual or perceived breach in the security of our or our vendors’ information technology systems could have a negative impact on our reputation, regulatory compliance status, operations, sales, and operating results.”
Data privacy is subject to frequently changing laws, rules, and regulations in the various jurisdictions in which we operate. We are subject to an evolving, and sometimes conflicting, landscape of privacy regulations, including the CCPA and the GLBA, which impose stringent requirements on data handling or other processing, security, and transparency. Noncompliance with these laws, and other laws, rules and regulations to which we are subject, could result in fines, penalties, enforcement actions, or costly litigation. Additionally, legislators in the U.S. are proposing new and more robust cybersecurity legislation in light of the recent broad-based cyberattacks at a number of companies. Continuing to maintain compliance with evolving privacy and data protection laws and regulations requires significant time, resources, and expense, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business. Our actual or perceived failure to adhere to, or successfully implement processes in response to, changing legal or regulatory requirements in this area could result in financial losses, legal liability, or damage to our reputation in the marketplace. See also “— We are subject to evolving laws and regulations on data privacy, data protection, and cybersecurity, which can be complex and conflicting. We may face investigations, fines, and sanctions as a result of our or our service providers’ or partners’ actual or perceived failure to comply with such laws and regulations and incur increased operational costs in order to ensure future compliance.”
Finally, because the interpretation and application of many privacy and data protection laws, commercial frameworks, and standards are uncertain, it is possible that these laws, frameworks, and standards may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our products. If so, in addition to the possibility of fines, lawsuits, breach of contract claims, criminal penalties, and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our products and features, which could have an adverse effect on our business. Furthermore, we may also be required to disclose personal information pursuant to demands from individuals, regulators, government authorities, and law enforcement agencies in a variety of jurisdictions with conflicting laws and regulations. Such disclosure may result in adverse media coverage and harm our brand and reputation, leading to loss of policyholders, which can result in adverse impact on our business, financial condition, and share price.
The confidentiality and invention assignment agreements that we enter into with our employees, consultants, and contractors involved in the development of intellectual property may not provide meaningful protection for our trade secrets or other confidential information, and if we are unable to protect the confidentiality of our trade secrets or other confidential information, the value of our platform and products and our business and competitive position could be materially adversely affected.
We rely heavily on trade secret laws and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information, including our platform and products and to maintain our competitive position. With respect to our platform and products, we consider trade secrets and know-how to be one of our
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primary sources of intellectual property. Trade secrets and know-how can be difficult to protect. We seek to protect these trade secrets and other confidential information in part by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, outside contractors, advisors, and other third parties. We also enter into confidentiality and invention assignment agreements with our employees, contractors, consultants, and other third parties who develop intellectual property on our behalf or who may have access to our proprietary information, know-how, or trade secrets. These confidentiality agreements are designed to protect our proprietary information and, in the case of agreements or clauses containing invention assignment, to grant us ownership of technologies that are developed through a relationship with employees or third parties. These agreements may not be self-executing or otherwise sufficient and may not provide meaningful protection against the unauthorized use or disclosure of our trade secrets or other confidential information, and adequate remedies may not exist if unauthorized use or disclosure were to occur, or we may not have executed, or may in the future fail to execute, invention assignment agreements with employees, contractors, consultants, and third parties who may be involved in the development of our intellectual property. The exposure of our trade secrets and other proprietary information would impair our competitive advantages and could have a material adverse effect on our business, results of operations, and financial condition. In particular, a failure to protect our confidential information may allow competitors to copy our technology, which could adversely affect our pricing and market share. Further, other parties may independently develop substantially equivalent know-how and technology.
Furthermore, individuals executing agreements with us may have preexisting or competing obligations to third parties, and thus an agreement with us may be ineffective in perfecting ownership of intellectual property developed by those individuals. We may in the future become subject to claims that we or our employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, we may be forced to pay monetary damages or be enjoined from using certain technology, aspects of our platforms, aspects of our programs, or knowledge. Even if we are successful in defending against these claims, litigation could result in substantial costs and demand on management resources.
In addition to contractual measures, we seek to protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee, consultant, or other third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee, consultant, contractor, or other third party from misappropriating our trade secrets and providing them to a competitor, and the recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our intellectual property, trade secrets, or confidential information will be effective. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our platform and programs that we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. Trade secret violations are often a matter of state law, and the criteria for protection of trade secrets can vary among different jurisdictions. In addition, trade secrets may otherwise become known or be independently developed by others, including our competitors, in a manner that could prevent legal recourse by us.
Our platform contains third-party open-source software components, which may entail greater operational risks than use of third-party commercial software.
Our platform contains software modules licensed by third-party providers and authors under “open-source” licenses. Use and distribution of open-source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification, or other contractual protections regarding infringement claims or the quality of the code. In addition, the public availability of such software may make it easier for others to compromise our platform, leading to greater cybersecurity risks.
Some open-source licenses contain requirements that the licensee makes available source code for modifications or derivative works we create based upon the type of open-source software we use or grant other licenses to our intellectual property. If we combine our proprietary software with open-source software in a certain manner, we could, under certain open-source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar products with lower development effort
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and time and ultimately could result in a loss of our competitive advantages. Alternatively, to avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of our software.
We expect that we will monitor our use of open-source software to avoid subjecting our platform to conditions we do not intend, but we cannot provide assurance that our processes for controlling our use of open-source software will be effective. If we are held to have breached or failed to fully comply with all the terms and conditions of an open source software license, we could face litigation, infringement or other liability, or be required to seek costly licenses from third-parties to continue providing our offerings on terms that are not economically feasible, to re-engineer our platform, to discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business and operations. Moreover, the terms of many open-source licenses have not been interpreted by U.S. or foreign courts. As a result, there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to operate our platform. From time to time, there have been claims challenging the ownership of open-source software against companies that incorporate open-source software into their solutions. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open-source software. The risks associated with our use of open-source software described above can result in adverse impact on our reputation, business, and operations.
Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property and other proprietary rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:
• others may be able to develop a platform or other technology that is similar to our Triton platform, but that is not covered by the claims of our issued patent;
• others may independently develop similar or alternative technologies or otherwise circumvent any of our technologies without infringing our intellectual property rights;
• we might not have been the first to invent the inventions covered by our issued patent;
• we might not have been the first to file the patent application covering our issued patent or future patents;
• it is possible that any patent applications we may file in the future will not lead to issued patents;
• others may have access to the same intellectual property rights licensed to us on a non-exclusive basis in the future;
• our issued patent or any future patents we own may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;
• our competitors might conduct R&D activities in countries where we do not have patent rights, or in countries where R&D safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
• ownership, validity, or enforceability of our issued patent may be challenged by third parties;
• patent enforcement is expensive and time-consuming and difficult to predict, thus we may not be able to enforce our issued patent or future patents against a competitor;
• we may choose not to file a patent for certain inventions, instead choosing to rely on trade secret protection or know-how, and a third party may subsequently file a patent covering such intellectual property; and
• the patents of third parties or pending or future applications of third parties, if issued, may have an adverse effect on our business.
Should any of these events occur, it could significantly harm our business, financial condition, and results of operations.
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Risks Relating to Regulatory and Legal Matters
The insurance business is extensively regulated, and changes in regulation may reduce our profitability and limit our growth.
We operate in a highly regulated industry, subject to regulatory oversight in the 50 states and Washington, D.C., where we are qualified to do business, and regulatory factors at the federal and state level may impact our ability to sell insurance policies. This extensive regulatory framework governs consumer protections and data security, exposing our business to significant litigation and compliance risks. Any failure to meet these requirements as a result of our or our service providers’ or partners’ actual or perceived failure to comply with such laws and regulations or allegations of noncompliance can result in fines, penalties, or operational restrictions. Regulators may scrutinize the underwriting and pricing decisions made by our proprietary Triton platform, potentially raising concerns about transparency, accuracy, or adherence to applicable laws. Failure to comply with applicable regulations or to obtain or maintain appropriate authorizations or exemptions under any applicable laws could result in restrictions on our ability to conduct business or engage in activities regulated in one or more jurisdictions in which we operate and could subject us to fines, injunctions, and other sanctions that could have a material adverse effect on our business, results of operations, and financial condition. In addition, the nature and extent of regulation could materially change, which may result in additional costs associated with compliance with any such changes, or changes to our operations that may be necessary to comply, any of which may have a material adverse effect on our business. State insurance regulatory authorities have broad administrative powers, which at times are coordinated and communicated across regulatory bodies. These administrative powers include, but are not limited to:
• licensing companies and agents to transact business;
• regulating certain premium rates;
• reviewing and approving policy forms;
• regulating discrimination in pricing, coverage terms, and unfair trade and claims practices, including payment of inducements;
• establishing and revising statutory capital and reserve requirements and solvency standards;
• evaluating enterprise risk to an insurance company;
• approving changes in control of insurance companies;
• restricting the payment of dividends and other transactions between affiliates;
• regulating the types, amounts, and valuation of investments; and
• restricting, pursuant to state monoline restrictions, the types of insurance products that may be offered.
State insurance regulators and the NAIC regularly re-examine existing laws and regulations, which may lead to modifications to statutory accounting principles, interpretations of existing laws, and the development of new laws and regulations applicable to insurance companies and their products. Changes in regulations or heightened scrutiny of underwriting practices or E&S lines could materially and adversely affect our business, financial condition, results of operations, and growth prospects.
Litigation often arises from claims activity. Even though we do not directly handle or adjudicate claims, legal disputes related to denied or delayed claims under policies sold through our platform may incorrectly name us as a party, resulting in reputational damage and legal expenses. Litigation may also involve underwriting decisions, where Triton’s algorithms could be challenged for perceived inaccuracies, discrimination, or noncompliance with regulatory standards. Such disputes can lead to court-mandated changes to our processes, financial liabilities, and reputational harm. The scale and reach of our business can also expose us to the risk of class-action lawsuits or consumer protection claims alleging unfair practices or misleading disclosures. Legal proceedings tied to these allegations, whether substantiated or not, can result in significant financial liabilities, disruption to operations, and erosion of policyholder trust.
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While we operate as a private flood insurer, changes in NFIP regulations can impact our business. For example, the implementation of Risk Rating 2.0 by the NFIP aims to align premiums more closely with actuarial accuracy by increasing rates for most policyholders. Similar changes could affect the competitive landscape and influence policyholder behavior, potentially impacting our market share and profitability.
As a provider of flood insurance, we are particularly sensitive to regulations related to climate change and natural disasters. Due to the frequency and intensity of the natural disasters related to climate change, government and regulatory bodies may introduce new regulations aimed at mitigating the impact of natural disasters. These regulations could include stricter building codes, mandatory insurance requirements, or incentives for risk mitigation measures. Such regulations could increase our service providers’ or partners’ compliance costs and operational complexity. Further, a substantial legal liability or a significant regulatory action against us could have a material adverse effect on our business, results of operations, and financial condition. It is possible that we could become subject to future investigations, regulatory actions, lawsuits, or enforcement actions, which could cause us to incur legal costs and, if we were found to have violated any laws or regulations, require us to pay fines and damages, perhaps in material amounts, and result in injunctions and other sanctions. Increased regulatory scrutiny and any resulting investigations or legal proceedings could result in new legal precedents and industry-wide regulations or practices that could have a material adverse effect on our business, results of operations, and financial condition. Moreover, even if we ultimately prevail in such litigation, regulatory action, or investigation, we could suffer significant reputational harm and incur significant legal expenses, which could have a material adverse effect on our business, results of operations, and financial condition. We cannot predict the ultimate outcomes of any future investigations, regulatory actions, or legal proceedings. Additionally, our carrier partners are regulated by state insurance departments for solvency issues and are subject to reserve requirements. We cannot guarantee that all carriers with which we do business comply with regulations instituted by state insurance departments. For example, if our carrier partners are perceived as unstable or financially weak, they may face increased regulatory scrutiny, which could result in restrictions on their operations or additional compliance requirements. This could further impact their ability to support our business and lead to operational disruptions. If our carriers are unable to adapt to these regulatory changes, it could lead to a reduction in their capacity or willingness to partner with us, thereby affecting our ability to operate and expand our business and maintain existing policies. We may need to expend resources to address questions or concerns regarding our relationships with these insurers, diverting management resources away from operating our business, which could have an adverse impact on our business.
Reform or repeal of the Biggert-Waters Act could materially reduce sales.
The Biggert-Waters Act of 2012 defined “private flood insurance” as an insurance policy that meets certain criteria and mandated that the NFIP establish actuarially sound premium rates; following its adoption, the NFIP’s premium rates increased. Thereafter, as part of the Consolidated Appropriations Act of 2014, Congress prohibited FEMA from implementing section 207 of the Biggert-Waters Act, effectively stopping certain rate increases while new law was developed to address concerns about increased rates. In 2014, Congress passed the Homeowner Flood Insurance Affordability Act of 2014, which repealed certain provisions of the Biggert-Waters Act, thereby restoring certain subsidies and “grandfathering” of certain properties, and also implemented limits on certain NFIP rate increases, implemented an annual surcharge on all policyholders, and mandated FEMA conduct an affordability study to explore ways to make flood insurance more affordable for policyholders. In addition to the mandates relating to NFIP rates, the Biggert-Waters Act and the related regulations required federally-regulated lending institutions to accept private flood insurance policies that meet certain criteria in satisfaction of flood regulations governing a federally-related mortgage loan secured by a building located in an SFHA.
Subsequently, in 2021, FEMA continued to modify NFIP’s approach to pricing by launching Risk Rating 2.0, a pricing methodology aimed at better aligning premiums with the risk profile of a given property. Under Risk Rating 2.0, NFIP policyholders became subject to limits on annual rate increases of up to 18%, the maximum allowed under congressional caps, until their premiums reach full risk-based levels. In addition, certain executive orders have been adopted in 2025 that have rescinded the Federal Flood Risk Management Standard Policy and established a bipartisan FEMA Review Council tasked with reforming and streamlining the U.S. emergency management and disaster response system. To date, these developments have not had any impact on the provisions of the Biggert-Waters Act that established the private flood insurance market, but a weakening or repeal of, or future legislation or executive action addressing, the mandatory acceptance provisions included in the Biggert-Waters Act or the related regulations could result in fewer sales if lending institutions subsequently choose not to accept private flood policies in satisfaction of the regulation. Further, if NFIP’s implementation of Risk Rating 2.0 is tolled or delayed or
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Congress elects to continue to subsidize the NFIP consistent with historic levels, it could limit our potential growth opportunities relating to existing NFIP policyholders. In addition, adjustments to NFIP’s pricing, coverage options, or underwriting guidelines, whether through amendments or modifications to the Biggert-Waters-Act or otherwise, could also significantly alter the competitive landscape. If any of such developments occur, it could materially and adversely affect our business, financial condition, and results of operations.
Changes to the E&S lines regulatory landscape, or a requirement for Neptune to file admitted rates, could have a detrimental impact to our sales, innovation, and ability to grow.
We operate in the E&S lines market, which allows for greater flexibility in underwriting, pricing, and product innovation compared to the admitted insurance market. E&S insurers are not required to file rates and forms with state regulators in the same manner as admitted carriers, enabling us to adapt quickly to market conditions and policyholder needs.
Regulatory changes affecting the E&S market or the imposition of admitted-market requirements on Neptune could have a material and adverse impact on our business. If we are required to file and receive approval for our rates and policy forms in certain states, it could significantly slow our ability to adjust pricing based on evolving risk factors and our proprietary models and technology platform. This would limit our flexibility and responsiveness to competitive and climate-related changes and could require us to make changes to our pricing structure. In addition, the E&S market’s ability to rapidly introduce new coverage options and adjust terms is a key advantage. If regulatory changes require us to comply with admitted-market filing processes, our product development cycles could be delayed, reducing our ability to respond to emerging policyholder needs. Further, many of our competitors and potential competitors operate within the admitted insurance market and have already built compliance frameworks for rate and form filings. If we are required to transition to an admitted structure, we may face increased operational costs and administrative burdens that could reduce our competitive advantage. Some states may also introduce new regulations limiting the use of E&S carriers or requiring E&S lines insurers to meet additional compliance thresholds. If states impose restrictions that force more policies into the admitted market, our ability to underwrite and sell flood insurance through the E&S structure could be limited. Changes in E&S regulations may also affect how insurance and reinsurance partners evaluate risk-taking arrangements. Stricter regulatory oversight could lead to increased capital requirements or changes in reinsurance terms, impacting our ability to secure or grow risk-taking partnerships. If regulatory changes restrict the advantages of the E&S market or require Neptune to file admitted rates, it could hinder our ability to innovate, slow our sales growth, and impose additional costs that could materially and adversely affect our business, financial condition, and results of operations.
Compliance with insurance licensing requirements for MGAs and E&S lines agencies and individual producers is critical to our operations, and any failure to maintain required licenses could disrupt our business.
As an MGA, we are subject to licensing requirements and must maintain insurance licenses in each of the jurisdictions in which we operate. These licenses are subject to periodic renewal and compliance with jurisdiction-specific regulations, including recordkeeping, tax reporting, and E&S lines filing requirements. Any failure to meet these obligations could result in fines, penalties, or suspension of our licenses, which would impair our ability to operate in affected jurisdictions.
Our operations as both an MGA and E&S lines broker subject us to complex, overlapping licensing requirements that could have an adverse impact on our business if not maintained. This dual role subjects us to distinct but overlapping regulatory frameworks, increasing both compliance complexity and operational risk. Some states require separate licenses for MGA and E&S lines activities, while others may combine these authorities under different licensing structures.
Additionally, certain employees who provide customer service or interact with policyholders are required to obtain and maintain individual insurance producer licenses in compliance with state regulations. These licenses require passing state examinations, completing continuing education courses, and adhering to ethical standards. Many states also restrict E&S lines broker licenses to individuals rather than agencies. Our ability to operate in these jurisdictions depends entirely on maintaining employed individuals who hold these personal licenses. The departure of key licensed individuals could immediately impact our ability to place new business or service existing policies in affected states until we can obtain new individual licenses. This creates operational risk, as the process of obtaining new individual licenses can be time-consuming, potentially creating business interruptions. As a result, failure by any of our licensed employees to meet these requirements could limit our ability to provide customer service or result in regulatory action.
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The variation in licensing requirements across states increases administrative complexity and costs. Monitoring and managing compliance for both agency and individual licenses requires significant investment in resources and systems. Any oversight, such as missed renewal deadlines or failure to meet state-specific reporting requirements, could result in lapses or disciplinary action. Loss or suspension of licenses in key markets could significantly impact our revenue and growth prospects, particularly in states that represent a substantial portion of our business. Additionally, lapses in individual licensing could expose Neptune to liability if unlicensed employees inadvertently engage in regulated activities.
The regulatory landscape governing insurance licensing is continually evolving, and new or modified requirements could impose additional compliance burdens or restrict our ability to operate in certain jurisdictions. Maintaining licensing compliance requires significant ongoing investment in personnel, training, and systems, and these costs may increase as regulations evolve or our business expands. We also depend on third-party service providers to assist with certain aspects of our licensing compliance and any failures by these providers could result in inadvertent non-compliance with licensing requirements. In addition, as we expand into new markets or offer new products, we may face additional licensing requirements or heightened regulatory scrutiny, which could impede our growth strategies.
Finally, as an MGA, we must verify that our sub-producers maintain required licenses and comply with the conditions of our delegated binding authorities. Failure to oversee the license status of our sub-producers could result in termination of carrier relationships and/or increased regulatory risk.
These licensing requirements are complex, vary by state, and impose ongoing obligations that are critical to maintaining our ability to conduct business. While we strive to maintain all required licenses, we cannot assure that we will be able to maintain them in the future or obtain additional licenses as needed, and any such failure or lapses in compliance could materially and adversely affect our business, financial condition, results of operations, and growth prospects.
Our role in collecting and paying E&S lines taxes exposes us to financial, operational, and regulatory risks.
As an E&S lines broker, we are responsible for collecting and remitting E&S lines taxes on behalf of our policyholders to various state authorities. This process requires strict compliance with state-specific tax laws, accurate recordkeeping, and timely payments.
Any errors, delays, or omissions in the collection or payment of E&S lines taxes could result in penalties, fines, or interest charges. State regulators may also audit our tax compliance practices, and any findings of noncompliance could lead to further penalties or reputational harm. E&S lines tax requirements also vary by state, adding complexity to our operations. Misinterpretation of state laws, calculation errors, or failures in tracking transactions across jurisdictions could result in underpayment or overpayment of taxes, disrupting cash flow and increasing administrative burdens.
Our role in handling funds for E&S lines taxes could make us liable for any unpaid taxes. Disputes with policyholders or state authorities over tax amounts or remittance could result in financial losses and damage to our reputation. Proper management of E&S lines taxes is critical to maintaining compliance and avoiding financial and operational disruptions. Any failure to do so could materially and adversely affect our business, financial condition, and results of operations.
Regulatory and licensing requirement changes could disrupt operations or increase compliance costs and restrict our ability to conduct our business.
The flood insurance industry operates within a complex and evolving regulatory environment, encompassing federal, state, and local laws. Changes to these regulations could significantly impact our business model, operational costs, and competitive position.
Dramatic policy changes to the NFIP are possible. Any modifications to the NFIP’s pricing structure, underwriting guidelines, or subsidy programs could alter the competitive landscape in which we operate. For example, if the administration were to implement measures to lower NFIP premiums or expand coverage options, private flood insurance providers like Neptune could face heightened competitive pressures. Conversely, reductions in NFIP subsidies could drive more customers to seek private market solutions, creating both opportunities and operational challenges.
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Regulatory changes at the federal level, including those affecting floodplain mapping, risk assessment standards, and lender requirements, could also create uncertainty for private insurers. For example, changes to FEMA’s flood zone designations or its risk rating methodologies could affect how we evaluate and price flood risk, necessitating costly updates to our proprietary technology. Additionally, prolonged regulatory uncertainty could discourage banks or other lenders from accepting private flood insurance policies, further limiting market growth. Changes to Standard Flood Insurance Policy forms or requirements could also necessitate swift adjustments to our processes and systems, potentially increasing compliance costs and operational risks. These dependencies make our business sensitive to potential federal policy shifts. Further, while federal policies dominate the flood insurance market, state regulators also play a significant role in governing private insurers. Variability in state-level requirements for rate filings, consumer protections, and policy approvals can add complexity and cost to our operations.
Additionally, we are subject to licensing requirements and must maintain insurance licenses in each of the jurisdictions where we operate. These licenses are subject to periodic renewal and compliance with state- and jurisdiction-specific regulations, including recordkeeping, tax reporting, and E&S lines filing requirements. For example, a significant portion of our business is concentrated in Florida, Texas, and Louisiana, collectively representing 49% of our policies in force as of June 30, 2025. The insurance business is primarily a state-regulated industry, and therefore, state legislatures may enact laws that adversely affect the insurance industry. Because our business is concentrated in these states, we face greater exposure to unfavorable changes in regulatory conditions in Florida, Texas and Louisiana than insurance intermediaries whose operations are more diversified through a greater number of states. Unfavorable changes to regulatory conditions in Florida, Texas, and Louisiana could harm our business, financial condition and results of operations. See also “— Compliance with insurance licensing requirements for MGAs and E&S lines agencies and individual producers is critical to our operations, and any failure to maintain required licenses could disrupt our business” for further discussion.
As a result, any significant shifts in federal or state regulations — particularly those related to the NFIP — could materially and adversely affect our business, financial condition, and results of operations.
Changes in federal and state tax laws, or interpretations thereof, could materially and adversely affect our financial performance.
Neptune is subject to federal and state income taxes, including in Florida where our headquarters are located and in numerous other states where we sell policies. The complexity and variability of tax regulations, combined with the potential for legislative or administrative changes, expose our business to significant tax-related risks.
Federal and state governments periodically enact changes to income tax rates, tax deductions, credits, and other provisions. Increases in corporate income tax rates or reductions in available deductions could materially increase our tax obligations. For example, legislative proposals to raise federal corporate tax rates or broaden the tax base could significantly impact our profitability.
In addition, as we operate in multiple states, Neptune is subject to varying tax regimes and reporting requirements. States may impose additional taxes, which could increase our compliance burden and tax liabilities. Changes in Florida’s tax laws or in other key states where we sell policies could disproportionately affect our financial results. Differences in state tax laws and interpretations can also result in disputes with tax authorities, audits, and potential assessments for unpaid taxes, penalties, or interest. Additionally, changes in enforcement practices or increased scrutiny from federal or state tax agencies could lead to greater compliance costs and risks of financial penalties. Further, changes to tax laws or regulations may be enacted with retroactive effect, resulting in unexpected liabilities. Similarly, unanticipated changes in tax policy could disrupt our financial planning and operational strategies, potentially impacting cash flow and investment decisions.
The need to comply with diverse tax laws across multiple jurisdictions adds administrative complexity and costs and we must allocate resources to ensure compliance with filing requirements, tax payments, and reporting standards, diverting attention and resources from core business activities. The dynamic and often unpredictable nature of tax regulation increases the risk of adverse impacts, particularly as we continue to look to expand our operations into additional jurisdictions. As a result, tax policy changes or increased tax liabilities could materially and adversely affect our business, financial condition, and results of operations.
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We are subject to evolving laws and regulations on data privacy, data protection, and cybersecurity, which can be complex and conflicting. We may face investigations, fines, and sanctions as a result of our or our service providers’ or partners’ actual or perceived failure to comply with such laws and regulations and incur increased operational costs in order to ensure future compliance.
Our collection, use, retention, protection, disclosure, transfer, and other processing of personal data subject us to laws and regulations on data protection in multiple jurisdictions, which are often evolving and sometimes conflicting. There is uncertainty and inconsistency in how these data protection and privacy laws and regulations are interpreted and applied, and they continue to evolve in ways that could adversely impact our business. These laws have a substantial impact on our operations in the United States. Further, we are subject to certain federal, state, and international regulations related to cybersecurity, including the NYDFS 23 NYCRR Part 500 Cybersecurity Requirements for Financial Services Companies.
We may also be considered a financial institution under the GLBA. The GLBA regulates, among other things, the use of personal information (“non-public personal information” under the GLBA) in the context of the provision of financial services, including by banks and other financial institutions. The GLBA includes both a “Privacy Rule,” which imposes obligations on financial institutions relating to the use or disclosure of non-public personal information, and a “Safeguards Rule,” which imposes obligations on financial institutions and, indirectly, their service providers, to implement and maintain physical, administrative, and technological measures to protect the security of non-public personal information.
Furthermore, in the United States, federal and state lawmakers and regulatory authorities have increased their attention to the collection and use of consumer data. For example, certain states in the United States have enacted stringent privacy and data protection legislation and regulations, such as the CCPA, which gives California residents the right to access and request deletion of their personal data, opt out of the sale of personal data, and receive detailed information about how their personal data is processed, and which provides a private right of action for certain data breaches involving the loss of personal data. The California Privacy Rights Act modified the CCPA by expanding consumers’ rights with respect to certain personal data and creating a new state agency to oversee implementation and enforcement efforts. Another example is the Virginia Consumer Data Protection Act, which regulates how businesses collect and share personal information. Several other states have passed comprehensive privacy laws similar to the CCPA. Like the CCPA, these laws create obligations related to the processing of personal information, as well as special obligations for the processing of “sensitive” data. Some of the provisions of these laws may apply to our business activities. Additionally, state laws are changing rapidly and there is discussion in Congress of a new comprehensive federal data privacy law to which we may likely become subject, if enacted, which may add additional complexity, conflicting requirements, additional restrictions, and potential legal risk. The existence of comprehensive privacy laws in various jurisdictions will make our compliance obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions or otherwise incur liability for noncompliance.
We also send marketing messages via email and are subject to the Controlling the Assault of Non-Solicited Pornography And Marketing Act (the “CAN-SPAM Act”). The CAN-SPAM Act imposes certain obligations regarding the content of emails and providing opt-outs (with the corresponding requirement to honor such opt-outs promptly). While we strive to ensure that all of our marketing communications comply with the requirements set forth in the CAN-SPAM Act, any violations could result in the FTC and/or state regulators and attorneys general seeking civil penalties against us.
Additionally, depending on the nature of the information compromised, in the event of a data breach or other unauthorized access to our policyholder data, we may also have obligations to notify policyholders and regulators about the incident, and we may need to provide some form of remedy, such as a subscription to credit monitoring services, pay significant fines to one or more regulators, or pay compensation in connection with a class action settlement. Furthermore, we may be required to disclose personal data pursuant to demands from individuals, regulators, government agencies, and law enforcement agencies in various jurisdictions with conflicting privacy and security laws, which could result in a breach of privacy and data protection policies, notices, laws, rules, court orders, and regulations. Although we may have contractual protections with our vendors, any actual or perceived security breach, incident, or compromise could harm our reputation and brand, expose us to potential liability or require us to expend significant resources on cybersecurity and in responding to any such actual or perceived breach, incident, or compromise. Any contractual protections we may have from our vendors may not be sufficient
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to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections. Moreover, changes in the laws and regulations that govern our collection, use, and disclosure of policyholder data and offering of products to new jurisdictions could impose additional requirements with respect to the retention and security of policyholder data and could limit marketing activities. Complying with these obligations could cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises policyholder data. Our failure to comply with data protection laws or the improper disclosure of our own confidential business information or sensitive policyholder information could have an adverse effect on our reputation, business, operating results, financial condition, and share price.
Our business is subject to risks related to legal, governmental, and regulatory proceedings.
In the normal course of business, we may be subject to regulatory and governmental investigations and civil actions, litigation, and other forms of dispute resolution. In addition, we may become involved in litigation and arbitration concerning our rights and obligations under insurance policies issued by our capacity providers to third parties. Additionally, from time to time, various regulatory and governmental agencies may review our transactions and practices in connection with industry-wide and other inquiries. Such investigations, inquiries, or examinations could in the future develop into administrative, civil, or criminal proceedings or enforcement actions, in which remedies could include fines, penalties, restitution, or alterations in our business practices, and could result in additional expenses, limitations on certain business activities, and reputational damage.
We and our officers and directors may also become subject to a variety of additional types of legal disputes brought by holders of our securities, policyholders, employees and others, alleging, among other things, breach of contractual or fiduciary duties, bad faith, indemnification and violations of federal and state statutes and regulations. Certain of these matters may also involve potentially significant risk of loss due to the possibility of significant jury awards and settlements, punitive damages, or other penalties. These matters could be highly complex and seek recovery on behalf of a class or similarly large number of plaintiffs. It is therefore inherently difficult to predict the size or scope of potential future losses arising from them, and developments in these matters could have a material adverse effect on our financial condition or results of operations.
Risks Related to Financial and Accounting Matters
We will incur significant increased costs and management resources as a result of operating as a public company.
As a public company, we will be subject to the information and reporting requirements of the Securities Act, the Exchange Act, and other federal securities laws, rules and regulations related thereto, including compliance with the Sarbanes-Oxley Act and the Dodd-Frank Act. In addition, the NYSE listing requirements and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will significantly increase our legal and financial compliance costs and will make some activities more time-consuming and costly. Among other things, as a public company we are required to:
• maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;
• maintain policies relating to disclosure controls and procedures;
• prepare and distribute periodic reports in compliance with our obligations under federal securities laws;
• institute a more comprehensive compliance function, including with respect to corporate governance; and
• involve, to a greater degree, our outside legal counsel and accountants in the above activities.
The costs of preparing and filing annual and quarterly reports, proxy statements, and other information with the SEC and furnishing audited reports to stockholders is expensive and much greater than that of a privately-held company, and compliance with these rules and regulations will require us to hire additional financial reporting, internal controls, and other finance personnel, and will involve a material increase in regulatory, legal, and accounting expenses and the attention of our board of directors and management. In addition, being a public company makes it more expensive for us to obtain director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage. These factors could
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also make it more difficult for us to attract and retain qualified executives and members of our board of directors. We expect a substantial increase in legal, accounting, insurance, and certain other expenses incurred to comply with these additional regulatory and other requirements in the future, which will negatively impact our business, results of operations, and financial condition.
Changes in accounting principles and financial reporting requirements could impact our consolidated results of operations and financial condition.
Our financial statements are prepared in accordance with GAAP, which are periodically revised. Changes in accounting principles and financial reporting requirements could significantly impact our consolidated results of operations and financial condition. From time to time, we are required to adopt new or revised accounting standards issued by FASB, which may require us to modify our accounting policies, procedures, and systems. These changes could result in significant variations in our reported financial results and may affect our financial condition. See Note 2, “Significant Accounting Policies,” to our audited consolidated financial statements and our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus for a discussion of any accounting developments that have been issued but not yet implemented.
We could be subject to additional tax liabilities.
We are subject to U.S. federal, state, and local income taxes, sales, and other taxes in the United States. Significant judgment is required in evaluating our tax positions, and the ultimate tax outcome may be uncertain. In addition, our provision for income taxes is subject to volatility and could be adversely affected by many factors, including, among other things, changes to our operating or holding structure, changes in the amounts of earnings in jurisdictions with differing statutory tax rates, and changes in the valuation of deferred tax assets and liabilities. In addition, our future income tax obligations could be adversely affected by changes in, or interpretations of, tax laws in the United States. Tax authorities may disagree with our calculation of R&D tax credits, cross-jurisdictional transfer pricing, or other matters and assess additional taxes, interest, or penalties. While we regularly assess the likely outcomes of these examinations to determine the adequacy of our provision for income taxes and we believe that our financial statements reflect adequate reserves to cover any such contingencies, there can be no assurance that the outcomes of such examinations will not have a material impact on our results of operations and cash flows. If tax authorities change applicable tax laws, our overall taxes could increase, and our financial condition or results of operations may be adversely impacted.
If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our stock.
We prepare our consolidated financial statements in accordance with GAAP. These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue, and expenses, as well as the disclosure of contingent assets and liabilities at the date of our financial statements. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue, and expenses that are not readily apparent from other sources. If our assumptions change or actual circumstances differ from those in our assumptions, our results could differ from these estimates, which could materially affect our consolidated financial statements. This could cause our results of operations to fall below expectations of securities analysts and investors, and result in a decline in the market price of our common stock. Future changes in accounting standards or accounting guidance generally could also have an adverse impact on our results of operations and financial condition. Further, the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements, or misrepresentations.
We are exposed to the risk of failure by banks where we hold uninsured deposits exceeding FDIC limits.
We currently maintain cash deposits at JPMorgan Chase Bank, N.A., with balances that often exceed the $250,000 per-depositor limit insured by the FDIC. Any failure of a bank where we hold deposits above this insured threshold could result in the loss of uninsured funds, leading to financial losses, liquidity constraints, and operational disruptions. For example, in early 2023, substantially all of our cash and cash equivalents were held in accounts with Silicon Valley Bank (“SVB”) at the time it was closed by state regulators, and the FDIC was appointed as its receiver. As a result, we were unable to access funds needed for working capital and operating expenses during the suspension of SVB’s banking services. While the FDIC eventually created
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a successor bridge bank for SVB and all of our funds held at SVB were subsequently transferred to the bridge bank under a systemic risk exception approved by the U.S. Treasury, the Federal Reserve and the FDIC, there can be no guarantee that we would be able to recover our uninsured deposits from any other banking institution with which we hold funds if such institution were to fail.
Economic instability, financial market volatility, or stress in the banking sector could increase the likelihood of bank failures. If a bank holding our uninsured deposits fails and we are unable to recover those funds, it could materially and adversely affect our financial condition, liquidity, results of operations, and ability to execute our business strategy.
Risks Relating to our Indebtedness
We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business.
As of June 30, 2025, we had total consolidated debt outstanding of $292.4 million. Our outstanding debt was incurred under our 2025 Amended and Restated Credit Agreement and is collateralized by substantially all of our assets. For the six months ended June 30, 2025 and 2024, we had debt servicing costs of $8.3 million and $10.6 million, respectively, all of which were attributable to interest expense. The level of debt we have outstanding during any period could adversely affect our financial flexibility. We also bear risk at the time our debt matures and related to the floating nature of the interest rate on our debt. Our ability to make interest and principal payments, to refinance our debt obligations, and to fund any planned capital expenditures will depend on our ability to generate cash from operations. Our ability to generate cash from operations is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control, such as an environment of rising interest rates. The need to service our indebtedness will also reduce our ability to use cash for other purposes, including working capital, dividends to stockholders, acquisitions, capital expenditures, share repurchases, and general corporate purposes. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity, or reducing or delaying capital expenditures, strategic acquisitions, and investments, any of which could impede the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business. Additionally, we may not be able to effect such actions, if necessary, on favorable terms, or at all. We may not be able to refinance any of our indebtedness on favorable terms, or at all.
The 2025 Amended and Restated Credit Agreement governing our debt contains covenants that, among other things, restrict our ability to make certain restricted payments, incur additional debt, engage in certain asset sales, mergers, acquisitions, or similar transactions, create liens on assets, engage in certain transactions with affiliates, change our business, or make investments, and require us to comply with certain financial covenants. The restrictions in the 2025 Amended and Restated Credit Agreement governing our debt may prevent us from taking actions that we believe would be in the best interest of our business and our stockholders and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. We may also incur future debt obligations that might subject us to additional or more restrictive covenants that could affect our financial and operational flexibility, including our ability to pay dividends. We cannot make any assurances that we will be able to refinance our debt or obtain additional financing on terms acceptable to us, or at all. A failure to comply with the restrictions under the 2025 Amended and Restated Credit Agreement could result in a default under the financing obligations or could require us to obtain waivers from our lenders for failure to comply with these restrictions. If we were unable to make payments or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as sales of assets, sales of equity, or negotiations to restructure the debt. The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could cause our obligations with respect to our debt to be accelerated and have a material adverse effect on our business, financial condition, and results of operations.
We may seek additional debt financing in the future, which may not be available or may be available only on unfavorable terms.
We may need to raise additional funds through debt financings or access funds through existing or new credit facilities. Any debt financing or refinancing, if available at all, may be on terms that are not favorable to us. Our access to additional funds under the 2025 Amended and Restated Credit Agreement is dependent on the ability of the
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banks that are parties to 2025 Amended and Restated Credit Agreement to meet their funding commitments. If we cannot obtain adequate capital or sources of credit on favorable terms, or at all, our business, results of operations, and financial condition could be adversely affected.
Our business, and therefore our results of operations and financial condition, may be adversely affected by further changes in the U.S.-based credit markets.
We utilize the credit markets to finance our operations and support our growth initiatives. For example, in 2023, we undertook a recapitalization that significantly increased our debt levels, in June 2024, we refinanced our long-term debt, and in April 2025, we undertook another recapitalization through our entry into the 2025 Amended and Restated Credit Agreement that further increased our debt levels. These transactions were dependent on favorable credit market conditions. If the credit markets were to deteriorate, it could become more difficult or expensive for us to obtain financing on favorable terms. This could limit our ability to invest in technology, expand our operations, or pursue strategic initiatives, thereby impacting our growth and profitability. Tightening conditions in the credit markets could adversely affect the availability and terms of future borrowings or renewals or refinancing.
Risks Relating to our Organizational Structure
The concentration of our share ownership with those stockholders who held our stock prior to this offering, including our executive officers, directors, and holders of more than 5% of our capital stock, may limit your ability to influence corporate matters.
Following this offering, stockholders who held our stock prior to this offering, including our executive officers, directors, and holders of more than 5% of our capital stock, will continue to beneficially own at least % of our outstanding common stock, including % of the voting power of our outstanding common stock. As a result, stockholders who held our stock prior to this offering will control all matters requiring a stockholder vote, including: the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; the amendment of our amended and restated certificate of incorporation and our amended and restated bylaws; and our winding up and dissolution. This concentration of ownership may delay, deter, or prevent acts that would be favored by our other stockholders. The interests of stockholders who held our stock prior to this offering may not always coincide with our interests or the interests of our other stockholders. This concentration of ownership may also have the effect of delaying, preventing, or deterring a change in control of our company. Also, stockholders who held our stock prior to this offering may seek to cause us to take courses of action that, in their judgment, could enhance their investment in us, but which might involve risks to our other stockholders or adversely affect us or our other stockholders, including investors in this offering. As a result, the market price of our Class A common stock could decline or stockholders might not receive a premium over the then-current market price of our Class A common stock upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our Class A common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders. See “Principal and Selling Stockholders” and “Description of Capital Stock — Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws — Delaware Anti-Takeover Statute.”
We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for, and will rely on, exemptions from certain corporate governance requirements that provide protection to the stockholders of companies that are subject to such corporate governance requirements.
Upon completion of this offering, we will be a “controlled company” as defined under the NYSE corporate governance rules. A “controlled company” is one in which more than 50% of the voting power is held by a single entity or a group of entities acting together. As a result, we will qualify for, and may choose to rely on, exemptions from certain corporate governance requirements, including:
• Independent Board Requirements: We may not be required to have a majority of independent directors on our board of directors.
• Independent Committees: We may be exempt from requirements to have fully independent nominating and corporate governance committees, or fully independent compensation committees.
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• Governance Oversight: The exemptions may reduce the level of oversight typically provided by independent directors over management decisions, executive compensation, and director nominations.
While we believe that our governance structure and the composition of our board of directors will serve the best interests of Neptune and its stockholders, reliance on these exemptions means that minority stockholders may have limited influence over corporate governance matters. This could result in decisions that favor the interests of our controlling stockholder(s) at the expense of other stockholders.
The implications of being a controlled company could materially and adversely affect the perception of our corporate governance practices, stockholder confidence, and the market value of our common stock.
We are a holding company, and our only material asset is our equity interest in Neptune Flood. As a result, we depend on the ability of our subsidiaries to pay dividends and make other payments and distributions to us in order to meet our obligations.
Neptune Holdings was incorporated in Delaware on March 20, 2025, to implement a holding company organizational structure for Neptune Flood. Neptune Holdings currently has no material assets other than ownership of the outstanding equity of Neptune Flood. As such, Neptune Holdings has no independent means of generating revenue or cash flow, and its ability to pay taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the results of operations and cash flows of Neptune Flood and its subsidiaries. Its direct and indirect subsidiaries may not generate sufficient cash flow to distribute funds to Neptune Holdings and applicable law and contractual restrictions, such as negative covenants in any debt instruments, such as the 2025 Amended and Restated Credit Agreement, may not permit such distributions. In addition, in the event that the board of directors and stockholders of Neptune Holdings were to approve a sale of all of the equity in its direct or indirect subsidiaries, your shares of Class A common stock would be in a holding company with no material assets other than those assets and other consideration received in such transaction.
Risks Relating to Ownership of our Common Stock
Our failure to maintain proper and effective internal control over financial reporting could result in material weaknesses, impact investor confidence in us, and adversely affect the value of our common stock.
As a public company, we will be required to design, implement, and maintain internal control over financial reporting to comply with the requirements of the Sarbanes-Oxley Act, including Section 404. This process requires us to document and test our internal control procedures, remediate any deficiencies identified, and undergo an annual audit of these controls by our independent registered public accounting firm.
Developing and maintaining proper and effective internal controls may involve substantial costs, significant management time and resources, and potential disruption to our financial reporting processes. We may encounter challenges in completing our assessment of internal control over financial reporting in a timely manner, or we may identify material weaknesses or significant deficiencies that require remediation.
If we fail to maintain adequate internal controls or if our auditors identify material weaknesses, it could result in:
• Inaccurate Financial Reporting: Ineffective internal controls could lead to errors or inaccuracies in our financial statements, potentially requiring restatements or impairing investor confidence.
• Regulatory Noncompliance: Failure to comply with Section 404 could result in regulatory scrutiny, fines, or penalties, further impacting our business and reputation.
• Loss of Investor Confidence: Material weaknesses or perceived weaknesses in our internal controls may reduce investor confidence in our financial reporting, adversely affecting the market price of our common stock.
• Operational Disruptions: Addressing control deficiencies could divert management’s attention and resources from other strategic priorities, negatively impacting our operations and growth.
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Ensuring compliance with Section 404 of the Sarbanes-Oxley Act is critical to maintaining the integrity of our financial reporting and investor confidence. Any failure to establish or maintain effective internal controls could materially and adversely affect our business, financial condition, and the value of our common stock.
There is no existing market for our common stock, and we do not know if one will develop, which may cause our Class A common stock to trade at a discount from its initial offering price and make it difficult to sell the shares you purchase.
Prior to this offering, there has not been a public market for our common stock, and we cannot predict the extent to which investor interest in us will lead to the development of an active trading market on the NYSE, or otherwise, or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling your shares of Class A common stock at an attractive price, or at all. The initial public offering price for our Class A common stock will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our Class A common stock at prices equal to or greater than the price you paid in this offering.
The dual class structure of our common stock has the effect of concentrating voting control with our Chief Executive Officer; this will limit or preclude your ability to influence corporate matters.
Our Class B common stock has ten votes per share, and our Class A common stock, which is the stock we are offering in our initial public offering, has one vote per share. Our Chief Executive Officer and Chairman of our board of directors, Mr. Burgess, will beneficially own all of our outstanding shares of Class B common stock, constituting approximately % of the voting power of our outstanding capital stock following our initial public offering, assuming no exercise of Mr. Burgess’s rights under the Class B Equity Exchange Agreement, and approximately % of the voting power assuming Mr. Burgess exercises his rights under the Class B Equity Exchange Agreement with respect to all equity awards subject to such agreement. Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, Mr. Burgess will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval so long as the shares of Class B common stock represent at least % of all outstanding shares of our Class A common stock and Class B common stock. Mr. Burgess may have conflicting interests with holders of shares of our Class A common stock. Mr. Burgess’ concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future. For example, during such period of time, Mr. Burgess will have significant influence with respect to our management, business plans, and policies, including the appointment and removal of our officers, decisions on whether to raise future capital, and whether to amend our charter and bylaws, which govern the rights attached to our common stock. In particular, for so long as Mr. Burgess continues to own a significant percentage of our common stock, Mr. Burgess will be able to cause or prevent a change of control of Neptune or a change in the composition of our board of directors and could preclude any unsolicited acquisition of us. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of Class A common stock as part of a sale of us and ultimately might affect the market price of our Class A common stock.
The Class B common stock will automatically convert into Class A common stock upon the occurrence of certain events described in “Description of Capital Stock — Class A Common Stock and Class B Common Stock — Conversion.” The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of the remaining outstanding shares of Class B common stock. For a description of the dual class structure, see “Description of Capital Stock — Class A Common Stock and Class B Common Stock.”
Some provisions of Delaware law and our amended and restated certificate of incorporation and amended and restated bylaws may deter third parties from acquiring us and diminish the value of our Class A common stock.
Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors who are not nominated by current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions:
• establish a classified board of directors so that not all members of our board of directors are elected at one time;
• permit only the board of directors to establish the number of directors and fill vacancies on the board;
• provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;
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• following the Voting Threshold Date, require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws;
• authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
• prohibit cumulative voting;
• following the Voting Threshold Date, provide that our stockholders will only be able to take action at a meeting of stockholders and not by written consent;
• provide that only the chairperson of our board of directors, the chief executive officer, or our board of directors acting pursuant to a resolution adopted by a majority of the whole board of directors will be authorized to call a special meeting of stockholders; and
• establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
These and other provisions in our amended and restated certificate of incorporation, our amended and restated bylaws, and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including actions to delay or impede a merger, tender offer, or proxy contest involving Neptune. The existence of these provisions could negatively affect the price of our Class A common stock and limit opportunities for you to realize value in a corporate transaction.
In addition, until the Voting Threshold Date, we have opted out of Section 203 of the DGCL, which prohibits a publicly held Delaware corporation from engaging in a business combination transaction with an interested stockholder for a period of three years after the interested stockholder became such unless the transaction fits within an applicable exemption, such as board approval of the business combination or the transaction which resulted in such stockholder becoming an interested stockholder. See “Description of Capital Stock” for more information.
Our certificate of incorporation will designate the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders and the federal district courts of the U.S. as the exclusive forum for litigation arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation, as will be in effect upon the consummation of this offering, will provide that the Court of Chancery of the State of Delaware is the exclusive forum (or, if, and only if, the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if, and only if, all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) for the following types of actions or proceedings under Delaware statutory or common law: any derivative action or proceeding brought on our behalf, any action asserting a breach of a fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, our amended and restated certificate of incorporation, any action, suit, or proceeding as to which the DGCL confers jurisdiction, or any action asserting a claim against us that is governed by the internal affairs doctrine. The provisions would not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for which the U.S. federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation will provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Accordingly, given the provision in Section 22 of the Securities Act for concurrent jurisdiction by federal and state courts, there is uncertainty as to whether a court would enforce this forum selection provision with respect to claims arising under the Securities Act.
We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, who are particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection
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against the burdens of multi-forum litigation. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us, our directors, officers, or other employees in a venue other than in the federal district courts of the United States of America. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions, and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our Class A common stock could decline.
Upon the consummation of this offering, we will have shares of Class A common stock (or shares if the underwriters exercise their option to purchase additional shares of Class A common stock in full) outstanding, excluding shares of Class A common stock issuable upon exercise of outstanding equity awards. Of these shares, the Class A shares sold in this offering (or Class A shares if the underwriters exercise their option to purchase additional shares of Class A common stock in full) will be freely tradable without further restriction or registration under the Securities Act.
Upon the completion of this offering, the shares of Class B common stock and remaining outstanding shares of Class A common stock will be deemed “restricted securities,” as that term is defined under Rule 144 of the Securities Act. Immediately following the consummation of this offering, certain holders of these remaining shares of our common stock will be entitled to dispose of their shares following the expiration of an initial 180-day underwriter “lock-up” period, subject to certain customary exceptions. See “Shares Eligible for Future Sale.” If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our Class A common stock could decline substantially.
New investors in our Class A common stock will suffer immediate and substantial dilution in the book value of the shares purchased in this offering.
The initial public offering price of our Class A common stock will be substantially higher than the pro forma net tangible book value per share of the outstanding common stock immediately after the offering. Based on our pro forma net tangible book value as of June 30, 2025, if you purchase our Class A common stock in this offering at the initial public offering price set forth on the cover page of this prospectus, you will suffer immediate dilution in net tangible book value per share of $ per share. See “Dilution.”
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our common stock, the price of our Class A common stock could decline.
The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business, as well as the way analysts and investors interpret our financial information and other disclosures. Securities and industry analysts do not currently, and may never, publish research on our business. If few or no securities or industry analysts commence coverage of us, our stock price could be negatively affected. If securities or industry analysts downgrade our common stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our Class A common stock.
We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.
Our amended and restated certificate of incorporation, as will be in effect upon the consummation of this offering, will authorize us to issue one or more series of preferred stock. Our board of directors will have the authority to determine the preferences, limitations, and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior
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to the rights of our Class A common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our Class A common stock at a premium to the market price, and materially adversely affect the market price and the voting and other rights of the holders of our Class A common stock.
For as long as we are an EGC, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies, which may make our Class A common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an EGC, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including:
• not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act;
• reduced disclosure obligations regarding executive compensation in our periodic reports and annual report on Form 10-K; and
• exemptions from Say-on-Pay and stockholder approval of any golden parachute payments not previously approved.
Our status as an EGC will end as soon as any of the following takes place:
• the last day of the fiscal year in which we have more than $1.235 billion in annual revenues;
• the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates;
• the date on which we have issued, in any three-year period, more than $1.00 billion in non-convertible debt securities; or
• the end of the fiscal year following the fifth anniversary of our initial public offering date.
We cannot predict if investors will find our Class A common stock less attractive if we choose to rely on any of the exemptions afforded emerging growth companies. If some investors find our Class A common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our Class A common stock and the market price of our Class A common stock may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this provision of the JOBS Act. As a result, we will not be subject to new or revised accounting standards at the same time as other public companies that are not emerging growth companies. Therefore, our consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates.
We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.
While we have paid dividends in the past, we do not currently intend to pay any cash dividends after the offering or for the foreseeable future. We expect to retain future earnings, if any, to repay debt and to fund the development and growth of our business. As a result, you may only receive a return on your investment in our Class A common stock if the market price of our Class A common stock increases.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future results of operations, financial position, market size and opportunity, our business strategy and plans, the factors affecting our performance and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “expect,” “objective,” “plan,” “potential,” “seek,” “grow,” “target,” “if” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
• our ability to protect and enforce our intellectual property;
• our ability to effectively manage and sustain our rapid growth, which may place significant demands on our resources, systems and personnel;
• adverse NFIP developments that create challenges for private insurers;
• the impact of slower housing market activity, especially in areas needing flood coverage, due to various general economic and other factors;
• our ability to attract and retain talent, including highly skilled engineers, data scientists, and other technical professionals;
• our reliance on third parties for critical functions such as processing policyholder payments and mailing policy documents and notices;
• the highly competitive industry in which we operate;
• our reliance on the accuracy and performance of our AI-powered Triton platform, for underwriting and data modeling;
• developments and projections relating to advancements in AI, our competitors, and our industry;
• our ability to successfully launch additional products or expand our product offerings, including into new domestic and international markets;
• our ability to apply technology effectively in driving value for our policyholders through technology-based solutions;
• the impact of current and future laws and regulations, especially those related to insurance regulations;
• potential cybersecurity risks with respect to our or our vendors’ information processing systems;
• the development of a market for our common stock; and
• other risks and uncertainties, including those listed under the caption “Risk Factors.”
We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.
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You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this prospectus in the context of these risks and uncertainties. The forward-looking statements included in this prospectus are made only as of the date hereof. Except as required by law, we do not intend to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual results or revised expectations.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
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We will not receive any proceeds from the sale of Class A common stock by the selling stockholders in this offering (including any proceeds from the sale of Class A common stock that such selling stockholders may sell pursuant to the underwriters’ option to purchase additional shares of Class A common stock). The selling stockholders will receive all of the proceeds from the sale of shares of our Class A common stock by such selling stockholders. The selling stockholders have agreed to reimburse us for certain of our expenses relating to this offering, in an aggregate amount not to exceed 2% of the gross proceeds of this offering to be received by the selling stockholders.
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While we have paid dividends in the past, we do not currently intend to pay any cash dividends after this offering and we currently expect to retain any future earnings, if any, to repay debt and to fund the development and growth of our business. Any future determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend upon, among other factors, our financial condition, operating results, earnings, current and anticipated liquidity and capital requirements, plans for expansion, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by Delaware law, general business conditions, and other factors that our board of directors may deem relevant in making such a determination. See “Risk Factors — Risks Related to Ownership of Our Common Stock — We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.”
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The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2025, on:
• an actual basis;
• an as adjusted basis for us to reflect (i) a -for- stock split of our capital stock that was effected on , 2025; (ii) the authorization of our Class A common stock and Class B common stock and the reclassification of all shares of our common stock outstanding as of June 30, 2025, into shares of our Class A common stock; (iii) the automatic conversion of all 4,185,000 shares of our convertible preferred stock outstanding as of June 30, 2025, into an aggregate of shares of our Class A common stock; (iv) the occurrence of the Class B Stock Exchange as if such exchange had occurred on June 30, 2025; and (v) the filing and effectiveness of our amended and restated certificate of incorporation and amended and restated bylaws immediately prior to the completion of this offering.
The selling stockholders are selling all of the shares of Class A common stock to be sold in this offering. We will not receive any of the proceeds from the sale of shares of Class A common stock by the selling stockholders, including any proceeds from the sale of shares of Class A common stock that such selling stockholders may sell pursuant to the underwriters’ option to purchase additional Class A common stock. The selling stockholders have agreed to reimburse us for certain of our expenses relating to this offering, in an aggregate amount not to exceed 2% of the gross proceeds of this offering to be received by the selling stockholders.
You should read this information together with our audited consolidated financial statements and unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this prospectus and the information set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
|
As of June 30, 2025 |
|||||||
|
(In thousands, except per share data) |
Actual |
As Adjusted |
|||||
|
Cash and cash equivalents |
$ |
11,697 |
|
$ |
|||
|
Debt, less current portion |
|
277,349 |
|
|
|||
|
Convertible preferred stock, $0.00001 par value per share, shares authorized, issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma |
|
|
|
||||
|
Stockholders’ equity (deficit): |
|
|
|
||||
|
Class A common stock, $ par value per share, no shares authorized, issued and outstanding, actual; shares authorized, shares issued and outstanding, pro forma |
|
— |
|
|
|||
|
Class B common stock, $ par value per share, no shares authorized, issued and outstanding, actual; shares authorized, shares issued and outstanding, pro forma |
|
— |
|
|
|||
|
Accumulated deficit |
|
(526,615 |
) |
|
|||
|
Additional paid-in capital |
|
524 |
|
|
|||
|
Total stockholders’ deficit |
|
(526,091 |
) |
|
|||
|
Total capitalization |
$ |
(248,742 |
) |
$ |
|||
The number of shares of our Class A common stock and Class B common stock issued and outstanding in the table above does not include the following shares:
• shares of our Class A common stock issuable upon the exercise of stock options outstanding as of June 30, 2025, with a weighted average exercise price of $ per share;
• shares of our Class B common stock issuable in exchange for (i) shares of our Class A common stock issuable upon the exercise of stock options held by Mr. Burgess and outstanding as of June 30, 2025, with a weighted average exercise price of $ per share, and (ii) shares of Class A common stock issuable upon settlement of the IPO Grants expected to be made to Mr. Burgess, as described in this prospectus, in each case pursuant to the Class B Equity Exchange Agreement, as described in more detail below;
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• shares of our Class A common stock reserved for future issuance under the Pre-IPO 2025 Plan as of June 30, 2025, of which shares of our Class A common stock are issuable upon the exercise of stock options granted after June 30, 2025, with a weighted average exercise price of $ per share; and
• shares of our Class A common stock reserved for future issuance under our 2025 Plan, including shares of Class A common stock to be issued thereunder in respect of the IPO Grants and shares of Class A common stock reserved for future issuance under our ESPP, which plans will become effective in connection with this offering, as more fully described in “Executive Compensation — Employee Benefit Plans.”
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If you invest in our Class A common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of our Class A common stock in this offering and the as adjusted net tangible book value per share of our Class A common stock immediately after this offering.
As of June 30, 2025, our net tangible book value was approximately $ million, or $ per share of Class A common stock and Class B common stock. Our net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our Class A common stock and Class B common stock outstanding as of June 30, 2025, after giving effect to (i) a -for- stock split of our capital stock that was effected on , 2025, (ii) the authorization of our Class A common stock and Class B common stock and the reclassification of all shares of our common stock outstanding as of June 30, 2025, into shares of our Class A common stock, (iii) the automatic conversion of all 4,185,000 shares of our convertible preferred stock outstanding as of June 30, 2025, into an aggregate of shares of our Class A common stock, (iv) the occurrence of the Class B Stock Exchange as if such exchange had occurred on June 30, 2025, and (v) the filing and effectiveness of our amended and restated certificate of incorporation and amended and restated bylaws immediately prior to the completion of this offering.
We will not receive any proceeds from the sale of our Class A common stock offered by the selling stockholders in this offering. The selling stockholders have agreed to reimburse us for certain of our expenses relating to this offering, in an aggregate amount not to exceed 2% of the gross proceeds of this offering to be received by the selling stockholders. Consequently, this offering will not result in any change to our net tangible book value per share, prior to giving effect to the payment of estimated fees and expenses in connection with this offering that are not reimbursed by the selling stockholders. Purchasing shares of Class A common stock in this offering will result in net tangible book value dilution to new investors of $ per share. The following table illustrates this per share dilution to new investors:
|
Assumed initial public offering price per share |
|
$ |
||||
|
Net tangible book value per share as of June 30, 2025 |
$ |
|
||||
|
Increase in net tangible book value per share attributable to this offering |
|
|
|
|||
|
As adjusted net tangible book value per share after this offering |
|
|
|
|||
|
Dilution in per share to new investors in this offering |
|
$ |
|
The following table summarizes the total consideration paid and the average price paid per share by existing Class A stockholders and Class B stockholders and investors purchasing Class A common stock from the selling stockholders in this offering. This information is presented on an as adjusted basis described above as of June 30, 2025, after giving effect to the sale of Class A common stock in this offering by the selling stockholders at an assumed public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus):
|
|
Total Consideration |
Average |
|||||||||||
|
Number |
Percent |
Amount |
Percent |
||||||||||
|
Existing stockholders(1) |
% |
|
% |
|
$ |
||||||||
|
Investors purchasing shares in this offering |
% |
|
% |
|
|
||||||||
|
Total |
% |
|
% |
|
|
||||||||
____________
(1) Does not give effect to the sale of shares by the selling stockholders to the underwriters pursuant to their over-allotment option to purchase up to an additional shares of our Class A common stock from the selling stockholders.
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After giving effect to the sale of shares of Class A common stock in this offering, new investors will hold shares of Class A common stock, or % of the total number of shares of Class A common stock outstanding after this offering and existing stockholders will hold % of the total shares of Class A common stock and 100% of the total shares of Class B common stock outstanding. If the underwriters exercise their option to purchase additional shares in full, our existing stockholders will own % and our new investors will own % of the total number of shares of our Class A common stock and Class B common stock outstanding upon the completion of this offering. To the extent that any outstanding options to purchase shares of our Class A common stock and Class B common stock are exercised or new awards are granted under our equity compensation plans, there will be further dilution to investors participating in this offering.
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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 the audited consolidated financial statements and unaudited interim condensed consolidated financial statements and related notes thereto together with the sections entitled “Prospectus Summary — Summary Consolidated Financial Data,” “Risk Factors,” and “Special Note Regarding Forward-Looking Statements” included elsewhere in this prospectus. This discussion contains forward-looking statements that are based on our current plans, expectations, and beliefs and involve numerous risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included elsewhere in this prospectus.
Overview
Neptune is a leading, high-growth, highly profitable, data-driven MGA that is revolutionizing the way homeowners and businesses protect against the growing risks of flooding. We offer a range of easy-to-purchase residential and commercial insurance products — including primary flood insurance, excess flood insurance, and parametric earthquake insurance — distributed through a nationwide network of agencies. Neptune does not take any balance sheet insurance risk or have claims handling responsibility relating to the policies we sell. We underwrite and administer the issuance of insurance policies on behalf of a diverse panel of insurance and reinsurance companies, whom we refer to as capacity providers, that manage both this risk and the associated claims handling. From day one, we have built our business on a foundation of advanced data science and AI, leveraging proprietary ML algorithms, which has led to superior underwriting results, outsized growth, recurring revenue, and robust margins, including delivering a lifetime written loss ratio of just 24.7% to our capacity providers from our inception through June 30, 2025. In addition, for the year ended December 31, 2024, we achieved 40.6% organic revenue growth, 29.0% net income margin, and 60.4% Adjusted EBITDA margin and for the six months ended June 30, 2025, we achieved 32.3% organic revenue growth, 30.2% net income margin, and 59.3% Adjusted EBITDA margin.
Technology and data science are the foundation of Neptune’s business model, driving our three core pillars:
• Our Underwriting Engine: Our entirely digital underwriting engine, Triton, uses advanced technology, including proprietary AI and ML models, without any human underwriters, to assess risk with speed and precision. Powered by predictive analytics and loss estimation, Triton has enabled our policies to consistently outperform the NFIP in written loss ratio despite 21 landfall hurricanes — including four of the ten largest flood events in U.S. history — taking place since Neptune’s founding.
• Our Risk Relationships: Our risk relationships are built on performance and trust, and we currently have 33 capacity providers, including 26 reinsurance providers, backing 7 distinct insurance programs to help minimize concentration risk while delivering consistent returns. In turn, the accuracy of our risk assessment and our precision pricing have delivered hundreds of millions of dollars of underwriting profit for our capacity providers since inception, leading to high rates of capacity renewals and increases in committed capacity.
• Our Distribution: Our distribution strategy is primarily focused on deep partnerships across agencies with tens of thousands of agents who benefit from the ease-of-use of our automated underwriting platform, seamless API integrations, instantaneous bindable quotes and proprietary Agent Portal. We believe this is a meaningful departure from industry norms and makes our approach to distribution attractive to the agents we work with.
The three pillars above interlock, creating a powerful and reinforcing loop. Unlike traditional insurance underwriting that historically relied on humans, static models, and infrequent adjustments, we leverage an iterative approach that allows us to consistently and rapidly integrate new data and models into our underwriting engine, thereby refining our processes and adapting to evolving market and environmental conditions. As our models constantly evolve and improve, they are able to deliver superior results that minimize losses for our capacity providers, which in turn grant us additional underwriting capacity. With more capacity available, we can offer
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coverages our policyholders want, enhancing the ability for our agency partners to easily sell policies while expanding our distribution and reach. The resulting increase in quoted and bound policies provides us with access to more data, enhancing the predictive capabilities of our underlying models.
We operate as an MGA, with a highly attractive, recurring, fee-based revenue model derived from two primary sources: commissions paid by capacity providers, and fees paid by policyholders. Commissions are calculated as a negotiated percentage of premium for each policy. As of June 30, 2025, our average commission rates have increased by more than 4% since 2018, as capacity providers continue to recognize our superior underwriting performance. Given our high retention rates to date, we believe that we have a high degree of visibility into our future revenue streams. For example, for the six-month period ended June 30, 2025, our eligible policy and premium retention rates at renewal were 85.8% and 98.9%, respectively.
We are organized as a single operating and reportable segment.
Factors Affecting Our Results of Operations
Our financial results and operating performance are influenced by a number of macroeconomic, industry-specific, and company-specific factors, the most significant of which we believe include:
Reliance on Relationships with Capacity Providers, Third-Party Agents and Brokers
We do not bear the balance sheet insurance risk or claims handling responsibility relating to the policies sold and, as a result, our ability to support and service the policies we provide is dependent on the capacity and appetite of our capacity providers to assume flood risk. If we are unable to maintain profitable portfolios for our capacity providers or if our relationship with them is undermined for any reason, capacity providers may be unwilling to provide insurance capacity to us, or our insurance carriers may seek to amend our agreements with them. This could happen for various reasons, including for competitive or regulatory reasons, because of an insurance carrier’s reluctance to distribute their products through our platform, because they decide to rely on their own internal flood insurance providers or products or elect not to insure or reinsure flood risk generally, or because they decide not to distribute insurance products in individual markets in certain geographies or altogether. Additionally, conditions in the broader insurance and reinsurance markets may influence the ability or willingness of our capacity providers to underwrite flood insurance risk and in turn impact the capacity we receive or the commissions and other terms we are able to negotiate with our capacity providers. For example, in 2023, significant insured losses and increasing demand for reinsurance led the property catastrophe reinsurance market to experience price increases, heightened “attachment points” where primary insurers became responsible for a greater portion of initial losses before reinsurance coverage became available to them, and stricter terms and conditions for reinsurance coverage. These changes were driven by factors such as significant insured losses and increased demand for reinsurance, leading to fewer participants in the property catastrophe reinsurance market. Although this development did not impact the underwriting capacity we were able to secure from our capacity providers in the flood insurance market, industry-wide constraints could limit our growth in the future if capacity providers elect to exit the flood insurance market, limit the capacity they provide or become more selective in providing insurance or reinsurance coverage. See “Risk Factors — An overall decline in the housing market or general economic conditions could have a material adverse effect on the financial condition and results of operations of our business.” Our results benefit from stable, long-term relationships with our capacity providers — currently, we place our policies through a panel of highly rated insurers and reinsurers who have committed significant capital to our program. If we are not able to effectively manage our relationships with our key capacity providers, if one of our key capacity providers were to reduce its desired exposure or if reinsurance costs spike dramatically or we were to otherwise lose one or more of our key capacity providers or were to experience a significant reduction in such provider’s capacity, it might require us to shift business to alternative capacity providers, if any are available, or potentially accept lower commission rates to maintain coverage availability or might otherwise materially and adversely impact our business, financial condition, results of operations, growth potential, reputation in the market, and our ability to sustain our business. See “Risk Factors — Our business may be harmed if one or more of our relationships with capacity providers are terminated or are reduced, if we fail to maintain good relationships with such capacity providers, if we become dependent upon a limited number of capacity providers, or if we fail to develop new capacity provider relationships.” We mitigate this risk by diversifying our capacity provider panel and through our ability to continually demonstrate profitable results through our data-driven underwriting. In addition, we have expanded our panel of capacity providers from 2 capacity providers as of December 31, 2018, to 33 capacity providers as of June 30, 2025.
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Additionally, our ability to distribute the policies we offer is dependent on our distribution model, which relies on third-party agents and brokers. Our insurance agent and broker partners drive over 96% of our policy sales, supported by our in-house sales team and technology integrations. This distribution model exposes us to meaningful third-party risks. Any failure by our agents and brokers to consistently promote our products or the loss of any key agent or broker relationships could adversely affect our business. See “Risk Factors — Our distribution model depends on third-party agents and brokers, and any failure by those agents and brokers to consistently promote our products or the loss of any key agent or broker relationships could adversely affect our business.” We mitigate this risk by diversifying the third-party agents and brokers that we use in our distribution model.
Impact of Climate and Catastrophe Events on Demand for Flood Insurance
Our growth and success are dependent on homeowners continuing to purchase flood insurance from us, in turn increasing the revenue we generate from commissions and policy fees. Increasing high-profile flood events, including Hurricane Ida (2021), Hurricane Ian (2022), Hurricane Helene (2024), and Hurricane Milton (2024), tend to raise consumer awareness and demand for flood insurance, potentially increasing our policy sales and, as a result, our commissions and fees in subsequent periods. Increases in flood risk, or the perception of increases in flood risk, in areas believed to have lower flood risk today (e.g., non-coastal regions that have not historically been considered to be flood-prone) could also increase demand for flood insurance in those areas. Alternatively, significant increases in insured losses due to increasing frequency and intensity of storms could result in additional governmental regulation aimed at mitigating the impact of natural disasters, including stricter building codes or incentives for risk mitigation measures, that could change the dynamics of the housing markets in which we provide flood insurance or incentives for homeowners to seek private flood insurance coverage, or could cause our capacity providers to exit from, or reduce their exposure to, significant flood events and other natural disasters. See also “— Reliance on Capacity Relationships.”
Economic Environment Impact on Demand for Flood Insurance
Macroeconomic conditions that affect the housing market influence our policy sales. Many flood insurance purchases are driven by mortgage requirements (e.g., homeowners with a government backed mortgage in FEMA designated High-Risk flood zones are required to obtain flood insurance coverage). As a result, a high volume of home sales or new housing starts in coastal and flood-prone areas can lead to more policies written by Neptune. If rising interest rates, economic downturns, or a persistent inflationary environment slow home purchase or construction activity, particularly in areas where flood coverage is required, the growth of our new policy sales could slow. Conversely, lower home sales may lead to fewer mid-term cancellations as policy holders stay in their current home longer and could result in a positive impact to renewal rates. We also monitor property value inflation and construction cost trends, as these can increase insured values and premiums (and, thereby, our commission income) on existing policies at renewal. Alternatively, if homeowners experience higher prices generally, whether due to inflationary pressure, tariffs, or other macroeconomic factors, it may lead to a decrease in our renewal acceptance rates as homeowners seek lower cost alternatives, such as the NFIP, or elect not to maintain flood insurance in areas where it is not federally required. See “Risk Factors — Risks Relating to our Business and Industry — An overall decline in the housing market or general economic conditions could have a material adverse effect on the financial condition and results of operations of our business.”
Seasonality of Our Business
Our business is seasonal as hurricanes typically occur during the period from June 1 through November 30 each year. Hurricane season drives sales awareness of the need for flood insurance. This has historically resulted in an increase in total sales in our second and third quarters of each fiscal year, as compared to the first and fourth quarters.
Competition from the National Flood Insurance Program and Private Market (Including New Entrants)
The flood insurance market is dominated by the U.S. government’s NFIP, which historically has provided the vast majority of flood insurance policies for American properties. Changes in NFIP policies or pricing can affect our growth. For instance, the implementation of NFIP’s Risk Rating 2.0, a new pricing methodology, and regular premium increases may drive price-sensitive policyholders to seek private alternatives like Neptune. Additionally, periodic lapses or uncertainties in the NFIP’s federal authorization could boost demand for private flood insurance.
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Conversely, if the NFIP were to reduce rates or expand coverage limits, it could potentially attract policyholders back to the NFIP program and away from private alternatives like Neptune. We also face competition from other private insurers and MGAs in the flood market. Increased competition in the private flood insurance market could put pressure on, and require us to increase, the commission rates we pay to agents that distribute our products or require higher marketing spend in order for us to maintain market share.
Underwriting Profitable Portfolios
We rely on our capacity providers to provide insurance capacity and to assume the associated balance sheet insurance risk of the flood insurance policies we sell to policyholders. While higher claims frequency or severity bears no direct risk to our financial results, given we do not bear the insurance risk associated with claims, if incurred losses exceed any capacity partner’s loss tolerance, we face the risk of their reduction or withdrawal as a risk-taking partner to Neptune and as a result may need to seek additional capacity from other capacity providers, or new capacity providers, in order to support our continued growth. See “Risk Factors — Risks Relating to our Business and Industry — Our business may be harmed if one or more of our relationships with capacity providers are terminated or are reduced, if we fail to maintain good relationships with such capacity providers, if we become dependent upon a limited number of capacity providers, or if we fail to develop new capacity provider relationships.” Historically, we have been able to produce portfolios that perform exceptionally well for our capacity providers, and we believe our investments into our Triton system will help deliver continued outperformance versus our peers. If we continue to outperform through large scale flood events, this could lead to increased access to insurance capacity or improvement in ceding commissions, which could positively impact our economics and ability to grow.
Investments in Technology
Our success is due in large part to our data science-driven approach to our underwriting technology platform. Our results of operations are favorably impacted by automation in policy quoting, binding, and administration, which allows us to handle a growing book of business with relatively low incremental operating expense. Continued investment in our platform, including the integration of our recently acquired data science capabilities, is important to maintain the efficiency edge we see as a key competitive advantage. However, these investments also lead to higher amortization expense over time as we capitalize software development costs. We expect to continue balancing operating expense growth with revenue growth, and periods of heavy investment in technology or hiring (for example, adding staff in finance and compliance to support being a public company) can increase our cost base.
Regulatory Changes
We operate in a highly regulated industry, subject to regulatory oversight in the 50 states and Washington, D.C., where we are qualified to do business, and regulatory factors at the federal and state level may impact our ability to sell insurance policies. This extensive regulatory framework governs consumer protections and data security, exposing our business to significant litigation and compliance risks. See “Risk Factors — Risks Relating to Regulatory and Legal Matters — The insurance business is extensively regulated, and changes in regulation may reduce our profitability and limit our growth.” In addition, as an MGA, we are subject to licensing requirements and must maintain insurance licenses in each of the jurisdictions in which we operate. These licenses are subject to periodic renewal and compliance with jurisdiction-specific regulations, including recordkeeping, tax reporting, and E&S lines filing requirements. Any failure to meet these obligations could result in fines, penalties, or suspension of our licenses, which would impair our ability to operate in affected jurisdictions. We must also verify that our sub-producers maintain required licenses and comply with the conditions of our delegated binding authorities. Failure to monitor and verify the licensing status of our sub-producers could result in the termination of carrier binding authorities and/or increased regulatory risk. See “Risk Factors — Risks Relating to Regulatory and Legal Matters — Compliance with insurance licensing requirements for MGAs and E&S lines agencies and individual producers is critical to our operations, and any failure to maintain required licenses could disrupt our business” and “Risk Factors — Risks Relating to Regulatory and Legal Matters — Regulatory and licensing requirement changes could disrupt operations or increase compliance costs and restrict our ability to conduct our business.”
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Regulatory changes at the federal and state levels, including those affecting floodplain mapping, risk assessment standards, and lender requirements, could also create uncertainty for private insurers like Neptune. For example, changes to FEMA’s flood zone designations or its risk rating methodologies could affect how we evaluate and price flood risk, necessitating costly updates to our proprietary technology. Additionally, prolonged regulatory uncertainty could discourage banks or other lenders from accepting private flood insurance policies, further limiting market growth. However, regulatory changes can also have a positive impact on our business. For example, state insurance regulations related to the placement of E&S policies can influence our ability to sell private flood products within a particular state and, in 2021, Florida removed the requirement for insurance agents to complete a diligent search of the admitted market prior to placing personal lines flood insurance policies with surplus lines insurers. This change simplified the sales process for agents distributing our products by no longer requiring them to seek admitted insurance options before completing a Neptune sale. Although recent updates to state insurance regulations have generally supported the growth of the private flood insurance market, there can be no assurance that future federal or state regulatory changes would be similarly favorable. Any unfavorable changes could materially restrict our ability to place private flood insurance policies and could have a material adverse effect on our business, results of operations, and/or financial condition. We closely monitor policymaking efforts that may expand or inhibit the further development of the private flood and E&S markets.
Cost of Being a Public Company
To operate as a public company, we will be required to continue to implement changes in certain aspects of our business and develop, manage, and train management level and other employees to comply with on-going public company requirements. We will also incur new expenses as a public company, including those relating to public reporting obligations, proxy statements, stockholder meetings, stock exchange fees, transfer agent fees, SEC and FINRA filing fees, and expenses associated with any public offering we may engage in from time to time.
Certain Income Statement Line Items
The following is an overview of certain key income statement items, which management believes are important to an understanding of our results of operations in accordance with GAAP.
Revenue
Our revenue is primarily comprised of commission income and fee income, discussed in more detail below.
Commission Income
The largest component of our revenue is commission income, which is derived from the placement of insurance contracts between our insurance carriers and policyholders who acquire our flood insurance policies. Our commissions are established by the carrier agreement between Neptune and the insurance carrier and are calculated as a negotiated percentage of premiums for the underlying insurance contract. Commission rates and terms vary across insurance carriers.
Our main performance obligation under our agreements with our insurance carriers is selecting, pricing, and placing our policyholders’ insurance contracts with our carrier partners. Each underlying insurance contract is a separate and distinct contract between the policyholder and the insurance carrier. We collect the full premium for the policy from our policyholders at inception, then remit that premium, net of the commission owed to us, to the insurance carrier. We recognize commission income at a point in time upon the effective date of the insurance policy we have placed with the insurance carrier, at which point we have satisfied our performance obligation.
Each policyholder’s insurance contract is for a period of one year and can only be canceled by the policyholder prior to expiration for a limited set of reasons, most often in conjunction with the sale of the underlying insured property. Prior to the expiration of the insurance contract, the risk is re-underwritten using the then-current version of Triton. If the risk still qualifies for an insurance contract, we present the policyholder with a renewal offer. For the six months ended June 30, 2025, 86% of the eligible renewal offers presented to policyholders were accepted and the policyholder began a new one-year insurance contract. Upon the effective date of the renewal policy, commission is recognized. As Neptune receives its commission for the full policy year up front, Neptune estimates a cancellation reserve for commissions for those policies that are expected to cancel during the term.
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The majority of our commission income is the base commissions on premium described above. Although there is a small component of revenue share commission paid by our reinsurance broker, this additional revenue share commission is similar to the base commissions, in that it is a set percentage of the premium paid by the policyholder.
We also maintain a small internal agency which sells Neptune’s policies to direct inbound policyholders sourced via our website. Along with Neptune’s policies, the internal agency is appointed to sell NFIP policies when a risk does not meet the underwriting criteria for Neptune. We collect the agent commission that is paid by the NFIP for any NFIP policies sold by our internal agency.
Fee Income
In addition to commission income on premium, we earn fee income directly from our policyholders. This fee amount represents the administrative and operational costs associated with Neptune’s issuance of the policy. The fee income is retained 100% by Neptune.
Fees can vary by product type, underlying risk, and location of the insured property. The fee is non-refundable should the policy be canceled due to mid-term home sale or any other type of acceptable mid-term cancelation reason, therefore, fee income is treated as fully earned once a policy has become effective. Similar to the commission income described above, fees are recognized at a point in time upon the effective date of bound insurance coverage, at which point the performance obligation has been met as no performance obligation exists after coverage is bound.
Operating Expenses
Agent Commissions
Agent commission is our largest expense. We pay agent commissions to our distribution partners, such as independent agents, brokers, or referral partners, for bringing business to Neptune. It is a variable cost directly linked to premium placed with our insurance carriers via our distribution partners.
Employee Compensation and Benefits
Employee compensation and benefits consists of salaries, benefits, bonuses, and payroll taxes for our employees, as well as any share-based compensation expense. We expense share-based compensation over the vesting period based on the grant-date fair value of the awards.
General and Administrative
G&A expenses include all other operating costs — e.g., marketing and advertising, technology infrastructure and cloud services, office lease expenses, professional fees (legal, accounting, consulting), licensing and regulatory fees, travel, and other overhead. This category also includes certain one-time costs, such as transaction-related expenses not capitalized. While many G&A costs scale with the size of our business (for example, as the number of policyholders increases, customer support and cloud hosting costs may rise), we implement new technology from time to time to improve efficiency.
Amortization Expense
Our amortization expense primarily relates to capitalized software development costs for our proprietary technology platform. We capitalize the direct labor and software costs for developing new features or capabilities of our platform and amortize those costs, typically over a 3-year useful life. Amortization expense has increased in recent years as we have continued to invest in our software, with significant additions in 2023, 2024, and the six months ended June 30, 2025. These expenses will likely continue to grow modestly as we deploy new technology enhancements.
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Consolidated Results of Operations
The following is a discussion of our consolidated results of operations for the periods presented. This information is derived from our accompanying consolidated financial statements prepared in accordance with GAAP.
Comparison of the Six Months Ended June 30, 2024 and 2025
The following table provides an overview of our consolidated results of operations for the six months ended June 30, 2024 and 2025:
|
Six Months Ended |
||||||||
|
($ in thousands) |
2024 |
2025 |
||||||
|
Revenues: |
|
|
|
|
||||
|
Commissions and fees |
$ |
53,976 |
|
$ |
71,419 |
|
||
|
Operating expenses: |
|
|
|
|
||||
|
Agent commissions |
$ |
16,157 |
|
$ |
21,676 |
|
||
|
Employee compensation and benefits |
$ |
2,418 |
|
$ |
2,933 |
|
||
|
General and administrative |
$ |
3,729 |
|
$ |
8,107 |
|
||
|
Amortization expense |
$ |
1,425 |
|
$ |
1,786 |
|
||
|
Total operating expenses |
$ |
23,729 |
|
$ |
34,502 |
|
||
|
Income from operations |
$ |
30,247 |
|
$ |
36,917 |
|
||
|
Other income (expense): |
|
|
|
|
||||
|
Interest income |
$ |
423 |
|
$ |
416 |
|
||
|
Interest expense |
$ |
(10,632 |
) |
$ |
(8,269 |
) |
||
|
Loss on extinguishment of debt |
$ |
(5,426 |
) |
$ |
— |
|
||
|
Income tax expense |
$ |
3,725 |
|
$ |
7,505 |
|
||
|
Net income |
$ |
10,887 |
|
$ |
21,559 |
|
||
Revenues
|
Six Months Ended June 30, |
Change |
|||||||||||
|
($ in thousands) |
2024 |
2025 |
Amount |
Percentage |
||||||||
|
Revenues: |
|
|
|
|
||||||||
|
Commission income |
$ |
40,412 |
$ |
54,769 |
$ |
14,357 |
35.5 |
% |
||||
|
Fee income |
$ |
13,564 |
$ |
16,650 |
$ |
3,086 |
22.8 |
% |
||||
|
Total revenues |
$ |
53,976 |
$ |
71,419 |
$ |
17,443 |
32.3 |
% |
||||
Revenues increased to $71.4 million for the six months ended June 30, 2025, from $54.0 million for the six months ended June 30, 2024, an increase of $17.4 million, or 32.3%, driven by higher policy counts and the corresponding higher premium volume. The largest driver of our revenue growth was the increased number of policies eligible for renewal, as our total policies in force continued to grow due to a combination of policy and premium retention along with new business sales. Because each policy contract has a one-year term, any policy in force at the end of that term may be renewed for the subsequent year, provided it remains in force at the time of renewal and continues to meet our underwriting criteria. Policies in force increased to 244,964 at June 30, 2025, from 188,342 as of June 30, 2024, an increase of 30.1%. Of the policies in force at June 30, 2024, 95.7% were offered a renewal term. This increased from 95.3% of our policies in force at June 30, 2023, having been offered a renewal term. The effect is that, in any year, we expect the majority of the total revenue we earned in the prior year to be retained as revenue from renewals as policyholders accept renewal offers. Of the total revenue recognized on policies during the six months ended June 30, 2024, 92.4% was recognized under the renewal terms of those same policies during the six months ended June 30, 2025. Of the total revenue recognized on policies during the six months ended June 30, 2023, 89.1% was recognized under the renewal terms of those policies during the six months ended June 30, 2024. We believe this 3.7% improvement reflects the impact of the ML models we have deployed to optimize renewal offers for revenue retention.
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Another factor driving revenue growth was the increase in new policies sold. In the six months ended June 30, 2025, we wrote 46,000 new policies, an increase of 9.5% from 42,000 new policies in the six months ended June 30, 2024. This growth can be attributed to a few important drivers, including growth of our distribution network, increased penetration with existing agents, and increased consumer awareness due to nationwide publicity of flooding events.
Our commission income in the six months ended June 30, 2025, was $54.8 million, an increase of 35.5% from $40.4 million in the six months ended June 30, 2024. While primarily due to growth in written premium, the increase in commission income was also the result of a higher average commission rate paid by our carrier partners. For the six months ended June 30, 2025, as a percentage of premium, average commission rate increased 0.9% when compared to the prior period. This increase was driven by our ability to deliver superior underwriting results to our carrier partners.
Fee income in the six months ended June 30, 2025, was $16.7 million, an increase of 22.8% from $13.6 million in the six months ended June 30, 2024. While there was not a material increase to the year-over-year average policy fee paid by policyholders, increases to new business and renewal acceptance rates drove the growth in fee income.
Operating Expenses
|
Six Months Ended June 30, |
Change |
|||||||||||
|
($ in thousands) |
2024 |
2025 |
Amount |
Percentage |
||||||||
|
Operating expenses |
|
|
|
|
||||||||
|
Agent commissions |
$ |
16,157 |
$ |
21,676 |
$ |
5,519 |
34.2 |
% |
||||
|
Employee compensation and benefits |
$ |
2,418 |
$ |
2,933 |
$ |
515 |
21.3 |
% |
||||
|
General and administrative |
$ |
3,729 |
$ |
8,107 |
$ |
4,378 |
117.4 |
% |
||||
|
Amortization expense |
$ |
1,425 |
$ |
1,786 |
$ |
361 |
25.3 |
% |
||||
|
Total operating expenses |
$ |
23,729 |
$ |
34,502 |
$ |
10,773 |
45.4 |
% |
||||
Total operating expenses were $34.5 million for the six months ended June 30, 2025, an increase of 45.4% from $23.7 million for the six months ended June 30, 2024. The primary driver of our increased operating expenses was an increase in our agent commission costs, which are directly correlated with the growth in our policy portfolio for the six months ended June 30, 2025, as well as increased costs relating to accounting and legal expenses in preparation for our initial public offering.
Our agent commission expenses were $21.7 million for the six months ended June 30, 2025, an increase of 34.2% from $16.2 million for the six months ended June 30, 2024. The increase in agent commission expenses for the six months ended June 30, 2025, was due to higher policy sales, leading to higher corresponding commission payouts to external agents. Our agent commission rates remained consistent year-over-year as the expense increase was volume-driven and aligned with our increased year-over-year revenue.
Our employee compensation and benefits expenses was $2.9 million for the six months ended June 30, 2025, an increase of 21.3% from $2.4 million for the six months ended June 30, 2024. The increase was primarily related to a partial period of compensation for the employees onboarded from Charles River Data during 2024 versus a full period in 2025, together with share-based compensation expense related to stock options granted to employees, increasing from $0.1 million for the six months ended June 30, 2024, to $0.2 million for the six months ended June 30, 2025.
Our general and administrative expenses were $8.1 million for the six months ended June 30, 2025, an increase of 117.4% from $3.7 million for the six months ended June 30, 2024. This increase was primarily due to a $4.4 million year-over-year increase in our professional fees, due to increased costs in the six months ended June 30, 2025, relating to accounting and legal expenses in preparation for our initial public offering.
Our amortization expenses were $1.8 million for the six months ended June 30, 2025, an increase of 25.3% from $1.4 million for the six months ended June 30, 2024. This $0.4 million increase is primarily attributable to higher amortization of our capitalized software, reflecting our larger base of capitalized software, as we have continued to invest in our proprietary technology platform with significant investments in the six months ended June 30, 2025, including the capitalization of $1.9 million of software development costs which began amortizing during the six months ended June 30, 2025.
79
Interest Income (Expense) and Other
|
Six Months Ended June 30, |
Change |
||||||||||||||
|
($ in thousands) |
2024 |
2025 |
Amount |
Percentage |
|||||||||||
|
Other income (expense): |
|
|
|
|
|
|
|
||||||||
|
Interest income |
$ |
423 |
|
$ |
416 |
|
$ |
(7 |
) |
(1.7 |
)% |
||||
|
Interest expense |
$ |
(10,632 |
) |
$ |
(8,269 |
) |
$ |
2,363 |
|
(22.2 |
)% |
||||
|
Loss on extinguishment of debt |
$ |
(5,426 |
) |
$ |
— |
|
$ |
5,426 |
|
(100.0 |
)% |
||||
Our interest income was $0.4 million for the six months ended June 30, 2025, consistent with $0.4 million for the six months ended June 30, 2024.
Our interest expense was $8.3 million for the six months ended June 30, 2025, compared to interest expense of $10.6 million for the six months ended June 30, 2024, a decrease of 22.2%. During the six months ended June 30, 2024, we completed a debt refinancing, which resulted in the expensing of capitalized loan costs that had not yet been amortized and a prepayment penalty on the refinanced facility, leading to a $5.4 million loss on extinguishment of debt. For the six months ended June 30, 2025, interest expense decreased due to a lower average interest rate under our credit facilities compared with 2024.
Income Tax Expense
Our income tax expense was $7.5 million for the six months ended June 30, 2025, an increase of 101.5% from $3.7 million for the six months ended June 30, 2024. The increase in our income tax expense was primarily due to increased taxable income for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. To a lesser extent, this increase was also driven by a slightly higher effective tax rate of 25.5% for the six months ended June 30, 2024, compared to 25.8% for the six months ended June 30, 2025, which was primarily attributable to the impact of certain permanent differences and state tax apportionment changes.
Comparison of the Years Ended December 31, 2023 and 2024
The following table provides an overview of our consolidated results of operations for the years ended December 31, 2023 and 2024:
|
Years Ended December 31, |
||||||||
|
($ in thousands) |
2023 |
2024 |
||||||
|
Revenues: |
|
|
|
|
||||
|
Commissions and fees |
$ |
84,870 |
|
$ |
119,299 |
|
||
|
Operating expenses: |
|
|
|
|
||||
|
Agent commissions |
$ |
26,014 |
|
$ |
35,317 |
|
||
|
Employee compensation and benefits |
$ |
4,347 |
|
$ |
4,752 |
|
||
|
General and administrative |
$ |
6,896 |
|
$ |
7,757 |
|
||
|
Amortization expense |
$ |
2,182 |
|
$ |
3,027 |
|
||
|
Total operating expenses |
$ |
39,439 |
|
$ |
50,853 |
|
||
|
Income from operations |
$ |
45,431 |
|
$ |
68,446 |
|
||
|
Other income (expense): |
|
|
|
|
||||
|
Interest income |
$ |
308 |
|
$ |
880 |
|
||
|
Interest expense |
$ |
(21,326 |
) |
$ |
(17,520 |
) |
||
|
Loss on extinguishment of debt |
$ |
(556 |
) |
$ |
(5,426 |
) |
||
|
Income tax expense |
$ |
5,971 |
|
$ |
11,788 |
|
||
|
Net income |
$ |
17,886 |
|
$ |
34,592 |
|
||
80
Revenues
|
Years Ended December 31, |
Change |
|||||||||||
|
($ in thousands) |
2023 |
2024 |
Amount |
Percentage |
||||||||
|
Revenues: |
|
|
|
|
||||||||
|
Commission income |
$ |
64,349 |
$ |
90,098 |
$ |
25,749 |
40.0 |
% |
||||
|
Fee income |
$ |
20,521 |
$ |
29,201 |
$ |
8,680 |
42.3 |
% |
||||
|
Total revenues |
$ |
84,870 |
$ |
119,299 |
$ |
34,429 |
40.6 |
% |
||||
For the year ended December 31, 2024, total revenues were $119.3 million. Revenues increased from $84.9 million for the year ended December 31, 2023, an increase of $34.4 million, or 40.6%, due to higher policy counts and the corresponding higher premium volume. The largest driver of our revenue growth was the increased number of policies eligible for renewal, as our total policies in force continued to grow due to a combination of policy and premium retention along with new business sales. Because each policy contract has a one-year term, any policy in force at the end of that term may be renewed for the subsequent year, provided it remains in force at the time of renewal and continues to meet our underwriting criteria. At December 31, 2022, we had 136,389 total policies in force, an increase of 22.2% to 166,739 for the year ended December 31, 2023. Of the policies in force at December 31, 2022, 95.3% were offered a renewal term for the year ended December 31, 2023. This increased to 95.8% of our policies in force at December 31, 2023, having been offered a renewal term for the year ended December 31, 2024. The effect is that, in any year, we expect the majority of the total revenue we earned in the prior year to be retained as revenue from renewals as policyholders accept renewal offers. Of the total revenue recognized on policies during the year ended December 31, 2023, 90.7% was recognized under the renewal terms of those same policies during the year ended December 31, 2024. Of the total revenue recognized on policies during the year ended December 31, 2022, 90.0% was recognized under the renewal terms of those same policies during the year ended December 31, 2023. We believe the 0.8% improvement reflects the impact of the ML models we have deployed to optimize renewal offers for revenue retention.
Another factor driving revenue growth was the increase in new policies sold. In the year ended December 31, 2024, we wrote 95,656 new policies, an increase of 39.9% from 68,357 new policies for the year ended December 31, 2023.
This growth can be attributed to a few important drivers, including growth of our distribution network, increased penetration with existing agents, and increased consumer awareness due to a particularly active storm season. Specifically, in 2024 there were 11 hurricanes (up from 8 in 2022 and 7 in 2023), with 5 of those making landfall in the U.S. (up from 3 in 2022 and 1 in 2023).
Our commission income in the year ended December 31, 2024, was $90.1 million, an increase of 40.0%, from $64.3 million in the year ended December 31, 2023. While primarily due to growth in written premium, the increase in commission income was also the result of a higher average commission rate paid by our carrier partners. For the year ended December 31, 2024, as a percentage of premium, average commission rate increased 0.9% when compared to the prior year. This increase was driven by our ability to deliver superior underwriting results to our carrier partners.
Fee income in the year ended December 31, 2024, was $29.2 million, an increase of 42.3%, from $20.5 million in the year ended December 31, 2023. While there was not a material increase to the year-over-year average policy fee paid by policyholders, increases to new business and renewal acceptance rates drove the growth in fee income.
Operating Expenses
|
Years Ended December 31, |
Change |
|||||||||||
|
($ in thousands) |
2023 |
2024 |
Amount |
Percentage |
||||||||
|
Operating expenses: |
|
|
|
|
||||||||
|
Agent commissions |
$ |
26,014 |
$ |
35,317 |
$ |
9,303 |
35.8 |
% |
||||
|
Employee compensation and benefits |
$ |
4,347 |
$ |
4,752 |
$ |
405 |
9.3 |
% |
||||
|
General and administrative |
$ |
6,896 |
$ |
7,757 |
$ |
861 |
12.5 |
% |
||||
|
Amortization expense |
$ |
2,182 |
$ |
3,027 |
$ |
845 |
38.7 |
% |
||||
|
Total operating expenses |
$ |
39,439 |
$ |
50,853 |
$ |
11,414 |
28.9 |
% |
||||
81
Total operating expenses were $50.9 million for the year ended December 31, 2024, an increase of 28.9% from $39.4 million for the year ended December 31, 2023. The increase in operating expenses was below our revenue growth as we continued to leverage operating efficiencies to scale the business. The primary driver of our increased operating expenses was an increase in our agent commission costs, which are directly correlated with the growth in our policy portfolio for the year ended December 31, 2024.
Our agent commission expenses were $35.3 million for the year ended December 31, 2024, an increase of 35.8% from $26.0 million for the year ended December 31, 2023. The increase in agent commissions expenses for the year ended December 31, 2024, was due to higher policy and premium sales, leading to higher corresponding commission payouts to external agents. Our agent commission rates remained consistent year-over-year as the expense increase was volume-driven and aligned with our increased year-over-year revenue.
Our employee compensation and benefits expenses were $4.8 million for the year ended December 31, 2024, an increase of 9.3% from $4.3 million for the year ended December 31, 2023. The increase was partially related to an increase in overall headcount, due in part to our onboarding of the employees of Charles River Data during the year ended December 31, 2024. In 2023, share-based compensation expense was $41 thousand, which increased to $0.3 million in 2024 due to stock options granted to employees. Compensation expense for the year ended December 31, 2023, includes a discretionary cash bonus, totaling $0.7 million, paid to certain employees following the completion of our sale of preferred shares to Bregal Sagemount and FTV Capital.
Our general and administrative expenses were $7.8 million for the year ended December 31, 2024, an increase of 12.5% from $6.9 million for the year ended December 31, 2023. This increase was primarily due to a $0.5 million year-over-year increase in our software technology costs, due to increased costs from our data cloud servers and software license fees as usage of our platform grew in the year ended December 31, 2024, and a $0.2 million increase in bank charges and fees for the year ended December 31, 2024, due to a higher volume of transactions, directly related to the growing number of policies in our portfolio.
Our amortization expenses were $3.0 million for the year ended December 31, 2024, an increase of 38.7% from $2.2 million for the year ended December 31, 2023. This $0.8 million increase from the prior year is primarily attributable to higher amortization of our capitalized software, reflecting our larger base of capitalized software, as we have continued to invest in our proprietary technology platform with significant investments in the years ended December 31, 2024 and 2023, including the capitalization of $3.7 million of software development costs which began amortizing during the year ended December 31, 2024, which contributed to our amortization expenses for the year ended December 31, 2024.
Interest Income (Expense) and Other
|
Years Ended December 31, |
Change |
||||||||||||||
|
($ in thousands) |
2023 |
2024 |
Amount |
Percentage |
|||||||||||
|
Other income (expense): |
|
|
|
|
|
|
|
||||||||
|
Interest income |
$ |
308 |
|
$ |
880 |
|
$ |
572 |
|
185.7 |
% |
||||
|
Interest expense |
$ |
(21,326 |
) |
$ |
(17,520 |
) |
$ |
3,806 |
|
(17.8 |
)% |
||||
|
Loss on extinguishment of debt |
$ |
(556 |
) |
$ |
(5,426 |
) |
$ |
(4,870 |
) |
875.9 |
% |
||||
Our interest income was $0.9 million for the year ended December 31, 2024, an increase of 185.7% from $0.3 million for the year ended December 31, 2023. The increase was primarily due to higher average balances and improved yield on deposits held in our bank accounts, as compared to the prior year.
Our interest expense was $17.5 million for the year ended December 31, 2024, which decreased by 17.8% from $21.3 million for the year ended December 31, 2023. The decrease in interest expense from the year ended December 31, 2023, to the year ended December 31, 2024, was due to a lower average outstanding loan balance and lower average interest rate under our credit facilities, primarily as a result of a debt refinancing we completed in June 2024. This transaction also resulted in the expensing of capitalized loan expenses that had not yet amortized and a prepayment penalty in respect of the refinanced facility, resulting in a $5.4 million loss on extinguishment of debt.
82
Income Tax Expense
Our income tax expense was $11.8 million for the year ended December 31, 2024, an increase of 97.4% from $6.0 million for the year ended December 31, 2023. The increase in our income tax expense was primarily due to increased taxable income for the year ended December 31, 2024, as compared to the year ended December 31, 2023. To a lesser extent, this increase was also driven by a slightly higher effective tax rate of 25.0% for the year ended December 31, 2023, rising to 25.4% for the year ended December 31, 2024, which was primarily attributable to the impact of certain permanent differences and state tax apportionment changes.
Key Performance Indicators
In managing our business, our management regularly reviews certain KPIs, to evaluate our operations, guide decision-making, and measure progress. We utilize a variety of operational metrics to understand growth, retention, and ultimately drive profitability.
• Premium in force: This metric represents the annualized premium of all active policies at a given date. Premium in force is an insurance industry indication of scale and a leading indicator of future renewal commissions.
• Policies in force: The number of active policies at a given point in time. This is monitored to gauge scale and penetration and is a strong indicator of future renewal opportunities and their related revenue.
• Policy and premium retention rate: We closely monitor the acceptance of renewal offers as an early indicator of price elasticity. Retention is measured in two primary ways for any given period: our “policy retention rate” is the percentage of our policyholders who receive renewal offers that accept the offered renewal term, and our “premium retention rate” is the premium associated with those accepted renewal offers, as a percentage of the total premium from expiring policies for which renewal offers were made. Premium retention often tracks significantly higher than policy retention, as price increases mean fewer units would be necessary to maintain the same amount of premium. Higher premium results in higher commission, but large price increases can decrease policy retention and the associated policy fees. Because of this inverse relationship between premium and policy retention, we use data science and ML to inform renewal pricing to optimize for revenue retention.
• Written Premium: The total premium we placed with insurance programs during a reporting period, less “return premiums” refunded to policyholders due to cancellations, endorsement of policies, or otherwise. We believe written premium is an appropriate measure of operating performance because it is the primary driver of our commission revenue.
• Organic revenue and organic revenue growth: We define organic revenue as total revenue determined in accordance with GAAP, adjusted to remove the impact of any acquisitions or divestitures. We define organic revenue growth as the year-over-year growth in our organic revenue. However, as of the date of this prospectus and for the relevant periods presented herein, we have not completed any relevant acquisitions or divestitures, therefore our organic revenue and organic revenue growth reflect our total revenue and total revenue growth, respectively, as determined in accordance with GAAP. Organic revenue and organic revenue growth are also non-GAAP financial measures which are commonly reported by others in the insurance industry. We use “organic revenue” and “organic revenue growth” in this prospectus to facilitate investors’ understanding of our operating performance and comparison with our peers.
• Revenue and Adjusted EBITDA per employee: We closely monitor both revenue and Adjusted EBITDA per employee as metrics of scaling growth and believe these to be leading indicators of sustained profitability and efficiency. To calculate revenue per employee we divide our total revenue for the trailing four quarters, determined in accordance with GAAP, by the average number of our employees for the trailing four quarters. The result is a revenue per employee calculation that we believe is an accurate representation of our revenue as it relates to the timing of changes in headcount. We calculate Adjusted EBITDA per employee on the same basis, by dividing Adjusted EBITDA for the trailing four quarters by the average number of our employees for the trailing four quarters. For further discussion on our calculation of Adjusted EBITDA, see “Non-GAAP Financial Measures” below.
83
The tables below compare certain of our KPIs as of and for the six months ended June 30, 2024 and 2025, and as of and for the years ended December 31, 2023 and 2024:
|
Six Months Ended June 30, |
|||||||||||
|
($ in thousands) |
2024 |
2025 |
Change |
||||||||
|
Premium in force (period-end) |
$ |
236,701 |
|
$ |
317,972 |
|
34.3 |
% |
|||
|
Policies in force (period-end) |
|
188,342 |
|
|
244,964 |
|
30.1 |
% |
|||
|
Policy retention rate (six months)(1) |
|
82.9 |
% |
|
85.8 |
% |
2.9 |
pp |
|||
|
Premium retention rate (six months)(1) |
|
95.2 |
% |
|
98.9 |
% |
3.7 |
pp |
|||
|
Written Premium |
$ |
125,442 |
|
$ |
165,544 |
|
32.0 |
% |
|||
|
Organic revenue |
$ |
53,976 |
|
$ |
71,419 |
|
32.3 |
% |
|||
|
Organic revenue growth(1) |
|
38.0 |
% |
|
32.3 |
% |
(5.7 |
)pp |
|||
|
Years Ended December 31, |
|||||||||||
|
($ in thousands) |
2023 |
2024 |
Change |
||||||||
|
Premium in force (year-end) |
$ |
204,118 |
|
$ |
277,595 |
|
36.0 |
% |
|||
|
Policies in force (year-end) |
|
166,739 |
|
|
220,964 |
|
32.5 |
% |
|||
|
Policy retention rate (full year)(1) |
|
82.4 |
% |
|
84.3 |
% |
1.9 |
pp |
|||
|
Premium retention rate (full year)(1) |
|
97.9 |
% |
|
97.1 |
% |
(0.8 |
)pp |
|||
|
Written Premium |
$ |
201,561 |
|
$ |
273,917 |
|
35.9 |
% |
|||
|
Organic revenue |
$ |
84,870 |
|
$ |
119,299 |
|
40.6 |
% |
|||
|
Organic revenue growth(1) |
|
36.6 |
% |
|
40.6 |
% |
4.0 |
pp |
|||
____________
(1) Year-over-year changes in percentages are reported in percentage points (pp).
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared in conformity with GAAP, we use certain financial measures, including Adjusted EBITDA and Adjusted EBITDA margin, which are not required by, or prepared in accordance with, GAAP. We refer to these measures as “non-GAAP” financial measures. We use these non-GAAP financial measures when planning, monitoring and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period, to assess our financial and operating performance, and to better understand our cash available for debt service and reinvestment in our business. These non-GAAP financial measures should not be considered as substitutes for, or superior to, the financial statements and financial information prepared in accordance with GAAP. See below for a description of these non-GAAP financial measures, as well as for more information about the limitations of these non-GAAP financial measures and for reconciliations to their most directly comparable measure reported under GAAP.
Adjusted EBITDA and Adjusted EBITDA margin: We define Adjusted EBITDA as net income (the most directly comparable GAAP measure) adjusted to exclude interest expense (net of interest income), income taxes, depreciation and amortization, and further adjusted for other non-cash or non-recurring items, including share-based compensation. By removing these expenses, Adjusted EBITDA provides a clearer year-to-year comparison of operating performance.
We regard Adjusted EBITDA as an important measure for several reasons:
• It excludes the impact of financing decisions (debt vs. equity) by adding back interest, thus focusing on the performance of the underlying operations.
• It excludes loss on extinguishment of debt, which we do not consider indicative of our core operating performance.
• It excludes non-cash charges like amortization and share-based compensation (which depends on equity grant timing and valuation assumptions).
• It eliminates the distortion from one-time events such as the $0.7 million discretionary cash bonus we paid to certain employees in May 2023. This bonus was paid following our successful sale of preferred shares in Neptune Flood to Bregal Sagemount and FTV Capital, as a one-time discretionary cash reward to certain employees. We do not anticipate future bonuses of this nature.
84
• It removes any other non-recurring, one-time expenses, most often related to corporate finance activities such as the debt refinancing we conducted in 2024 and our expenses associated with this offering.
• This measure is also useful for management and investors to compare our performance with that of other insurance technology or MGA companies who may have differing depreciation or financing structures.
In conjunction with Adjusted EBITDA, we also calculate Adjusted EBITDA margin, or Adjusted EBITDA as a percentage of total revenue. Below is a reconciliation of Adjusted EBITDA to net income, as well as our net income margin and Adjusted EBITDA margin, for each of the six months ended June 30, 2025 and 2024, for the twelve months ended June 30, 2025 and 2024, and for each of the years ended December 31, 2018 through December 31, 2024:
|
Six Months Ended June 30, |
|||||||||||
|
($ in thousands) |
2024 |
2025 |
Change |
||||||||
|
Total revenues |
$ |
53,976 |
|
$ |
71,419 |
|
32.3 |
% |
|||
|
Net income |
$ |
10,887 |
|
$ |
21,559 |
|
98.0 |
% |
|||
|
Interest expense (net of interest income) |
$ |
10,209 |
|
$ |
7,853 |
|
(23.1 |
)% |
|||
|
Income tax expense |
$ |
3,725 |
|
$ |
7,505 |
|
101.5 |
% |
|||
|
Loss on extinguishment of debt |
$ |
5,426 |
|
$ |
— |
|
(100.0 |
)% |
|||
|
Amortization expense |
$ |
1,425 |
|
$ |
1,786 |
|
25.3 |
% |
|||
|
Share-based compensation |
$ |
142 |
|
$ |
187 |
|
31.7 |
% |
|||
|
Corporate transaction related(1) |
$ |
100 |
|
$ |
3,473 |
|
3,373.0 |
% |
|||
|
One-time expenses(2) |
$ |
115 |
|
$ |
— |
|
(100.0 |
)% |
|||
|
Adjusted EBITDA |
$ |
32,029 |
|
$ |
42,363 |
|
32.3 |
% |
|||
|
Net income margin(3) |
|
20.2 |
% |
|
30.2 |
% |
10.0 |
pp |
|||
|
Adjusted EBITDA margin(3) |
|
59.3 |
% |
|
59.3 |
% |
0.0 |
pp |
|||
____________
(1) Corporate transaction expenses during the six months ended June 30, 2024, were a $0.1 million administrative fee paid to MC Capital, our lender prior to the refinancing transaction in June 2024, in connection with the refinancing and extinguishment of our prior credit facility. Corporate transaction expenses during the six months ended June 30, 2025, were increased accounting and legal fees related to preparation for our initial public offering.
(2) One-time expenses during the six months ended June 30, 2024, were entirely related to the corporate rebrand that was completed in that period.
(3) Year-over-year changes in percentages are reported in percentage points (pp).
|
Twelve Months Ended |
|||||||||||
|
($ in thousands) |
2024 |
2025 |
Change |
||||||||
|
Total revenues |
$ |
99,729 |
|
$ |
136,742 |
|
37.1 |
% |
|||
|
Net income |
$ |
20,949 |
|
$ |
45,264 |
|
116.1 |
% |
|||
|
Interest expense (net of interest income) |
$ |
21,501 |
|
$ |
14,284 |
|
(33.6 |
)% |
|||
|
Income tax expense |
$ |
7,122 |
|
$ |
15,568 |
|
118.6 |
% |
|||
|
Loss on extinguishment of debt |
$ |
5,646 |
|
|
— |
|
(100.0 |
)% |
|||
|
Amortization expense |
$ |
2,659 |
|
$ |
3,388 |
|
27.4 |
% |
|||
|
Share-based compensation |
$ |
183 |
|
$ |
341 |
|
86.3 |
% |
|||
|
Corporate transaction related(1) |
$ |
103 |
|
$ |
3,473 |
|
3,271.8 |
% |
|||
|
One-time expenses(2) |
$ |
125 |
|
$ |
115 |
|
(8.0 |
)% |
|||
|
Adjusted EBITDA |
$ |
58,288 |
|
$ |
82,433 |
|
41.4 |
% |
|||
|
Net income margin(3) |
|
21.0 |
% |
|
33.1 |
% |
12.1 |
pp |
|||
|
Adjusted EBITDA margin(3) |
|
58.4 |
% |
|
60.3 |
% |
1.9 |
pp |
|||
____________
(1) Corporate transaction expenses during the twelve months ended June 30, 2025, included accounting and legal fees related to preparation for our initial public offering.
(2) One-time expenses for twelve months ended June 30, 2025, included $0.1 million associated with the one-time integration costs for Neptune into a distribution partner’s quoting platform.
(3) Year-over-year changes in percentages are reported in percentage points (pp).
85
|
Years Ended December 31, |
|||||||||||
|
($ in thousands) |
2023 |
2024 |
Change |
||||||||
|
Total revenues |
$ |
84,870 |
|
$ |
119,299 |
|
40.6 |
% |
|||
|
Net income |
$ |
17,886 |
|
$ |
34,592 |
|
93.4 |
% |
|||
|
Interest expense (net of interest income) |
$ |
21,018 |
|
$ |
16,640 |
|
(20.8 |
)% |
|||
|
Income tax expense |
$ |
5,971 |
|
$ |
11,788 |
|
97.4 |
% |
|||
|
Loss on extinguishment of debt |
$ |
556 |
|
$ |
5,426 |
|
875.9 |
% |
|||
|
Amortization expense |
$ |
2,182 |
|
$ |
3,027 |
|
38.7 |
% |
|||
|
Share-based compensation |
$ |
41 |
|
$ |
296 |
|
622.0 |
% |
|||
|
Corporate transaction related(1) |
$ |
732 |
|
$ |
100 |
|
(86.3 |
)% |
|||
|
One-time expenses(2) |
$ |
51 |
|
$ |
230 |
|
351.0 |
% |
|||
|
Adjusted EBITDA |
$ |
48,437 |
|
$ |
72,099 |
|
48.9 |
% |
|||
|
Net income margin(3) |
|
21.1 |
% |
|
29.0 |
% |
7.9 |
pp |
|||
|
Adjusted EBITDA margin(3) |
|
57.1 |
% |
|
60.4 |
% |
3.3 |
pp |
|||
____________
(1) Corporate transaction expenses during the year ended December 31, 2023, were legal fees associated with the sale of preferred shares in Neptune Flood to Bregal Sagemount and FTV Capital. This also includes the $0.7 million associated with the discretionary cash bonus paid to certain employees as a reward following the completion of that transaction. The corporate transaction expense for the year ended December 31, 2024, was a $0.1 million administrative fee paid to MC Capital, our lender prior to the refinance transaction in June 2024, in connection with the refinancing and extinguishment of our prior credit facility.
(2) One-time expenses during the year ended December 31, 2023, were entirely related to the corporate rebrand that was completed in the year ended December 31, 2024. One-time expenses for the year ended December 31, 2024, included $0.1 million of expenses related to the corporate rebrand, as well as $0.1 million associated with the one-time integration costs for Neptune into a distribution partner’s quoting platform. The remaining, less than $0.1 million, was associated with compensation of a Neptune advisory board that was discontinued prior to this offering.
(3) Year-over-year changes in percentages are reported in percentage points (pp).
|
Years Ended December 31, |
||||||||||||||||||||
|
($ in thousands) |
2018 |
2019 |
2020 |
2021 |
2022 |
|||||||||||||||
|
Total revenues |
$ |
1,427 |
|
$ |
6,882 |
|
$ |
18,679 |
|
$ |
36,920 |
|
$ |
59,870 |
|
|||||
|
Net income (loss) |
$ |
(821 |
) |
$ |
677 |
|
$ |
6,054 |
|
$ |
12,774 |
|
$ |
18,218 |
|
|||||
|
Interest expense (net of interest income) |
$ |
— |
|
$ |
— |
|
$ |
(0.0 |
) |
$ |
1,451 |
|
$ |
7,601 |
|
|||||
|
Income tax expense (benefit) |
$ |
(269 |
) |
$ |
318 |
|
$ |
1,920 |
|
$ |
4,273 |
|
$ |
6,459 |
|
|||||
|
Amortization expense |
$ |
— |
|
$ |
— |
|
$ |
88 |
|
$ |
622 |
|
$ |
1,571 |
|
|||||
|
Corporate transaction related(1) |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
244 |
|
$ |
— |
|
|||||
|
One-time expenses(2) |
$ |
— |
|
$ |
— |
|
$ |
282 |
|
$ |
— |
|
$ |
— |
|
|||||
|
Adjusted EBITDA |
$ |
(1,069 |
) |
$ |
1,035 |
|
$ |
8,345 |
|
$ |
19,398 |
|
$ |
33,873 |
|
|||||
|
Net income margin |
|
(57.6 |
)% |
|
9.8 |
% |
|
32.4 |
% |
|
33.7 |
% |
|
29.3 |
% |
|||||
|
Adjusted EBITDA margin |
|
(75.0 |
)% |
|
15.0 |
% |
|
44.7 |
% |
|
51.1 |
% |
|
54.5 |
% |
|||||
____________
(1) Corporate transaction expenses during the year ended December 31, 2021 were expenses from our various mergers and acquisitions activities, which consisted of $0.1 million from mergers and acquisition activities not consummated and $0.1 million of legal expenses associated with our completed acquisition of Jumpstart.
(2) One-time expenses during the year ended December 31, 2020 were related to a separation agreement with an early employee which totaled $0.3 million.
Adjusted EBITDA was $42.4 million for the six months ended June 30, 2025, an increase of $10.4 million, or 32.3%, from $32.0 million for the six months ended June 30, 2024. Our Adjusted EBITDA margin for both the six months ended June 30, 2025, and June 30, 2024, was 59.3%.
86
Adjusted EBITDA was $82.4 million for the twelve months ended June 30, 2025, an increase of $24.1 million, or 41.4%, from $58.3 million for the twelve months ended June 30, 2024. Our Adjusted EBITDA margin for the twelve months ended June 30, 2025, was 60.3%, an increase from 58.4% for the twelve months ended June 30, 2024.
|
($ in thousands) |
Twelve Months Ended June 30, |
Change |
|||||||||
|
2024 |
2025 |
||||||||||
|
Average number of employees |
|
47.9 |
|
|
55.5 |
|
15.9 |
% |
|||
|
Total revenues |
$ |
99,729 |
|
$ |
136,742 |
|
37.1 |
% |
|||
|
Revenue per employee |
$ |
2,082 |
|
$ |
2,464 |
|
18.3 |
% |
|||
|
Adjusted EBITDA |
$ |
58,288 |
|
$ |
82,433 |
|
41.4 |
% |
|||
|
Adjusted EBITDA per employee |
$ |
1,217 |
|
$ |
1,485 |
|
22.0 |
% |
|||
|
Adjusted EBITDA margin(1) |
|
58.4 |
% |
|
60.3 |
% |
1.9 |
pp |
|||
____________
(1) Year-over-year changes in percentages are reported in percentage points (pp).
While our revenue and Adjusted EBITDA grew 37.1% and 41.4%, respectively, for the twelve months ended June 30, 2025, from the twelve months ended June 30, 2024, our headcount increased by only around 16% over the same period. The accelerated growth in revenue and Adjusted EBITDA relative to our growth in employees helps illustrate the scalability of our existing platform and emphasis on efficient growth.
Adjusted EBITDA increased by $23.6 million, or 48.9%, to $72.1 million for the year ended December 31, 2024, as compared to $48.4 million for the year ended December 31, 2023, and our Adjusted EBITDA margin rose to 60.4% for the year ended December 31, 2024, from 57.1% for the year ended December 31, 2023. We believe this growth reflects our improved revenue dynamics, achieved through higher commission rates and policy retention, as well as our continued emphasis on operational efficiency and high gross margins.
|
($ in thousands) |
Year Ended December 31, |
Change |
|||||||||
|
2023 |
2024 |
||||||||||
|
Average number of employees |
|
45.0 |
|
|
51.8 |
|
15.1 |
% |
|||
|
Total revenues |
$ |
84,870 |
|
$ |
119,299 |
|
40.6 |
% |
|||
|
Revenue per employee |
$ |
1,886 |
|
$ |
2,303 |
|
22.1 |
% |
|||
|
Adjusted EBITDA |
$ |
48,437 |
|
$ |
72,099 |
|
48.9 |
% |
|||
|
Adjusted EBITDA per employee |
$ |
1,076 |
|
$ |
1,392 |
|
29.4 |
% |
|||
|
Adjusted EBITDA margin(1) |
|
57.1 |
% |
|
60.4 |
% |
3.3 |
pp |
|||
____________
(1) Year-over-year changes in percentages are reported in percentage points (pp).
While our revenue and Adjusted EBITDA grew 40.6% and 48.9%, respectively, for the year ended December 31, 2024, from the year ended December 31, 2023, our headcount increased by only around 15% over the same period. The accelerated growth in revenue and Adjusted EBITDA relative to our growth in employees helps illustrate the scalability of our existing platform and emphasis on efficient growth.
Limitations of Non-GAAP Financial Measures
Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under GAAP. There are a number of limitations related to the use of non-GAAP financial measures versus comparable financial measures determined under GAAP. For example, the non-GAAP financial information presented above may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.
In addition, while we find Adjusted EBITDA and Adjusted EBITDA margin to be useful measures, they have limitations. Adjusted EBITDA does not reflect cash needs for capital expenditures or debt service. It also does not reflect changes in working capital or any provision for income taxes. Therefore, it should not be considered in isolation or as a substitute for net income or cash flow metrics. In particular, because we have significant interest expense and have to pay cash interest, Adjusted EBITDA overstates the cash generated by our business that is available to equity holders.
All of these limitations could reduce the usefulness of these non-GAAP financial measures as analytical tools. Investors are encouraged to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures and to not rely on any single financial measure to evaluate our business. We provide this non-GAAP measure as supplemental information and encourage review of the reconciliation to understand the adjustments made.
87
Liquidity and Capital Resources
Liquidity and Capital Resources
Liquidity is a measure of a company’s ability to generate cash flows sufficient to meet the short-term and long-term cash requirements of its business operations. Our principal sources of liquidity have been cash generated from operating activities and available borrowing capacity under our credit facilities. Our principal liquidity requirements include operating expenses, debt service obligations (interest and scheduled principal repayments), capital expenditures (primarily capitalized software development) and working capital for growth. All shares sold in this offering are to be sold by existing stockholders and we will not receive any proceeds from the offering. As such, our liquidity position and capital resources following this offering will continue to depend on cash generated from operating activities and existing financing arrangements.
As of June 30, 2025, December 31, 2024, and December 31, 2023, we had $58.5 million, $28.1 million, and $24.3 million of cash and cash equivalents and fiduciary cash on the balance sheet, respectively. This consisted of $11.7 million, $7.1 million, and $8.1 million of cash and cash equivalents, respectively, and $46.8 million, $21.0 million, and $16.2 million of fiduciary cash, respectively. In our capacity as an insurance agent, we typically collect premiums from policyholders and, after deducting the authorized commissions, remit the net premiums to the appropriate insurance company or companies. Accordingly, premiums receivable from policyholders are reported as fiduciary receivables and premiums payable to insurance companies are reported as insurance company payables. Unremitted net insurance premiums are held in a fiduciary capacity until we distribute them. Net insurance premiums payable to insurance companies, together with premium deposits received from policyholders, are held as fiduciary cash on the balance sheet. Cash and cash equivalents held in excess of the amounts required to meet our fiduciary obligations are recognized as cash and cash equivalents. We had operating cash flows of $23.0 million for the six months ended June 30, 2025, and $49.9 million and $18.6 million for the years ended December 31, 2024 and 2023, respectively. We have historically used our positive operating cash flows to pre-pay portions of the principal amount of our then-outstanding loans, while retaining sufficient liquidity for working capital needs.
The 2024 Credit Agreement established a revolving credit facility of up to $10 million, which continues in effect under the 2025 Amended and Restated Credit Agreement. The revolving credit facility was undrawn as of December 31, 2024, remains undrawn as of the date of this prospectus, and provides flexibility for short-term funding needs or working capital requirements.
We believe our current cash and cash equivalents, and amounts available under our 2025 Amended and Restated Credit Agreement will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months and beyond. Over the longer term, we may explore refinancing options to reduce interest costs or raise equity to accelerate growth or reduce leverage and, depending on interest rates and market conditions, may from time to time consider distributing dividends or engaging in stock repurchases.
Cash Flows
Comparison of the Six Months Ended June 30, 2024 and 2025
The following table shows a summary of our cash flows for the periods presented:
|
Six Months Ended June 30, |
||||||||
|
($ in thousands) |
2024 |
2025 |
||||||
|
Net cash provided by operating activities |
$ |
20,271 |
|
$ |
22,964 |
|
||
|
Net cash used in investing activities |
$ |
(1,724 |
) |
$ |
(1,884 |
) |
||
|
Net cash used in financing activities |
$ |
2,579 |
|
$ |
9,307 |
|
||
Operating Activities
For the six months ended June 30, 2025, net cash provided by operating activities was $23.0 million, primarily consisting of our net income of $21.6 million, adjusted for amortization of intangible assets of $1.8 million, amortization of deferred financing costs of $0.2 million, share-based compensation of $0.2 million, and an increase in operating liabilities of $0.7 million. These amounts were partially offset by a $1.5 million increase in operating assets. Accounts payable and accrued expenses grew as the Company’s operations expanded, contributing to cash flow. Net cash provided by operating activities increased from the six months ended June 30, 2024, to the six months ended June 30, 2025, mainly due to higher net income and an increase in operating liabilities.
88
For the six months ended June 30, 2024, net cash provided by operating activities was $20.3 million, primarily consisting of our net income of $10.9 million, adjusted for amortization of intangible assets of $1.4 million, amortization of deferred financing costs of $0.4 million, loss on the extinguishment of debt of $5.4 million, and an increase in operating liabilities of $2.7 million. These amounts were partially offset by a $0.3 million increase in deferred tax assets and a $0.3 million increase in operating assets.
Investing Activities
For the six months ended June 30, 2025, net cash used in investing activities was $1.9 million, compared to $1.7 million for the six months ended June 30, 2024, all related to capital expenditures for internally developed software. The slight increase in year-over-year net cash used in investing activities for the six months ended June 30, 2025, was due to additions to headcount in the technology and data science teams. We expect to continue investing in software development at a similar or slightly greater pace in the future, which is a use of cash that we believe yields high returns in terms of functionality and accretion to future growth.
For the six months ended June 30, 2024, cash used in investing activities was $1.7 million due to capital expenditures for internally developed software.
Financing Activities
For the six months ended June 30, 2025, net cash provided by financing activities was $9.3 million, which was primarily due to refinancing of our then-existing debt facility through our entry into the 2025 Credit Agreement, resulting in proceeds of $301.0 million, as well as a $26.6 million change in fiduciary liabilities. This was partially offset by cash dividends paid of $175.0 million, $142.0 million of repayments of our long-term debt, and a $0.8 million change in fiduciary receivables.
For the six months ended June 30, 2024, net cash provided by financing activities was $2.6 million, which was primarily due to $179.5 million of repayments of our long-term debt, a $3.7 million payment of deferred financing fees, and a $1.2 million decrease in fiduciary receivables. This was partially offset by proceeds of $171.0 million from the issuance of long-term debt.
Comparison of the Years Ended December 31, 2023 and 2024
The following table shows a summary of our cash flows for the periods presented:
|
Years Ended December 31, |
||||||||
|
($ in thousands) |
2023 |
2024 |
||||||
|
Net cash provided by operating activities |
$ |
18,647 |
|
$ |
49,926 |
|
||
|
Net cash used in investing activities |
$ |
(4,030 |
) |
$ |
(3,713 |
) |
||
|
Net cash used in financing activities |
$ |
(9,866 |
) |
$ |
(42,468 |
) |
||
Operating Activities
For the year ended December 31, 2024, net cash provided by operating activities was $49.9 million, primarily consisting of our net income of $34.6 million, adjusted for amortization of intangible assets of $3.0 million, amortization of deferred financing costs of $0.9 million, loss on the extinguishment of debt of $5.4 million, share-based compensation of $0.3 million, and an increase in operating liabilities of $7.4 million. These amounts were partially offset by a $0.6 million increase in deferred tax assets and a $1.1 million increase in operating assets. Accounts payable and accrued expenses grew as the Company’s operations expanded, contributing to cash flow. Net cash provided by operating activities increased from the year ended December 31, 2023, to the year ended December 31, 2024, mainly due to higher net income, a higher loss on extinguishment of debt, and an increase in operating liabilities.
For the year ended December 31, 2023, net cash provided by operating activities was $18.6 million, primarily consisting of our net income of $17.9 million, adjusted for amortization of intangible assets of $2.2 million, amortization of deferred financing costs of $1.2 million, loss on the extinguishment of debt of $0.6 million, and an increase in operating liabilities of $0.4 million. These amounts were partially offset by a $2.2 million increase in deferred tax assets and a $1.5 million increase in operating assets.
89
Investing Activities
For the year ended December 31, 2024, net cash used in investing activities was $3.7 million, compared to $4.0 million for the year ended December 31, 2023, all related to capital expenditures for internally developed software. The slight decrease in year-over-year net cash used in investing activities for the year ended December 31, 2024, was due in part to higher than baseline capitalized software development in the prior year, related to a discretionary cash bonus paid to certain employees following our sale of preferred shares to Bregal Sagemount and FTV Capital. The bonus resulted in additional capitalized software development of $0.8 million for the year ended December 31, 2023, as compared to the year ended December 31, 2024. For the year ended December 31, 2024, baseline capitalization of software costs increased by $0.5 million as we invested in software development at a slightly higher rate than the prior year in connection with ramping up our investment in the Neptune platform, including hiring more developers and undertaking significant projects like AI integration. We expect to continue investing in software development at a similar or slightly greater pace in the future, which is a use of cash that we believe yields high returns in terms of functionality and accretion to future growth.
For the year ended December 31, 2023, cash used in investing activities was $4.0 million due to capital expenditures for internally developed software. As discussed below, the capitalized software development in the year ended December 31, 2023, was higher than baseline by $0.8 million due to increased capitalization related to the discretionary cash bonus paid to certain employees.
Financing Activities
For the year ended December 31, 2024, net cash used in financing activities was $42.5 million, which was primarily due to $3.7 million of deferred financing fees associated with the refinancing of our then-existing debt facility through our entry into the 2024 Credit Agreement, $214.5 million of repayments of our long-term debt, and $0.6 million change in fiduciary receivables. This was partially offset by proceeds of $171.0 million from the issuance of our long-term debt and a $5.4 million change in fiduciary liabilities. The main driver of our net cash used in financial activities for the year ended December 31, 2024, were costs related to refinancing our then existing debt facility and regular debt paydowns.
For the year ended December 31, 2023, net cash used in financing activities was $9.9 million, which was primarily due to a $339.0 million dividend payment, $81.4 million of repayments of our long-term debt, a $3.0 million payment of deferred financing fees, and a $0.9 million decrease in fiduciary receivables. This was partially offset by proceeds of $190.0 million from the issuance of long-term debt, net proceeds of $219.1 million from the issuance and sale of preferred stock, and a change in fiduciary liabilities of $5.4 million.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of December 31, 2024:
|
Payments Due by Period |
||||||||||||||
|
($ in thousands) |
Less than |
1 – 3 |
3 – 5 |
More than |
Total |
|||||||||
|
Short- and long-term debt obligations |
$ |
8,550 |
$ |
38,474 |
$ |
87,976 |
— |
$ |
135,000 |
|||||
|
Total |
$ |
8,550 |
$ |
38,474 |
$ |
87,976 |
— |
$ |
135,000 |
|||||
The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.
We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
90
On June 13, 2024, Neptune Flood, as borrower, entered into the 2024 Credit Agreement pursuant to which Neptune Flood received a term loan in the aggregate principal amount of $171 million, and, as of December 31, 2024, Neptune Flood had $135 million in principal amount of term loans outstanding under the 2024 Credit Agreement. On April 10, 2025, in connection with our reorganization transaction described elsewhere in this prospectus, the 2024 Credit Agreement was amended and restated in its entirety in the form of the 2025 Amended and Restated Credit Agreement to, among other things, increase the aggregate principal amount of term loans outstanding under the facility to $301 million, including $170 million in principal amount of new term loans, and extend the maturity date of all outstanding loans under the facility to April 10, 2030. The 2025 Amended and Restated Credit Agreement requires us to make quarterly principal payments of approximately (a) $3.8 million beginning with the fiscal quarter ending September 30, 2025, through and including the fiscal quarter ending June 30, 2027, (b) $5.6 million from and including the fiscal quarter ending September 30, 2027 through and including the fiscal quarter ending June 30, 2029, and (c) $7.5 million from and including the fiscal quarter ending September 30, 2029 through and including the fiscal quarter ending March 31, 2030, with a balloon payment of approximately $195.7 million of principal due at maturity, subject to any prior prepayments or repayments. Although there can be no assurance as to the timing or amount of any such prepayments, if any, we currently anticipate that we will make accelerated prepayments of the outstanding loans under the 2025 Amended and Restated Credit Agreement in advance of maturity. We also maintain a revolving credit facility of up to $10 million as part of the 2025 Amended and Restated Credit Agreement. As of June 30, 2025, we had no outstanding balance on our revolving credit facility, with $10 million in available capacity, and $294 million in principal amount of term loans outstanding under the 2025 Amended and Restated Credit Facility. Our borrowings under the Amended and Restated Credit Agreement accrue interest tied to SOFR.
The 2025 Amended and Restated Credit Agreement contains covenants that, among other things, restrict our ability to make certain restricted payments, incur additional debt, engage in certain asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change our business or make investments and require us to comply with certain financial covenants. We are in compliance with the 2025 Amended and Restated Credit Agreement covenants as of the date of this prospectus.
Quarterly Results of Operations
The following table sets forth our unaudited quarterly consolidated results of operations for each of the quarterly periods for the year ended December 31, 2024, and six months ended June 30, 2025. These unaudited quarterly results of operations have been prepared on the same basis as our audited consolidated financial statements included elsewhere in this prospectus. In the opinion of management, the financial information set forth in the table below reflects all normal recurring adjustments necessary for the fair statement of results of operations for these periods. Our historical results are not necessarily indicative of the results that may be expected in the future, and the results of a particular quarter or other interim period are not necessarily indicative of the results for a full year. You should read the following unaudited quarterly consolidated results of operations in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus.
|
Three Months Ended |
||||||||||||||||||
|
(In thousands) |
March 31, |
June 30, |
September 30, |
December 31, |
March 31, |
June 30, |
||||||||||||
|
Revenues |
|
|
|
|
|
|
||||||||||||
|
Commissions and fees |
$ |
21,566 |
$ |
32,410 |
$ |
33,820 |
$ |
31,503 |
$ |
29,353 |
$ |
42,066 |
||||||
|
|
|
|
|
|
|
|||||||||||||
|
Operating expenses |
|
|
|
|
|
|
||||||||||||
|
Agent commissions |
|
6,511 |
|
9,646 |
|
10,014 |
|
9,146 |
|
8,940 |
|
12,736 |
||||||
|
Employee compensation and benefits |
|
1,192 |
|
1,226 |
|
1,284 |
|
1,050 |
|
1,405 |
|
1,528 |
||||||
|
General and administrative |
|
1,633 |
|
2,096 |
|
1,931 |
|
2,097 |
|
2,505 |
|
5,602 |
||||||
|
Amortization expense |
|
688 |
|
737 |
|
782 |
|
820 |
|
874 |
|
912 |
||||||
|
Total operating |
|
10,024 |
|
13,705 |
|
14,011 |
|
13,113 |
|
13,724 |
|
20,778 |
||||||
|
|
|
|
|
|
|
|||||||||||||
|
Income from |
|
11,542 |
|
18,705 |
|
19,809 |
|
18,390 |
|
15,629 |
|
21,288 |
||||||
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|
Three Months Ended |
||||||||||||||||||||||||
|
(In thousands) |
March 31, |
June 30, |
September 30, |
December 31, |
March 31, |
June 30, |
||||||||||||||||||
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Interest income |
|
168 |
|
|
255 |
|
|
256 |
|
|
201 |
|
|
169 |
|
|
247 |
|
||||||
|
Interest expense |
|
(5,518 |
) |
|
(5,114 |
) |
|
(3,596 |
) |
|
(3,290 |
) |
|
(2,401 |
) |
|
(5,868 |
) |
||||||
|
Loss on extinguishment of debt |
|
— |
|
|
(5,426 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||||
|
Income before income tax expense |
|
6,192 |
|
|
8,420 |
|
|
16,469 |
|
|
15,301 |
|
|
13,397 |
|
|
15,667 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Income tax expense |
|
1,578 |
|
|
2,147 |
|
|
4,201 |
|
|
3,862 |
|
|
3,456 |
|
|
4,049 |
|
||||||
|
Net income |
$ |
4,614 |
|
$ |
6,273 |
|
$ |
12,268 |
|
$ |
11,439 |
|
$ |
9,941 |
|
$ |
11,618 |
|
||||||
Quantitative and Qualitative Disclosures about Market Risk
Market risk is the potential loss arising from adverse changes in market rates and prices, such as premium amounts, interest rates, and equity prices. We are exposed to market risk through our business partners, investments and borrowings under our 2025 Amended and Restated Credit Agreement.
The insurance market in which we operate has historically been cyclical based on the underwriting capacity of the insurance carriers and reinsurers, general economic conditions, state regulatory responses to market conditions, the timing of hurricane and storm season and other natural disasters, and other social, economic, and business factors. In a period of decreasing insurance capacity or higher than typical loss ratios across an insurance segment or segments, insurance carriers may raise premium rates. This type of market frequently is referred to as a “hard” market. In a period of increasing insurance capacity or lower than typical loss ratios across an insurance segment or segments, insurance carriers may reduce premium rates, and business might migrate away from the E&S lines market and into the admitted market. This type of market frequently is referred to as a “soft” market. Our results of operations are affected by this cyclicality of the market.
Our investments are held primarily as cash and cash equivalents. These investments are subject to interest rate risk. The fair values of cash and cash equivalents as of December 31, 2023 and 2024, approximated their respective carrying values due to their short-term nature and therefore, such market risk is not considered to be material. We do not actively invest or trade in equity or derivative securities.
As of December 31, 2024, under the 2024 Credit Agreement, we had $135.0 million of borrowings outstanding under our term loan and no outstanding balance on our revolving credit facility with $10 million in available capacity. As of June 30, 2025, under our 2025 Amended and Restated Credit Facility, which amended and restated the 2024 Credit Agreement, we have $294 million of borrowings outstanding under our term loan and no outstanding balance on our revolving credit facility with $10 million in available capacity. These borrowings accrue interest tied to SOFR and therefore interest expense under these borrowings is subject to change. An immediate hypothetical 1% change in interest rates on our borrowings would have a $2.9 million annual effect on our consolidated financial statements.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Management regularly evaluates these estimates, which are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. Actual results may differ from these estimates. We consider an accounting estimate to be critical if it involves a significant level of estimation uncertainty and if different estimates or assumptions could reasonably have a material impact on our financial condition or results of operations. The following are the critical accounting policies and estimates that we believe are most important to understanding our financial statements:
Revenue Recognition (Commission and Fee Revenue)
We recognize revenue from commissions and fees upon the effective date of insurance coverage, with an estimate for cancellations.
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Estimates for Policy Cancellations
We estimate the proportion of premiums and commissions that will not ultimately remain in force for the full policy term due to cancellations. This estimate directly reduces the revenue we recognize at policy inception. We base our estimates on historical cancellation experience by policy type and tenure and adjust for any known trends or events. The estimation period typically covers the allowable cancellation period. If our estimated cancellation rates are inaccurate, then our revenue could be materially impacted. We monitor actual cancellations and update our estimates quarterly. For instance, if cancellation rates were to rise, we might increase the constraint and recognize less revenue upfront, deferring more commission until uncertainty is resolved. For the years ended December 31, 2023 and 2024, no significant adjustments were recorded for prior estimates.
Capitalization of Internally Developed Software and Amortization
We capitalize internally developed software at cost. The critical estimates here include:
• Determining which projects meet the criteria for capitalization. We carefully evaluate each feature and project for these criteria.
• The useful life of our capitalized software. We review this estimated useful life periodically. Given the rapid innovation in our platform, three years has historically been used as our platform’s useful life. For the years ended December 31, 2023 and 2024, no changes were made to the useful life of our capitalized software. As we continue to incorporate AI and other enhancements, we will continue our periodic assessments to determine if such integrations warrant the use of a different useful life for our platform.
Recent Accounting Pronouncements
We currently qualify as an EGC under the JOBS Act. Accordingly, we are provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We are electing to use the extended transition periods available under the JOBS Act for complying with new or revised accounting standards and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
We will remain an EGC until the earliest to occur of: (i) the end of the first fiscal year in which our annual gross revenues are $1.235 billion or more; (ii) the end of the first fiscal year in which we are deemed to be a “large accelerated filer,” as defined in the Exchange Act; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; and (iv) the end of the fiscal year during which the fifth anniversary of this listing occurs.
See Note 2, “Significant Accounting Policies,” to our audited consolidated financial statements and our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus for a summary of our significant accounting policies.
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Our Mission
Our mission is to create a smarter, more resilient insurance platform powered by AI, data science, and technology, enabling insurers to deploy capacity with confidence and delivering instant access to coverage for policyholders and agents.
Company Overview
Neptune is a leading, high-growth, highly profitable, data-driven MGA that is revolutionizing the way homeowners and businesses protect against the growing risks of flooding. We offer a range of easy-to-purchase residential and commercial insurance products — including primary flood insurance, excess flood insurance, and parametric earthquake insurance — distributed through a nationwide network of agencies. Neptune does not take any balance sheet insurance risk or have claims handling responsibility relating to the policies we sell. We underwrite and administer the issuance of insurance policies on behalf of a diverse panel of insurance and reinsurance companies, whom we refer to as capacity providers, that manage both this risk and the associated claims handling. From day one, we have built our business on a foundation of advanced data science and AI, leveraging proprietary ML algorithms, which has led to superior underwriting results, outsized growth, recurring revenue, and robust margins, including delivering a lifetime written loss ratio of just 24.7% to our capacity providers from our inception through June 30, 2025. In addition, for the year ended December 31, 2024, we achieved 40.6% organic revenue growth, 29.0% net income margin and 60.4% Adjusted EBITDA margin and for the six months ended June 30, 2025, we achieved 32.3% organic revenue growth, 30.2% net income margin and 59.3% Adjusted EBITDA margin.
Neptune was founded to solve the inefficiencies and poor product-market fit we saw in the traditional flood insurance market, which we believe represents a significant and underpenetrated opportunity. According to the American Housing Survey and the Energy Information Administration, there are over 100 million residential and commercial buildings in the U.S., many of which face flood risk, yet only a small fraction are covered by flood insurance. Today, the largest provider of flood insurance in the United States — and the holder of the majority market share — is the NFIP, a U.S. government-run entity and our main competitor. We believe purchasing insurance from the NFIP is relatively burdensome and time-consuming for policyholders and agents, and that its limited product offerings often fail to meet policyholder needs. In addition, the NFIP has historically received substantial government subsidies that have enabled it to limit premiums to rates that have been challenging for private flood insurance providers to compete with, a dynamic that is shifting with the NFIP’s recent introduction of its “Risk Rating 2.0” pricing model, discussed in more detail below. Private market participation has also historically been constrained by regulatory barriers, a lack of innovation expertise, and limited access to sufficient claims and performance data to optimize pricing and underwriting decisions. We believe that Neptune’s position as the first scaled private flood platform, including the years of claims and performance data we have generated through our operations, provides a key early-mover advantage in addressing all of these challenges and disrupting the industry.
With Neptune’s use of AI, our technology platform, and our data-driven approach, we believe we have delivered the promise of disrupting the insurance industry. Not only have our innovation efforts delivered vastly improved policyholder and agent experiences through the ease-of-use of our proprietary underwriting (Triton) and policy management (Poseidon) platforms, we have also demonstrated superior risk selection and underwriting through our top-tier financial performance and sustained growth. Utilizing AI and ML algorithms with no human underwriters, Neptune has redefined how flood insurance can be underwritten, creating value for policyholders and agents while producing consistent, long-term positive returns for our insurance and reinsurance partners. Further, as the NFIP moves away from its historical subsidized pricing model, we believe our Triton platform, backed by years of proprietary data derived from our business operations, positions us to optimize pricing determinations and compete for existing NFIP policyholders in a way that would be challenging for a new entrant to replicate until it is able to generate, or otherwise gain access to, comparable claims and performance data.
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Technology and data science are the foundation of Neptune’s business model, driving our three core pillars:
• Our Underwriting Engine: Our entirely digital underwriting engine, Triton, uses advanced technology, including proprietary AI and ML models, without any human underwriters, to assess risk with speed and precision. Powered by predictive analytics and loss estimation, Triton has enabled Neptune’s policies to consistently outperform the NFIP in written loss ratio despite 21 landfall hurricanes — including four of the ten largest flood events in U.S. history — taking place since Neptune’s founding.
• Our Risk Relationships: Our risk relationships are built on performance and trust, and we currently have 33 capacity providers, including 26 reinsurance providers, backing 7 distinct insurance programs to help minimize concentration risk while delivering consistent returns. In turn, the accuracy of our risk assessment and our precision pricing have delivered hundreds of millions of dollars of underwriting profit for our capacity providers since inception, leading to high rates of capacity renewals and increases in committed capacity.
• Our Distribution: Our distribution strategy is primarily focused on deep partnerships across agencies with tens of thousands of agents who benefit from the ease-of-use of our automated underwriting platform, seamless API integrations, instantaneous bindable quotes, and proprietary Agent Portal. We believe this is a meaningful departure from industry norms and makes our approach to distribution attractive to the agents we work with.
The three pillars above interlock, creating a powerful and reinforcing loop. Unlike traditional insurance underwriting that historically relied on humans, static models, and infrequent adjustments, we leverage an iterative approach that allows us to consistently and rapidly integrate new data and models into our underwriting engine, thereby refining our processes and adapting to evolving market and environmental conditions. As our models constantly evolve and improve, they are able to deliver superior results that minimize losses for our capacity providers, which in turn grant us additional underwriting capacity. With more capacity available, we can offer coverages our policyholders want, enhancing the ability for our agency partners to easily sell policies while expanding our distribution and reach. The resulting increase in quoted and bound policies provides us with access to more data, enhancing the predictive capabilities of our underlying models.
We operate as an MGA, with a highly attractive, recurring, fee-based revenue model derived from two primary sources: commissions paid by capacity providers, and fees paid by policyholders. Commissions are calculated as a negotiated percentage of premium for each policy. As of June 30, 2025, our average commission rates have increased by more than 4% since 2018, as capacity providers continue to recognize our superior underwriting performance. Given our high retention rates to date, we believe that we have a high degree of visibility into our future revenue streams. For example, for the six-month period ended June 30, 2025, our eligible policy and premium retention rates at renewal were 85.8% and 98.9%, respectively.
As of December 31, 2018, the end of our first full year of operations, we had $4.4 million of premium in force with one insurance program. As of December 31, 2024, we have achieved remarkable growth. Since 2018, our premium in force has increased at a CAGR of 99% to $277.6 million as of December 31, 2024. For the year ended December 31, 2024, we generated $119.3 million in revenue, $34.6 million in net income, and $72.1 million in Adjusted EBITDA. This 16 translates to $2.3 million in revenue per employee and $1.4 million in Adjusted EBITDA per employee, a 29.0% net income margin and a 60.4% Adjusted EBITDA margin. In addition, for the six months ended June 30, 2025, we generated $71.4 million in revenue, $21.6 million in net income, and $42.4 million in Adjusted EBITDA, which translates to a 30.2% net income margin and a 59.3% Adjusted EBITDA margin. For the twelve months ended June 30, 2025, we generated $136.7 million in revenue, $45.3 million in net income, and $82.4 million in Adjusted EBITDA, which translates to $2.5 million in revenue per employee and $1.5 million in Adjusted EBITDA per employee, a 33.1% net income margin and a 60.3% Adjusted EBITDA margin. Our Adjusted EBITDA margin has consistently exceeded 50% over the past four years, thanks to the operational leverage inherent in our technology-first business model. Notably, our organic revenue for the year ended December 31, 2024, increased by $34.4 million, or 40.6%, year-over-year, primarily due to the increased number of renewals in our portfolio and an active 2024 hurricane season. For the year ended December 31, 2024, we also generated net cash
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provided by operating activities of $49.9 million. As of June 30, 2025, we had negative book value per share due to our history of paying dividends to our stockholders, which have been financed through a combination of debt and redeemable, convertible preferred stock financings and cash flows generated from our business operations. Since inception, we have made dividend payments to our stockholders totaling approximately $605 million.

Our Unique, Data-Driven Approach
Data science is our guiding principle, driving innovation that we believe enables us to deliver fast and accurate insurance solutions that are policyholder-centric, more efficient for our agents, and that deliver consistent underwriting profits for our capacity providers.
Our internally-developed and proprietary technology platforms include Triton, our underwriting engine, and Poseidon, our policy management system, which are closely integrated and easy to use. The key features of our data science approach that underpin our platforms include:
• Precise Pricing Models: Our models leverage advanced ML and data analysis to evaluate flood risks at the individual property level. By incorporating real-time data, including from geospatial mapping as well as predictive analytics, we deliver competitive, risk-adjusted pricing that reflects the unique risk of each property. The precision of this data-driven approach empowers us to offer instant underwriting decisions and bindable quotes at scale, with a level of intention and sophistication in our risk selection that we believe sets us apart in the industry and that results in a high degree of predictability in our business outcomes.
• Automation and Efficiency: We operate with the mantra of “automating everything.” We constantly focus on reducing manual processes across our operations and enabling our team to concentrate on more complex and high-value tasks.
• Scalability: Our emphasis on automation in our technology infrastructure allows us to process tens of thousands of quotes daily, providing the scale necessary for rapid growth and market expansion without a proportional increase in headcount.
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• Agility: Our platform has demonstrated a great degree of flexibility, seamlessly incorporating new perils and geographies over time in response to the evolving needs of policyholders and agency partners.
• Ease of Use: Our platforms are designed with a focus on simplicity and accessibility. Agents and policyholders can obtain quotes, purchase policies, and manage policyholder coverage in just minutes through our streamlined online interface. In many cases, the creation of a Neptune quote is automatic and instantaneous for agents via our API, allowing seamless cross-sell opportunities alongside standard home and business insurance quotes. This ease of use and quote-to-issue process differentiates Neptune from traditional insurance providers and has been a key driver of our success.
Triton and Poseidon were built entirely in-house by our Neptune Engineering Group. These platforms are powered by ML models centered around our vast proprietary datasets, which are developed and maintained by the in-house Neptune Data Science Group and are generated from data collected through the operation of our business, including quote requests, the policies we have bound, and the losses incurred on the policies we have sold. Triton processes over 20,000 quotes on a typical day. As of June 30, 2025, Triton has provided approximately 29.7 million quotes, underwritten 11.9 million properties, and bound 1.1 million policies across the U.S. since inception, providing Neptune with what we believe is the largest flood insurance sales and claims database outside of the NFIP.
Our systems continually update and constantly learn and improve from the expansive datasets generated by our daily operations, helping us stay ahead of the curve in understanding flood risk. In June 2025, we released the 514th product version of our underwriting model, demonstrating our commitment to continued improvements.
From a risk selection perspective, we believe our focus on data science has allowed us to provide a more accurate estimate of likelihood of loss across our portfolio compared to the industry. This has allowed us to deliver superior written loss ratios for our capacity providers. Despite navigating some of the largest flood disasters in U.S. history, our Triton underwriting platform has delivered a lifetime written loss ratio of just 24.7% from our inception through June 30, 2025. For example, in 2024, Hurricane Helene devastated parts of Florida and North Carolina as the fourth most expensive flooding event in NFIP history. The written loss ratio on that storm for policies sold by Neptune was 18% while the NFIP announced a written loss ratio of between 163% and 188%. At the time of the storm, we had approximately 74,000 policies in force in the affected states of Florida, North Carolina, and Tennessee.
In 2024, we also implemented an ML-driven renewal optimization model, which has had a measurable impact on policy retention rates. This model enabled more precise identification of policyholders at risk of non-renewal and allowed for targeted engagement strategies, driving an increase in policy retention from 82.9% for the six months ended June 30, 2024, to 85.8% for the six months ended June 30, 2025.
Altogether, our data science capabilities underpin the stability of our earnings to date, driving a premium retention rate of our policies in a renewal term that has exceeded 97% for each of the last 4 years. As our business grows, this strong retention rate has resulted in a larger share of our portfolio consisting of tenured policyholders. As of June 30, 2025, 68.5% of our premium in force was associated with policies in a renewal term, and these policies accounted for 62.9% of our policies in force.

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Our Industry
Our Market Opportunity
We operate in the large and growing flood insurance market. According to FEMA, flooding is the most common and costly natural disaster in the U.S., causing damages that exceed $40 billion annually according to the Congressional Budget Office, and is expected to continue to grow with progressing climate change. Despite the growing risk, flood insurance penetration remains low.
In the U.S., there are more than 100 million residential and commercial buildings, and we believe more of these buildings are likely to be at risk of flooding than is currently identified by FEMA. According to First Street’s First National Flood Risk Assessment, in 2020 there were approximately 22 million buildings at risk of flooding and over 14 million buildings at risk of substantial flooding over the following 30 years. However, only approximately 9 million buildings are identified by FEMA as being within SFHAs — regions with 1% or higher annual probability of flooding. Properties in SFHAs with federally backed mortgages are required by the FDPA and related regulations to have flood insurance. Yet FEMA has noted that flood maps that underlie the SFHA designations are outdated and require extensive updates, as they do not currently take into account key types of precipitation. This was highlighted during Hurricane Harvey (2017) when, despite lower flood insurance penetration rates than in SFHAs, 68% of reported claims in Harris County were outside SFHAs according to Harris County Flood Control District.
Outside SFHAs, we estimate that flood insurance uptake in general is inadequate, with only approximately 2% of properties being covered by flood insurance, representing vast underinsurance and what we believe is a significant and untapped addressable market for our products. Even in high-risk states such as Florida, Texas, and Louisiana, combined residential penetration is below 13% according to NFIP Residential Penetration Rates as of January 2, 2025. We believe this gap in flood insurance coverage, together with the limited designation of SFHAs, creates significant financial vulnerabilities for millions of American home and business owners and lenders and presents a substantial opportunity for innovative private-sector insurance solutions like Neptune.
NFIP Challenges and Developments
Historically, the flood insurance market offered limited options, as regulated lending institutions were required to accept only policies underwritten by the NFIP to satisfy mortgage requirements. In 2012, however, Congress passed the Biggert-Waters Act, mandating that lenders also accept private flood insurance policies if written on an NFIP-equivalent form. Despite this regulatory opening, to date, the NFIP has continued to dominate the market, as private insurers have lacked the expertise, innovation, and access to historical claims data necessary to profitably underwrite flood risk. In addition, the NFIP historically received substantial government subsidies that enabled it to limit premiums to rates that were challenging for private flood insurance providers to compete with, a dynamic that is shifting with the NFIP’s recent introduction of “Risk Rating 2.0,” discussed in more detail below.
Today, the NFIP insures approximately 3.7 million properties and collects approximately $4.1 billion in annual premiums, with an average annual premium of $1,100 per policy according to FEMA. We believe the NFIP falls short in meeting the evolving needs of homeowners and businesses. For decades, its policies have provided low coverage limits that often fail to address the true costs of rebuilding. Moreover, the process of purchasing NFIP coverage can be slow and cumbersome for both policyholders and agents, in contrast to the instantaneous and accessible Neptune quote-to-issue process.
Operational and financial challenges have also persisted throughout the NFIP’s history. We believe these issues stem from its subsidized and rudimentary pricing methodology, which has frequently failed to accurately reflect the underlying risk of policies. As a result, the NFIP has accumulated substantial financial losses, currently owing $22.525 billion to the U.S. Treasury, accruing approximately $2 million in daily interest according to FEMA and the Congressional Research Service.
In 2021, the NFIP launched Risk Rating 2.0, a new pricing methodology aimed at better aligning premiums with the risk profile of a given property. Under Risk Rating 2.0, most policyholders will experience annual rate increases of up to 18%, the maximum allowed under congressional caps, until their premiums reach full risk-based levels. The U.S. Government Accountability Office estimates that approximately $27 billion in additional subsidies will be required for the NFIP portfolio between 2022 and 2037 due to these price caps. While this subsidized pricing model historically allowed the NFIP to price policies at rates that limited our ability to compete for those policies,
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as subsidies phase out under Risk Rating 2.0, we expect the gap between NFIP rates and actual risk costs to narrow, positioning Neptune to offer more affordable coverage to approximately 50-60% of current NFIP policyholders, representing approximately 50-70% of the NFIP’s premium base.
We believe the NFIP’s legacy pricing model, cumbersome processes, and limited coverage have created significant market dislocation and inefficiencies, resulting in a compelling opportunity for private flood insurers like Neptune to capture market share.
Industry Tailwinds
We believe there are several additional structural shifts that will continue to drive opportunities in the flood insurance market broadly and for private providers such as Neptune, including:
• Increased Demand Driven by Growing Natural Disaster and Flood Damage: As climate change intensifies, areas with low perceived flood risk today (e.g., non-coastal regions) could face increased frequency and intensity of flooding due to additional rainfalls and storms. As climate change continues to intensify, associated with increasing severity of storms and resulting losses, we expect the demand for flood insurance to increase. Additionally, more areas with severe inland flooding could be designated as mandatory flood insurance zones for policyholders with federally-backed mortgages.
• Underlying Housing Market Backdrop: The housing market significantly influences property and flood insurance sales, as a substantial portion of policies are purchased during home acquisitions or refinancings. If housing market activity were to increase, a revitalized housing market would likely also stimulate growth in the property and flood insurance sector, presenting opportunities for insurers to expand their policyholder base and enhance market share. At the same time, with housing prices increasing above the rate of inflation, the NFIP coverage limit of $250,000 — which was first implemented in 1994 and has remained static since — grows more outdated each year, prompting policyholders to look to the private market for excess or replacement coverage. We believe that Neptune, with its advanced technology, policyholder and agent-first approach, coverage limit of over $7,000,000 for residential properties, and innovative products, can be at the forefront of capitalizing on this potential growth, were it to materialize, and closing the insurance gap.
Our Business Model
Our team’s energy is focused, every day, on advancing the three pillars of our business: underwriting, risk relationships, and distribution.

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Underwriting
Our automated underwriting engine, Triton, is at the core of everything we do. Our use of the latest ML technology, advanced data science, AI, and behavioral economics allows us to execute key underwriting tasks — including risk selection, accurate risk pricing, aggregation management, and carrier assignment — in less than two seconds. This combination of speed and precision provides robust scalability and enables us to process high volumes of quotes and policies efficiently while maintaining industry-leading performance. We have no human underwriters and 100% of our underwriting is performed instantaneously by our Triton engine.

____________
(1) We had approximately 27,021 policies in force in states with flood insurance claims related to Hurricane Ida.
(2) We had approximately 51,562 policies in force in states with flood insurance claims related to Hurricane Ian.
(3) We had approximately 102,426 policies in force in states with flood insurance claims related to Hurricane Helene.
(4) We had approximately 80,266 policies in force in states with flood insurance claims related to Hurricane Milton.
Our underwriting engine has delivered positive results, including a lifetime written loss ratio of just 24.7% from our inception through June 30, 2025. This performance has spanned some of the largest flooding disasters in U.S. history — including four of the ten largest flooding events in U.S. history, as measured by NFIP insured loss: Hurricane Ida (2021), Hurricane Ian (2022), Hurricane Helene (2024), and Hurricane Milton (2024). By contrast, from 2018 to 2024, the NFIP has delivered an 86% written loss ratio according to FEMA and the U.S. property and casualty industry in general has seen an average written loss ratio of 54% according to NAIC statutory data.
Our underwriting philosophy is generally built around three fundamental principles:
• Risk Selection: Our approach to risk selection is driven by data science and informed by what we believe is the most comprehensive claims dataset in the private flood insurance market, generated predominantly from our operations to date. With over a quarter billion dollars in paid claims across our portfolio since inception, and our extensive analysis of industry claims and performance data, we have developed deep insights into identifying and managing properties with the highest probability of flood losses.
We believe we can evaluate property-specific risks with exceptional accuracy. Our proprietary models identify the characteristics and factors most likely to contribute to large-scale losses, allowing us to focus on selecting risks that align with the risk tolerances of our capacity providers. This granular approach helps us avoid adverse selection and has allowed us to deliver consistent, positive underwriting results. It has also allowed us to provide quotes for 95% of all submissions, optimizing the identification of properties with the highest probability of flood losses.
Through ongoing analysis of claims data and continuous refinement of our underwriting models, we ensure that our risk selection process remains sophisticated and nimble. By focusing on selecting the right risks, we aim to deliver value to both our capacity providers and our policyholders while maintaining a sustainable and profitable portfolio.
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• Pricing: Our pricing is a sophisticated, data-driven process that incorporates advanced ML and behavioral economics to ensure accuracy and market competitiveness. Rather than relying on static or simplistic pricing models, we use a proprietary technology-driven framework to evaluate the unique characteristics of each property and its risk profile. Our pricing methodology is informed by a combination of flood risk data, customer behavior, and market dynamics. Behavioral economics plays a crucial role in determining how customers perceive and value coverage, and incorporating customer behavioral factors into our methodology enables us to tailor pricing to increase adoption while maintaining underwriting integrity. By understanding not only the risk, but also the behavior of customers, we believe we can optimize premium structures to drive growth and retention.
Unlike traditional insurance underwriting, our pricing does not depend on manual adjustments or broad risk groupings. Instead, it is dynamically informed by hundreds of data points to assess factors such as property characteristics, geographic exposure, and historical loss data. This property-specific, data-first approach allows us to quickly offer fair and competitive pricing while aligning with the risk tolerance of our capacity providers and continuously improving the accuracy of our Triton underwriting system.
• Aggregation Management (Disaggregation): Our approach to aggregation management is a key differentiator that sets us apart from industry norms. Traditional underwriting and risk assessment methods often rely on generalized risk aggregation based on administrative boundaries, such as states or counties, which serve as crude proxies for exposure to catastrophic events. In contrast, we have developed a patented technology that enables us to manage maximum loss scenarios at the individual property level through an analysis that uses radial circles to assess policy concentration in any given area in real time. This advanced methodology, which we refer to as “disaggregation,” allows us to optimize risk exposure in real time and align each policy with the specific risk appetite of our capacity providers.
By moving beyond man-made legacy geographic boundaries, we can more effectively distribute exposure to minimize concentration risk while focusing on the actual drivers of loss, such as property-specific vulnerability to flood. This precision also allows us to confidently underwrite in high-cost insurance markets, including hurricane-prone areas, while continuously informing and refining our pricing models to remain both responsive and data-driven.
Our disaggregation framework also leverages real-time data to adjust exposure dynamically as policies are written. This sophisticated approach enables us to manage risk with precision, so we maintain our capacity providers’ confidence in our ability to deliver consistent, positive underwriting performance. Through our patented technology and innovative methodology, we not only provide accurate risk management for our capacity providers but also ensure long-term scalability and sustainability for our business.
Risk Relationships
Neptune does not take any balance sheet insurance risk or have claims handling responsibility relating to the policies we sell. We currently contract with 7 distinct insurance programs, which are supported by 26 reinsurance providers, all of whom collectively provide underwriting capacity for the policies we sell. We refer to this panel of global insurers and reinsurers as our “capacity providers,” who bear all of the balance sheet insurance risk associated with our underwriting. Although we do not directly contract with the reinsurance providers who support our insurance programs, we engage and cultivate relationships with them, and the superior written loss ratios and underwriting results we are able to deliver on the policies we sell incentivizes these reinsurance providers to provide underwriting capacity in support of our insurance programs.
Over the past 7 years, we have built and expanded a panel of 33 capacity providers, including some of the largest insurance and reinsurance companies in the world. The strength and reputation of our capacity providers underscores the market’s confidence in our ability to deliver consistent results and manage risk effectively. Our insurance carriers are high-quality international insurers with A.M. Best ratings of A- or higher and our 26 reinsurance providers, supporting 7 distinct insurance programs, diversify our risk across both program structures and ultimate risk takers. As of June 30, 2025, our largest capacity provider accounted for 18.8% of our
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dollar-one premium risk. In addition, all of our insurance programs are eligible to write policies in all 50 states and Washington D.C. This approach mitigates concentration risk on both a financial and geographic basis, provides stability for both our business and our capacity providers, and ensures our portfolios remain resilient with access to ample future capacity to meet our growth objectives.
The relationships we have cultivated with our capacity providers are built on transparency, trust, and our unwavering commitment to delivering value. A key driver of our success is the availability of detailed data and insights, paired with our ability to deliver results with speed and efficiency. We provide real-time access to performance metrics, maintain an open and continuous dialogue with our capacity providers, and consistently exceed expectations with profitable underwriting results.
We have also delivered consistent and substantial premium growth for our capacity providers and our proven performance has been instrumental in driving partner confidence and growth and engagement with additional reinsurers who may wish to provide underwriting capacity for our insurance programs. Through the exceptional written loss ratios experienced by our capacity providers on policies sold by Neptune, driven by the dynamic, risk-adjusted pricing and coverage decisions made by our Triton platform, we have been able to deliver superior returns, even through some of the largest flooding events in U.S. history. As a result, we have delivered hundreds of millions of dollars of underwriting profits for our capacity providers since inception and have delivered underwriting profitability to every capacity provider in every contract year. These outcomes are a testament to our platform capabilities and our success has led to an increase in the average commission paid to us by our capacity providers of more than 4% between 2018 and June 30, 2025.
These results, combined with our ability to provide actionable insights, have attracted new capacity providers and strengthened relationships with existing ones. Our proven underwriting results have also generated meaningful goodwill with our existing capacity providers, allowing us to enhance and develop our product offerings efficiently to respond to agent and policyholder needs.
The following information showcases the expanding nature of our capacity relationships since inception.

Distribution
Our distribution strategy is built to maximize market reach and provide seamless access to our innovative flood insurance products with diversification across distribution partnerships. Leveraging a hybrid distribution model, we utilize strong agency partnerships across the insurance industry and complement those with direct-to-customer sales to drive efficiency, reach, and scale.
Agent and Broker Partnerships: The cornerstone of our distribution network is our deep relationships with insurance agents and brokers. As of June 30, 2025, over 96% of our policy sales are driven by these partnerships, which include more than 19,000 unique agency codes that have bound a policy through Neptune and over 81,000 unique agency codes that have run a quote through our Triton platform.
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Since inception, we have been able to grow our distribution network tremendously and uninterruptedly. For example, as of June 30, 2025, 19,919 cumulative agency codes have bound a policy with Neptune, an increase of 23% from 16,238 as of June 30, 2024.

We believe that Neptune delivers significant value to agents through a combination of ease of use, a superior product-market fit, high availability — made possible by our quoting of 95% of all submissions — and our ability to deepen agents’ relationships with policyholders. Historically, agents have had to undergo NFIP training and engage in the cumbersome NFIP quoting process to sell flood insurance policies. With Neptune, agents can leverage our user-friendly Agent Portal to quickly enter customer data and receive instantaneous quotes, which they can relay in real-time, thereby democratizing the sale of flood insurance. To further enhance the agent experience, we have developed deep technology integrations with many of our agency partners through API links directly into their quoting systems, allowing them to quickly quote and bind flood policies alongside homeowner policies and provide comprehensive solutions for their customers. In addition, our Agent Portal provides our agents with up to date, data-driven insights about flood risk in the geographies where a quote is being sought, empowering our agents to drive further demand for our products at the time of each quote. Through these innovations, our platform enables agents to grow their business by enhancing the overall value of the policyholder relationship, while offering a product that seamlessly fits the needs of both agents and policyholders. This in turn drives increasing adoption and higher conversion rates.
We believe our deep relationships with high quality agencies are critical in maintaining our early-mover advantage. Our agency partners include carriers with large captive agent forces, wholesalers, agency networks, flood specialists, and small, independent, family-owned agencies. Our ability to offer an alternative product that better fits many customers’ needs has resonated with our agents and has been essential to driving over 60.0% of our sales in “non-mandatory flood zones” over the last two years. Furthermore, our policies in force are highly diversified across a network of high-quality agents, without any material concentration risk or reliance on individual agencies or agents. As of June 30, 2025, our largest agency partner contributed approximately 8.9% of our total policyholder base. We maintain a robust pipeline of potential agencies interested in partnering with Neptune, while our in-house sales team continually nurtures existing relationships, supporting strong alignment with our agency partners and mutual growth. Our agency relationships are deeply entrenched at the agent level and play an active role in both converting NFIP policyholders to Neptune and winning new customers to the flood insurance market to enable our continued expansion.
Neptune Internal Agency: 2.0% of our policies in force as of June 30, 2025, were attributed to our in-house agency, with a team of licensed agents managing a growing number of quotes from our website and a select few of our distribution partners. These agents are also licensed to distribute NFIP policies in certain rare cases where policies do not meet Triton’s underwriting criteria.
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Direct-to-Customer Sales: 1.3% of our policies in force as of June 30, 2025, were attributed to our direct-to-customer channel. Our easy-to-use online interface allows prospective customers in select states to quote, bind, and manage policies directly. This option complements our agency partnerships and provides ease of access for all property owners seeking flood insurance solutions. We support our online interface with our third-party agencies and in-house agency able to assist when required or to otherwise finalize the sales process.
In addition to driving scalability and flexibility, as we rapidly expand into new markets and introduce additional products, our distribution infrastructure is critical in reinforcing our data advantage. Our distribution and referral partners submit over 20,000 quotes to Triton on a typical day, with approximately 29.7 million lifetime quotes and 1.1 million binds from inception through June 30, 2025. All these quotes (whether or not they lead to binds) and binds fold into and grow our proprietary dataset, allowing us to continually build the competitive advantage provided by our platform.
The following information illustrates the cumulative quotes and binds on our Triton and Poseidon systems since inception in 2018.

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In addition, below is a chart demonstrating the roles we, our capacity providers, and our distribution partners play in the flow of data and payments, and the role our capacity providers and distribution partners play in the flow of claims from policyholders:

Our Products
We offer a range of innovative insurance products designed to address the needs of residential and commercial property owners facing flood and other natural disaster risks. As of June 30, 2025, across all of our insurance product offerings, residential properties accounted for 88.1% of our premium in force and commercial properties accounted for the remaining 11.9%. Our flagship primary residential flood insurance product accounted for 86.0% of our premium in force as of June 30, 2025. In addition to the base policy, we offer enhanced protection through expanded coverage options, making our flood insurance product a superior coverage alternative to the NFIP. We also offer an excess flood insurance product, which we introduced in 2024, which made up 2.7% of our premium in force as of June 30, 2025, and which is available to both residential and commercial property owners. Both our primary and excess flood insurance products are structured around the NFIP form and can be used to supplement or fully replace existing NFIP coverage, as needed. In addition to our flood insurance products, we offer a parametric earthquake insurance product, launched following our acquisition of Jumpstart in September 2021. While currently less than 1% of our portfolio, this product allows us to collect data and expertise that we believe will allow us to eventually diversify into other perils and address additional unmet insurance needs.
Primary Flood Insurance: Our primary flood insurance products accounted for 97.3% of our premium in force as of June 30, 2025. In addition to the base policy, we offer enhanced protection through expanded coverage options, making our flood insurance product a superior coverage alternative to the NFIP.
Excess Flood Insurance: In February 2024, we introduced our excess flood insurance product, to meet the needs of a significant portion of NFIP policyholders for whom transition to the private market is not economical due to continued substantial subsidies that support their NFIP policy premiums. This product, which is available to both residential and commercial property owners, allows policyholders to supplement their existing NFIP coverage, providing more comprehensive protection for their homes, businesses and families. The introduction of our excess insurance product has been well received in the market. Premium in force was $8.5 million as of June 30, 2025, and the product made up 2.7% of our premium in force as of June 30, 2025. By addressing critical gaps in NFIP flood insurance, this product expands our ability to protect a broader set of property owners from significant financial risks.
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Both our primary and excess flood insurance products are structured around the NFIP form and can be used to supplement or fully replace existing NFIP coverage, as needed.
Parametric Earthquake Insurance: In addition to our flood insurance products, we offer a parametric earthquake insurance product, launched following our acquisition of Jumpstart in September 2021. This innovative product provides predetermined payouts based on the intensity of an earthquake, ensuring fast and straightforward claims processing. While currently less than 1% of our portfolio, this product allows us to collect data and expertise that we believe will allow us to eventually diversify into other perils and address additional unmet insurance needs.
Our Geographic Presence
We operate nationwide and actively mitigate our concentration risk by expanding and diversifying our portfolio across the country. As of June 30, 2025, Florida, Texas, and Louisiana accounted for only 49% of our policies in force, compared to a much heavier exposure of 60% for the NFIP according to the NFIP.

The Neptune Advantage
We believe that Neptune’s competitive advantage is driven by the three core pillars of our business model (underwriting engine, risk relationships, and distribution) and is extended by the following:
• Technology and Data-First Culture: Technology is at the heart of our capabilities and success, enabling us to deliver innovative, efficient, and optimized insurance solutions in a simple and accessible way. As of June 30, 2025, 42% of our 60 employees were on our technology development team, with our proprietary and internally-developed underwriting and policy management systems forming the backbone of our operations.
• Our technology infrastructure is built to support rapid expansion into new markets and product lines. Whether adapting to regulatory changes, adding capacity relationships, or launching new offerings like our excess flood product, our systems are designed to support growth without compromising speed or reliability. We operate on a fully digital, cloud-based computing infrastructure. Leveraging cloud computing allows us to rapidly scale our underwriting, policy management, and analytics capabilities in response to market demand. This infrastructure provides seamless remote access for our distributed workforce, enhancing system reliability, and ensuring that our data science and ML models can process vast amounts of information with minimal latency.
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• Our technology ecosystem is strengthened by our ML models and predictive analytics developed by the Neptune Data Science Group. These models use vast datasets from our operations, as well as geospatial mapping and real-time risk assessments, along with our proprietary data from the high volumes of transactions effected on our systems, to evaluate flood risks at the individual property level with precision. This enables us to provide instant underwriting decisions and dynamic, risk-adjusted pricing for both residential and commercial properties, allowing us to provide coverage with exceptional accuracy that incumbents and other players struggle to do.
• We are committed to continuously refining and expanding our technology capabilities. Through constant innovation, we ensure our platforms remain at the cutting edge of the insurance industry, empowering us to stay ahead of market trends and deliver value to our capacity providers, agents and policyholders.
• Early-Mover Advantage in a Large, Evolving Market Dominated by the NFIP: As the first entrant in the private flood insurance market with substantial scale and geographic presence, we have accumulated proprietary datasets through our operations that continuously improve our predictive technology, designed innovative products that we believe better suit evolving customer demand, and developed an extensive distribution network with trusted relationships that ensures broad reach across the market. We believe this measurable competitive edge positions us to capture greater market share as the industry evolves following anticipated long-term structural shifts driven by NFIP risk re-rating, climate change, and growing housing demand.
• Trusted Relationships with Capacity Providers: Through seven challenging storm seasons, we have delivered underwriting profit to each of our capacity providers annually. This has enabled our capacity providers to deliver consistent and predictable capacity to support our current and expected growth. Additionally, as a result of our performance, our capacity providers have awarded us greater flexibility to underwrite and bind policies, a contrast to industry norms where binding authority is typically set on stricter negotiated limits and criteria. This flexibility allows us to control product design, risk aggregation and capacity allocation, and allows us to respond to opportunities and needs from agents and our policyholders in an agile manner, continuing to reinforce our competitive advantage.
• Robust Track Record of Financial Performance with Strong Visibility into Future Earnings: We have consistently outperformed our internal expectations, demonstrating a disciplined and reliable approach to growth. Through 21 landfall hurricanes, we have delivered positive underwriting results and maintained strong loss performance. This operational consistency has translated into substantial revenue and Adjusted EBITDA growth since inception. Our business is supported by a high degree of recurring revenue and predictable renewal patterns, providing strong visibility into revenue growth and profitability. For example, for the six months ended June 30, 2025, 70% of our revenue was derived from renewal business.
• Disciplined Leadership Team: We are a founder-led organization, with a unified strategic vision, focused on delivering superior outcomes for our stakeholders. Our disciplined approach to risk management and optimization has led to us being profitable since our second year of operation. Our lean organizational footprint of 60 employees as of June 30, 2025, allows us to prioritize efficiency, scalability, and flexibility in our operations, driving industry-leading profitability per employee.
Our Growth Strategy
The opportunities for growth in the Neptune portfolio are both broad and deep. We believe we will continue to maintain strong revenue growth based on:
• Growth Across Existing Products and Geographies: We believe the U.S. primary and excess flood insurance markets present immense growth opportunities for Neptune. Despite our significant achievements and expanding scale to date, based on data from NAIC and NFIP, we estimate that we currently account for just 6-7% of the U.S. primary residential flood insurance market, with an even smaller share of both the excess flood market, which we entered in 2024, and the commercial flood market. This leaves substantial room for growth, given the current insurance gap, increased market awareness of flood risk, and evolving market conditions, particularly around anticipated developments
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related to the NFIP’s implementation of Risk Rating 2.0. In addition, we believe our distribution strategy, which is primarily focused on deep partnerships across agencies with tens of thousands of agents, facilitates increased awareness of both our products and flood risk among our agents and prospective policyholders, through the ease-of-use of our automated underwriting platform, seamless API integrations, instantaneous bindable quotes, and proprietary Agent Portal. In many cases, the creation of a Neptune quote is automatic and instantaneous for agents via our API, facilitating easy cross-sell opportunities alongside standard home and business insurance quotes. In addition, our Agent Portal provides our agents with up to date, data-driven insights about flood risk in the geographies where a quote is being sought, empowering our agents to drive further demand for our products at the time of each quote. Through these innovations, we believe our platform enables agents to grow their business by delivering added value to the policyholders, while creating further awareness in support of our growth strategy.
• Ability to Scale with Limited Incremental Cost: Our technology infrastructure is built to support rapid expansion, allowing us to scale our business using the same cost structure without requiring us to incur material additional capital expenditures. We operate on a fully digital, cloud-based computing infrastructure, which we can leverage to rapidly scale our underwriting, policy management, and analytics capabilities in response to market demand. This infrastructure provides seamless remote access for our distributed workforce, enhancing system reliability, and ensuring that our data science and ML models can process vast amounts of information with minimal latency. Further, because our entirely digital underwriting engine, Triton, uses advanced algorithms, without any human underwriters, to assess risk with speed and precision, we are able to price, quote, and bind additional policies at scale without any significant expansions to our employee base. As a result, while many of our G&A costs are expected to scale with the size of our business (for example, as the number of policyholders increases, customer support and cloud hosting costs may rise), we do not believe that growing our business or the number of policies we sell will require any material changes to our cost structure. We intend to continue to implement new technology from time to time, which we intend to build and maintain using our existing technology development team, including our Neptune Engineering Group and Neptune Data Science Group, to further improve efficiency and scalability.
• Expansion of Product Offerings: We have continued to innovate and broaden our product offerings to capitalize on market trends and growth opportunities. In 2024, we launched an excess flood insurance product designed to address a critical gap in coverage for policyholders who remain with the NFIP. Many NFIP policyholders are unable to transition fully into the private market due to the economic benefit provided by substantial government subsidies that limit their premiums. Our excess flood product allows these policyholders to maintain their NFIP coverage while purchasing additional protection from Neptune, providing more comprehensive protection for their homes and families. Growth within this market represents a meaningful opportunity. With our innovative primary flood product and rapidly growing excess flood offering, we are well-equipped to serve both residential and commercial property owners, providing them with comprehensive and affordable coverage. As climate change likely continues to increase the frequency and severity of flooding events, including in areas that have not historically been considered flood prone, we believe increased awareness of flood risk among the general public can drive further demand for Neptune products. As a result, we remain focused on leveraging technology and delivering tailored solutions to meet the evolving needs of our policyholders. These market dynamics play directly to Neptune’s strengths and reinforce our ability to grow market share. Additionally, as part of our commitment to addressing long-standing market gaps and expanding our product portfolio, we are actively exploring opportunities in additional perils beyond flood. We are exploring the option of adding an indemnity earthquake product in California, where there is a material insurance gap for earthquake coverage, with approximately 89% of buildings uninsured. We expect an indemnity earthquake product would provide true value to policyholders by addressing shortcomings in the options currently available on the market, including long-term affordability and ease of purchase. The development of an indemnity earthquake product would build on the expertise gained from our acquisition of Jumpstart and would respond to the growing demand from both policyholders and our agency partners for comprehensive earthquake protection. By leveraging our proprietary technology platform and underwriting capabilities, we believe we are well-positioned to develop new insurance solutions that deliver value to policyholders and close protection gaps in underserved markets.
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• International Expansion: Flooding is a pervasive and growing global challenge, yet the flood peril remains inadequately understood and underinsured in many countries around the world. Across the globe, millions of residential and commercial properties face significant and rising flood risks, often without sufficient insurance coverage to protect property owners from financial loss. In most international markets, flood insurance penetration is minimal, with many regions relying on outdated risk models, government-backed programs, or ad hoc relief efforts to address flooding events. These approaches often leave property owners exposed to significant financial vulnerabilities, particularly as climate change likely exacerbates the frequency and severity of flood events globally. This underinsurance may create an opportunity for Neptune to expand into international markets and provide innovative, data-driven flood insurance solutions to property owners in need. Leveraging our proprietary technology platform, advanced underwriting capabilities, and experience in the U.S. market, we believe we are uniquely positioned in the coming years to enter international markets and address the gaps left by traditional insurance providers. We expect our scalable technology infrastructure, built for rapid deployment, would enable us to adapt quickly to the regulatory requirements and unique risk profiles of different countries.
• Inorganic Growth Opportunities: From time to time, we may supplement our long-term organic growth with strategic acquisitions, focused on gaining expertise or expanding and complementing our existing portfolio. In recent years, we have completed a notable intellectual capital focused acquisition of Jumpstart, a leading parametric insurance company, and expanded our expertise through the strategic hiring of the employees of Charles River Data, a Boston-based data science consulting firm.
Potential Challenges
There are also a number of factors that we believe could present challenges to our strategic plans or limit our ability to grow our business, including:
• Adverse NFIP Developments: The flood insurance market is highly competitive, with the NFIP holding approximately 90% of the market share. As the dominant provider, the NFIP benefits from strong federal backing and widespread consumer recognition. Its significant market presence and subsidized pricing in certain areas create challenges for private insurers, including Neptune, to compete effectively. If the NFIP’s implementation of Risk Rating 2.0 is tolled or delayed or the Congress elects to continue to subsidize the NFIP consistent with historic levels, it could limit our potential growth opportunities relating to existing NFIP policyholders. In addition, adjustments to the NFIP’s pricing, coverage options, or underwriting guidelines could also significantly alter the competitive landscape. Although we believe purchasing insurance from the NFIP is relatively burdensome and time-consuming for policyholders and agents, and that its limited product offerings often fail to meet policyholder needs, if the NFIP were to lower premiums, simplify its processes, or increase its coverage options, we could face increased difficulty in retaining or growing our policyholder base.
• Continued Weakness in the Housing Market: Our performance and ability to issue new policies and retain existing policies is closely tied to home sales, economic activity, construction costs, household income, and employment levels, as well as commercial property markets. Elevated mortgage rates and declining affordability have recently strained the housing market, leading to a decrease in first-time homebuyers and overall housing market activity. As of January 2025, the average rate on a 30-year fixed mortgage in the U.S. had risen to over 7%, marking its highest level since mid-2024. While this average rate has since decreased below 7%, this surge has contributed to a decline in home sales, with existing home sales in 2025 projected to be at the lowest level since 1995. Elevated mortgage rates, together with higher home prices, can create affordability challenges, particularly for first-time buyers. For example, the National Association of Home Builders estimates that in 2023, when mortgage rates on a 30-year fixed mortgage rose from 6.25% to 6.5%, nearly 1.3 million households were priced out of the market for a median-priced home. Continued weakness or a further decrease in housing market activity, particularly in areas where flood coverage is needed, due to adverse economic conditions or other factors, could result in a decline in the home insurance industry and reduction in the sale of our policies, reduced renewal rates, and increased cancellations of existing policies, as many flood insurance purchases are driven by mortgage requirements and a substantial portion of our flood insurance policies are purchased during home acquisitions or refinancing.
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• Access to Top Talent: Our success depends, in large part, on our ability to attract and retain talent, which may be difficult due to the intense competition in our industry and the technology industry generally for key employees with demonstrated ability. We rely on a team of highly skilled engineers, data scientists, and other technical professionals who are responsible for the development, enhancement, and maintenance of our proprietary technology. This team’s expertise in ML, geospatial analysis, and data modeling is vital to ensuring our ongoing success and our ability to remain competitive. The financial services and technology industries are highly competitive, and the demand for talented professionals in fields such as data science and ML often exceeds supply. The loss of key technical talent or critical members of our engineering and data science team, or any inability to hire additional talent as the needs of our business may require, could impair our ability to refine our risk assessment capabilities, address evolving market needs, or respond effectively to competitive pressures.
M&A
Jumpstart
In September 2021, we acquired Jumpstart, a leading parametric insurance company providing parametric earthquake coverage in California, Oregon, and Washington. This acquisition allowed us to introduce a parametric earthquake insurance product, positioning us for future expansion into the indemnity earthquake insurance market. The expertise and technology gained through Jumpstart would serve as the foundation for a potential launch of an indemnity earthquake product in the future, targeted at further addressing the significant insurance gap in the U.S. earthquake market. This innovative approach aligns with our mission to simplify and expedite the insurance process for property owners.
Charles River Data
In May 2024, we hired all of the employees of Charles River Data, a Boston-based data science consulting firm renowned for its expertise in advanced analytics and ML, which had previously consulted on the enhancement of our AI-driven underwriting platform, Triton. The onboarding of all the employees of Charles River Data led to the formation of our Neptune Data Science Group, which is dedicated to further enhancing Triton. By integrating Charles River Data’s capabilities, we have improved the precision and speed of our flood risk assessments, further solidifying our position as a technology leader in the insurance industry.
This integration demonstrated our ability to execute and our commitment to leveraging cutting-edge technology and innovative insurance solutions to meet the evolving needs of our policyholders while driving growth and market leadership.
Competition
The flood insurance market is competitive, with participants ranging from government programs to private insurers. While the NFIP remains the predominant provider by far, its challenges — such as substantial debt, inadequate coverage limits, and rising premiums under Risk Rating 2.0 — create opportunities for us to compete in the future. However, to date, the U.S. government subsidization of the NFIP and resulting lower premiums have discouraged most policyholders from considering private market alternatives. Competition in the insurance business is largely based upon innovation, knowledge, terms and condition of coverage, quality of service, and price.
In the private flood insurance sector, we face competition from other MGAs, established carriers, and startups. Certain established carriers and other MGAs may have substantially greater resources and market presence than us. However, unlike these carriers and other MGAs, we believe we have successfully leveraged advanced data analytics and risk modeling, via our Triton platform, to offer competitively priced policies with comprehensive coverage options at sustainable written loss ratios, addressing the complex nature of flood risk assessment. Established carriers often do not directly originate flood insurance due to the perceived unpredictability, data gaps, and potential for catastrophic losses with traditional aggregation approaches, preferring to focus on their core risk offerings. In contrast, we have focused on solving the barriers to entry in flood insurance by using technology to drive scale, streamline underwriting processes, enhance policyholder and agent experience, and improve underwriting results through appropriate pricing and risk disaggregation.
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Startup companies in the flood insurance space often struggle with brand recognition and trust, areas where we believe we have built a strong reputation and confidence among agents, policyholders, and capacity providers. Ultimately, our proprietary technology platform enables us to provide precise, scalable solutions that meet the needs of property owners. Additionally, our partnership approach and tech-enabled integrations with agencies makes us a provider of choice. Based on our analysis of State-by-State data on the private flood insurance market published by the NAIC, we believe that we currently hold more than one third of the primary residential private flood insurance market, and that our leading market share continues to grow. This leadership position reflects our early-mover advantage and our ability to outperform competitors by offering innovative products, efficient processes, and a proven track record of underwriting success. We believe our substantial market share, carrier capacity, and deep data advantages support our positioning to scale more rapidly and efficiently than competitors.
As we continue to expand across our current products and footprint, and into new insurance markets, we expect new entrants and established players to emerge. However, we believe that our commitment to technology, data science, and policyholder value will enable us to maintain and grow our competitive and early-mover advantage.
Branding and Marketing
Our branding and marketing efforts are central to building Neptune’s reputation as a trusted, innovative leader in insurance. From our headquarters in St. Petersburg, Florida, we manage all branding and marketing activities with a sharp focus on data-driven strategies that deliver measurable results.
Our marketing initiatives are primarily online, leveraging a diverse range of digital channels including targeted advertising, social media, and agent promotions. This digital-first approach allows us to engage directly with consumers and efficiently drive demand for our products. We prioritize campaigns that we believe deliver immediate and measurable growth, ensuring our marketing efforts are accretive to financial performance.
In 2024, we underwent a comprehensive rebranding effort to prepare Neptune for its next phase of growth. This included a significant investment in updating our logo, website, and overall brand aesthetic. Our new branding reflects our commitment to innovation and excellence, resonating with stakeholders across the industry.

Our brand recognition and reputation have been instrumental in driving growth through both direct-to-consumer channels and partnerships with agents and brokers. The Neptune brand has not only attracted distribution relationships but also enhances our appeal to risk-taking partners, helping to build strong alliances that further our business objectives.
In addition to traditional branding and marketing efforts, we launched the Neptune Research Group in 2024. This initiative produces and publishes research reports aimed at increasing awareness of flood risk and fostering industry-wide discussions about flood insurance. These reports have received extensive coverage across the insurance sector for their insight and depth, further establishing Neptune as a thought leader in flood risk mitigation.
Our marketing and branding efforts are tightly aligned with our mission to simplify flood insurance and close the protection gap for homeowners and businesses. By combining innovative design, strategic messaging, and data-driven tactics, we continue to strengthen our position as a leading provider of private flood insurance.
Intellectual Property
Our intellectual property is a cornerstone of our competitive advantage, enabling us to deliver innovative solutions and maintain our position as one of the market leaders in private flood insurance. We have developed a portfolio of proprietary technologies, algorithms, and data models that are critical to our operations and growth strategy. We rely on intellectual property laws, as well as restrictions on our employees, consultants, contractors, and other third parties including through confidentiality, invention assignment and nondisclosure agreements, license agreements, policies and procedures and other contractual obligations, to protect our intellectual property rights,
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proprietary technologies and commercially valuable confidential information, and data used in our business. The success of our business depends in part on our ability to obtain, use, maintain, defend, and enforce our intellectual property in the operation of our business.
Proprietary Technology and Platforms: Our underwriting engine, Triton, our policy management system, Poseidon, and other core technologies have been developed entirely in-house by our Neptune Engineering Group. These platforms incorporate patented features and proprietary algorithms that enable us to evaluate flood risk with precision and efficiency.
Machine Learning Models and Data Science Capabilities: Developed by our Neptune Data Science Group, our advanced ML models and predictive analytics tools are essential to our ability to provide instant, accurate underwriting decisions and competitive pricing. These models are built and maintained exclusively within Neptune, ensuring we maintain full control over their development and evolution.
Patents and Trade Secrets: We actively protect our intellectual property through patents, trade secrets, and other intellectual property laws and legal safeguards. In the United States, we have obtained one issued patent on our disaggregation technology, an advancement in aggregation management that is a key component to the creation of efficient and attractive portfolios for our risk-taking partners. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection and have measures in place designed to protect our proprietary algorithms, dynamic pricing models, and other technological innovations and to ensure they cannot be replicated by competitors, securing our unique position in the market. However, trade secrets can be difficult to protect. While we have confidence in the measures we take to protect and preserve our trade secrets, such measures can be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
Brand and Trademarks: The Neptune brand, including our name, logo, and other trademarks, is a valuable asset that reinforces our reputation as an industry leader. We have registered trademarks that protect the Neptune brand identity against unauthorized use by others. In the United States, we have obtained five trademark registrations. In addition, we have registered the <neptuneflood.com> domain name, which we use in connection with our platform.
Continuous Innovation: We are committed to ongoing investment in R&D to expand our intellectual property portfolio. This includes enhancements to existing technologies, the creation of new products, and the exploration of additional applications for our proprietary tools.
Our intellectual property is not only a key differentiator but also a critical driver of our ability to scale efficiently, expand into new markets, and deliver unmatched value to our policyholders and partners. We have procedures in place to monitor for potential infringement, misappropriation, or other violation of our intellectual property or proprietary rights, and it is our policy to take appropriate action to defend and enforce our intellectual property, taking into account the strength of our claim, likelihood of success, cost, and overall business priorities. However, the steps we take may not be adequate and could harm our reputation and could adversely affect our competitive position, financial condition, or results of operations. See “Risk Factors — Risks Relating to Data, Intellectual Property and Cybersecurity.” By taking steps to safeguard and continually advance our innovations, we look to ensure Neptune remains at the forefront of the insurance industry.
Regulatory Matters
As an MGA, we operate within a highly regulated industry, subject to state and federal laws governing various aspects of our business. Unlike traditional admitted carriers, we operate on an E&S lines basis, which provides greater flexibility in underwriting, pricing, and product offerings. This flexibility allows us to innovate and respond quickly to market demands without requiring the filing of rates and forms for state approval.
Operating on E&S lines requires compliance with specific regulatory frameworks, including maintaining proper licensure, adhering to E&S lines reporting requirements, and ensuring compliance with applicable E&S lines laws, and the payment of E&S lines taxes, in each jurisdiction where we write business. Our dedication to regulatory compliance ensures we meet these obligations while enabling us to maintain operational agility. In addition, all of our insurance programs are eligible to write policies in all 50 states and Washington D.C., facilitating the operation of our business throughout the United States.
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In addition to E&S regulations, we are subject to data privacy and cybersecurity laws relating to the policyholder data and other personal information we collect and must comply with stringent privacy standards, including state-level privacy laws in the United States and international data protection regulations, where applicable. However, the personally identifiable information we collect and store with respect to policyholders is limited and basic and does not include payment information, credit status, social security numbers, or dates of birth, which we believe limits our exposure to such laws and regulations, and any potential changes thereto. We strive to maintain systems and processes to safeguard policyholder information that are designed to ensure compliance with evolving legal requirements. See also “Risk Factors — Risks Relating to Regulatory and Legal Matters — We are subject to evolving laws and regulations on data privacy, data protection, and cybersecurity, which can be complex and conflicting. We may face investigations, fines, and sanctions as a result of our or our service providers’ or partners’ actual or perceived failure to comply with such laws and regulations and incur increased operational costs in order to ensure future compliance” and “Risk Factors — Risks Relating to Regulatory and Legal Matters — We rely on the efficient, uninterrupted, and secure operation of complex information technology systems and networks to operate our business. Any significant system or network disruption due to an actual or perceived breach in the security of our or our vendors’ information technology systems could have a negative impact on our reputation, regulatory compliance status, operations, sales, and operating results.”
Through our use of AI, we may also from time to time be subject to laws and regulations relating to AI, automated decision-making, and similar technologies, or may be impacted if existing or future laws and regulations are interpreted in ways that would affect or extend to the types of “machine learning models” utilized by the Company, which use AI-driven, complex algorithms to analyze data inputs. The Company’s models, however, predominantly use proprietary data derived from the Company’s business operations, and are generally not trained on external or other third-party data. See also “Risk Factors — The regulatory framework for AI technologies is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations; to the extent any such laws or regulations apply to our business, or existing laws and regulations are interpreted in ways that would affect the use of AI in our business, we may need to implement additional standards or practices to remain compliant and the operation of our business could be adversely affected.”
While our regulatory environment is complex, we view compliance as essential to maintaining trust with policyholders, partners, and stakeholders. By staying proactive and adaptive in our approach, we are well-positioned to navigate the evolving regulatory landscape and support the continued growth of our business.
Human Capital Management
Our employees are our most valuable asset, driving innovation, growth, and operational excellence. With a lean yet highly efficient workforce of 60 employees as of June 30, 2025, most of whom work remotely, we have built a company culture focused on talent, efficiency, and automation.
Our hiring process is rigorous, incorporating both personality and capability testing to ensure that every employee not only has the skills required to excel in their role but also aligns with our values and mission. This approach has allowed us to assemble a team of exceptionally talented individuals who are passionate about solving complex challenges and delivering value to our policyholders and partners.
Neptune was founded on the principle of automating everything. By leveraging advanced technology and data science, we have created a business model that allows our team to focus on high-value, complex tasks rather than routine operations. This mantra continues to shape our approach to innovation and efficiency, ensuring that our workforce is able to drive maximum impact with minimal resource requirements.
Forty-two percent of our employees are dedicated entirely to the development of our proprietary technology, including our underwriting platform, ML models, and policy management systems. This investment in technology development not only enables us to stay at the forefront of the industry but also allows us to operate at a level of efficiency and scalability that is unmatched in the insurance market.
Our remote-first workforce model provides flexibility and access to a broader talent pool, enabling us to attract and retain top talent regardless of location. We support our employees with the tools and resources they need to succeed, fostering a collaborative and innovative environment that drives both individual and company success.
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By focusing on talent, efficiency, and automation, we have built a human capital management strategy that supports our mission to revolutionize flood insurance and ensures our ability to scale effectively as we continue to grow.
Cybersecurity Risk Management
Protecting the sensitive data of our policyholders, partners, and organization is a top priority. As a technology-first company, we recognize that maintaining cybersecurity practices and safeguards is essential to ensuring the integrity of our systems and the trust of our stakeholders.
Our cybersecurity strategy is designed to address both current and emerging threats and leverage best practices, advanced tools, and ongoing vigilance. Key components of our approach include:
1. Comprehensive Security Framework: We employ a multi-layered cybersecurity framework that includes firewalls, intrusion detection systems, endpoint protection, and encryption protocols to safeguard data and systems. Our infrastructure is regularly updated to ensure alignment with the latest security standards and regulatory requirements.
2. Data Protection: Policyholder and partner data is stored securely within our systems, with access strictly controlled and monitored. Sensitive information is encrypted both in transit and at rest, ensuring protection against unauthorized access.
3. Proactive Threat Monitoring and Response: We utilize threat monitoring tools to identify and mitigate potential vulnerabilities in real time. Our dedicated cybersecurity team conducts regular audits, vulnerability assessments, and penetration testing to proactively address risks.
4. Employee Awareness and Training: Cybersecurity is a shared responsibility across our organization. We provide regular training to employees on identifying and mitigating cybersecurity risks, ensuring that our team is equipped to recognize phishing, social engineering, and other common attack vectors.
5. Incident Response Plan: In the event of a cybersecurity incident, we have a detailed incident response plan in place to contain, investigate, and resolve the issue promptly. Our team conducts post-incident reviews to continuously improve our defenses and reduce the likelihood of future occurrences.
6. Third-Party Risk Management: As part of our commitment to cybersecurity, we carefully vet all third-party vendors and partners to ensure they meet our security standards. We maintain contractual agreements and conduct periodic assessments to confirm compliance.
7. Regulatory Compliance: We have policies and procedures in place designed to adhere to all applicable data privacy and security regulations, including state, federal, and international standards, where applicable. Compliance is regularly reviewed to ensure our practices remain current with evolving regulatory landscapes.
Cybersecurity risk management is an ongoing process, and we remain committed to staying ahead of emerging threats. By continuously investing in advanced technologies, fostering a culture of security awareness, and prioritizing proactive measures, we strive to protect our policyholders, partners, and business from potential risks while maintaining the integrity of our operations.
Facilities
Our corporate headquarters is located in St. Petersburg, Florida, where we currently lease approximately 2,000 square feet of office space. This facility serves as the central hub for our operations, supporting key functions such as technology development, sales, and corporate administration.
As a remote-first company, the majority of our workforce operates remotely, leveraging our advanced technology infrastructure to collaborate seamlessly across locations. This model enables us to attract top talent from a broad geographic pool while maintaining operational flexibility and efficiency.
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In 2026, we plan to transition to a new corporate headquarters, also located in St. Petersburg, Florida. This new facility is designed to support our continued growth.
We believe that our facilities, combined with our remote-first workforce strategy, provide the resources and flexibility needed to support our business objectives as we scale and expand into new markets.
Legal Proceedings
From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business. Although the results of litigation and claims are inherently unpredictable and uncertain, we are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows, or financial condition.
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Executive Officers and Directors
The following table provides information regarding our executive officers and directors as of the date of this prospectus:
|
Name |
Age |
Position(s) |
||
|
Executive Officers and Employee Directors |
||||
|
Trevor Burgess |
52 |
Chief Executive Officer and Chairman |
||
|
Jim Steiner |
44 |
Chief Financial Officer, Secretary and Director |
||
|
Matt Duffy |
34 |
President and Chief Risk Officer, Neptune Flood |
||
|
Jonathan Carlon |
40 |
Director of Business Development, Neptune Flood, and Director |
||
|
Non-Employee Directors |
||||
|
Blair J. Greenberg(1)(2) |
44 |
Director |
||
|
Cristian Melej(1)(2) |
48 |
Director |
||
|
Mike Vostrizansky(1)(2) |
41 |
Director |
____________
(1) Member of the audit committee
(2) Member of the compensation committee
Executive Officers and Employee Directors
Trevor Burgess, our co-founder, has served as our Chief Executive Officer and as Chairman of our board of directors since our formation as a holding company in April 2025. Mr. Burgess has been Chairman of Neptune Flood’s board of directors since July 2023 and as a director of Neptune Flood since January 2018. Mr. Burgess has also served as Chief Executive Officer of Neptune Flood since December 2019. Mr. Burgess is the lead inventor of the technology for which we have been granted one patent and have filed an additional patent application. Mr. Burgess also currently serves as Chairman of TRB Development LLC, a family office, real estate development and investment company. Mr. Burgess formerly served as the Chief Executive Officer and Director of C1 Financial (NYSE: BNK) since its inception in July 2013, as the Chief Executive Officer of C1 Bank since April 1, 2012, and as a member of its board of directors since December 2019. C1 Financial was sold to Bank of the Ozarks, now Bank OZK, in July of 2016. In 2013, he was named the Ernst & Young Florida Entrepreneur of the Year in the Financial Services Category and in 2014 was named American Banker’s Banker of the Year. Prior to joining C1 Bank, Mr. Burgess gained an extensive finance background working as a Managing Director for Morgan Stanley & Co. LLC, where, among other responsibilities, he executed initial public offerings and other capital raising transactions as an investment banker in the Equity Capital Markets division. Prior to his nearly ten years at Morgan Stanley, Mr. Burgess also worked as a management consultant at Monitor Company. He earned his bachelor’s degree from Dartmouth College in 1994. We believe that Mr. Burgess is qualified to serve on our board of directors due to his extensive knowledge of our company and the industry in which we compete, and his vision and leadership as our Chief Executive Officer.
Jim Steiner has served as our Chief Financial Officer and as a member of our board of directors since April 2025. Mr. Steiner has served as Neptune Flood’s Chief Operating Officer and Chief Financial Officer since May 2023 and previously served as Neptune Flood’s Chief Risk Officer, Chief Operating Officer and Secretary from April 2019 to May 2023. Mr. Steiner has also served as a member of Neptune Flood’s board of directors since May 2023. Prior to joining Neptune Flood, Mr. Steiner was the Director of Risk Strategy and Innovation at Bank OZK from July 2016 to May 2018, the Executive Vice President and Chief Risk Officer, among other roles, at C1 Financial, Inc. and its subsidiary C1 Bank from September 2012 to July 2016 and worked in private wealth management at Morgan Stanley from October 2003 to August 2010. Mr. Steiner earned a Bachelor of Business Administration (Finance) degree from George Washington University, a Master of Public Policy (Public Management) degree from Georgetown University, and a Master of Science in Risk Management degree from New York University’s Stern School of Business. Mr. Steiner is also a CFA® charterholder and holds the Professional Risk Manager (PRM®) and Chartered Property Casualty Underwriter (CPCU) designations. We believe that Mr. Steiner is qualified to serve on our board of directors due to his extensive experience in risk management, financial oversight, strategic leadership roles, and deep understanding of corporate governance.
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Matt Duffy has served as Neptune Flood’s President since April 2025 and Chief Risk Officer since December 2022 and served as Director of Risk Management and Internal Audit from July 2021 to December 2022. Prior to joining Neptune Flood, Mr. Duffy was at Bank OZK from 2016 to 2021, most recently as the Executive Vice President, Director of Enterprise Technology Solutions from July 2018 to July 2021, where he oversaw digital process automation, software development, and data visualization. Prior to Bank OZK, Mr. Duffy was at C1 Bank from 2013 to 2016 and served as Vice President, Enterprise Risk Officer from December 2015 to October 2016. Mr. Duffy earned a Bachelor of Arts in Economics from Eckerd College and is a designated Financial Risk Manager, Chartered Property Casualty Underwriter, Certified Internal Auditor, and Project Management Professional.
Jonathan Carlon has served as a member of our board of directors since April 2025 and as a member of Neptune Flood’s board of directors since January 2018. Mr. Carlon has also served as Neptune Flood’s Director of Business Development since May 2023. Mr. Carlon has been CEO of TRB Development LLC, a family office, real estate development, investment company, since July 2016. Previously, Mr. Carlon worked at C1 Bank as Chief of Staff and as Director of Investor Relations, among other roles, from July 2013 to the sale of the bank in July 2016. Mr. Carlon received his Master of Business Administration from The University of Tampa and his Bachelor of Arts in Finance and Business Management from Marietta College. We believe that Mr. Carlon is qualified to serve on our board of directors due to his extensive understanding of our financial model as well as his longstanding experience as Mr. Burgess’s business partner.
Non-Employee Directors
Blair J. Greenberg has served as a member of our board of directors since April 2025 and as a member of Neptune Flood’s board of directors since May 2023. Mr. Greenberg is a partner at Bregal Sagemount and has been with the fund since January 2013. Prior to Bregal Sagemount, Mr. Greenberg worked at Technology Crossover Ventures from July 2006 to January 2013, where he focused on investing in technology and financial services companies, and at UBS Group AG, in the Financial Institutions Group from July 2004 to June 2006. At UBS, Mr. Greenberg focused on mergers & acquisitions and capital raising transactions for financial technology, asset management, and specialty finance companies. Mr. Greenberg has served as a member of the board of directors of Open Lending Corporation (Nasdaq: LPRO) since March 2016. Mr. Greenberg received a Bachelor of Sciences in Business Administration with a concentration in Finance from the Kelley School of Business at Indiana University Bloomington and a Master of Business Administration with concentrations in Finance, Management & Strategy, and Marketing from the Kellogg School of Management at Northwestern University. We believe that Mr. Greenberg is qualified to serve on our board of directors due to his extensive experience investing in financial services and software companies.
Cristian Melej has served as a member of our board of directors since April 2025 and as a member of Neptune Flood’s board of directors since February 2025. Since 2016, Mr. Melej has served as the Chief Financial Officer of Hingham Institution for Savings (Nasdaq: HIFS), a bank headquartered in Massachusetts. Mr. Melej plans, implements, and manages all the finance activities of the bank, including asset-liability and risk management, financial planning, accounting, treasury and both public and regulatory reporting. Mr. Melej served as the Chief Financial Officer of C1 Financial and its subsidiary C1 Bank from May 2014 to September 2016 and as the Deputy Chief Financial Officer from September 2013 to April 2014. Prior to his service at C1 Financial, Mr. Melej held finance roles in private and public companies in Brazil and Chile. Mr. Melej holds a Master of Business Administration degree from IE Business School in Madrid, Spain and a Bachelor’s degree in Civil Engineering from Pontificia Universidad Católica de Chile. Mr. Melej is a CFA® charterholder and an Elijah Watt Sells Award recipient Certified Public Accountant. We believe that Mr. Melej is qualified to serve on our board of directors due to his diverse multinational experience across different industries and his long tenure as Chief Financial Officer of two U.S. publicly listed banks, with expertise in strategic planning, risk management, regulatory compliance and financial operations within highly regulated environments.
Mike Vostrizansky has served as a member of our board of directors since April 2025 and as a member of Neptune Flood’s board of directors since May 2023. Mr. Vostrizansky is a Partner at FTV Capital, and has been with the firm since October 2017. He also serves as a board member at Arden Insurance Services LLC, a private technology-enabled MGA serving the Condo Association market; Patra Corporation, a private technology-enabled services company serving the insurance industry; Embroker Insurance Services, LLC, a private technology-enabled
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MGA serving specialized SME markets; and ManyPets Inc., a private technology-enabled MGA serving the pet market in the UK. Prior to FTV Capital, Mr. Vostrizansky worked at Pine Brook Road Partners from March 2016 to July 2017, and at Flexpoint Ford from July 2009 until January 2016, both where he focused on investing in and managing firm investments across the financial services industry, and at Credit Suisse Group, in the Financial Institutions Group from November 2007 to July 2009. At Credit Suisse, Mr. Vostrizansky focused on mergers & acquisitions and capital raising transactions for banking, financial technology, asset management, and specialty finance companies. Mr. Vostrizansky is also a board member of MOUSE, a New York charity working to narrow the tech education gap for the city’s underserved youth. Mr. Vostrizansky holds a Bachelor of Science in Engineering in Aerospace Engineering magna cum laude from the University of Michigan and a Master of Science in Industrial and Operations Engineering cum laude from the University of Michigan’s Rackham Graduate School. We believe that Mr. Vostrizansky is qualified to serve on our board of directors due to his extensive experience investing in and managing strategy for businesses across the financial services landscape.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Controlled Company Exemption
Upon completion of our initial public offering, our Chief Executive Officer and Chairman of our board of directors, Mr. Burgess, will beneficially own approximately % of the voting power of our outstanding voting securities (or approximately % of the voting power of our outstanding voting securities if the underwriters exercise in full their option to purchase additional shares of our Class A common stock) and we will be a “controlled company” within the meaning of the listing rules of the NYSE.
As long as Mr. Burgess beneficially owns more than 50% of the voting power of our company, we will be a “controlled company” as defined under the listing rules of the NYSE. As a controlled company, we are permitted to rely on certain exemptions from the NYSE’s corporate governance rules, including:
• an exemption from the rule that a majority of our board of directors must be independent directors;
• an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and
• an exemption from the rule requiring an independent nominating and governance committee or a group of independent directors making nominating decisions.
Following this offering, we intend to rely on some of these exemptions. As a result, we will not have a majority of independent directors on our board, and we will not have a nominating and corporate governance committee (or a group of independent directors making nominating decisions). The nominating and corporate governance committee functions will be managed by our full board of directors until the rules change, we cease to be a “controlled company,” or we otherwise determine to do so. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.
These exemptions do not modify the independence requirements for our audit committee, and we satisfy the member independence requirement for the audit committee provided under the NYSE’s listing standards and SEC rules and regulations for companies completing their initial public offering.
In the event that we cease to be a “controlled company,” and our Class A common stock continues to be listed on the NYSE, we will be required to comply with these provisions within the applicable transition periods.
Composition of our Board of Directors
Blair Greenberg and Mike Vostrizansky were each designated by BSIV, the holder of our convertible preferred stock, pursuant to the Pre-IPO Stockholders Agreement. The provisions of the Pre-IPO Stockholders Agreement by which some of the directors are currently elected will terminate, and there will be no contractual obligations regarding the election of our directors, upon the completion of this offering.
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Our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective immediately prior to the completion of this offering will divide our board of directors into three classes, with staggered three-year terms:
• Class I directors, whose initial term will expire at the first annual meeting of stockholders following the completion of this offering;
• Class II directors, whose initial term will expire at the second annual meeting of stockholders following the completion of this offering; and
• Class III directors, whose initial term will expire at the third annual meeting of stockholders following the completion of this offering.
At each annual meeting of stockholders after the initial classification, the successors to directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following election. Upon the completion of this offering, the Class I directors will consist of and ; the Class II directors will consist of and ; and the Class III directors will consist of and . As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.
In addition, we intend to restate our bylaws and certificate of incorporation upon the completion of this offering to provide that only the board of directors may fill vacancies, including newly created seats, on the board of directors until the next annual meeting of stockholders, subject to limited exceptions. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors.
This classification of the board of directors and the provisions described above may have the effect of delaying or preventing changes in our control or management. Our amended and restated certificate of incorporation will further provide for the removal of a director only for cause and by the affirmative vote of the holders of two-thirds or more of the shares then entitled to vote at an election of our directors. See “Description of Capital Stock — Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws.”
Board Independence
We are applying to list our Class A common stock on the NYSE. The listing rules of this stock exchange require that a majority of the members of a listed company’s board of directors be independent within specified periods following the completion of an initial public offering. As a controlled company, we will be exempt from such requirements. In addition, the listing rules generally require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and governance committees be independent. As a controlled company, we are not required to have a compensation committee or a nominating and governance committee, though we do not currently intend to rely on the “controlled company” exemption relating to the establishment of a compensation committee. Accordingly, our nominating and governance functions will be managed by our full board of directors until we cease to be a “controlled company,” there is any applicable change in the relevant listing rules, or we otherwise determine to do so.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries, or be an affiliated person of the listed company or any of its subsidiaries.
Our board of directors has determined that none of the members of our board of directors other than Mr. Burgess, Mr. Steiner, and Mr. Carlon has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of the members of our board of directors other than Mr. Burgess, Mr. Steiner, and Mr. Carlon is “independent” as that term is defined under the rules of the NYSE.
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Board Committees
Our board of directors has established an audit committee and a compensation committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignations or until otherwise determined by the board of directors.
Audit Committee
Our audit committee is comprised of Cristian Melej, who is the chair of the audit committee, Blair J. Greenberg, and Mike Vostrizansky. The composition of our audit committee meets the requirements for independence under the current NYSE listing standards and SEC rules and regulations, including the enhanced independence standards of Rule 10A-3. Each member of our audit committee is financially literate. In addition, our board of directors has determined that Cristian Melej is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K of the Securities Act.
All audit services to be provided to us and all permissible non-audit services to be provided to us by our independent registered public accounting firm will be approved in advance by our audit committee. Our audit committee recommended, and our board of directors adopted, a charter for our audit committee, which will be posted on our website. Our audit committee, among other things:
• selects a firm to serve as the independent registered public accounting firm to audit our financial statements;
• helps to ensure the independence of the independent registered public accounting firm;
• discusses the scope and results of the audit with the independent registered public accounting firm, and reviews, with management and the independent accountants, our interim and year-end operating results;
• develops procedures for employees to anonymously submit concerns about questionable accounting or audit matters; and
• considers the adequacy of our internal accounting controls and audit procedures.
Compensation Committee
Our compensation committee is comprised of Cristian Melej, who is the chair of the compensation committee, Blair J. Greenberg, and Mike Vostrizansky. The purpose of our compensation committee is to discharge the responsibilities of our board of directors relating to compensation of our executive officers. Our compensation committee, among other things:
• reviews and determines the compensation of our executive officers and recommends to our board of directors the compensation for our directors;
• administers our stock and equity incentive plans;
• reviews and makes recommendations to our board of directors with respect to incentive compensation and equity plans; and
• establishes and reviews general policies relating to compensation and benefits of our employees.
Code of Business Conduct and Ethics
In connection with this offering, our board of directors adopted a code of business conduct and ethics that applies to all of our employees, officers, and directors. Following the completion of this offering, the full text of our code of business conduct and ethics will be posted on the investor relations section of our website. We intend to disclose future amendments to certain provisions of our code of business conduct and ethics or waivers of these provisions, on our website and/or in public filings.
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Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation and nominating committee of any entity that has one or more executive officers serving on our board of directors or compensation and nominating committee. None of the members of the compensation and nominating committee is, nor has ever been, an officer or employee of our company.
Director Compensation
Historically, we have neither had a formal compensation policy for our non-employee directors, nor have we had a formal policy of reimbursing expenses incurred by our non-employee directors in connection with their board service. However, we have reimbursed our non-employee directors for reasonable expenses incurred in connection with their attendance at board of directors or committee meetings and occasionally granted stock options. We anticipate adopting a formal compensation policy for our non-employee directors to provide cash and equity compensation to them following this offering.
We did not provide our non-employee directors, in their capacities as such, with any cash, equity or other compensation during the year ended December 31, 2024. As of the date of this prospectus, none of our non-employee directors held any equity awards other than Cristian Melej, who held 3,000 shares subject to outstanding stock options that were granted in March 2025 and is expected to hold shares of Class A common stock issuable upon settlement of restricted stock units that are expected to be granted to Mr. Melej pursuant to the Company’s 2025 Plan by the Company in connection with this offering, subject to and contingent upon the 2025 Plan becoming effective and the filing of a Form S-8 to register the shares subject to the Company’s 2025 Plan. The restricted stock unit grant will vest in one installment on the anniversary of the vesting commencement date, which will be the effectiveness of the registration statement of which this prospectus forms a part. Neither Mr. Greenberg nor Mr. Vostrizansky received any compensation for service as a director for the year ended December 31, 2024. The compensation of Mr. Burgess and Mr. Steiner as named executive officers is set forth below under “Executive Compensation — Summary Compensation Table.”
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Summary Compensation Table
The following table provides information concerning all plan and non-plan compensation awarded to, earned by or paid to our Chief Executive Officer and each of our two other most highly compensated officers, whom we collectively refer to as “named executive officers,” during the year ended December 31, 2024.
|
Name and Principal Position |
Fiscal |
Salary |
Bonus |
Option |
All Other |
Total |
|||||||||||
|
Trevor Burgess Chief Executive Officer |
2024 |
$ |
500,000 |
|
— |
|
— |
$ |
10,350 |
$ |
510,350 |
||||||
|
Jim Steiner Chief Financial Officer and Secretary |
2024 |
$ |
250,000 |
$ |
500 |
$ |
10,717 |
$ |
7,515 |
$ |
268,732 |
||||||
|
Matt Duffy President and Chief Risk Officer, Neptune Flood |
2024 |
$ |
200,000 |
$ |
100,500 |
$ |
102,179 |
$ |
9,015 |
$ |
411,694 |
||||||
____________
(1) The amounts reported in this column represent the aggregate grant date fair value of stock options granted under our Pre-IPO 2025 Plan to our named executive officers during the year ended December 31, 2024, as computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the dollar amount recognized for financial statement reporting purposes of the equity awards reported in this column are set forth in Note 7, “Share-Based Compensation Plan” to our audited consolidated financial statements included elsewhere in this prospectus. Note that the amounts reported in this column reflect the accounting value for these equity awards and may not correspond to the actual economic value that may be received by our named executive officers from the equity awards.
(2) The amounts reported include non-elective Company contributions pursuant to the Company’s 401(k) plan.
Salaries
During the year ended December 31, 2024, Mr. Burgess, Mr. Steiner and Mr. Duffy received an annual base salary of $500,000, $250,000, and $200,000, respectively, to compensate them for services rendered to Neptune Flood. Effective upon the consummation of this offering, the Company intends to change the annual base salaries of Mr. Burgess, Mr. Steiner and Mr. Duffy to $ , $ , and $ , respectively.
Bonuses
Our board of directors determined in its discretion to pay Mr. Steiner and Mr. Duffy discretionary bonuses of $500 and $100,500, respectively, in respect of the year ended December 31, 2024.
Equity Awards
2024 Equity Grants
On April 25, 2024, Mr. Steiner received three grants of 2,500 stock options (7,500 stock options in the aggregate) and Mr. Duffy received three grants of 5,000 stock options (15,000 stock options in the aggregate). On October 29, 2024, Mr. Duffy also received three grants of 5,000 stock options (15,000 stock options in the aggregate).
One of the three option grants made to each of Mr. Steiner and Mr. Duffy on April 25, 2024, and one of the three option grants made to Mr. Duffy on October 29, 2024 (collectively, the “Time-Based Options”), is subject to a 5-year cliff vesting schedule, with 100% of the shares vesting on the fifth anniversary of the applicable vesting commencement date, subject to the option holder’s continuous service through the vesting date. The vesting commencement date of the options granted on April 25, 2024, is November 10, 2023, and the vesting commencement date of the options granted on October 29, 2024, is October 29, 2024.
One of the three option grants made to each of Mr. Steiner and Mr. Duffy on April 25, 2024, and one of the three option grants made to Mr. Duffy on October 29, 2024 (collectively, the “Type A Liquidity Event Options”), will vest upon the consummation of a Liquidity Event (as defined below), subject to the executive officer’s continuous service through such Liquidity Event, in which each share of convertible preferred stock has achieved an MOIC (as defined in our amended and restated certificate of incorporation as currently in effect (the “Pre-IPO
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charter”)) of less than 3.0 in connection with such Liquidity Event (a “Type A Qualified Liquidity Event”); provided that in the event of an initial public offering, the holders of convertible preferred stock shall be deemed for purposes of determining the applicable MOIC to have been paid and distributed an amount per share of convertible preferred stock equal to the offering price of the Company’s common stock in such initial public offering multiplied by the number of shares of common stock into which a share of convertible preferred stock is convertible. “Liquidity Event” means the consummation of (i) a liquidation (as defined in the Pre-IPO charter), including, without limitation, a change of control (as defined in the Pre-IPO charter), or (ii) an initial public offering. The options will terminate upon the consummation of (and not be exercisable in connection with) a Liquidity Event in which each share of convertible preferred stock has achieved an MOIC of equal to or greater than 3.0.
One of the three option grants made to each of Mr. Steiner and Mr. Duffy on April 25, 2024, and one of the three option grants made to Mr. Duffy on October 29, 2024 (collectively, the “Type B Liquidity Event Options” and together with the Type A Liquidity Event Options, the “Liquidity Event Options”), will vest upon the consummation of a Liquidity Event, subject to the executive officer’s continuous service through such Liquidity Event, in which each share of convertible preferred stock has achieved an MOIC of equal to or greater than 3.0 in connection with such Liquidity Event (a “Type B Qualified Liquidity Event” and, together with a Type A Qualified Liquidity Event, the “Qualified Liquidity Events”); provided that in the event of an initial public offering, the holders of convertible preferred stock shall be deemed for purposes of determining the applicable MOIC to have been paid and distributed an amount per share of convertible preferred stock equal to the offering price of the Company’s common stock in such initial public offering multiplied by the number of shares of common stock into which a share of convertible preferred stock is convertible. The options will terminate upon the consummation of (and not be exercisable in connection with) a Liquidity Event in which each share of convertible preferred stock has achieved an MOIC of less than 3.0.
This offering will constitute a Liquidity Event for purposes of the Liquidity Event Options and 100% of either the Type A Liquidity Event Options or the Type B Liquidity Event Options will fully vest upon the consummation of this offering. If the Type A Liquidity Event Options vest in connection with this offering, 100% of the Type B Liquidity Event Options will be forfeited. If the Type B Liquidity Event Options vest in connection with this offering, 100% of the Type A Liquidity Event Options will be forfeited.
2025 Equity Grants
On March 9, 2025, Mr. Burgess received three grants of 14,000 stock options (42,000 stock options in the aggregate), Mr. Steiner received three grants of 4,000 stock options (12,000 stock options in the aggregate) and Mr. Duffy received three grants of 8,000 stock options (24,000 stock options in the aggregate). With respect to the grants made to each of Mr. Burgess, Mr. Steiner and Mr. Duffy on March 9, 2025, one of the three option grants made to each executive is subject to the same vesting conditions as the Time-Based Options (provided the vesting commencement date is February 13, 2025), one of the three option grants made to each executive is subject to the same vesting conditions as the Type A Liquidity Event Options, and one of the three option grants made to each executive is subject to the same vesting conditions as the Type B Liquidity Event Options.
For additional information regarding the Pre-IPO 2025 Plan pursuant to which the above options were granted, please see “— Employee Benefit Plans — Pre-IPO 2025 Plan”.
In addition, the Company approved grants of restricted stock units to each of Mr. Burgess, Mr. Steiner and Mr. Duffy in the amounts of , , and , respectively, pursuant to the Company’s 2025 Plan and as part of the IPO Grants, in each case, subject to and contingent upon the 2025 Plan becoming effective and the filing of a Form S-8 to register the shares subject to the Company’s 2025 Plan. Each restricted stock unit grant will vest in three installments on each of the first, second and third anniversaries of the vesting commencement date, which will be the effectiveness of the registration statement of which this prospectus forms a part.
For additional information regarding the 2025 Plan pursuant to which the above options were granted, please see “— Employee Benefit Plans — 2025 Equity Incentive Plan”.
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Outstanding Equity Awards at Year-end Table
The following table provides information regarding the outstanding stock options held by our named executive officers as of December 31, 2024.
|
Option Awards |
Stock Awards |
|||||||||||||||
|
Name |
Grant |
|
Exercise |
Expiration |
Number of |
Market |
||||||||||
|
Exercisable |
Unexercisable(2) |
|||||||||||||||
|
Trevor Burgess |
11/10/2023 |
— |
294,000 |
(3) |
$ |
54.95 |
11/09/2033 |
— |
— |
|||||||
|
Chief Executive Officer |
11/10/2023 |
— |
294,000 |
(4) |
$ |
109.90 |
11/09/2033 |
— |
— |
|||||||
|
11/10/2023 |
— |
294,000 |
(5) |
$ |
54.95 |
11/09/2033 |
— |
— |
||||||||
|
|
|
|||||||||||||||
|
Jim Steiner |
11/10/2023 |
— |
47,500 |
(3) |
$ |
54.95 |
11/09/2033 |
— |
— |
|||||||
|
Chief Financial Officer, |
11/10/2023 |
— |
47,500 |
(4) |
$ |
109.90 |
11/09/2033 |
— |
— |
|||||||
|
Secretary |
11/10/2023 |
— |
47,500 |
(5) |
$ |
54.95 |
11/09/2033 |
— |
— |
|||||||
|
4/25/2024 |
— |
2,500 |
(3) |
$ |
54.95 |
4/24/2034 |
— |
— |
||||||||
|
4/25/2024 |
— |
2,500 |
(4) |
$ |
109.90 |
4/24/2034 |
— |
— |
||||||||
|
4/25/2024 |
— |
2,500 |
(5) |
$ |
54.95 |
4/24/2034 |
— |
— |
||||||||
|
|
|
|||||||||||||||
|
Matt Duffy |
11/10/2023 |
— |
40,000 |
(3) |
$ |
54.95 |
11/09/2033 |
— |
— |
|||||||
|
President and Chief Risk |
11/10/2023 |
— |
40,000 |
(4) |
$ |
109.90 |
11/09/2033 |
— |
— |
|||||||
|
Officer, Neptune Flood |
11/10/2023 |
— |
40,000 |
(5) |
$ |
54.95 |
11/09/2033 |
— |
— |
|||||||
|
4/25/2024 |
— |
5,000 |
(3) |
$ |
54.95 |
4/24/2034 |
— |
— |
||||||||
|
4/25/2024 |
— |
5,000 |
(4) |
$ |
109.90 |
4/24/2034 |
— |
— |
||||||||
|
4/25/2024 |
— |
5,000 |
(5) |
$ |
54.95 |
4/24/2034 |
— |
— |
||||||||
|
10/29/2024 |
— |
5,000 |
(3) |
$ |
54.95 |
10/28/2034 |
— |
— |
||||||||
|
10/29/2024 |
— |
5,000 |
(4) |
$ |
109.90 |
10/28/2034 |
— |
— |
||||||||
|
10/29/2024 |
— |
5,000 |
(5) |
$ |
54.95 |
10/28/2034 |
— |
— |
||||||||
____________
(1) All of the outstanding equity awards were granted under our Pre-IPO 2025 Plan and are subject to acceleration of vesting as described in “— Employment, Severance and Change of Control Arrangements” below.
(2) The exercise price and number of shares reflect the -for- stock split that was completed on .
(3) The option grants are subject to a 5-year cliff vesting schedule, with 100% of the shares vesting on the fifth anniversary of the applicable vesting commencement date, subject to the option holder’s continuous service through the vesting date. The vesting commencement date is November 10, 2023 (or October 29, 2024, with respect to the options granted on October 29, 2024). Unvested time-based options will also become fully vested and exercisable upon the consummation of a Liquidity Event during the executive officer’s service with the Company.
(4) The options will vest upon the consummation of a Liquidity Event, subject to the option holder’s continuous service through such Liquidity Event, in which each share of convertible preferred stock has achieved an MOIC of less than 3.0 in connection with such Liquidity Event. The options shall terminate upon the consummation of (and not be exercisable in connection with) a Liquidity Event in which each share of convertible preferred stock has achieved an MOIC of equal to or greater than 3.0.
(5) The options will vest upon the consummation of a Liquidity Event, subject to the option holder’s continuous service through such Liquidity Event, in which each share of convertible preferred stock has achieved an MOIC of equal to or greater than 3.0 in connection with such Liquidity Event. The options shall terminate upon the consummation of (and not be exercisable in connection with) a Liquidity Event in which each share of convertible preferred stock has achieved an MOIC of less than 3.0.
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Employment, Severance and Change of Control Arrangements
Termination or Change of Control Arrangements
Vesting Acceleration
Pursuant to the terms of each executive officer’s applicable option agreement, upon the executive officer’s death or disability, unvested time-based options will become fully vested and exercisable and, with respect to all liquidity-based options, the requirement to remain in continuous service through a Liquidity Event (including this offering) will be deemed satisfied.
Unvested time-based options will also become fully vested and exercisable upon the consummation of a Liquidity Event during the executive officer’s service with the Company. Liquidity-based options will become fully vested if the executive officer remains in continuous service through the 5-year anniversary of the applicable vesting start date and a Qualified Liquidity Event has not occurred; provided that such liquidity-based options (A) will not be exercisable until immediately prior to such Qualified Liquidity event and (B) will have an extended post-termination exercise period such that the options will remain outstanding until the earlier of a Non-Qualified Liquidity Event and the expiration date of the options.
In addition, on , 2025, our board of directors adopted a death and disability policy, which provides that, upon a termination of employment or service due to death or disability, all outstanding equity awards held by the applicable service provider will fully accelerate upon such termination, provided such service provider has been in continuous service with the Company or one of its affiliates for at least one year at the time of termination.
Employee Benefit Plans
2025 Equity Incentive Plan
General. Our 2025 Plan was adopted by our board of directors on , 2025, and approved by our stockholders on . The 2025 Plan will become effective immediately upon the effectiveness of the registration statement of which this prospectus forms a part.
Share Reserve. The maximum aggregate number of shares that may be issued under the 2025 Plan is shares of our Class A common stock, which number is the sum of (i) shares of our Class A common stock plus (ii) any shares remaining available for issuance under the Pre-IPO 2025 Plan, at the time the 2025 Plan becomes effective, in an amount not to exceed shares. In addition, the number of shares reserved for issuance under the 2025 Plan will be increased automatically on the first day of each fiscal year, beginning with the Company’s 2027 fiscal year, by a number equal to the least of:
• shares;
• 2% of the aggregate shares of Class A and Class B common stock outstanding on the last day of the immediately preceding fiscal year; or
• such smaller number of shares determined by our board of directors.
To the extent an award or Pre-IPO 2025 Plan award should expire or be forfeited or become unexercisable for any reason without having been exercised in full, or is surrendered pursuant to an exchange program, the unissued shares that were subject thereto shall, unless the 2025 Plan shall have been terminated, continue to be available under the 2025 Plan for issuance pursuant to future awards. In addition, any shares which are retained by the Company upon exercise of an award or Pre-IPO 2025 Plan award in order to satisfy the exercise or purchase price for such award or Pre-IPO 2025 Plan award or any withholding taxes due with respect to such award or Pre-IPO 2025 Plan award shall be treated as not issued and shall continue to be available under the 2025 Plan for issuance pursuant to future awards. Shares issued under the 2025 Plan or any Pre-IPO 2025 Plan award and later forfeited to the Company due to the failure to vest or repurchased by the Company at the original purchase price paid to the Company for the shares (including, without limitation, upon forfeiture to or repurchase by the Company in connection with a participant ceasing to be a service provider) shall again be available for future grant under the 2025 Plan. To the extent an award under the 2025 Plan or Pre-IPO 2025 Plan award is paid out in cash rather than shares, such cash payment will not result in reducing the number of shares available for issuance under the 2025 Plan.
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Plan administration. Our board of directors has delegated its authority to administer the 2025 Plan to our compensation committee. Subject to the provisions of our 2025 Plan, the administrator has the power to determine the terms of awards, including the recipients, the exercise price, if any, the number of shares subject to each award, the fair market value of a share of our Class A common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, and the form of consideration, if any, payable upon exercise of the award and the terms of the award agreement for use under the 2025 Plan. The administrator also has the authority, subject to the terms of the 2025 Plan, to amend existing awards, to prescribe rules and to construe and interpret the 2025 Plan and awards granted thereunder and to institute an exchange program by which outstanding options and stock appreciation rights, at a time when the applicable exercise price exceeds the fair market value, options or stock appreciation rights may be surrendered in exchange for awards of the same type which may have a lower exercise price or different terms, awards of a different type, or a combination thereof, subject to stockholder approval.
Eligibility. Employees, members of our board of directors who are not employees, and consultants are eligible to participate in our 2025 Plan.
Types of award. Our 2025 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Code, to our employees and the employees of our subsidiaries, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares to our employees, directors, and consultants and the employees and consultants of our subsidiaries.
Stock options. The administrator may grant incentive and/or non-statutory stock options under our 2025 Plan, provided that incentive stock options may only be granted to employees. The exercise price of such options must generally be equal to at least the fair market value of our Class A common stock on the date of grant. The term of an option may not exceed 10 years; provided, however, that an incentive stock option held by a participant who owns more than 10% of the total combined voting power of all classes of our stock, or of certain of our subsidiary corporations, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair market value of our Class A common stock on the grant date. Notwithstanding the foregoing, in the event that on the last business day of the term of an option (x) the exercise of the option is prohibited by applicable law or (y) shares may not be purchased or sold by certain employees or directors of the Company due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the administrator may provide that the term of the option shall be extended but not beyond a period of thirty (30) days following the end of the legal prohibition, black-out period, or lock-up agreement and provided further that no extension will be made if the grant price of such option at the date the initial term would otherwise expire is above the fair market value.
The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares, or other property acceptable to the administrator. Subject to the provisions of our 2025 Plan, the administrator determines the remaining terms of the options (e.g., vesting). After the termination of service of an employee, director, or consultant, the participant may exercise his or her option, to the extent vested, for the period of time stated in his or her option agreement. Generally, if termination is due to death or disability, the option will remain exercisable for twelve (12) months. In the event of a termination for cause, options generally terminate immediately upon the termination of the participant for cause. In all other cases, the option will generally remain exercisable for three months following the termination of service. However, in no event may an option be exercised later than the expiration of its term. The maximum aggregate number of shares of our Class A common stock that may be issued under the 2025 Plan pursuant to incentive stock options may not exceed the maximum number of shares initially reserved under the 2025 Plan and to the extent allowable under Section 422 of the Code and any other shares that become available for issuance or reissuance pursuant to the terms of the 2025 Plan.
Stock appreciation rights. Stock appreciation rights may be granted under our 2025 Plan. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our Class A common stock between the date of grant and the exercise date. Subject to the provisions of our 2025 Plan, the administrator determines the terms of stock appreciation rights, including when such rights vest and become exercisable and whether to settle such awards in cash or with shares of our Class A common stock, or a combination thereof, except that the per share exercise price for the shares to be issued pursuant to the exercise of a stock appreciation right will be no less than 100% of the fair market value per share on the date of grant. The specific terms will be set forth in an award agreement. In the event that on the last business day of the term of a stock appreciation right (x) the exercise of the stock appreciation right is prohibited by applicable law or (y) shares may not be purchased or sold by certain employees or directors of the Company due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the administrator may provide that the term of the stock appreciation right shall be extended
126
but not beyond a period of thirty (30) days following the end of the legal prohibition, black-out period, or lock-up agreement and provided further that no extension will be made if the grant price of such stock appreciation right at the date the initial term would otherwise expire is above the fair market value.
Restricted stock. Restricted stock may be granted under our 2025 Plan. Restricted stock awards are grants of shares of our Class A common stock that are subject to various restrictions, including restrictions on transferability and forfeiture provisions. Shares of restricted stock will vest and the restrictions on such shares will lapse, in accordance with terms and conditions established by the administrator. Such terms may include, among other things, vesting upon the achievement of specific performance goals determined by the administrator and/or continued service. The administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. Recipients of restricted stock awards generally will have voting and dividend rights with respect to such shares upon grant without regard to vesting, unless the administrator provides otherwise. Shares of restricted stock that do not vest for any reason will be subject to our right of repurchase or forfeited by the recipient and will revert to us. The specific terms will be set forth in an award agreement.
Restricted stock units. Restricted stock units may be granted under our 2025 Plan, and may include the right to dividend equivalents, as determined in the discretion of the administrator. Each restricted stock unit granted is a bookkeeping entry representing an amount equal to the fair market value of one share of our Class A common stock. The administrator determines the terms and conditions of restricted stock units, including the vesting criteria, which may include achievement of specified performance criteria and/or continued service, and the form and timing of payment. The administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. The administrator determines, in its sole discretion, whether an award will be settled in stock, cash, or a combination of both. The specific terms will be set forth in an award agreement.
Performance units/performance shares. Performance units and performance shares may be granted under our 2025 Plan. Performance units and performance shares are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved and any other applicable vesting provisions are satisfied. The administrator will establish organizational or individual performance goals in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants. For purposes of such awards, the performance goals may be based on one or more of the following performance criteria and any adjustment(s) thereto, in each case as determined by the administrator: (i) sales or non-sales revenue; (ii) return on revenues; (iii) operating income; (iv) income or earnings including operating income; (v) income or earnings before or after taxes, interest, depreciation, and/or amortization; (vi) income or earnings from continuing operations; (vii) net income; (viii) pre-tax income or after-tax income; (ix) net income excluding amortization of intangible assets, depreciation and impairment of goodwill and intangible assets, and/or excluding charges attributable to the adoption of new accounting pronouncements; (x) raising of financing or fundraising; (xi) project financing; (xii) revenue backlog; (xiii) gross margin; (xiv) operating margin or profit margin; (xv) capital expenditures, cost targets, reductions and savings, and expense management; (xvi) return on assets (gross or net), return on investment, return on capital or invested capital, or return on stockholder equity; (xvii) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xviii) performance warranty and/or guarantee claims; (xix) stock price or total stockholder return; (xx) earnings or book value per share (basic or diluted); (xxi) economic value created; (xxii) pre-tax profit or after-tax profit; (xxiii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration or market share, completion of strategic agreements such as licenses, funded collaborations, joint ventures, acquisitions, and the like, geographic business expansion, customer satisfaction or information technology goals, and/or intellectual property asset metrics; (xxiv) goals relating to divestitures, joint ventures, mergers, acquisitions, and similar transactions; (xxv) goals relating to staff management, results from staff attitude and/or opinion surveys, staff satisfaction scores, staff safety, compliance headcount, performance management, and completion of critical staff training initiatives; (xxvi) goals relating to projects, including project completion timing and/or achievement of milestones, project budget, and technical progress against work plans; (xxvii) enterprise resource planning; and (xxviii) or any other metric that is capable of measurement or evaluation as determined by the administrator. However, awards issued to participants may take into account other factors (including subjective factors). In addition, performance goals may differ from participant to participant, performance period to performance period, and from award to award. Any criteria used may be measured, as applicable, (i) in absolute terms, (ii) in relative terms (including, but not limited to, any increase (or decrease) over the passage of time and/or any measurement against other companies or financial or business or stock index metrics particular to us), (iii) on a per share and/or share per capita basis, (iv) against our performance
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as a whole or against any of our affiliate(s), or a particular segment(s), a business unit(s) or a product(s) of ours or individual project company, (v) on a pre-tax or after-tax basis, and/or (vi) using an actual foreign exchange rate or on a foreign exchange neutral basis. After the grant of a performance unit or performance share, the administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or performance shares. Performance units shall have an initial dollar value established by the administrator prior to the grant date. Performance shares shall have an initial value equal to the fair market value of our Class A common stock on the grant date. The administrator, in its sole discretion, may pay earned performance units or performance shares in the form of cash, in shares, or in some combination thereof.
Outside Director Limitations. Stock awards granted during a single fiscal year under the 2025 Plan or otherwise, taken together with any cash fees paid during such fiscal year for services on our board of directors, shall not exceed $750,000 in total value for any non-employee director, except with respect to the first year of service in which case any stock awards granted and cash fees paid will not exceed $1,000,000 in total value (calculating the value of any such stock awards, in each case, based on the grant date fair value of such stock awards for financial reporting purposes). Such applicable limit includes the value of any stock awards that are granted in lieu of all or a portion of any annual committee cash retainers or other similar cash-based payments. Stock awards granted to an individual while he or she was serving in the capacity as an employee or while he or she was an independent contractor but not a non-employee director will not count for purposes of the limitations described above.
Non-transferability of awards. Unless the administrator provides otherwise, our 2025 Plan generally does not allow for the transfer of awards other than by will or the laws of descent and distribution and only the recipient of an option or stock appreciation right may exercise such an award during his or her lifetime.
Certain adjustments. In the event of a stock split, reverse stock split, stock dividend, combination, consolidation, extraordinary cash dividend, recapitalization (including a recapitalization through a large nonrecurring cash dividend) or reclassification of the shares, subdivision of the shares, a rights offering, a reorganization, merger, spin-off, split-up, repurchase, or exchange of common stock or other securities of the Company or other significant corporate transaction, or other change affecting the common stock occurs, the administrator, in order to prevent dilution, diminution or enlargement of the benefits or potential benefits intended to be made available under the 2025 Plan, will, in such manner as it may deem equitable, adjust the number, kind and class of securities that may be delivered under the 2025 Plan and/or the number, class, kind and price of securities covered by each outstanding award, and the terms and conditions of any outstanding award (including, without limitation, any applicable performance targets or criteria with respect thereto).
Liquidation or dissolution. In the event of our proposed winding up, liquidation or dissolution, the administrator will notify participants as soon as practicable and all awards will terminate immediately prior to the consummation of such proposed transaction.
Corporate transaction. Our 2025 Plan provides that in the event of certain significant corporate transactions, including: (1) a transfer of all or substantially all of our assets, (2) a merger, consolidation or other capital, reorganization or business combination transaction of the Company with or into another corporation, entity or person, or (3) the consummation of a transaction, or series of related transactions, in which any person becomes the beneficial owner, directly or indirectly, of more than 50% of the Company’s then outstanding capital stock, each outstanding award will be treated as the administrator determines. Such determination may provide that such awards will be (i) continued if we are the surviving corporation, (ii) assumed by the surviving corporation or its parent, (iii) substituted by the surviving corporation or its parent for a new award, (iv) canceled in exchange for a payment equal to the excess of the fair market value of our shares subject to such award over the exercise price or purchase price paid for such shares, or if such award is “underwater” canceled for no consideration, if any, or (v) in the case of options, accelerated prior to the consummation of the corporate transaction and canceled for no consideration if not exercised.
Change of control. The administrator may provide, in an individual award agreement or in any other written agreement between a participant and us, that the stock award will be subject to additional acceleration of vesting and exercisability in the event of a change of control. Under the 2025 Plan, a “change of control” is generally (1) a merger, consolidation, or any other corporate reorganization in which our stockholders immediately before the transaction do not own, directly or indirectly, more than a majority of the combined voting power of the surviving entity (or the parent of the surviving entity), (2) the consummation of the sale, transfer or other disposition of all or substantially all of our assets, (3) a change in the effective control of the Company which occurs on the date that, within any period of twenty-four (24) consecutive months, persons who were members of our board of directors
128
immediately prior to such twenty-four (24) month period, together with persons who were first elected as directors (other than as a result of any settlement of a proxy or consent solicitation contest or any action taken to avoid such a contest) during such twenty-four (24) month period by or upon the recommendation of persons who were members of our board of directors immediately prior to such twenty-four (24) month period and who constituted a majority of our board of directors at the time of such election, cease to constitute a majority of our board of directors, and (4) the acquisition by any person or company of more than 50% of the total voting power of our then outstanding stock.
Compensation recovery policy. Stock awards granted under the 2025 Plan will be subject to recoupment in accordance with any compensation recovery policy we may be required to adopt pursuant to applicable law and listing requirements. In addition, the administrator may impose such other compensation recovery, recovery or recoupment provisions in any stock award agreement as it determines necessary or appropriate.
Amendment or termination. Our board of directors has the authority to amend, suspend or terminate the 2025 Plan provided such action does not impair the existing rights of any participant. Our 2025 Plan will automatically terminate in 2035, unless we terminate it sooner. We will obtain stockholder approval of any amendment to our 2025 Plan as required by applicable law or listing requirements.
IPO Grants. The Company approved grants of restricted stock units to certain employees of the Company, including each of Mr. Burgess, Mr. Steiner, and Mr. Duffy, pursuant to our 2025 Plan, subject to and contingent upon the 2025 Plan becoming effective and the filing of a Form S-8 to register the shares subject to our 2025 Plan (collectively, the “IPO Grants”). Each restricted stock unit grant will vest in three installments on each of the first, second and third anniversaries of the vesting commencement date, which will be the effectiveness of the registration statement of which this prospectus forms a part.
Pre-IPO 2025 Plan
The board of directors of Neptune Flood initially adopted the Neptune Flood Incorporated 2019 Stock Plan on April 23, 2019, and the stockholders of Neptune Flood approved the 2019 Stock Plan on April 24, 2019. The 2019 Stock Plan was later amended and restated on May 8, 2023, and November 10, 2023, in the form of the Amended and Restated 2019 Stock Plan. In connection with our corporate reorganization, Neptune Holdings assumed the Amended and Restated 2019 Stock Plan and further amended and restated the plan in its entirety on April 10, 2025, in the form of the Pre-IPO 2025 Plan.
Under the Pre-IPO 2025 Plan, our board of directors may grant awards to our employees and consultants, in the form of incentive and nonstatutory stock options to purchase shares of our common stock and restricted stock awards. Our board of directors has broad discretion to determine individuals eligible for awards, the individuals to whom awards will be granted, and to determine the specific terms and conditions of each award. The board of directors will, with regard to each stock option, determine the number of shares subject to the option, the manner and time of the option’s exercise and vesting, and the exercise price of the option. The exercise price per share of incentive stock options must be no less than 100% of the fair market value of a share on the date of grant (or, in the case of ten percent holders, no less than 110% of the fair market value of a share on the date of grant). The exercise price per share of a nonstatutory stock option is the price determined by the board of directors, provided that, if the exercise price per share is less than 100% of the fair market value on the date of grant, it must otherwise comply with all applicable laws. Under our Pre-IPO 2025 Plan, we have reserved for issuance an aggregate of 2,379,000 shares (all of which shares may be issued under the Pre-IPO 2025 Plan pursuant to incentive stock options); provided that no awards may be granted under the Pre-IPO 2025 Plan if such awards could result in the issuance of more than 1,176,000 shares pursuant to awards granted after May 8, 2023. Our Pre-IPO 2025 Plan was terminated effective upon the effectiveness of the registration statement of which this prospectus forms a part, and no new awards will be granted under our Pre-IPO 2025 Plan following this offering, but previously granted awards will continue to be subject to the terms and conditions of the Pre-IPO 2025 Plan and the award agreements pursuant to which such awards were granted. Following the effectiveness of our 2025 Plan, such shares available for issuance under the Pre-IPO 2025 Plan will again become available for awards under the 2025 Plan.
All of the outstanding options under the Pre-IPO 2025 Plan are structured such that one third of the options granted to each optionee are subject to the same terms as the Time-Based Options, one third of the options granted to each optionee are subject to the same terms as the Type A Liquidity Event Options and one third of the options
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granted to each optionee are subject to the same terms as the Type B Liquidity Event Options, in each case, as described in the sections above titled “— Summary Compensation Table — Equity Awards” and “— Employment, Severance and Change of Control Arrangements — Termination or Change of Control Arrangements”.
As a result, pursuant to the above-referenced provisions, 100% of either the Type A Liquidity Event Options or the Type B Liquidity Event Options will fully vest upon the consummation of this offering, such that if the Type A Liquidity Event Options vest in connection with this offering, 100% of the Type B Liquidity Event Options will be forfeited, and if the Type B Liquidity Event Options vest in connection with this offering, 100% of the Type A Liquidity Event Options will be forfeited. Further, 100% of the Company’s options that will be outstanding as of immediately following the closing of this offering will be fully vested.
2025 Employee Stock Purchase Plan
General. Our ESPP was adopted by our board of directors on , 2025, and approved by our stockholders on . The ESPP will become effective immediately upon the effectiveness of the registration statement of which this prospectus forms a part.
The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code for U.S. employees. In addition, the ESPP authorizes grants of purchase rights that do not comply with Section 423 of the Code under a separate non-423 component for non-U.S. employees and certain non-U.S. service providers.
Share reserve. We have reserved shares of our Class A common stock for issuance under the ESPP. The number of shares reserved for issuance under the ESPP will be increased automatically on the first day of each fiscal year for a period of up to ten years, starting with the fiscal year following the year in which the ESPP becomes effective, by a number equal to the least of:
• shares; or
• 1% of the aggregate shares of Class A and Class B common stock outstanding at that time.
Notwithstanding the foregoing, our board of directors may act prior to the first day of any fiscal year to provide that there will be no increase in the share reserve for such fiscal year or that the increase in the share reserve for such fiscal year will be a lesser number of shares of Class A common stock than would otherwise occur pursuant to the preceding sentence
As of the date hereof, no shares of our Class A common stock have been purchased under the ESPP.
Plan administration. The ESPP is administered by our board of directors or a committee designated by our board of directors. Our board of directors has delegated its authority to administer the ESPP to our compensation committee.
Eligibility. Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates and certain non-U.S. service providers may participate in the ESPP.
Employees may have to satisfy one or more of the following service requirements before participating in the ESPP, as determined by the administrator, including: (1) being customarily employed for more than 20 hours per week, (2) being customarily employed for more than five months per calendar year, or (3) continuous employment with us or one of our affiliates for a period of time (not to exceed two years). No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of our Class A common stock based on the fair market value per share of our Class A common stock at the beginning of an offering for each year such a purchase right is outstanding. Finally, no employee will be eligible for the grant of any purchase rights under the ESPP if immediately after such rights are granted, such employee has voting power over 5% or more of our outstanding capital stock measured by vote or value under Section 424(d) of the Code.
Non-U.S. service providers must provide bona fide services to the Company and may be subject to additional eligibility criteria as the administrator may determine even if such criteria are not consistent with Section 423 of the Code.
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Offerings. The ESPP is implemented through a series of offerings under which participants are granted purchase rights to purchase shares of our Class A common stock on specified dates during such offerings. Under the ESPP, we may specify offerings with durations of not more than twenty-seven (27) months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our Class A common stock will be purchased for participants in the offering. An offering under the ESPP may be terminated under certain circumstances. The administrator will have the discretion to structure an offering so that if the fair market value of a share of our Class A common stock on the first trading day of a new purchase period within that offering is less than or equal to the fair market value of a share of our Class A common stock on the offering date for that offering, then that offering will terminate immediately as of that first trading day, and the participants in such terminated offering will be automatically enrolled in a new offering beginning on the first trading day of such new offering period.
Payroll deductions. Participants who are employees may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of our Class A common stock under the ESPP. Participants who are not employees will contribute on an after-tax basis in a manner determined by the administrator.
Unless otherwise determined by the administrator, Class A common stock will be purchased for the accounts of participants in the ESPP at a price per share that is at least the lesser of (1) 85% of the fair market value of a share of our Class A common stock on the first date of an offering, or (2) 85% of the fair market value of a share of our Class A common stock on the date of purchase.
Certain adjustments. In the event that there occurs a change in our capital structure through such actions as a stock split, reverse stock split, stock dividend, combination, consolidation, extraordinary cash dividend, recapitalization (including a recapitalization through a large nonrecurring cash dividend) or reclassification of our common stock, subdivision of our common stock, a rights offering, a reorganization, merger, spin-off, split-up, repurchase, or exchange of our common stock or other significant corporate transaction, or other change affecting our common stock, the administrator will make appropriate adjustments to: (1) the class(es) and maximum number of shares reserved under the ESPP, (2) the class(es) and maximum number of shares by which the share reserve may increase automatically each year, (3) the class(es) and number of shares and purchase price of all outstanding purchase rights, and (4) the class(es) and number of shares that are subject to purchase limits under ongoing offerings.
Dissolution or liquidation. In the event of our proposed winding up, liquidation or dissolution, any offering period then in progress will be shortened by setting a new purchase date, and will terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the administrator. The administrator will notify each participant that the purchase date has been changed and that the participant’s purchase right will be exercised automatically on the new purchase date unless prior to such date the participant has withdrawn from the offering period.
Corporate transactions. The ESPP provides that in the event of certain significant corporate transactions, including: (1) a transfer of all or substantially all of our assets, (2) a merger, consolidation or other capital, reorganization or business combination transaction of the Company with or into another corporation, entity or person, or (3) the consummation of a transaction, or series of related transactions, in which any person becomes the beneficial owner, directly or indirectly, of more than 50% of the Company’s then outstanding capital stock, a successor corporation may assume or substitute each outstanding purchase right. If the successor corporation refuses to assume or substitute the purchase right, the offering period then in progress will be shortened, and a new purchase date will be set. The administrator will notify each participant that the purchase date has been changed and that the participant’s purchase right will be exercised automatically on the new purchase date unless prior to such date the participant has withdrawn from the offering period.
Amendment or termination. The administrator has the authority to amend, suspend or terminate our ESPP, except that, subject to certain exceptions described in our ESPP, no such action may adversely affect any outstanding rights to purchase stock under our ESPP without the holder’s consent. We will obtain stockholder approval of any amendment to our ESPP as required by applicable law or listing requirements.
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Executive Incentive Bonus Plan
Our Incentive Bonus Plan, was adopted by our board of directors on , 2025. The Bonus Plan will become effective on the day immediately prior to the date that the registration statement of which this prospectus forms a part becomes effective. The purpose of the Bonus Plan is to motivate and reward eligible officers and employees for their contributions toward the achievement of certain performance goals.
Administration. The Bonus Plan will be administered by the compensation committee, which will have the discretionary authority to interpret the provisions of the Bonus Plan, including all decisions on eligibility to participate, the establishment of performance goals, the amount of awards payable under the plan, and the payment of awards. The compensation committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or part of its authority and powers under the Bonus Plan to one or more directors and/or officers of the Company.
Eligibility. Officers and other key employees of the Company designated by the compensation committee to participate in the Bonus Plan will be eligible to participate in this Bonus Plan, provided the compensation committee has not, in its sole discretion, withdrawn such designation and he or she meets the following conditions: (a) is a full-time regular employee of the Company as of the last day of the applicable performance period; and (b) is not subject to disciplinary action, is in good standing with the Company and is not subject to a performance improvement plan.
Performance criteria. Commencing with the fiscal year ending December 31, 202 , we expect the compensation committee to establish cash bonus targets and corporate performance metrics for a specific performance period pursuant to the Bonus Plan. Corporate performance goals may be based on one or more of the following criteria, as determined by our compensation committee and any adjustments thereto established by the compensation committee: (i) sales or non-sales revenue; (ii) return on revenues; (iii) operating income; (iv) income or earnings including operating income; (v) income or earnings before or after taxes, interest, depreciation, and/or amortization; (vi) income or earnings from continuing operations; (vii) net income; (viii) pre-tax income or after-tax income; (ix) net income excluding amortization of intangible assets, depreciation, and impairment of goodwill and intangible assets and/or excluding charges attributable to the adoption of new accounting pronouncements; (x) raising of financing or fundraising; (xi) project financing; (xii) revenue backlog; (xiii) gross margin; (xiv) operating margin or profit margin; (xv) capital expenditures, cost targets, reductions, and savings and expense management; (xvi) return on assets (gross or net), return on investment, return on capital or invested capital, or return on stockholder equity; (xvii) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xviii) performance warranty and/or guarantee claims; (xix) stock price or total stockholder return; (xx) earnings or book value per share (basic or diluted); (xxi) economic value created; (xxii) pre-tax profit or after-tax profit; (xxiii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration or market share, completion of strategic agreements such as licenses, funded collaborations, joint ventures acquisitions, and the like, geographic business expansion, customer satisfaction or information technology goals, or intellectual property asset metrics; (xxiv) goals relating to divestitures, joint ventures, mergers, acquisitions, and similar transactions; (xxv) goals relating to staff management, results from staff attitude and/or opinion surveys, staff satisfaction scores, staff safety, compliance, headcount, performance management, or completion of critical staff training initiatives; (xxvi) goals relating to projects, including project completion, timing and/or achievement of milestones, project budget, or technical progress against work plans; (xxvii) enterprise resource planning; and (xxviii) or any other metric that is capable of measurement or evaluation as determined by the compensation committee.
However, awards issued to participants may take into account other factors (including subjective factors). Performance goals may differ from participant to participant, performance period to performance period, and from award to award. Any criteria used may be measured, as applicable, (i) in absolute terms, (ii) in relative terms (including, but not limited to, any increase (or decrease) over the passage of time and/or any measurement against other companies or financial or business or stock index metrics particular to us), (iii) on a per share and/or share per capita basis, (iv) against our performance as a whole or against any of our affiliate(s), or a particular segment(s), a business unit(s) or a product(s) of ours or individual project company, (v) on a pre-tax or after-tax basis, and/or (vi) using an actual foreign exchange rate or on a foreign exchange neutral basis.
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Service requirement. Unless otherwise determined by the compensation committee, a participant must be actively employed and in good standing with the Company on the date the award is paid. The compensation committee may make exceptions to this requirement in the case of retirement, death or disability, an unqualified leave of absence or under other circumstances, as determined by the compensation committee in its sole discretion.
Amendment or termination. The compensation committee may terminate the Bonus Plan at any time, provided such termination will not affect the payment of any awards accrued under the Bonus Plan prior to the date of the termination. The compensation committee may, at any time, or from time to time, amend or suspend and, if suspended, reinstate, the Bonus Plan in whole or in part.
Perquisites, Health, Welfare and Retirement Benefits
Our named executive officers are eligible to participate in our employee benefit plans, including our medical, dental, vision, group life, disability and accidental death and dismemberment insurance plans, in each case on the same basis as all of our other employees. We provide a 401(k) plan to our employees, including our current named executive officers, as discussed in the section below entitled “— 401(k) Plan.”
We generally do not provide perquisites or personal benefits to our named executive officers, except in limited circumstances.
401(k) Plan
We maintain a 401(k) plan that provides eligible employees with an opportunity to save for retirement on a tax advantaged basis. Eligible employees are able to defer eligible compensation subject to applicable annual Code limits. Employees are immediately and fully vested in their contributions. The 401(k) plan permits us to make matching contributions and profit-sharing contributions to eligible participants. We intend for our 401(k) plan to qualify under Sections 401(a) and 501(a) of the Code so that contributions by employees to the 401(k) plan, and earnings on those contributions, are not taxable to employees until withdrawn from the 401(k) plan.
Pension Benefits
None of our named executive officers participate in or have an account balance in any qualified or non-qualified defined benefit plan sponsored by us.
Nonqualified Deferred Compensation
We have not offered any nonqualified deferred compensation plans or arrangements or entered into any such arrangements with any of our named executive officers.
Limitation of Liability and Indemnification of Directors and Officers
Our amended and restated certificate of incorporation will contain provisions that limit the liability of our directors and certain of our officers for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors and officers will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors and officers, except liability for the following:
• for any breach of their duty of loyalty to us or our stockholders;
• for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
• for directors, any unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL;
• for any transaction from which they derived an improper personal benefit; or
• for officers, for any action by or in the right of the Company.
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Our amended and restated bylaws will provide that we shall indemnify, to the fullest extent permitted by law, any person who is or was a party or is threatened to be made a party to any action, suit or proceeding, by reason of the fact that he or she is or was one of our directors or officers or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust or other enterprise. Our amended and restated bylaws will provide that we may indemnify our employees or agents. Our amended and restated bylaws will also provide that we must advance expenses incurred by or on behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to limited exceptions.
Prior to the completion of this offering, we intend to obtain insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and officers against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or officer, including claims relating to public securities matters, and to us with respect to payments that may be made by us to these officers and directors pursuant to our indemnification obligations or otherwise as a matter of law.
Prior to the completion of this offering, we also intend to enter into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained in the DGCL. These indemnification agreements may require us, among other things, to indemnify our directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.
At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees, or other agents or is or was serving at our request as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.
The underwriting agreement provides for indemnification by the underwriters of us and our officers, directors, and employees for certain liabilities arising under the Securities Act or otherwise.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Clawback Policy
In connection with this offering, we intend to adopt a “clawback” policy that is compliant with the listing rules of the applicable listing exchange, as required by the Dodd-Frank Act.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements, including employment, termination of employment and change of control arrangements and indemnification arrangements described in “Executive Compensation” and the registration rights described in “Description of Capital Stock — Registration Rights,” the following is a description of each transaction since January 1, 2022, and each currently proposed transaction in which:
• we have been or are to be a participant;
• the amount involved exceeds $120,000; and
• any of our directors, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of or person sharing the household with any of these individuals, had or will have a direct or indirect material interest.
Neptune Holdings Corporate Reorganization
On April 10, 2025, we completed an internal corporate reorganization pursuant to which, after giving effect to the corporate reorganization, Neptune Flood became a direct, wholly-owned subsidiary of Neptune Holdings. See “Prospectus Summary — Corporate Structure.” As part of our corporate reorganization, each issued and outstanding share of common stock of Neptune Flood prior to giving effect to the reorganization was converted into one share of common stock of Neptune Holdings and each issued and outstanding share of convertible preferred stock prior to giving effect to the reorganization was converted into one share of convertible preferred stock of Neptune Holdings, in each case on a 1:1 basis. As a result of our corporate reorganization, each stockholder of Neptune Flood became a stockholder of Neptune Holdings, holding the same proportional equity interests and voting power as of immediately prior to our corporate reorganization. In connection with our corporate reorganization, Neptune Holdings also assumed the Amended and Restated 2019 Stock Plan and amended and restated the plan in its entirety in the form of our Pre-IPO 2025 Plan. The assumption of these agreements did not result in any changes to the terms, conditions, or fair value of the shares. The other liabilities of Neptune Flood were not assumed by Neptune Holdings in our corporate reorganization and therefore continue to be obligations of Neptune Flood, and the assets of Neptune Flood were not transferred to Neptune Holdings and continue to be assets of Neptune Flood.
Convertible Preferred Stock Financing
On May 10, 2023, Neptune Flood sold an aggregate of 4,185,000 shares of convertible preferred stock, at a purchase price of $54.95 per share for an aggregate purchase price of $230 million, to BSIV. In connection with this offering, the shares of convertible preferred stock will automatically convert into an aggregate of shares of Class A common stock. BSIV is a joint venture between Bregal Sagemount and FTV Capital, each of which beneficially owns more than 5% of our outstanding capital stock. Bregal Sagemount is affiliated with Blair J. Greenberg and FTV Capital is affiliated with Mike Vostrizansky, members of our board of directors. BSIV is entitled to specified registration rights. For additional detail on BSIV’s registration rights and equity holdings, see “Description of Capital Stock — Registration Rights” and “Principal and Selling Stockholders,” respectively.
Stock Transfers and Acquisitions
On June 26, 2024, the Ann J Albert 2021 Irrevocable Grantor Trust, the James D Albert 2021 Irrevocable Grantor Trust FBO Emily Polk Albert Goldman, and the James D Albert 2021 Irrevocable Grantor Trust FBO Laura Elizabeth Albert Duckworth (together, the “Albert Trusts”), collectively a greater than 5% beneficial owner of our common stock, sold an aggregate of 473,200 shares of our outstanding common stock for $68.42 per share to FTV-NE Aggregator, LLC (“FTV-NE Aggregator”), a greater than 5% beneficial owner of our common stock, in a private transaction, pursuant to the terms of a stock purchase agreement.
On November 1, 2024, FTV-NE Aggregator transferred 146,162 shares of our outstanding common stock to its affiliated fund, Growth VII-Centre, L.P., for $10 million.
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Charles River Data
From January 1, 2022, through April 30, 2024, Neptune Flood received consulting services for software development and data analytics from a Boston-based data science consulting firm, Charles River Data, in which Mr. Burgess, our Chief Executive Officer and Chairman of our board of directors, held a 20% equity interest. During the years ended December 31, 2022, 2023, and 2024, Neptune Flood made payments to Charles River Data of $0.3 million, $0.8 million and $0.4 million, respectively.
In May 2024, Neptune Flood hired all of the employees of Charles River Data through individual employment arrangements.
Directed Share Program
At our request, the underwriters have reserved % of the shares of Class A common stock to be offered by the selling stockholders under this prospectus for sale, at the initial public offering price, to directors, officers, employees, business associates and related persons of Neptune. See the section titled “Underwriting — Directed Share Program” for additional information.
Investors’ Rights, Voting, and Right of First Refusal Agreements
In connection with the convertible preferred stock financing, Neptune Flood entered into, and as part of the corporate reorganization, Neptune Holdings assumed all rights and obligations under, the Pre-IPO Stockholders Agreement with BSIV and certain holders of our common stock containing, among other things, certain voting rights, board designation rights, tag-along and drag-along rights, rights of first refusal, transfer restrictions, equity purchase rights, and a commitment to enter into a registration rights agreement with BSIV in connection with our initial public offering. Pursuant to the Pre-IPO Stockholders Agreement, at the closing of this offering, we will enter into a registration rights agreement (the “registration rights agreement”), with BSIV. The parties to the Pre-IPO Stockholders Agreement include entities affiliated with Mr. Burgess, the Albert Trusts, and BSIV. The Pre-IPO Stockholders Agreement will terminate upon the closing of this offering, except with respect to our obligation to enter into the registration rights agreement, which is more fully described in “Description of Capital Stock — Registration Rights.” Since January 1, 2022, we have waived our right of first refusal in connection with the sale of certain shares of our capital stock. See the section titled “Principal and Selling Stockholders” for additional information regarding beneficial ownership of our capital stock.
Lease Agreement
In February 2021, Neptune Flood and TRB Rents, LLC (“TRB”), a Florida limited liability company, entered into a commercial lease agreement (the “Lease Agreement”) for Neptune’s commercial office space in St. Petersburg, Florida. Trevor Burgess and Jonathan Carlon, Neptune Flood’s Director of Business Development and a member of our board of directors, are TRB’s managing members. The Lease Agreement is a month-to-month lease with a monthly rent of $12,000 per month. During the years ended December 31, 2022, 2023, and 2024, Neptune Flood paid $144,000, $144,000 and $144,000, respectively, in rent expense to TRB.
Executive Compensation and Employment Arrangements
Please see “Executive Compensation” for information on compensation arrangements with our executive officers, including stock option grants and agreements with executive officers. Please see “Executive Compensation — Employment, Severance and Change of Control Arrangements — Termination or Change of Control Arrangements” for information on termination arrangements with executive officers.
Limitation of Liability and Indemnification of Directors and Officers
See “Certain Relationships and Related Party Transactions — Limitation of Liability and Indemnification of Directors and Officers” for information on our indemnification arrangements with our directors and executive officers.
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Offering Expense Reimbursement Arrangement
In connection with this offering, we will enter into a stockholder expense reimbursement letter agreement with the selling stockholders of this offering, pursuant to which the selling stockholders will agree to reimburse the Company for certain fees and expenses incurred by the Company related to the offering, up to an aggregate amount not to exceed 2% of the gross proceeds of the offering. Reimbursable expenses include certain legal, accounting, consulting, and advisory fees, printing and mailing costs, transfer and delivery expenses, Blue Sky and FINRA filing fees, listing fees, and road show costs, but exclude items such as director and officer insurance premiums, internal personnel costs, compensation or bonuses, taxes (other than transfer taxes), and costs related to ongoing public company compliance. Each selling stockholder’s reimbursement obligation is determined on a pro rata basis according to the number of shares sold, and reimbursement will be made from the proceeds of the offering at closing.
Other Transactions
To facilitate the Class B Stock Exchange, we will enter into the Class B Exchange Agreement with Mr. Burgess and entities affiliated with Mr. Burgess, pursuant to which, upon the Effective Time, shares of our outstanding Class A common stock beneficially owned by Mr. Burgess as of the Effective Time will be automatically exchanged for an equivalent number of newly issued shares of our Class B common stock. Pursuant to the Class B Exchange Agreement, the Company also agreed to be responsible for any filing fees and related costs and expenses incurred in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with the consummation of the Class B Stock Exchange. In addition, we will enter into the Class B Equity Exchange Agreement with Mr. Burgess pursuant to which, following the completion of this offering, Mr. Burgess shall have a right (but not an obligation), to require us to exchange any shares of Class A common stock received by Mr. Burgess upon the exercise, vesting, and/or settlement of certain equity awards held by Mr. Burgess for an equivalent number of shares of Class B common stock. As of the date of this prospectus, there were shares of our Class A common stock subject to equity awards held by Mr. Burgess that may become exchangeable for an equivalent number of shares of our Class B common stock following this offering.
Review, Approval or Ratification of Transactions with Related Parties
We intend to adopt a written related person transactions policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of our common stock and any members of the immediate family of and any entity affiliated with any of the foregoing persons are not permitted to enter into a material related person transaction with us without the review and approval of our audit committee or a committee composed solely of independent directors in the event it is inappropriate for our audit committee to review such transaction due to a conflict of interest. We expect the policy to provide that any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our common stock or with any of their immediate family members or affiliates, in which the amount involved exceeds $120,000 will be presented to our audit committee for review, consideration and approval. In approving or rejecting any such proposal, we expect that our audit committee will consider the relevant facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
Although we have not had a written policy for the review and approval of transactions with related persons, our board of directors has historically reviewed and approved any transaction where a director or officer had a financial interest, including all of the transactions described above. Prior to approving such a transaction, the material facts as to a director’s or officer’s relationship or interest as to the agreement or transaction were disclosed to our board of directors. Our board of directors would take this information into account when evaluating the transaction and in determining whether such transaction was fair to our company and in the best interest of all of our stockholders.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table presents information as to the beneficial ownership of our common stock as of , 2025, and as adjusted to reflect the selling stockholders’ sale of Class A common stock in this offering, by:
• each stockholder known by us to be the beneficial owner of more than 5% of our Class A common stock, assuming all shares of our Class B common stock were converted into shares of our Class A common stock;
• each of our directors;
• each of our named executive officers;
• all selling stockholders; and
• all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned by them, subject to community property laws where applicable. Shares of our common stock subject to stock options that are currently exercisable or exercisable within 60 days of , 2025, are deemed to be outstanding and to be beneficially owned by the person holding such securities for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Percentage ownership of our common stock before the completion of this offering is based on shares of our common stock outstanding on , 2025, after giving effect to our -for- stock split conducted on , 2025, which includes: (i) shares of Class A common stock resulting from the automatic conversion of all 4,185,000 outstanding shares of our convertible preferred stock immediately prior to the completion of this offering; (ii) shares of our Class A common stock outstanding as of , 2025; (iii) shares of our Class B common stock outstanding as of , 2025, the Class B Stock Exchange as if such exchange had occurred on , 2025, and (iv) shares of our Class A common stock issuable pursuant to options granted under our Pre-IPO 2025 Plan that are issued and outstanding as of , 2025, all of which options will become vested and exercisable in full at the consummation of this offering in accordance with their terms, subject to the lock-up restrictions described under “Underwriting”. Each share of our Class A common stock is entitled to one vote per share and each share of our Class B common stock is entitled to ten votes per share on all matters submitted to a vote of the stockholders, including the election of directors.
Percentage ownership of our common stock after the offering (assuming no exercise of the underwriters’ option to purchase additional shares to cover over-allotments, if any) also assumes the foregoing and assumes the sale of shares of Class A common stock by the selling stockholders in this offering. Unless otherwise indicated, the address of each of the individuals and entities named below is c/o Neptune Insurance Holdings Inc., 400 6th Street S, Suite 2, St. Petersburg, Florida 33701.
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Greater than 5% Stockholders and Selling Stockholders: |
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Wilbur L. Martin, IV |
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Named Executive Officers and Directors: |
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Jonathan Carlon(5) |
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Blair J. Greenberg(1) |
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Mike Vostrizansky(2) |
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Trevor Burgess(3)(6) |
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Jim Steiner(7) |
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Matt Duffy(8) |
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Cristian Melej(9) |
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All executive officers and directors as a group (7 persons) |
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(1) Consists of shares of Class A common stock issuable upon the deemed conversion of shares of preferred stock held by BSIV and also reflected in the immediately below footnote. BSIV is managed by a board of directors, a majority of which is appointed by BSIV Hold 101, LP (“BSIV 101”). BSIV 101 is managed by BSIV Hold 101 GP, LLC (“BSIV 101 GP”), its general partner, which is managed by Bregal Sagemount IV General Partner Jersey Limited (“Bregal GP”), its sole member, which is managed by a board of directors and is ultimately 100% owned by Gene Yoon. Bregal Sagemount Management LP, which is majority owned by Gene Yoon, is registered as an SEC Relying Advisor of Bregal Investments, Inc., an SEC Registered Investment Advisor. Bregal Sagemount Management LP is the investment advisor to BSIV 101. Gene Yoon, as managing director of Bregal Sagemount Management LP, and Blair J. Greenberg, a member of our board of directors, as director of Bregal Sagemount Management LP, may each be deemed to have or share beneficial ownership of the Class A common stock held directly by BSIV. The address of BSIV, BSIV 101, BSIV 101 GP, Bregal Sagemount Management LP and Bregal Investments, Inc. is 200 Park Avenue, 45th Floor, New York, NY 10166. The address of Bregal GP is Second Floor, Windward House, La Route de la Liberation, St. Helier, Jersey JE2 3BQ, Channel Islands.
(2) Consists of (a) shares of Class A common stock issuable upon the deemed conversion of shares of preferred stock held by BSIV and also reflected in the immediately preceding footnote, (b) shares of Class A common stock held by FTV-NE Aggregator, LLC (“FTV-NE Aggregator”) and (c) shares of Class A common stock held by Growth VII-Centre, L.P. (“Growth VII-Centre”). BSIV is managed by a board of directors, two of which are appointed by FTV VII, L.P. (“FTV VII”). FTV-NE Aggregator is managed by FTV VII, its sole member, which is managed by FTV Management VII, L.P. (“FTV Management”), its general partner, which is managed by FTV VII GP, L.L.C., (“FTV VII GP”) its general partner. Growth VII-Centre is managed by FTV Management, its general partner. Michael Vostrizansky, a member of our board of directors, serves as the representative of FTV VII GP and is a member of the investment committee of FTV Management, which directs investments by and the disposition of investments of FTV VII. The address of FTV NE Aggregator, Growth VII-Centre, FTV VII, FTV Management and FTV VII GP is 601 California Street, Floor 19, San Francisco, CA 94108.
(3) Consists of (a) shares of Class B common stock held by Trevor R. Burgess, Trustee of the Burgess Family SLAT, u/a/d March 26, 2025 (the “Burgess Family SLAT”), (b) shares of Class B common stock held by Jonathan W. Meyer and David J. Rectenwald, Co- Trustees of the Trevor R. Burgess Irrevocable Trust of 2020, u/a/d March 24, 2025 (the “Burgess Irrevocable Trust”), and (c) shares of Class B common stock held by Trevor R. Burgess, Trustee of the Trevor R. Burgess Revocable Trust, u/a/d September 30, 2024, which are affiliated with Mr. Burgess, our Chief Executive Officer and Chairman of our board of directors. The Burgess Family SLAT and the Burgess Irrevocable Trust each hold sole voting power over their respective shares of Class B common stock.
(4) Includes (a) shares of Class A common stock held by James D. Albert, as trustee of the Ann J. Albert Irrevocable Grantor Trust, dated June 9, 2021 (“Albert Irrevocable Grantor Trust”), (b) shares of Class A common stock held by Emily Polk Albert Goldman, as trustee of the James D. Albert 2021 Irrevocable Grant Trust FBO Emily Polk Albert Goldman, dated February 23, 2021 (“Trust FBO E. Albert Goldman”), and (c) shares of Class A common stock held by Laura Elizabeth Albert Duckworth, as trustee of the James D. Albert 2021 Irrevocable Grant Trust FBO Laura Elizabeth Albert Duckworth, dated February 23, 2021 (“Trust FBO L. Albert Duckworth”). Emily Polk Albert Goldman and Laura Elizabeth Albert Duckworth are children of James D. Albert. Each of the three trusts holds sole voting power over its respective shares of Class A common stock. The address of Albert Irrevocable Grantor Trust is 390 Coffee Pot Riviera NE, St. Petersburg, FL 33704. The address of Trust FBO E. Albert Goldman is 355 15th Ave. NE, St. Petersburg, FL 33704. The address of Trust FBO L. Albert Duckworth is 1315 Wilton Ln, Kirkwood, MO 63122.
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(5) Consists of (a) shares of Class A common stock subject to options exercisable in connection with the consummation of the IPO, including shares subject to options exercisable within 60 days of , 2025, held by Mr. Carlon, (b) shares of Class A common stock held by the JWC Irrevocable Trust and (c) shares of Class A common stock held by Jonathan Carlon and Alexis Carlon, as trustees of the Carlon Family Trust, dated May 7, 2024 (the “Carlon Family Trust”). Each of the two trusts holds sole voting power over their respective shares of Class A common stock.
(6) Includes shares of Class B common stock issuable to Mr. Burgess in accordance with the Class B Equity Exchange Agreement in exchange for shares of Class A common stock subject to options exercisable in connection with the consummation of the IPO held by Mr. Burgess.
(7) Consists of shares of Class A common stock subject to options exercisable in connection with the consummation of the IPO, including shares subject to options exercisable within 60 days of , 2025, held by Mr. Steiner.
(8) Consists of shares of Class A common stock subject to options exercisable in connection with the consummation of the IPO, including shares subject to options exercisable within 60 days of , 2025, held by Mr. Duffy, of which shares of Class A common stock are pledged as collateral to secure certain personal indebtedness of Mr. Duffy.
(9) Consists of shares of Class A common stock subject to options exercisable in connection with the consummation of the IPO, including shares subject to options exercisable within 60 days of , 2025, held by Mr. Melej.
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The following description summarizes the most important terms of our capital stock, as they will be in effect following the completion of this offering. Because it is only a summary, it does not contain all the information that may be important to you. We expect to adopt a restated certificate of incorporation and restated bylaws that will become effective immediately prior to the completion of this offering, and this description summarizes provisions that are expected to be included in these documents. For a complete description, you should refer to our amended and restated certificate of incorporation, restated bylaws and registration rights agreement, which are included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law.
Our amended and restated certificate of incorporation provides for two classes of common stock: Class A common stock and Class B common stock. Upon the completion of this offering, our authorized capital stock will consist of:
• shares of Class A common stock, $ par value per share;
• shares of Class B common stock, $ par value per share; and
• shares of undesignated preferred stock, $ par value per share.
Assuming the conversion of all 4,185,000 outstanding shares of our convertible preferred stock into shares of our Class A common stock, which will occur upon the completion of this offering, as of , 2025, there were shares of our Class A common stock and shares of Class B common stock outstanding, held by stockholders of record, and no shares of our preferred stock outstanding. Our board of directors is authorized, without stockholder approval except as required by the listing standards of the NYSE, to issue additional shares of our capital stock.
Class A Common Stock and Class B Common Stock
We have two classes of authorized common stock, Class A common stock and Class B common stock. Upon the effectiveness of the registration statement of which this prospectus forms a part, all 4,185,000 outstanding shares of our convertible preferred stock will be converted into shares of our Class A common stock.
Dividend Rights
Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available at the times and in the amounts that our board of directors may determine.
Voting Rights
Each holder of our Class A common stock is entitled to one vote per share, and holders of our Class B common stock are entitled to ten votes per share, on all matters submitted to a vote of stockholders. The holders of our Class A common stock and Class B common stock will generally vote together as a single class on all matters submitted to a vote of our stockholders, unless otherwise required by Delaware law or our amended and restated certificate of incorporation. Delaware law could require either holders of our Class A common stock or Class B common stock to vote separately as a single class in the following circumstances:
• if we were to seek to amend our amended and restated certificate of incorporation to increase or decrease the par value of a class of our capital stock, then that class would be required to vote separately to approve the proposed amendment; and
• if we were to seek to amend our amended and restated certificate of incorporation in a manner that alters or changes the powers, preferences, or special rights of a class of our capital stock in a manner that affected its holders adversely, then that class would be required to vote separately to approve the proposed amendment.
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Our amended and restated certificate of incorporation and restated bylaws will establish a classified board of directors that is divided into three classes with staggered three-year terms. Only the directors in one class will be subject to election by a plurality of the votes cast at each annual meeting of our stockholders, with the directors in the other classes continuing for the remainder of their respective three-year terms. Our amended and restated certificate of incorporation will not provide for cumulative voting for the election of directors. For more information on our classified board of directors, see “Management — Composition of our Board of Directors.”
Conversion
Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, whether or not for value, which occurs after the completion of this offering, except for certain permitted transfers, described in the paragraph that immediately follows this paragraph and further described in our amended and restated certificate of incorporation. Once converted into Class A common stock, the Class B common stock will not be reissued. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon the earlier of (i) twelve months following the death or disability of Mr. Burgess or (ii) upon the first trading day on or after such date that the outstanding shares of Class B common stock represent less than % of the then-outstanding Class A and Class B common stock, which, in either instance, may be extended to 18 months upon affirmative approval of a majority of the independent directors.
Future transfers of Class B common stock by the holder of Class B common stock will result in the corresponding shares of Class B common stock converting into shares of Class A common stock, other than transfers to (in each case, a “permitted transferee”) (i) a trust for the benefit of Mr. Burgess, provided Mr. Burgess or his permitted transferees do not receive consideration in exchange for the transfer (other than as a settlor or beneficiary of such trust); (ii) a trust for the benefit of persons other than Mr. Burgess, provided Mr. Burgess or his permitted transferees do not receive consideration in exchange for the transfer (other than as a settlor or beneficiary of such trust); (iii) a trust under the terms of which Mr. Burgess or his family members have retained a “qualified interest” within the meaning of §2702(b)(1) of the Code and/or a reversionary interest; (iv) Mr. Burgess’s estate, any one or more of Mr. Burgess’s family members or any revocable or irrevocable trust for the primary benefit of Mr. Burgess or one or more of Mr. Burgess’s family members or the spouses of such family members; (v) any charitable organization, private foundation, supporting organization, donor advised or donor directed fund, or any other charitable fund or similar entity established by Mr. Burgess; (vi) an Individual Retirement Account, as defined in Section 408(a) of the Code, or a pension, profit sharing, stock bonus, or other type of plan or trust of which Mr. Burgess or his permitted transferees are participants or beneficiaries and which satisfies the requirements for qualification under Section 401 of the Code; or (vii) a corporation, partnership, or limited liability company owned or controlled, directly or indirectly, by Mr. Burgess or his permitted transferees, in each case, so long as Mr. Burgess, his family members or a trustee of a trust described in clauses (i), (iii) and (iv) retain sole dispositive power and voting control with respect to the shares of Class B common stock.
No Preemptive or Similar Rights
Our Class A common stock and Class B common stock are not entitled to preemptive rights and are not subject to conversion or redemption.
Right to Receive Liquidation Distributions
Upon our liquidation, dissolution, or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our Class A common stock and Class B common stock and any participating preferred stock outstanding at that time, subject to any preferential or other rights, if any, on any outstanding shares of preferred stock.
Fully Paid and Non-assessable
All of the outstanding shares of our Class A common stock and Class B common stock are fully paid and non-assessable.
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Preferred Stock
Upon the completion of this offering, all of our previously outstanding shares of convertible preferred stock will have been converted into Class A common stock, there will be no authorized shares of convertible preferred stock and we will have no shares of convertible preferred stock outstanding. Under the terms of our amended and restated certificate of incorporation, which will be in effect upon the completion of this offering, our board of directors has the authority, without further action by our stockholders, to issue up to shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the designation, vesting, powers (including voting powers), preferences and relative, participating, optional, or other rights (and the qualifications, limitations or restrictions thereof), and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.
Our board of directors may authorize the issuance of preferred stock with voting, dividend rights, liquidation rights, redemption rights, or conversion rights that could adversely affect the voting power or other rights of the holders of Class A common stock and Class B common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change of control of our company and may adversely affect the market price of our Class A common stock and the voting and other rights of the holders of Class A common stock and Class B common stock. We have no current plans to issue any shares of preferred stock.
Options
As of June 30, 2025, pursuant to our Pre-IPO 2025 Plan, we had outstanding options to purchase an aggregate of (i) shares of our Class A common stock, with a weighted average exercise price of $ per share and (ii) shares of our Class B common stock, with a weighted average exercise price of $ per share.
Registration Rights
Pursuant to the Pre-IPO Stockholders Agreement, substantially concurrently with the consummation of this offering, we expect to enter into a registration rights agreement with BSIV, the holder of our convertible preferred stock, which will provide that BSIV and any other person who becomes a party thereto (collectively, the “RRA Investors”) will have certain registration rights relating to the shares of our Class A common stock that will be received by them upon conversion of their convertible preferred stock, on terms and conditions mutually agreed in accordance with proposed terms set forth in the Pre-IPO Stockholders Agreement. The registration of such shares of our Class A common stock through the exercise of such registration rights would enable BSIV and other parties thereto to sell such shares without restriction under the Securities Act at such time as the applicable registration statement with respect to the resale of those shares is declared effective, following the expiration or termination of any applicable lock-up restrictions.
Class A common stock held by any RRA Investor will cease to constitute registrable securities under the registration rights agreement at the earliest of such time as (i) such common stock is sold under an effective registration statement, (ii) such common stock is sold pursuant to Rule 144 of the Securities Act, (iii) such common stock has been otherwise transferred and delegended and can thereafter be sold without registration and (iv) with respect to any RRA Investor, when such RRA Investor beneficially owns less than 1% of our then-outstanding Class A common stock and all such shares are eligible to be sold without limitation under Rule 144 in any 90-day period thereunder.
We will pay the reasonable fees and expenses of any registration effected under the terms of the registration rights agreement, including the reasonable fees of one counsel for the selling stockholders in an amount not to exceed $50,000, other than any underwriting discounts, fees and commissions attributable to the Class A common stock to be sold by RRA investors pursuant to any such registration. In an underwritten offering, the underwriters have the right, subject to specified conditions, to limit the number of shares such holders may include. In addition, in connection with this offering, each RRA Investor has agreed that they will not, subject to limited exceptions, directly or indirectly sell, dispose of or hedge any shares of our Class A common stock or any securities convertible into or exchangeable or exercisable for shares of our Class A common stock for a period of 180 days after the date of this prospectus. See the sections titled “Shares Eligible for Future Sale — Lock-up Agreements and Market Standoff Provisions” and “Underwriting” for additional information.
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Form S-1 Demand Registration Rights
After the completion of this offering, certain holders of our Class A common stock will be entitled to certain demand registration rights. At any time beginning 180 days after the date of this prospectus, the RRA Investors may request that we register the resale of all or a portion of their shares on a registration statement on Form S-1.
Form S-3 Demand Registration Rights
At any time beginning one year after the date of this prospectus, certain holders of our Class A common stock will be entitled to certain Form S-3 demand registration rights. The holders of at least 10% of the outstanding shares of our Class A common stock may make a request that we register the resale of their shares on a registration statement on Form S-3. If such a request is made, then certain holders of our Class A common stock will have the right to demand underwritten Form S-3 registrations from time to time.
Piggyback Registration Rights
After the date of this prospectus, in the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other stockholders, the RRA Investors will be entitled to certain piggyback registration rights allowing the RRA Investors to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act, other than with respect to (i) a registration relating solely to the sale of securities to participants in our stock plan, (ii) a registration relating to a transaction covered by Rule 145 under the Securities Act, (iii) any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of registrable securities, or (iv) a registration in which the only stock being registered is common stock upon conversion of debt securities also being registered, the RRA Investors will be entitled to notice of the registration and have the right to include their shares in the registration, subject to limitations that the underwriters may impose on the number of shares included in the offering.
Our obligations to effect demand and piggyback registrations are subject to customary limitations, including certain rights to suspend or delay the effectiveness of any registration effected under the registration rights agreement.
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Some provisions of Delaware law, our amended and restated certificate of incorporation, and our amended and restated bylaws contain or will contain provisions that could make the following transactions more difficult: an acquisition of us by means of a tender offer; an acquisition of us by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions which provide for payment of a premium over the market price for our shares.
These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of the increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
Dual Class Stock
So long as the outstanding shares of our Class B common stock represent a majority of the combined voting power of our then-outstanding Class A common stock and Class B common stock, Mr. Burgess will effectively control all matters submitted to our stockholders for a vote, as well as the overall management and direction of the Company, which will have the effect of delaying, deferring or discouraging another person from acquiring control of our company.
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Stockholder Meetings
Our amended and restated certificate of incorporation provides, prior to the Voting Threshold Date, our stockholders will be able to take action by written consent. From and after the Voting Threshold Date, our stockholders will no longer be able to take action by written consent, and will only be able to take action at an annual or special meeting of our stockholders. Our amended and restated certificate of incorporation further provides that only the chairperson of our board of directors, the chief executive officer, or our board of directors acting pursuant to a resolution adopted by a majority of the whole board of directors will be authorized to call a special meeting of stockholders.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our amended and restated bylaws will establish advance notice procedures with respect to stockholder proposals to be brought before a stockholder meeting and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.
Staggered Board
Our board of directors will be divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders. For more information on the classified board, see “Management — Composition of our Board of Directors.” This system of electing and removing directors may tend to discourage a third-party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors.
Removal of Directors
Our amended and restated certificate of incorporation will provide that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of the total voting power of all of our outstanding voting stock then entitled to vote in the election of directors.
Stockholders Not Entitled to Cumulative Voting
Our amended and restated certificate of incorporation will not permit stockholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they choose, other than any directors that BSIV, the holder of the convertible preferred stock, may be entitled to elect.
Supermajority Approvals
Our amended and restated certificate of incorporation provides that, from and after the Voting Threshold Date, certain amendments to our amended and restated certificate of incorporation will require the approval of two-thirds of the combined voting power of our then-outstanding shares of Class A and Class B common stock, provided that, if such amendments are approved by two-thirds of the whole board of directors, they will only require the approval of a majority of the combined voting power of all the then-outstanding shares of Class A and Class B common stock. In addition, prior to the Voting Threshold Date, our amended and restated bylaws may be amended by the affirmative vote of a majority of the combined voting power of all the then-outstanding shares of Class A and Class B common stock, and after the Voting Threshold Date, the affirmative vote of at least two-thirds of the combined voting power of all the then-outstanding shares of Class A and Class B common stock. These provisions will have the effect of making it more difficult for our stockholders to amend our certificate of incorporation or amended and restated bylaws to remove or modify certain provisions.
Delaware Anti-Takeover Statute
In general, Section 203 of the DGCL prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies.
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Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset, or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. We have expressly elected not to be governed by the “business combination” provisions of Section 203 of the DGCL, until after we are no longer a controlled company. At that time, such election shall be automatically withdrawn and we will thereafter be governed by the “business combination” provisions of Section 203 of the DGCL.
Choice of Forum
Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware (or, if, and only if, the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if, and only if, all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees, or agents to us or our stockholders; (3) any action asserting a claim against the Company or any director or officer of the Company arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws; (4) any action, suit or proceeding as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or (5) any other action asserting a claim against the Company or any director or officer of the Company that is governed by the internal affairs doctrine. The provisions would not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for which the U.S. federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
While courts in Delaware and several other jurisdictions have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action and there can be no assurance that the provisions will be enforced by a court.
Stock Exchange Listing
We intend to apply for the listing of our Class A common stock on the NYSE under the symbol “NP.”
Transfer Agent and Registrar
The transfer agent and registrar for our Class A common stock and Class B common stock is . The transfer agent’s address is , and its telephone number is .
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our Class A common stock, and we cannot predict the effect, if any, that market sales of shares of our Class A common stock or the availability of shares of our Class A common stock for sale will have on the market price of our Class A common stock prevailing from time to time. As described below, only a limited number of Class A common stock currently outstanding will be available for sale immediately after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of substantial amounts of our Class A common stock, including shares issued upon exercise of outstanding options or settlement of outstanding restricted stock, or upon conversion of Class B common stock, in the public market after this offering, or the perception that those sales may occur, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
Upon the completion of this offering, based on the number of shares of Class B common stock outstanding as of , 2025, and assuming (i) the sale of shares of Class A common stock in this offering, (ii) the occurrence of the Class B Stock Exchange as if such exchange had occurred on , 2025, and (iii) the automatic conversion of all 4,185,000 shares of our convertible preferred stock outstanding as of , 2025, into an equal number of shares of Class A common stock immediately prior to the completion of this offering, we will have shares of Class A common stock and shares of Class B common stock outstanding. Of these outstanding shares, all of the shares of Class A common stock sold in this offering will be freely tradable, except that any shares purchased by our affiliates, as that term is defined in Rule 144 under the Securities Act, may only be sold in compliance with the limitations described below.
The remaining outstanding shares of our Class A common stock and our Class B common stock will be deemed restricted securities as defined under Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act, which rules are summarized below. In addition, all of our securityholders have entered into market standoff agreements with us or lock-up agreements with the underwriters under which they agreed, subject to specific exceptions, not to sell any of their stock for at least 180 days following the date of this prospectus. Subject to the provisions of Rule 144 or Rule 701, shares will be available for sale in the public market as follows:
• beginning 181 days after the date of this prospectus, additional shares will become eligible for sale in the public market, of which shares will be held by affiliates and subject to the volume and other restrictions of Rule 144, as described below; and
• the remainder of the shares will be eligible for sale in the public market from time to time thereafter, subject in some cases to the volume and other restrictions of Rule 144, as described below.
Lock-up Agreements and Market Standoff Provisions
We, our selling stockholders, each of our directors and executive officers and other stockholders owning substantially all of our common stock, have agreed that, without the prior written consent of on behalf of the underwriters, we and they will not, subject to limited exceptions, directly or indirectly sell, dispose of or hedge any shares of common stock or any securities convertible into or exchangeable or exercisable for shares of common stock for a period of 180 days after the date of this prospectus. See “Underwriting” for additional information.
In addition to the restrictions contained in the lock-up agreements described above, we have entered into agreements with holders of substantially all of our securities convertible into or exercisable for our common stock that contain market stand-off provisions imposing restrictions on the ability of such security holders to offer, sell or transfer our equity securities for a period of 180 days following the date of this prospectus.
Following the lock-up periods set forth in the agreements described above, and assuming that the representatives of the underwriters do not release any parties from these agreements, all of the shares of our common stock that are restricted securities or are held by our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance with Rule 144 under the Securities Act.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed
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to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the current public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person is entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up agreements and market stand-off provisions described above, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:
• 1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering; or
• The average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information and holding period requirements of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701. Moreover, all Rule 701 shares are subject to lock-up agreements or market standoff provisions as described above and under the section titled “Underwriting” and will not become eligible for sale until the expiration of those agreements.
Registration Statement on Form S-8
We intend to file a registration statement on Form S-8 under the Securities Act to register all of the shares of our Class A common stock and Class B common stock issuable or reserved for issuance under our Pre-IPO 2025 Plan, our 2025 Plan, and our ESPP. We expect to file this registration statement on, or as soon as practicable after, the effective date of this prospectus. However, the shares registered on Form S-8 will not be eligible for resale until expiration of the lock-up agreements and market standoff provisions to which they are subject.
Registration Rights
Pursuant to our registration rights agreement, the certain holders of our Class A common stock (including shares issuable upon the conversion of our outstanding convertible preferred stock immediately prior to the effectiveness of the registration statement of which this prospectus forms a part), or their transferees, will be entitled to certain rights with respect to the registration of the offer and sale of those shares under the Securities Act. See the section titled “Description of Capital Stock — Registration Rights” for a description of these registration rights. If the offer and sale of these shares is registered, the shares will be freely tradable without restriction under the Securities Act, and a large number of shares may be sold into the public market.
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CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR CLASS A COMMON STOCK
The following is a summary of certain material U.S. federal income tax consequences to “non-U.S. holders” (as defined below) relating to the ownership and taxable disposition of our Class A common stock, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Code, U.S. Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as in effect on the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. We have not sought any ruling from the IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.
This discussion does not address the tax considerations arising under the alternative minimum tax, the net investment income tax, the laws of any state, local or non-U.S. jurisdiction, or under U.S. federal gift and estate tax laws. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:
• banks, insurance companies or other financial institutions;
• partnerships or entities or arrangements treated as partnerships or other pass-through entities for U.S. federal income tax purposes (or investors in such entities);
• corporations that accumulate earnings to avoid U.S. federal income tax;
• tax-exempt or governmental organizations or tax-qualified retirement plans;
• real estate investment trusts or regulated investment companies;
• controlled foreign corporations or passive foreign investment companies;
• persons who acquired our Class A common stock pursuant to the exercise of an employee stock option or otherwise as compensation for services;
• brokers or dealers in securities or currencies;
• traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;
• persons that own, or are deemed to own, more than 5% of our Class A common stock;
• certain former citizens or long-term residents of the United States;
• persons who hold our Class A common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction;
• persons required to accelerate the recognition of any item of gross income with respect to our Class A common stock as a result of such income being recognized on an applicable financial statement;
• persons who do not hold our Class A common stock as a capital asset within the meaning of Section 1221 of the Code (generally, for investment purposes); or
• persons deemed to sell our Class A common stock under the constructive sale provisions of the Code.
In addition, if a partnership or entity classified as a partnership for U.S. federal income tax purposes is a beneficial owner of our Class A common stock, the tax treatment of a partner in the partnership or an owner of the entity will depend upon the status of the partner or owner and the activities of the partnership or entity. Accordingly, this discussion does not address U.S. federal income tax considerations applicable to partnerships that hold our Class A common stock, and partners in such partnerships should consult their tax advisors.
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You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and taxable disposition of our Class A common stock arising under the U.S. federal estate or gift tax rules or under the laws of any state, local, non-U.S. or other taxing jurisdiction or under any applicable tax treaty.
Non-U.S. Holder Defined
For purposes of this section, a “non-U.S. holder” is any beneficial owner of our Class A common stock, other than an entity taxable as a partnership for U.S. federal income tax purposes, that is not:
• an individual who is a citizen or resident of the United States for U.S. federal income tax purposes;
• a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state therein or the District of Columbia or otherwise treated as such for U.S. federal income tax purposes;
• a trust that (1) is subject to the primary supervision of a U.S. court and one or more “United States persons,” as defined under the Code, have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person; or
• an estate whose income is subject to U.S. federal income tax regardless of source.
Distributions
If we make a distribution of cash or other property (other than certain pro rata distributions of our common stock) in respect of our Class A common stock, the distribution will be treated as a dividend to the extent it is paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If the amount of a distribution exceeds our current and accumulated earnings and profits, such excess first will be treated as a tax-free return of capital to the extent of the non-U.S. holder’s adjusted tax basis in our Class A common stock, and thereafter will be treated as capital gain. Distributions treated as dividends on our Class A common stock held by a non-U.S. holder generally will be subject to U.S. federal withholding tax at a rate of 30%, or at a lower rate if provided by an applicable income tax treaty and the non-U.S. holder has provided the documentation required to claim benefits under such treaty. Generally, to claim the benefits of an applicable tax treaty, a non-U.S. holder will be required to provide a properly executed IRS Form W-8BEN (or other applicable form).
If, however, a dividend is effectively connected with the conduct of a trade or business in the U.S. by the non-U.S. holder (and, if an applicable tax treaty so provides, is attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the U.S.), the dividend will not be subject to the 30% U.S. federal withholding tax (provided the non-U.S. holder has provided the appropriate documentation, generally an IRS Form W-8ECI, to the withholding agent), but the non-U.S. holder generally will be subject to U.S. federal income tax in respect of the dividend on a net income basis in substantially the same manner as if the non-U.S. holder were a United States person. Dividends received by a non-U.S. holder that is a corporation for U.S. federal income tax purposes and which are effectively connected with the conduct of a U.S. trade or business may also be subject to a branch profits tax at the rate of 30% (or a lower rate if provided by an applicable tax treaty).
Sale of Class A common stock
Subject to the discussion below of FATCA and backup withholding, a non-U.S. holder generally will not be subject to U.S. federal income or withholding tax on any gain realized on the sale or other taxable disposition of our Class A common stock unless:
• such non-U.S. holder is an individual who is present in the U.S. for 183 days or more in the taxable year of such sale or disposition, and certain other conditions are met;
• such gain is effectively connected with the conduct by the non-U.S. holder of a trade or business in the U.S. (and, if an applicable tax treaty so provides, is attributable to a permanent establishment or a fixed base maintained by the non-U.S. holder in the U.S.); or
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• our Class A common stock constitutes a U.S. real property interest by reason of our status as a “United States real property holding corporation” for U.S. federal income tax purposes (a “USRPHC”), at any time within the shorter of the five-year period preceding the disposition or the non-U.S. holder’s holding period for our Class A common stock.
A non-U.S. holder that is an individual and who is present in the U.S. for 183 days or more in the taxable year of such sale or disposition, if certain other conditions are met, will be subject to tax at a gross rate of 30% on the amount by which such non-U.S. holder’s taxable capital gains allocable to U.S. sources, including gain from the sale or other disposition of our Class A common stock, exceed capital losses allocable to U.S. sources, except as otherwise provided in an applicable tax treaty.
Gain realized by a non-U.S. holder that is effectively connected with such non-U.S. holder’s conduct of a trade or business in the U.S. generally will be subject to U.S. federal income tax on a net income basis in substantially the same manner as a United States person (except as provided by an applicable tax treaty). In addition, if such non-U.S. holder is a corporation for U.S. federal income tax purposes, it may also be subject to a branch profits tax at the rate of 30% (or a lower rate if provided by an applicable tax treaty).
Generally, a corporation is a USRPHC if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business (all as determined for U.S. federal income tax purposes). We do not believe that we currently are a USRPHC, however there can be no assurances that we are not now nor will become a USRPHC in the future. If, however, we were a USRPHC during the applicable testing period, as long as our Class A common stock is regularly traded on an established securities market, our Class A common stock will be treated as U.S. real property interests only for a non-U.S. holder who actually or constructively holds (at any time within the shorter of the five-year period preceding the disposition or the non-U.S. holder’s holding period) more than 5% of such Class A common stock.
Backup Withholding and Information Reporting
Generally, we must report annually to the IRS the amount of dividends paid with respect to our Class A common stock to a non-U.S. holder and the amount of tax withheld, if any. A similar report is sent to the non-U.S. holder. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in the non-U.S. holder’s country of residence.
Payments of dividends or of proceeds on the disposition with respect to our Class A common stock made to a non-U.S. holder may be subject to information reporting and backup withholding unless the non-U.S. holder establishes an exemption, for example by properly certifying the non-U.S. holder’s status on a Form W-8BEN or another appropriate form. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that the non-U.S. holder is a United States person.
Backup withholding is not an additional tax; rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.
Foreign Account Tax Compliance Act — FATCA
Under Section 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”), U.S. federal withholding tax of 30% is imposed on certain types of U.S. source “withholdable payments” (including dividends and the gross proceeds from the sale, exchange or other taxable disposition of U.S. stock) to “foreign financial institutions,” which are broadly defined for this purpose, and other non-U.S. entities in connection with the failure to comply with certain certification and information reporting requirements regarding U.S. account holders or owners of such institutions or entities. The obligation to withhold under FATCA applies to any dividends on our Class A common stock. While withholding under FATCA would have applied to gross proceeds from the sale, exchange or other taxable disposition of our Class A common stock and to certain “passthru” payments received with respect to instruments held through foreign financial institutions after the date on which applicable final U.S. Treasury regulations are issued, proposed U.S. Treasury regulations eliminate FATCA withholding on payments of gross
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proceeds entirely and limit FATCA withholding on these “passthru” payments to those payments made two years after the date on which applicable final U.S. Treasury regulations are issued. Taxpayers generally may rely on these proposed U.S. Treasury regulations until final U.S. Treasury regulations are issued. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. holders should consult their own tax advisors regarding the possible implications of FATCA on their investment in our Class A common stock.
The preceding discussion of U.S. federal income tax considerations is for general information only. It is not tax advice. Each prospective investor should consult its own tax advisor regarding the particular U.S. federal, state, local and non-U.S. tax consequences of the sale, exchange or other taxable disposition of our Class A common stock, including the consequences of any proposed change in applicable laws.
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Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and BofA Securities, Inc. are acting as representatives, have severally agreed to purchase, and the selling stockholders have agreed to sell to them, severally, the number of shares of our Class A common stock indicated below:
|
Name |
Number of |
|
|
Morgan Stanley & Co. LLC |
||
|
J.P. Morgan Securities LLC |
||
|
BofA Securities, Inc. |
||
|
BMO Capital Markets Corp. |
||
|
Goldman Sachs & Co. LLC |
||
|
Evercore Group L.L.C. |
||
|
Deutsche Bank Securities Inc. |
||
|
Keefe, Bruyette & Woods, Inc. |
||
|
Mizuho Securities USA LLC |
||
|
Piper Sandler & Co. |
||
|
Raymond James & Associates, Inc. |
||
|
TD Securities (USA) LLC |
||
|
Dowling & Partners Securities LLC |
|
|
|
Total |
|
The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the shares of Class A common stock subject to their acceptance of the shares from the selling stockholders and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of Class A common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of Class A common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below.
The underwriters initially propose to offer part of the shares of Class A common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $ per share under the public offering price. After the initial offering of the shares of Class A common stock, the offering price and other selling terms may from time to time be varied by the representatives.
The selling stockholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to additional shares of Class A common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of Class A common stock offered by this prospectus. To the extent the over-allotment option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of Class A common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of Class A common stock listed next to the names of all underwriters in the preceding table.
The following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to the selling stockholders. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional shares of Class A common stock.
|
Per Share |
Without |
With |
|||||||
|
Public offering price |
$ |
$ |
$ |
||||||
|
Underwriting discount |
$ |
$ |
$ |
||||||
|
Proceeds, before expenses, to the selling stockholders |
$ |
$ |
$ |
||||||
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The expenses of the offering, not including the underwriting discount, are estimated at $ and are payable by us. We have agreed to reimburse the underwriters for certain expenses relating to clearance of this offering with FINRA. The selling stockholders have agreed to reimburse us for certain of our expenses relating to this offering, in an aggregate amount not to exceed 2% of the gross proceeds of this offering to be received by the selling stockholders.
The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of Class A common stock offered by them.
We are applying to list our Class A common stock on the NYSE under the trading symbol “NP.”
We have agreed that, without the prior written consent of at least two of the representatives on behalf of the underwriters, we will not, and will not publicly disclose an intention to, during the period ending 180 days after the date of this prospectus (the “restricted period”) (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Class A common stock (“lock-up securities”) or any securities convertible into or exercisable or exchangeable for lock-up securities or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of lock-up securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of lock-up securities or such other securities, in cash or otherwise or (3) file any registration statement with the Commission relating to the offering of any shares of lock-up securities or any securities convertible into or exercisable or exchangeable for lock-up securities, other than (A) lock-up securities to be sold in this offering, (B) the issuance by us of shares of lock-up securities upon the exercise or settlement of equity awards (including any “net” or “cashless” exercises or settlements) or forfeiture of equity awards granted pursuant to the equity compensation plans described herein, or the conversion of a security outstanding on the date of this prospectus as described therein, (C) facilitating the establishment or modification of a trading plan on behalf of our stockholders, officers or directors pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of lock-up securities, provided that (i) such plan does not provide for the transfer of lock-up securities during the restricted period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made during the restricted period by us regarding the establishment or modification of such plan, such announcement or filing shall include a statement to the effect that no transfer of lock-up securities stock may be made under such plan during the restricted period, (D) grants of options, stock awards, restricted stock or other equity awards and the issuance of lock-up securities or securities convertible into or exercisable for lock-up securities (whether upon the exercise of stock options or otherwise) to our employees, officers, directors, advisors or consultants pursuant to the terms of a plan in effect on the date of this prospectus and as described herein, provided that we will cause each recipient of such grant to be bound by the market standoff provisions that are enforceable by us or execute and deliver to the representatives a signed lock-up agreement substantially in the form of the lock-up agreement entered into by the lock-up party if such recipient has not already delivered one, (E) the issuance by us of shares of lock-up securities upon the conversion or exchange of shares of our Class B common stock, (F) the issuance by us of shares of Class B common stock upon the exercise of stock options or the settlement of restricted stock units (including any “net” or “cashless” exercises or settlements), or the award, if any, of stock options, restricted stock, or restricted stock units in accordance with our equity plans or programs that are outstanding as of the date of this prospectus and as described herein and the form of award agreement thereunder, (G) the exchange or conversion (or other means by which shares of one class or series can become another class or series) of shares of any class or series of our capital stock for shares of any other class or series of our capital stock, in each case as described herein, (H) the filing by us of any registration statement on Form S-8 pursuant to any employee benefit plans, qualified stock option plans or other employee compensation plans, described herein, relating to (i) the resale of equity awards granted or (ii) to register lock-up securities issuable under any such plans, or (I) the offer or issuance or agreement to issue by us of lock-up securities or securities convertible into, exercisable for or which are otherwise exchangeable for or represent the right to receive lock-up securities in connection with an acquisition, merger, joint venture, strategic alliance, commercial or other collaborative relationship or the acquisition or license by us or any of our subsidiaries of the securities, business, property or other assets of another person or entity or pursuant to any employee benefit plan as assumed by us in connection with any such acquisition or transaction, provided that the aggregate number of shares of lock-up securities, securities convertible into, exercisable for or which are otherwise exchangeable for or represent the right to receive lock-up securities (on an as-converted, as-exercised, or as-exchanged basis) that we may sell or issue or agree to sell or issue pursuant to this clause (I) shall not exceed 5.0% of the total number of shares of lock-up
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securities outstanding immediately following the offering and provided further that we shall cause each recipient of such grant to execute and deliver to the representatives a signed lock-up agreement substantially in the form of the lock-up agreement entered into by the lock-up party if such recipient has not already delivered one.
The selling stockholders and all directors and officers and certain of the other holders of our outstanding stock and stock options (such persons or entities, the “lock-up parties”) have agreed that, without the prior written consent of at least two of the representatives on behalf of the underwriters, they will not, and will not publicly disclose an intention to, during the restricted period (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of lock-up securities beneficially owned by them or any other securities so owned convertible into or exercisable or exchangeable for lock-up securities, (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of lock-up securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of lock-up securities or such other securities, in cash or otherwise. The lock-up parties further agreed that the foregoing precluded them from engaging in any hedging or other transaction designed or intended, or which could reasonably be expected to lead to or result in, a sale or disposition of any shares of lock-up securities, or any securities convertible into or exercisable or exchangeable for lock-up securities, even if any such sale or disposition transaction or transactions would be made or executed by or on behalf of someone else.
The restrictions described in the immediately preceding paragraph shall not apply to (a) transactions relating to shares of lock-up securities or other securities acquired in this offering or in open market transactions after the completion of this offering, provided that no filing under Section 16(a) of the Exchange Act shall be voluntarily made during the restricted period in connection with subsequent sales of lock-up securities or other securities acquired in this offering or in such open market transactions and that, if required, any filing under Section 16(a) of the Exchange Act during the restricted period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause (a); (b) transfers of lock-up securities or any security convertible into or exercisable or exchangeable for lock-up securities (i) as a bona fide gift, (ii) for bona fide estate planning purposes, (iii) as a charitable contribution, (iv) to an immediate family member or to any trust for the direct or indirect benefit of the lock-up party or an immediate family member of the lock-up party, (v) to any corporation, partnership, limited liability company, investment fund, trust or other entity controlled or managed, or under common control or management by, the lock-up party, (vi) upon death or by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or an immediate family member of the lock-up party, or (vii) if the lock-up party is a trust, to any beneficiary of the lock-up party or the estate of any such beneficiary; (c) distributions, transfers or dispositions of shares of lock-up securities or any security convertible into or exercisable or exchangeable for lock-up securities to current or former general or limited partners, managers or members, stockholders, other equityholders or direct or indirect affiliates of the lock-up party or the estates of any lock-up party; provided that in the case of any donation, transfer or distribution pursuant to clause (b) or (c), (i) each donee, transferee, or distributee shall sign and deliver a lock-up agreement substantially in the form of the lock-up agreement entered into by the lock-up party and (ii) no filing under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of shares of lock-up securities, shall be voluntarily made during the restricted period and that, if required, any filing required under Section 16(a) of the Exchange Act during the restricted period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in clause (b) or (c); (d) any sales of lock-up securities by the lock-up party to the underwriters; (e) the transfer to us of lock-up securities or any securities convertible into or exercisable or exchangeable for lock-up securities to satisfy any tax, including estimated tax, remittance, or other payment obligations of the lock-up party arising in connection with a vesting event of the our securities, upon the settlement of restricted stock units or the payment due for the exercise of options (including a transfer to us for the “net” or “cashless” exercise of such securities) or other rights to purchase our securities, in all such cases pursuant to equity awards granted under a stock incentive plan or other equity award plan described herein; provided that any remaining shares of lock-up securities received upon such vesting, settlement or exercise shall be subject to the terms of the lock-up agreement of such lock-up party; and provided further, that no public disclosure or filing shall be made voluntarily during the restricted period nor shall be required within 30 days after the date of this prospectus, and after such 30th day, any filing under Section 16(a) of the Exchange Act during the restricted period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause (e); (f) the establishment or modification of a trading plan on behalf of one of our stockholders, officers or directors pursuant to Rule 10b5-1 under the Exchange Act for the transfer of lock-up securities, provided that (i) such plan does not provide for the transfer of lock-up securities during the restricted
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period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made during the restricted period by or on behalf of the lock-up party or us regarding the establishment or modification of such plan, such announcement or filing shall include a statement to the effect that no transfer of lock-up securities may be made under such plan during the restricted period; (g) the transfer of lock-up securities or any security convertible into or exercisable or exchangeable for lock-up securities that occurs by operation of law pursuant to a qualified domestic order or in connection with a divorce settlement, divorce decree, separation agreement or other court order, provided that (i) the transferee shall sign and deliver a lock-up agreement substantially in the form of the lock-up agreement entered into by the lock-up party and (ii) any filing required under Section 16(a) of the Exchange Act during the restricted period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause (g); (h) certain permitted transfers of shares of Class B common stock or the conversion of Class B common stock into Class A common stock as described herein, provided that, in each case, (i) such shares received upon conversion shall continue to be subject to the restrictions on transfer set forth in the lock-up agreement of such lock-up party; and (ii) any filing required under Section 16(a) of the Exchange Act during the restricted period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause (h); (i) the transfer of lock-up securities or any security convertible into or exercisable or exchangeable for lock-up securities pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by our board of directors, made to all holders of Class A common stock involving a change of control, provided that, in the event that the tender offer, merger, consolidation or other such transaction is not completed, the lock-up securities owned by the lock-up party shall remain subject to the restrictions contained in the lock-up agreement of such lock-up party; (j) transfers in “sell to cover” or similar open market transactions to satisfy any exercise price or tax withholding obligations as a result of the exercise, vesting and/or settlement of Company equity awards (including options) held by the lock-up party and issued pursuant to a plan or arrangement described herein, provided that, any such lock-up securities retained by the lock-up party after giving effect to this clause (j) shall be subject to the terms of the lock-up agreement of such lock-up party, and provided further, that no public disclosure or filing shall be made voluntarily during the restricted period nor shall be required within 30 days after the date of this prospectus, and after such 30th day, any filing under Section 16(a) of the Exchange Act during the restricted period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause (j), (k) for certain stock splits, transfers to us in connection with any other exchange, conversion or reclassification (or other means by which shares of any class or series can become another class or series) of shares of any class or series of our capital stock for shares of any other class or series of shares of our capital stock as described herein, including pursuant to the Class B Exchange Agreement and the Class B Equity Exchange Agreement, or as required pursuant to our amended and restated certificate of incorporation, to be effective upon the completion of this offering (including as a result of any automatic conversion of shares of Class B common stock to shares of lock-up securities pursuant to the provisions of our amended and restated certificate of incorporation); provided that any such shares of our capital stock received upon such exchange, conversion or reclassification shall be subject to terms of the lock-up agreement of such lock-up party; or (l) transactions as permitted with the prior written consent of at least two of the representatives.
In order to facilitate the offering of the Class A common stock, the underwriters may engage in transactions that stabilize, maintain, or otherwise affect the price of the Class A common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Class A common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, shares of Class A common stock in the open market to stabilize the price of the Class A common stock. These activities may raise or maintain the market price of the Class A common stock above independent market levels or prevent or retard a decline in the market price of the Class A common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.
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We, the selling stockholders and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares of Class A common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses. In particular, some of the underwriters or their affiliates also serve as the agent or lenders under our 2025 Amended and Restated Credit Agreement and have received, and may in the future receive, customary fees and commissions with respect to their roles thereunder.
In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.
Pricing of the Offering
Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.
Directed Share Program
At our request, the underwriters have reserved % of the shares of Class A common stock to be offered by the selling stockholders under this prospectus for sale, at the initial public offering price, to directors, officers, employees, business associates and related persons of Neptune. Except for any shares acquired by our directors and officers, shares purchased pursuant to the directed share program will not be subject to lock-up agreements with the underwriters. The number of shares of Class A common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus.
Other than the underwriting discount described on the front cover of this prospectus, the underwriters will not be entitled to any commission with respect to shares of Class A common stock sold pursuant to the directed share program. We will agree to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with sales of the shares of Class A common stock reserved for the directed share program. Morgan Stanley & Co. LLC, an underwriter in this offering, will administer our directed share program.
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Selling Restrictions
European Economic Area
In relation to each Member State of the European Economic Area (each, a “Member State”), no shares of our Class A common stock have been offered or will be offered pursuant to the offering to the public in that Member State prior to the publication of a prospectus in relation to our Class A common stock which has been approved by the competent authority in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that offers of our Class A common stock may be made to the public in that Member State at any time under the following exemptions under the Prospectus Regulation:
(a) to any legal entity which is a qualified investor as defined in the Prospectus Regulation;
(b) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior consent of the representatives; or
(c) in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of shares shall require us or any of the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation, and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the representatives and us that it is a “qualified investor” within the meaning of Article 2(e) in the Prospectus Regulation.
In the case of any shares being offered to a financial intermediary as that term is used in Article 5 of the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged, and agreed that the shares acquired by it in the offer have not been acquired on a nondiscretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Member State to qualified investors as so defined or in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares of our Class A common stock to be offered so as to enable an investor to decide to purchase or subscribe for any shares of our Class A common stock, the expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended).
United Kingdom
No shares of our Class A common stock have been offered or will be offered pursuant to the offering to the public in the UK prior to the publication of a prospectus in relation to the shares of Class A common stock which (i) has been approved by the Financial Conduct Authority or (ii) is to be treated as if it had been approved by the Financial Conduct Authority in accordance with the transitional provisions in Article 74 (transitional provisions) of the Prospectus Amendment etc. (EU Exit) Regulations 2019/1234, except that shares of our Class A common stock may be offered to the public in the UK at any time:
(a) to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation;
(b) to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of underwriters for any such offer; or
(c) in any other circumstances falling within Section 86 of the Financial Services and Markets Act 2000 (“FSMA”),
provided that no such offer of shares of our Class A common stock shall require us or any underwriter to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public” in relation to the shares of our Class A common stock in the UK means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our Class A common stock to be offered so as to
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enable an investor to decide to purchase or subscribe for any shares of our Class A common stock and the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended by the European Union (Withdrawal Agreement) Act 2020.
In addition, in the UK, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Regulation) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”) or otherwise in circumstances which have not resulted and will not result in an offer to the public of the shares of our Class A common stock in the UK within the meaning of the FSMA.
Any person in the UK that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the UK, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons.
Japan
No registration pursuant to Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) (the “FIEL”), has been made or will be made with respect to the solicitation of the application for the acquisition of the shares of Class A common stock.
Accordingly, the shares of Class A common stock have not been, directly or indirectly, offered or sold and will not be, directly or indirectly, offered or sold in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements, and otherwise in compliance with, the FIEL and the other applicable laws and regulations of Japan.
For Qualified Institutional Investors
Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the shares of Class A common stock constitutes either a “QII only private placement” or a “QII only secondary distribution” (each as described in Paragraph 1, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the shares of Class A common stock. The shares of Class A common stock may only be transferred to QIIs.
For Non-QII Investors
Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the shares of Class A common stock constitutes either a “small number private placement” or a “small number private secondary distribution” (each as is described in Paragraph 4, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the shares of Class A common stock. The shares of Class A common stock may only be transferred en bloc without subdivision to a single investor.
Brazil
The offer and sale of our shares of Class A common stock has not been, and will not be, registered (or exempted from registration) with the Brazilian securities commission, Comissão de Valores Mobiliários (“CVM”), and, therefore, will not be carried out by any means that would constitute a public offering in Brazil under CVM resolution No. 160, dated July 13, 2022, as amended, or unauthorized distribution under Brazilian laws and regulations. The shares of our Class A common stock will be authorized for trading on organized non-Brazilian securities markets and may only be offered to Brazilian professional investors (as defined by the applicable CVM regulation), who may only acquire our shares of Class A common stock through a non-Brazilian account, with settlement outside Brazil in non-Brazilian currency. The trading of these securities on regulated securities markets in Brazil is prohibited.
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Switzerland
The shares of Class A common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland.
This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares of our Class A common stock or the offering may be publicly distributed or otherwise made publicly available in Switzerland. Neither this document nor any other offering or marketing material relating to the offering, us, or the shares of our Class A common stock have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of our Class A common stock will not be supervised by, the Swiss Financial Market Supervisory Authority, and the offer of Class A common stock has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares of our Class A common stock.
Canada
The shares of Class A common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares of Class A common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Hong Kong
Shares of our Class A common stock may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), and no advertisement, invitation or document relating to shares of our Class A common stock may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares of our Class A common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares of our Class A common stock may not be circulated or distributed, nor may the shares of
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Class A common stock be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where shares of Class A common stock are subscribed or purchased under Section 275 by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities based derivatives contracts (each as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable within six months after that corporation or that trust has acquired shares of Class A common stock under Section 275 of the SFA except:
(1) to an institutional investor or to a relevant person, or to any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA;
(2) where no consideration is or will be given for the transfer;
(3) where the transfer is by operation of law;
(4) as specified in Section 276(7) of the SFA; or
(5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities based Derivatives Contracts) Regulation 2018.
Solely for purposes of the notification requirements under Section 309B(1)(c) of the SFA, we have determined, and hereby notify all relevant persons, that the shares are “prescribed capital markets products” (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001(the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
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This prospectus contains general information only and does not take into account the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate for their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (the “DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares of Class A common stock to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
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Orrick, Herrington & Sutcliffe LLP, San Francisco, California will pass upon the validity of the shares of our Class A common stock offered by this prospectus. Certain legal matters will be passed upon for the underwriters by Davis Polk & Wardwell LLP, New York, New York.
On February 12, 2025, our board of directors approved the engagement of PricewaterhouseCoopers LLP as our independent registered public accounting firm to audit our consolidated financial statements for the year ended December 31, 2024, and to re-audit our consolidated financial statements for the year ended December 31, 2023, which had previously been audited by RSM US LLP, our prior independent auditor. We were not an SEC filer at the time of RSM US LLP’s replacement by PricewaterhouseCoopers LLP. The audited financial statements included in this prospectus for the years ended December 31, 2023 and 2024 have been audited by PricewaterhouseCoopers LLP.
During the year ended December 31, 2023, and through February 12, 2025, there were no disagreements with RSM US LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of RSM US LLP, would have caused them to make reference thereto in their report on our financial statements for the year ended December 31, 2023. The report of RSM US LLP on our financial statements for the year ended December 31, 2023, did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principle.
During the year ended December 31, 2023, and through February 12, 2025, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.
During the two most recent years and the subsequent period preceding the engagement of PricewaterhouseCoopers LLP, the Company did not consult with PricewaterhouseCoopers LLP with respect to: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the consolidated financial statements, and no written report or oral advice of PricewaterhouseCoopers LLP was provided that was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue; or (ii) any matter that was either the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K), or any “reportable event” (as defined in Item 304(a)(1)(v) of Regulation S-K).
We provided RSM US LLP with a copy of the foregoing disclosure and requested that RSM US LLP provide a letter addressed to the SEC stating whether it agrees with the above facts and, if not, stating the respects in which it does not agree. A copy of RSM US LLP’s letter, dated September 2, 2025, provided in response to that request, is filed as Exhibit 16.1 to the Registration Statement of which this prospectus forms a part.
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The financial statements as of December 31, 2023, and December 31, 2024, and for each of the two years in the period ended December 31, 2024, included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of Class A common stock covered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our Class A common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an Internet website that contains reports, proxy statements, and other information about issuers like us that file electronically with the SEC. The address of that website is www.sec.gov.
As a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements, and other information with the SEC. These periodic reports, proxy statements, and other information will be available for inspection and copying at the website of the SEC referred to above. We also maintain a website at www.neptuneflood.com. Upon the effectiveness of the registration statement of which this prospectus forms a part, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
164
Neptune Insurance Holdings Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page |
||
|
Unaudited Condensed Consolidated Financial Statements |
||
|
Condensed Consolidated Balance Sheets as of December 31, 2024, and June 30, 2025 |
F-2 |
|
|
Condensed Consolidated Statements of Income for the six months ended June 30, 2024, and 2025 |
F-3 |
|
|
F-4 |
||
|
Condensed Consolidated Statements of Cash Flows for six months ended June 30, 2024, and 2025 |
F-5 |
|
|
F-6 |
||
|
F-17 |
||
|
Audited Consolidated Financial Statements |
||
|
Consolidated Balance Sheets as of December 31, 2023, and 2024 |
F-18 |
|
|
Consolidated Statements of Income for the years ended December 31, 2023, and 2024 |
F-19 |
|
|
F-20 |
||
|
Consolidated Statements of Cash Flows for the years ended December 31, 2023, and 2024 |
F-21 |
|
|
F-22 |
F-1
Neptune Insurance Holdings Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2024, and June 30, 2025
(In thousands, except share and per share data)
(Unaudited)
|
December 31, |
June 30, |
|||||||
|
Assets |
|
|
|
|
||||
|
Current assets: |
|
|
|
|
||||
|
Cash and cash equivalents |
$ |
7,094 |
|
$ |
11,697 |
|
||
|
Fiduciary cash |
|
20,971 |
|
|
46,755 |
|
||
|
Fiduciary receivable |
|
4,096 |
|
|
4,927 |
|
||
|
Commissions and fees receivable |
|
2,612 |
|
|
3,204 |
|
||
|
Prepaid expenses and other current assets |
|
452 |
|
|
603 |
|
||
|
Income tax receivable |
|
— |
|
|
705 |
|
||
|
Total current assets |
|
35,225 |
|
|
67,891 |
|
||
|
|
|
|
|
|||||
|
Intangible assets, net |
|
476 |
|
|
441 |
|
||
|
Internally developed software, net |
|
5,756 |
|
|
5,889 |
|
||
|
Goodwill |
|
3,793 |
|
|
3,793 |
|
||
|
Deferred tax assets |
|
2,803 |
|
|
2,818 |
|
||
|
Deferred financing asset |
|
99 |
|
|
115 |
|
||
|
Total assets |
$ |
48,152 |
|
|
80,947 |
|
||
|
|
|
|
|
|||||
|
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit |
|
|
|
|
||||
|
Current liabilities: |
|
|
|
|
||||
|
Accounts payable |
|
7,165 |
|
|
8,539 |
|
||
|
Commissions payable |
|
2,528 |
|
|
4,866 |
|
||
|
Insurance company payables |
|
13,257 |
|
|
24,122 |
|
||
|
Income tax payable |
|
4,781 |
|
|
— |
|
||
|
Accrued expenses |
|
475 |
|
|
2,230 |
|
||
|
Premium deposits |
|
11,810 |
|
|
27,560 |
|
||
|
Current portion of debt |
|
8,550 |
|
|
15,050 |
|
||
|
Total current liabilities |
$ |
48,566 |
|
$ |
82,367 |
|
||
|
|
|
|
|
|||||
|
Debt, less current portion |
|
125,101 |
|
|
277,349 |
|
||
|
Total liabilities |
$ |
173,667 |
|
$ |
359,716 |
|
||
|
|
|
|
|
|||||
|
Commitments and contingencies (Note 11) |
|
|
|
|
||||
|
|
|
|
|
|||||
|
Redeemable, convertible preferred stock, $0.00001 par value, 5% cumulative dividend; 4,185,000 shares authorized, issued and outstanding at December 31, 2024, and June 30, 2025 (liquidation preference of $255,829) |
|
240,473 |
|
|
247,322 |
|
||
|
|
|
|
|
|||||
|
Stockholders’ deficit: |
|
|
|
|
||||
|
Common stock, $0.00001 par value, 15,430,000 and 15,430,000 shares authorized; 9,335,000 and 9,335,000 shares issued and outstanding at December 31, 2024, and June 30, 2025, respectively |
|
— |
|
|
— |
|
||
|
Accumulated deficit |
|
(366,325 |
) |
|
(526,615 |
) |
||
|
Additional paid-in capital |
|
337 |
|
|
524 |
|
||
|
Total stockholders’ deficit |
|
(365,988 |
) |
|
(526,091 |
) |
||
|
Total liabilities, redeemable, convertible preferred stock, and stockholders’ deficit |
$ |
48,152 |
|
$ |
80,947 |
|
||
See notes to condensed consolidated financial statements.
F-2
Neptune Insurance Holdings Inc. and Subsidiaries
Condensed Consolidated Statements of Income
For the six months ended June 30, 2024, and 2025
(In thousands, except share and per share data)
(Unaudited)
|
Six Months ended |
||||||||
|
2024 |
2025 |
|||||||
|
Revenues: |
|
|
|
|
||||
|
Commissions and fees |
$ |
53,976 |
|
$ |
71,419 |
|
||
|
|
|
|
|
|||||
|
Operating expenses: |
|
|
|
|
||||
|
Agent commissions |
|
16,157 |
|
|
21,676 |
|
||
|
Employee compensation and benefits |
|
2,418 |
|
|
2,933 |
|
||
|
General and administrative |
|
3,729 |
|
|
8,107 |
|
||
|
Amortization expense |
|
1,425 |
|
|
1,786 |
|
||
|
Total operating expenses |
|
23,729 |
|
|
34,502 |
|
||
|
|
|
|
|
|||||
|
Income from operations |
|
30,247 |
|
|
36,917 |
|
||
|
|
|
|
|
|||||
|
Other income (expense): |
|
|
|
|
||||
|
Interest income |
|
423 |
|
|
416 |
|
||
|
Interest expense |
|
(10,632 |
) |
|
(8,269 |
) |
||
|
Loss on extinguishment of debt |
|
(5,426 |
) |
|
— |
|
||
|
Income before income tax expense |
|
14,612 |
|
|
29,064 |
|
||
|
|
|
|
|
|||||
|
Income tax expense |
|
3,725 |
|
|
7,505 |
|
||
|
Net income |
$ |
10,887 |
|
$ |
21,559 |
|
||
|
|
|
|
|
|||||
|
Accretion adjustment to redeemable preferred stock |
|
(6,507 |
) |
|
(6,849 |
) |
||
|
Allocation to participating preferred stock |
|
(1,356 |
) |
|
— |
|
||
|
Cash dividend paid on redeemable preferred stock |
|
— |
|
|
(54,170 |
) |
||
|
Net (loss) income available to common stockholders |
$ |
3,024 |
|
$ |
(39,460 |
) |
||
|
|
|
|
|
|||||
|
Net (loss) income per share of common stock: |
|
|
|
|
||||
|
Basic |
$ |
0.32 |
|
$ |
(4.23 |
) |
||
|
Diluted |
$ |
0.32 |
|
$ |
(4.23 |
) |
||
|
Weighted average shares of common stock outstanding: |
|
|
|
|
||||
|
Basic and diluted |
|
9,335,000 |
|
|
9,335,000 |
|
||
See notes to condensed consolidated financial statements.
F-3
Neptune Insurance Holdings Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Redeemable, Convertible Preferred Stock and Stockholders’ Deficit
For the six months ended June 30, 2024, and 2025
(In thousands)
(Unaudited)
|
Stockholders’ Deficit |
|||||||||||||||||||||
|
Redeemable Convertible |
Common Stock |
Additional |
Accumulated |
Total |
|||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||
|
Balance, at December 31, 2024 |
4,185 |
$ |
240,473 |
9,335 |
$ |
— |
$ |
337 |
$ |
(366,325 |
) |
|
(365,988 |
) |
|||||||
|
Cash dividend paid |
— |
|
— |
— |
|
— |
|
— |
|
(175,000 |
) |
|
(175,000 |
) |
|||||||
|
Share-based compensation |
— |
|
— |
— |
|
— |
|
187 |
|
— |
|
|
187 |
|
|||||||
|
Accretion of redeemable, convertible preferred stock |
— |
|
6,849 |
— |
|
— |
|
— |
|
(6,849 |
) |
|
(6,849 |
) |
|||||||
|
Net income |
— |
|
— |
— |
|
— |
|
— |
|
21,559 |
|
|
21,559 |
|
|||||||
|
Balance at June 30, 2025 |
4,185 |
$ |
247,322 |
9,335 |
$ |
— |
$ |
524 |
$ |
(526,615 |
) |
$ |
(526,091 |
) |
|||||||
|
Balance, at December 31, 2023 |
4,185 |
$ |
227,199 |
9,335 |
$ |
— |
$ |
41 |
$ |
(387,643 |
) |
$ |
(387,602 |
) |
|||||||
|
Accretion of redeemable, convertible preferred stock |
— |
|
6,507 |
— |
|
— |
|
— |
|
(6,507 |
) |
|
(6,507 |
) |
|||||||
|
Share-based compensation |
— |
|
— |
— |
|
— |
|
142 |
|
— |
|
|
142 |
|
|||||||
|
Net income |
— |
|
— |
— |
|
— |
|
— |
|
10,887 |
|
|
10,887 |
|
|||||||
|
Balance at June 30, 2024 |
4,185 |
$ |
233,706 |
9,335 |
$ |
— |
$ |
183 |
$ |
(383,263 |
) |
$ |
(383,080 |
) |
|||||||
See notes to condensed consolidated financial statements.
F-4
Neptune Insurance Holdings Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2024, and 2025
(In thousands)
(Unaudited)
|
Six months ended |
||||||||
|
2024 |
2025 |
|||||||
|
Cash flows from operating activities: |
|
|
|
|
||||
|
Net income |
$ |
10,887 |
|
$ |
21,559 |
|
||
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
||||
|
Amortization expense |
|
1,424 |
|
|
1,786 |
|
||
|
Amortization of deferred financing costs |
|
365 |
|
|
237 |
|
||
|
Loss on extinguishment of debt |
|
5,426 |
|
|
— |
|
||
|
Share-based compensation |
|
142 |
|
|
187 |
|
||
|
Deferred income taxes |
|
(308 |
) |
|
(15 |
) |
||
|
(Increase) decrease in operating assets: |
|
|
|
|
||||
|
Commissions and fees receivable |
|
(205 |
) |
|
(592 |
) |
||
|
Income tax receivable |
|
(138 |
) |
|
(705 |
) |
||
|
Prepaid expenses and other current assets |
|
133 |
|
|
(151 |
) |
||
|
Deferred financing asset |
|
(111 |
) |
|
(37 |
) |
||
|
Increase (decrease) in operating liabilities: |
|
|
|
|
||||
|
Accounts payable |
|
317 |
|
|
1,374 |
|
||
|
Commissions payable |
|
1,429 |
|
|
2,338 |
|
||
|
Income tax payable |
|
(90 |
) |
|
(4,781 |
) |
||
|
Accrued expenses |
|
1,000 |
|
|
1,764 |
|
||
|
Net cash provided by operating activities |
|
20,271 |
|
|
22,964 |
|
||
|
|
|
|
|
|||||
|
Cash flows from investing activities: |
|
|
|
|
||||
|
Internal developed software |
|
(1,724 |
) |
|
(1,884 |
) |
||
|
Net cash used in investing activities |
|
(1,724 |
) |
|
(1,884 |
) |
||
|
|
|
|
|
|||||
|
Cash flows from financing activities: |
|
|
|
|
||||
|
Change in fiduciary receivables |
|
(1,241 |
) |
|
(831 |
) |
||
|
Change in fiduciary liabilities |
|
16,071 |
|
|
26,615 |
|
||
|
Repayments of 2023 Term Loan |
|
(178,525 |
) |
|
— |
|
||
|
Proceeds from 2024 Term Loan |
|
171,000 |
|
|
— |
|
||
|
Repayments of 2024 Term Loan |
|
(1,000 |
) |
|
(135,000 |
) |
||
|
Proceeds from 2025 Term Loan |
|
— |
|
|
301,000 |
|
||
|
Repayments of 2025 Term Loan |
|
— |
|
|
(7,000 |
) |
||
|
Payment of deferred financing fees and prepayment penalty |
|
(3,726 |
) |
|
(477 |
) |
||
|
Cash dividend paid |
|
— |
|
|
(175,000 |
) |
||
|
Net cash provided by financing activities |
|
2,579 |
|
|
9,307 |
|
||
|
|
|
|
|
|||||
|
Net increase in cash and cash equivalents and fiduciary cash |
|
21,126 |
|
|
30,387 |
|
||
|
|
|
|
|
|||||
|
Cash and cash equivalents and fiduciary cash: |
|
|
|
|
||||
|
Beginning of year |
|
24,320 |
|
|
28,065 |
|
||
|
End of year |
$ |
45,446 |
|
$ |
58,452 |
|
||
|
|
|
|
|
|||||
|
Cash and cash equivalents |
$ |
14,429 |
|
$ |
11,697 |
|
||
|
Fiduciary cash |
|
31,017 |
|
|
46,755 |
|
||
|
Total cash and cash equivalents and fiduciary cash |
$ |
45,446 |
|
$ |
58,452 |
|
||
See notes to condensed consolidated financial statements.
F-5
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Nature of Business and Basis of Presentation
Neptune Insurance Holdings Inc. (“Neptune Holdings” or the “Company”) was incorporated in Delaware on March 20, 2025, to serve as the holding company for Neptune Flood Incorporated (“Neptune Flood”). Neptune Flood, incorporated in Delaware on February 10, 2017, is an insurance agency engaged in the business of selling residential and commercial flood insurance policies on behalf of insurance carrier partners throughout the United States.
On April 10, 2025, Neptune Holdings completed a corporate restructuring through a reverse triangular merger (the “Reorganization”) to implement a holding company structure. In connection with the Reorganization, Neptune Insurance Merger Sub Inc. (“Merger Sub”), a wholly-owned subsidiary of Neptune Holdings, merged with and into Neptune Flood, with Neptune Flood continuing as the surviving entity. Each issued and outstanding share of common and preferred stock of Neptune Flood was converted into an equivalent share of common and preferred stock of Neptune Holdings. The outstanding shares of Neptune Holdings previously owned by Neptune Flood were canceled and retired. As a result, Neptune Holdings became the parent holding company, and Neptune Flood became its wholly-owned operating subsidiary. In connection with the Reorganization, the Company filed an amendment to its Certificate of Incorporation, effective April 10, 2025, which did not include any material changes other than those necessary to give effect to the new holding company structure. In connection with the Reorganization, Neptune Holdings assumed the Amended and Restated 2019 Stock Plan and amended and restated it in its entirety. The Amended and Restated 2019 Stock Plan, as so amended and restated in connection with the Reorganization, shall be referred to as the Pre-IPO 2025 Plan. Neptune Holdings also assumed Neptune Flood’s obligations under the Pre-IPO Stockholders Agreement that was entered into in connection with the convertible preferred stock financing of Neptune Flood in May 2023 as well as certain common stock and restricted stock purchase agreements and certain indemnification agreements. The assumption of these agreements by Neptune Holdings was administrative in nature and did not result in any changes to the terms, conditions, or fair value of the underlying equity awards or shares.
The Reorganization was accounted for as a combination of entities under common control in accordance with subsections of Accounting Standards Codification (“ASC”) Topic 805-50, Business Combinations (“ASC 805-50”). Consequently, Neptune Flood was contributed to Neptune Holdings and the Reorganization was recorded at historical carrying amounts and the Company’s Consolidated Financial Statements prior to the Reorganization have been adjusted to reflect the retrospective combination of the entities for all periods presented.
Basis of Presentation: The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and related notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of recurring accruals, considered necessary for fair statement have been included. The accompanying balance sheet for the year ended December 31, 2024, was derived from audited financial statements, but does not include all disclosures required by GAAP. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2024. The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The condensed consolidated financial statements are presented in US Dollars. All amounts are presented in thousands, except per share data and where otherwise noted.
Principles of Consolidation: The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany account balances and transactions have been eliminated in the condensed consolidated financial statements.
F-6
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Nature of Business and Basis of Presentation (cont.)
Use of Estimates: The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates, judgments and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. The Company’s most significant estimates and judgments involve the valuation of share-based compensation, including the fair value of common stock, accounting for capitalized internal-use software, including the related estimated useful life, as well as the estimates for policy cancellations.
Note 2. Significant Accounting Policies
Revenue Recognition: The Company recognizes revenue for the transfer of such promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those products or services. Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when or as the transfer of control of the underlying performance obligations occurs. ASC 606 provides a five-step model for recognizing revenue from contracts with customers as follows:
• Identify the contract with a customer
• Identify the performance obligations in the contract
• Determine the transaction price
• Allocate the transaction price to the performance obligations in the contract
• Recognize revenue when or as the performance obligations are satisfied
The Company recognizes revenues under ASC 606 and associated costs under ASC Topic 340, Incremental Costs to Obtain a Contract. Refer to Note 3 - Revenue to the condensed consolidated financial statements for additional details.
Fiduciary Cash and Fiduciary Receivable: In its capacity as a managing general agency (“MGA”), the Company typically collects premiums from insureds and, after deducting the authorized commissions, remits the net premiums to the appropriate insurance company or companies. Accordingly, premiums receivable from insureds are reported as fiduciary receivable and premiums payable to insurance companies are reported as insurance company payables in the accompanying condensed consolidated balance sheets. Unremitted net insurance premiums are held in a fiduciary capacity until the Company disburses them. Net insurance premiums payable to insurance companies together with premium deposits received from customers are held as fiduciary cash on the accompanying condensed consolidated balance sheets. Insurance company payables together with premium deposits are considered fiduciary liabilities. Cash and cash equivalents held in excess of the amount required to meet the Company’s fiduciary obligations are recognized as cash and cash equivalents on the condensed consolidated balance sheets.
Commissions and Fees Receivable: Commissions receivable reflect commissions due from insurance carrier partners. Fees receivable represent fees due from policyholders.
The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for expected credit losses, the Company considers historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considers customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. The allowance for expected credit losses is not material as of December 31, 2024, and June 30, 2025. Non-payments are accrued for as part of the Company’s estimate for policy cancellations.
F-7
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 2. Significant Accounting Policies (cont.)
Redeemable, Convertible Preferred Stock: The Company applies ASC Topic 480, Distinguishing Liabilities from Equity, when determining the classification of preferred stock. The Company classifies instruments that are conditionally redeemable for cash or other assets outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer.
The Company classifies redeemable, convertible preferred stock (“Redeemable Preferred Stock”) as temporary equity on the accompanying consolidated balance sheets as it is redeemable solely on the passage of time or upon an event outside the control of the Company. The Company accretes the changes in the redemption value over the period from the original issuance date until the earliest probable redemption date using the interest method. Changes in the redemption value are considered to be changes in accounting estimates.
Earnings Per Share: Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. The Company’s Redeemable Preferred Stock is classified as temporary equity and is considered probable of becoming redeemable. Additionally, Redeemable Preferred Stock represents participating securities, as holders of the Preferred Stock participate in dividends with holders of common stock on a pro rata basis. Accordingly, the Company used the two-class method of computing basic and diluted earnings per share for common stock. Under this method, net income applicable to holders of common stock is first reduced by the amount of accretion adjustment to the Redeemable Preferred Stock in the current period, and remaining undistributed earnings is then allocated on a pro rata basis to the holders of common stock and Redeemable Preferred Stock to the extent that each class may share income for the period; whereas undistributed net loss is allocated to common stock only because holders of Redeemable Preferred Stock are not contractually obligated to share the loss.
The Company takes a two-step approach to compute the diluted earnings per share, by first applying the treasury stock method and if-converted method, and then the two-class method. The dilutive earnings per share are computed using the more dilutive approach. See Note 10 — Earnings Per Share for additional information about per share data.
Recent Accounting Pronouncements Not Yet Adopted:
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, ASC Topic 740, Income Taxes — Improvements to Income Tax Disclosures. This standard requires the Company to provide further disaggregated income tax disclosures for specific categories on the effective tax rate reconciliation, as well as additional information about federal, state/local and foreign income taxes. The standard also requires the Company to annually disclose its income taxes paid (net of refunds received), disaggregated by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be applied on a prospective basis, although optional retrospective application is permitted. The Company is currently evaluating the impact this guidance will have on its financial statement disclosures.
Note 3. Revenue
The Company’s revenue is derived from the sale of insurance policies and is primarily comprised of commission income and fee income.
Commission Income
The largest component of the Company’s revenue is commission income from the placement of insurance contracts between insurance carriers and the policyholders who acquire property insurance policies. These commissions are established by the carrier agreement between the Company and the insurance carrier partner and are calculated as a negotiated percentage of premiums for the underlying insurance contract. Commission rates and terms vary across insurance carriers. The Company’s performance obligation under its agreements with insurance
F-8
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 3. Revenue (cont.)
carrier partners is selecting, pricing, and placing policyholders’ insurance contracts on their behalf. Each underlying insurance contract is a separate and distinct contract between the policyholder and the insurance carrier partner. The Company collects the full premium for the policy from the policyholder at inception, then remits that premium, net of the commission owed to the Company, to the insurance carrier partner. Commission income is recognized at a point in time upon the effective date of bound insurance coverage, at which point the performance obligation has been met as no performance obligation exists after coverage is bound.
Each policyholder’s insurance contract is for a period of one year and can only be canceled prior to expiration for a limited set of reasons, most often in conjunction with the sale of the underlying insured property. Renewal commissions are recognized at a point in time upon the effective date of the renewal policy, at which point the performance obligation has been met as the Company has no further performance obligations for that renewal policy term.
The transaction price is the total commission the Company expects to receive from the insurance carrier partner for the current term of the policy. The transaction date is determined by the effective date of the insurance policy. Policies are subject to cancellation at the discretion of the insured, and such a cancellation would result in the Company’s commission being limited to the period that the policy was in effect. The Company estimates any expected variable consideration, or cancellations, based on historical information, and records a corresponding deduction in revenue at the time revenue is recognized. The Company bases its estimates on historical cancellation experience by policy type and tenure and adjusts for any known trends or events. The estimation period typically covers the allowable cancellation period. This variable consideration is recognized to the extent that it is probable there will not be a significant reversal of revenue.
The Company also earns small amounts of contingent income from insurance carrier partners in the form of a profit-sharing commission, which is highly variable and based on underwriting results. The Company assesses whether the underlying book of business has attained the profitability criteria set by carriers and that enough time has passed to minimize the risk that sufficient losses will become realized that would negate the profit share. The Company closely monitors the calculations to identify if a profit-sharing commission would be earned and recognizes the profit-sharing commission as the underlying policies are placed, net of a constraint.
Contingent profit-sharing commissions represent a form of variable consideration associated with the placement and profitability of coverage, for which the Company earns commissions. In connection with ASC 606, contingent profit-sharing commissions are estimated with a constraint applied and accrued relative to the recognition of the corresponding commissions for the period over which the contract applies. As contingent commissions are earned in relation to policies placed by the Company with the insurance carrier partner, the timing of recognizing contingent commissions follows a similar pattern as the base commissions on premium described above, with any adjustments recognized when payments are received or as additional information that affects the estimate becomes available.
Fee Income
In addition to commissions on premium, the Company earns fee income. These fees are established by the carrier agreement between the Company and the insurance carrier partner and represent a flat charge on each underlying insurance contract. The Company’s performance obligation under its agreements with insurance carrier partners is selecting, pricing, and placing policyholders’ insurance contracts on their behalf. This fee compensates the Company for the administrative and operational costs associated with the Company’s placement of the policy for the insured. The Company is entitled to the full fee for the policy year, even in the event of cancellation. At each annual renewal, the policyholder is re-assessed a flat, non refundable policy fee, which the Company is entitled to retain.
F-9
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 3. Revenue (cont.)
Fees can vary by product type, underlying risk, and location of the insured property. The fee is non-refundable should the policy be canceled due to home sale or any other type of acceptable mid-term cancelation reason, therefore, fee income is treated as fully earned once a policy has become effective and is recognized as revenue at that time. Similar to the base commissions on premium described above, fees are recognized at a point in time upon the effective date of bound insurance coverage, at which point the performance obligation has been met as no performance obligation exists after coverage is bound.
The Company excludes from revenue any amounts collected from policyholders that are assessed by governmental authorities, such as sales and premium taxes, when the Company acts solely as a collecting agent.
Contract Costs
ASC Topic 340-40, Other Assets and Deferred Costs — Contracts with Customers requires the Company to review certain costs to obtain customer contracts primarily as they relate to agency commission arrangements. The Company pays agent commissions to its distribution partners, such as independent agents, brokers, or referral partners, for selling policies on behalf of the Company. The Company’s agency commission arrangements are the same for both new or renewal business. The Company has elected the practical expedient to expense these costs as incurred since the amortization period related to the resulting asset would be one year or less. The Company has no significant instances of contracts that would be amortized for a period greater than a year and therefore has no contract costs deferred for such arrangements.
Costs to fulfill — Due to the relatively short time period between the information gathering phase and binding insurance coverage, the Company has determined that costs to fulfill contracts are not significant. Therefore, costs to fulfill a contract are expensed as incurred.
Disaggregation of Revenue
The following table disaggregates revenue by source for the:
|
(In thousands) |
Six Months Ended |
|||||
|
2024 |
2025 |
|||||
|
Commission income |
$ |
40,412 |
$ |
54,769 |
||
|
Fee income |
|
13,564 |
|
16,650 |
||
|
Total revenues |
$ |
53,976 |
$ |
71,419 |
||
Contract Asset and Premium Deposits
The timing of revenue recognition may not align with the right to invoice the customer. The Company records accounts receivable when it has the unconditional right to issue an invoice and receive payment, regardless of whether revenue has been recognized. Policyholder payments received in advance of commencement of the performance obligation are recorded as premium deposits. No revenue is recognized on these deposits until the performance obligation is complete.
The following table provides information about receivables and premium deposits as of:
|
(In thousands) |
December 31, |
June 30, |
||||
|
Commissions and fees receivable |
$ |
2,612 |
$ |
3,204 |
||
|
Premium deposits |
$ |
11,810 |
$ |
27,560 |
||
During the six months ended June 30, 2025, the Company recognized revenue of $3,429 related to the premium deposits balance at December 31, 2024.
F-10
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 4. Debt
Debt consists of the following as of:
|
(In thousands) |
December 31, |
June 30, |
||||||
|
2024 Term Loan |
$ |
135,000 |
|
$ |
— |
|
||
|
2025 Term Loan |
|
— |
|
|
294,000 |
|
||
|
Total debt |
|
135,000 |
|
|
294,000 |
|
||
|
Less: unamortized deferred financing fees |
|
(1,349 |
) |
|
(1,601 |
) |
||
|
Less current maturities of debt |
|
(8,550 |
) |
|
(15,050 |
) |
||
|
Debt, net |
$ |
125,101 |
|
$ |
277,349 |
|
||
Amended and Restated Credit Agreement
On May 8, 2023, the Company amended and restated its prior credit agreement entered into during 2021 (“Amended and Restated Credit Agreement”) in its entirety with its existing lender increasing its borrowing base on the term loan to $190,000 (“2023 Term Loan”) and providing access to incremental loans and a revolving line of credit of $10,000. During the six months ended June 30, 2024, and prior to the refinancing on June 13, 2024, the Company made aggregate principal repayments of $4,475.
2024 Credit Agreement
On June 13, 2024, the Company entered into a credit agreement (“2024 Credit Agreement”) comprised of a $171,000 term loan (“2024 Term Loan”) and a revolving line of credit commitment of $10,000 (“2024 Revolver”) as well as access to incremental loans. The Company used the proceeds from the 2024 Term Loan in part to pay down the remaining balance of the 2023 Term Loan under the Amended and Restated Credit Agreement. A loss on extinguishment of debt of $5,346 was recognized in the consolidated statements of income during the period ended June 30, 2024, related to the pay down of the 2023 Term Loan, consisting of the prepayment penalty of $1,741 and the write-off of unamortized deferred financing fees of $3,348 and deferred financing asset of $257.
During the six months ended June 30, 2024, the Company made aggregate principal repayments of $1,000. During the six months ended June 30, 2025, and prior to the refinancing on April 10, 2025, the Company made aggregate principal repayments of $4,000. During the period ended June 30, 2024 and 2025, the Company recorded $28 and $111 of amortization expense. Interest expense related to the 2024 Credit Agreement was $736 and $2,617 for the period ended June 30, 2024 and 2025.
2025 Credit Agreement
On April 10, 2025, the Company amended and restated its 2024 Credit Agreement (“2025 Credit Agreement”) with its existing lenders to, among other things, increase its borrowing base on the term loan to $301,000 (“2025 Term Loan”) and extend the maturity date to April 30, 2030. The proceeds of the 2025 Term Loan were used to repay in full all outstanding obligations under the 2024 Term Loan and to finance a dividend. The revolving loan commitment remains at $10,000 (“2025 Revolver”) and its maturity date was also extended to April 30, 2030. The Company applied modification accounting to the 2024 Credit Agreement and capitalized $477 of deferred financing fees, $36 of deferred financing asset, and recognized interest expense of $518 for third party fees related to the 2025 Credit Agreement during the period ended June 30, 2025. Unamortized deferred financing fees of $1,238 related to the 2024 Term Loan continue to be amortized over the term of the 2025 Term Loan.
At the Company’s election, borrowings under the 2025 Credit Agreement may be based on either the Alternate Base Rate (“ABR”) or Term SOFR. ABR loans bear interest at a variable rate per annum equal to the highest of (a) the prime rate, (b) the New York Federal Reserve Bank (“NYFRB”) rate plus 0.50%, or (c) Term SOFR for a one-month interest period plus 1.00%, subject to a 1.00% floor, in each case plus an applicable margin ranging from 1.25% to 2.50% depending on the Company’s total net leverage ratio for the prior fiscal quarter. Term SOFR loans bear interest at a variable rate equal to Term SOFR, subject to a 1.00% floor, plus an applicable margin ranging from 2.25% to 3.50% depending on the Company’s total net leverage ratio for the prior fiscal quarter. As of June 30, 2025,
F-11
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 4. Debt (cont.)
the 2025 Term Loan was a Term SOFR loan with a margin of 3.0%, resulting in an interest rate of approximately 7.3%. The 2025 Term Loan requires annual amortization payments of 5.0% in years 1 and 2, 7.5% in years 3 and 4, and 10.0% in year 5 of the original principal amount, with a balloon payment due upon maturity on April 10, 2030. The 2025 Term Loan is prepayable at any time by the Company and mandatorily upon certain events, including asset dispositions, casualty or condemnation, equity dispositions by pledgors and debt incurrence. The Company must prepay 100% of the net proceeds received from such events. However, no prepayment is required unless the aggregate net proceeds from assets sales or casualty events exceed the greater of $1,250 or 2.5% of applicable earnings before interest, taxes, depreciation and amortization (“EBITDA”) in a fiscal year. Prepayments of the 2025 Term Loan are made without any penalty or premium. During the period ended June 30, 2025, the Company made aggregate principal repayments of $7,000. During the period ended June 30, 2025, the Company recorded $114 of amortization expense, resulting in unamortized deferred financing fees of $1,601 as of June 30, 2025. Interest expense related to the 2025 Credit Agreement was $5,101 for the period ended June 30, 2025. The Company’s effective interest rate for the period ended June 30, 2025, was 7.4%.
2025 Revolver: The 2025 Revolver has a maximum availability of $10,000. As of June 30, 2025, there were no amounts outstanding under the 2025 Revolver, and no amounts were drawn or repaid during the year then ended.
Incremental Loans: The Company may request up to three tranches of incremental term loans (“Incremental Term Loan”) or increases to the existing Revolver (“Additional Revolving Commitment”), subject to lender participation and agent approval. Each Incremental Term Loan request must be for a minimum principal amount of $10,000. The total amount of Additional Revolving Commitments under all such requests shall not exceed $10,000 over the term of the agreement. Any Incremental Term Loan(s) must (a) rank pari passu in right of payment and be secured solely by the existing collateral, (b) have no obligors other than the loan parties, (c) mature no earlier than the latest maturity date of any then-outstanding term loans, and (d) not have a shorter weighted average life to maturity than the existing Term Loans. Incremental Term Loans may be priced differently but must otherwise be treated no more favorably than existing term loans, subject to exceptions for loans maturing after the latest maturity date.
Borrowings under the 2025 Credit Agreement are secured by a first-priority lien on substantially all the stock in the Company and are subject to certain restricted covenants primarily relating to net leverage ratios. Under the 2025 Credit Agreement, the Company is subject to two key financial covenants beginning with the fiscal quarter ending March 31, 2025. First, the Company is required to maintain a total net leverage ratio that does not exceed 5.00 to 1.00 through the quarter ending September 30, 2025. This threshold tightens over time, requiring a maximum ratio of 4.50 to 1.00 for quarters ending from December 31, 2025, through September 30, 2026, and further reducing to 4.00 to 1.00 for quarters ending on or after September 30, 2026. Second, the Company is required to maintain an interest coverage ratio of at least 2.00 to 1.00 for any rolling four-quarter period ending on the last day of each fiscal quarter, starting with the quarter ending March 31, 2025. The Company was in compliance with both the covenants as of June 30, 2025.
The 2025 Credit Agreement contains a number of customary negative covenants for agreements of this type that, among other things and subject to certain exceptions, restrict the Company’s ability to: create, incur, or assume any additional indebtedness; create, incur, or assume any liens; engage in mergers, consolidations, or amalgamations; make investments, loans, or advances; pay dividends; sell assets; engage in certain transactions with affiliates; enter in restrictive agreements; enter into sale and leaseback transactions; execute amendments to organizational documents or certain other material agreements; and make certain accounting changes.
Interest expense was $10,632 and $8,269 for the six months ended June 30, 2024, and 2025, respectively, of which $343 and $225 was attributable to the amortization of the debt issuance costs, respectively, and $23 and $12 was attributable to the amortization of the deferred financing asset, respectively. Accrued interest associated with the outstanding debt is included within accrued expenses on the condensed consolidated balance sheets. As of December 31, 2024, and June 30, 2025, the Company had $451 and $1,141, respectively, of accrued interest associated with the debt.
F-12
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 5. Redeemable, Convertible Preferred Stock and Stockholders’ Deficit
The total number of shares of all classes of capital stock which the Company has the authority to issue is 19,615,000, consisting of 4,185,000 shares of Redeemable Preferred Stock $0.00001 par value per share and 15,430,000 shares of common stock $0.00001 par value per share (“Common Stock”).
Common Stock
On April 10, 2025, the Company’s Board approved a cash dividend in the aggregate amount of $175,000, payable to holders of Common Stock and Redeemable Preferred Stock of record as of April 10, 2025.
Redeemable, Convertible Preferred Stock
On May 10, 2023, (the “Original Issuance Date”), the Company issued 4,185,000 shares of Redeemable Preferred Stock to a single investor for cash consideration of $229,985 (“Original Issue Price”). The Company paid $10,921 in fees to complete the financing.
Dividends: Each share of Redeemable Preferred Stock shall be entitled to receive cumulative dividends of 5% per annum accrued daily and compounded quarterly commencing on the Original Issuance Date through the earlier of the eighth anniversary of the Original Issuance Date or the date on which the holder of Redeemable Preferred Stock achieves a multiple on invested capital equal to or exceeding three. The Redeemable Preferred Stock is entitled to participate ratably with the holders of Common Stock on all dividends paid on the shares of Common Stock. Cumulative undeclared dividends totaled $19,567 and $25,845 as of December 31, 2024, and June 30, 2025, respectively.
Voting: The holders of shares of Redeemable Preferred Stock shall be entitled to vote on an as-converted basis together with the holders of Common Stock on all matters submitted to a vote of stockholders of the Company, except as otherwise provided by applicable law. Except as otherwise provided herein or as required by applicable law, the holders of Redeemable Preferred Stock and the holders of Common Stock shall vote together as a single class.
Liquidation: Upon a change of control or any voluntary or involuntary liquidation, dissolution or winding up of the Company (“Liquidation”), the Redeemable Preferred Stock shall be paid in preference and prior to any payment made to the holders of Common Stock and any other securities that do not expressly rank senior to the Redeemable Preferred Stock (“Junior Securities”).
In the event of a Liquidation, including a change of control, holders of Redeemable Preferred Stock are entitled to receive accrued but unpaid dividends and either 1) receive a Liquidation preference in priority to holders of Common Stock and Junior Securities for an amount equal to the Original Issue Price based or 2) legally convert their shares to Common Stock based on what would result in the greatest return to the holders.
Conversion: The holders of Redeemable Preferred Stock shall have the right at any time to convert all or a portion of such shares into an equal number of shares of Common Stock. Upon the consummation of an initial public offering or transaction with a special purpose acquisition company that results in a certain amount of aggregate proceeds and an offering price above a certain threshold (“Qualified IPO”) or on the affirmative vote a majority of the holders of Redeemable Preferred Stock, the Redeemable Preferred Stock shall be automatically converted into such number of shares of Common Stock having a value per share equal to the amount that would have been distributed with respect to such share had the Company been sold for cash in a Liquidation for the value of the Company in a Qualified IPO implied by the price per share of Common Stock at which shares are sold to the public in a Qualified IPO.
No fractional shares of Common Stock shall be issued upon conversion of any shares of Redeemable Preferred Stock. If more than one share of Redeemable Preferred Stock subject to conversion is held by the same holder, such shares shall be aggregated for purposes of conversion. If the conversion of any share or shares of Redeemable Preferred Stock results in a fractional share of Common Stock issuable (after aggregating all shares of Redeemable Preferred Stock held by each holder), the Company shall pay a cash amount in lieu of issuing such fractional share in an amount equal to the fair market value of such fractional interest.
F-13
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 5. Redeemable, Convertible Preferred Stock and Stockholders’ Deficit (cont.)
The Company will at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting conversion of the Redeemable Preferred Stock into shares of Common Stock a number of shares of Common Stock equal to 110% of the number of shares of Common Stock issuable upon conversion of all then outstanding Redeemable Preferred Stock. All Common Stock that may be issued upon conversion of the Redeemable Preferred Stock shall upon issuance be duly authorized, fully paid and non-assessable and will not be subject to preemptive rights or subscription rights of any other stockholder of the Company.
Shares of Redeemable Preferred Stock which have been converted, redeemed, repurchased or otherwise canceled shall be retired and have the status of authorized and unissued shares of Redeemable Preferred Stock.
Redemption: In connection with a Change of Control, the holders of shares of Redeemable Preferred Stock shall be entitled to require the Company to purchase all or any portion of its shares of Redeemable Preferred Stock at a purchase price per share payable in cash equal to the amount per share that is distributable to such share in a Liquidation.
If a Liquidity Transaction has not been consummated on or after the seventh anniversary of the Original Issuance Date, the holder of the Redeemable Preferred Stock may cause the Company to initiate a sale process to sell the Company, whether by merger, consolidation, sale of all or substantially all of the Company’s assets or sale of all of its capital stock.
The Redeemable Preferred Stock is classified as temporary equity on the accompanying condensed consolidated balance sheets as it is redeemable solely on the passage of time or upon an event outside the control of the Company. As of the Original Issuance Date, the Redeemable Preferred Stock was probable of becoming redeemable as potential future redemption is dependent solely on the passage of time. The Company elected to accrete the changes in the redemption value over the period from the Original Issuance Date until the earliest probable redemption date using the interest method. Changes in the redemption value are considered to be changes in accounting estimates. The carrying value of Redeemable Preferred Stock totaled $240,473 and $247,322 as of December 31, 2024, and June 30, 2025, respectively. For the six months ended June 30, 2024, and 2025, the Company recognized accretion of $6,507 and $6,849, respectively, as an adjustment between Additional Paid-In Capital and Accumulated Deficit.
Note 6. Share-Based Compensation Plan
During the six months ended June 30, 2025, the Company issued 108,450 stock options. Stock options issued consisted of two tranches: 36,150 Time-Based Options and 72,300 Performance-Based Options. The aggregate grant date fair value of the options was $1,143.
Time-Based Options contain only service conditions and cliff vest on the 5th anniversary date of the grant date. Upon an optionee’s death or disability, or the consummation of a liquidity event by the Company, all of the Time-Based Option will immediately vest and become exercisable. All Time-Based Options have an exercise price of $54.95 per share. Performance-Based Options contain service, performance and market conditions. Subject to the optionee’s continuous service through a liquidity event, Performance-Based Options will vest upon the occurrence of a liquidity event; provided that if the return on the invested capital of preferred stockholders is less than a multiple of 3.0 (as defined in the Plan (referred to herein as the “Preferred Return Multiple”)), the exercise price for the vested options will be $109.9 per share; and if the return on the invested capital of preferred stockholders equals or is more than the Preferred Return Multiple, the exercise price for the vested options will be $54.95 per share. If a liquidity event does not occur before the 5th anniversary date of the grant date, the service condition is considered to be met once a grantee has provided continuous service for 5 years; however, the performance condition is still required to be met for the Performance-Based Options to vest. The maximum contractual term of the stock options issued under the Neptune Flood Incorporated 2019 Stock Plan is 10 years.
Share-based compensation expense was $142 and $187 for the six months ended June 30, 2024 and 2025, respectively.
F-14
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 7. Income Taxes
Neptune Flood has historically filed standalone United States federal and state income tax returns. As a result of the Reorganization and formation of Neptune Holdings, starting with its 2025 tax return, the Company will begin filing a consolidated federal income tax return and some consolidated state income tax returns where required or allowed.
The Company’s quarterly income tax provision is measured using an estimate of its consolidated annual effective tax rate adjusted for discrete items. The Company’s effective tax rate for the six months ended June 30, 2024 and 2025 was 25.5% and 25.8%. In both periods, the effective tax rate differed from the US federal statutory rate primarily due to state income taxes.
Note 8. Related-Party Transactions
Rent Expense
In February 2021, the Company entered into a month-to-month operating lease agreement for office space for management and administrative services at a rate of $12 per month from an affiliate of the Company’s executive and principal stockholder. Rent expense approximated $72 and $72 for each of the six months ended June 30, 2024, and 2025, respectively, which were included in general and administrative expense in the condensed consolidated statements of income.
Software Development
In 2022, the Company engaged with a contractor for software development and data analytics that is an affiliate of the Company’s executive and principal stockholder. Payments made to the contractor were approximately $373 and $0 for the six months ended June 30, 2024 and 2025, respectively, which were included in general and administrative expense in the condensed consolidated statements of income.
Note 9. Segment Reporting
The Company has one operating segment and therefore one reportable segment relating to its business as a MGA that offers accessible residential and commercial insurance products, including primary and excess flood insurance and parametric earthquake insurance, primarily through a nationwide agency network in the United States. The Company’s chief operating decision maker (“CODM”), the CEO, manages the Company’s operations on a condensed consolidated basis as one operating segment for the purpose of evaluating financial performance and allocating resources.
The accounting policies of the Company’s segment are the same as those described in the summary of significant accounting policies. The CODM uses net income, as reported on the condensed consolidated statements of income, to assess performance and allocate resources. The significant segment expense categories regularly provided to the CODM are the same as those included on the condensed consolidated statements of income. The measure of segment assets is total assets as reported on the condensed consolidated balance sheets.
The CODM uses net income to assess performance by examining period-over-period trends, benchmarking to the Company’s competitors, and monitoring budget versus actual results. The CODM uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the entity.
The Company does not have revenue from any one customer that is greater than 10% of condensed consolidated revenue.
F-15
Neptune Insurance Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 10. Earnings Per Share
The following table sets forth the computation of basic and dilutive earnings per share:
|
(In thousands, except share and per share data) |
June 30, |
June 30, |
||||||
|
Basic Shares |
|
|
|
|
||||
|
Numerator: |
|
|
|
|
||||
|
Net income |
$ |
10,887 |
|
$ |
21,559 |
|
||
|
Less: accretion adjustment to redeemable preferred stock(1) |
|
(6,507 |
) |
|
(6,849 |
) |
||
|
Less: allocation to participating preferred stock |
|
(1,356 |
) |
|
— |
|
||
|
Less: cash dividend paid on redeemable preferred stock |
|
— |
|
|
(54,170 |
) |
||
|
Net (loss) income available to common stockholders |
$ |
3,024 |
|
$ |
(39,460 |
) |
||
|
|
|
|
|
|||||
|
Denominator: |
|
|
|
|
||||
|
Weighted average Common Stock outstanding – basic and diluted |
|
9,335,000 |
|
|
9,335,000 |
|
||
|
Basic and diluted (loss) earnings per share |
$ |
0.32 |
|
$ |
(4.23 |
) |
||
|
Outstanding |
Outstanding |
|||
|
Time Vesting Options(2) |
536,000 |
578,400 |
||
|
Performance Vesting Options(3) |
536,000 |
578,400 |
____________
(1) This adjustment represents the accretion of the redeemable preferred stock to its redemption value and includes both the effect of cumulative undeclared dividends and the accretion of issuance costs for the applicable periods.
(2) Time Vesting Options are excluded from the diluted earnings per share computation because they are out-of-the-money as of June 30, 2024. The Time Vesting Options have been excluded from the calculation of diluted net loss per share for the period ended June 30, 2025, as their effect would be anti-dilutive.
(3) Performance Vesting Options have a performance condition. As of June 30, 2024, and June 30, 2023, the performance condition was not met and therefore, these options were excluded from the dilutive earnings per share computation.
On April 10, 2025, the Company’s Board approved a cash dividend in the aggregate amount of $175,000, payable to holders of Common Stock and Redeemable Preferred Stock of record as of April 10, 2025. The total dividend was paid to the redeemable preferred stockholders and common stockholders in the amounts of $54,170 and $120,830, respectively.
Note 11. Commitments and Contingencies
The Company is, from time to time, party to various legal actions and is subject to various claims arising in the ordinary course of business from time to time. Management believes that the resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
Note 12. Subsequent events
Management has evaluated all subsequent events through August 8, 2025, which is the date these financial statements were available to be issued. The Company did not identify any material subsequent events that required recognition or additional disclosure in these condensed consolidated financial statements except for the following:
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA introduces significant changes to the tax code, including modifications to bonus depreciation and interest expense limitations. As the OBBBA was enacted after the Company’s reporting period ended on June 30, 2025, it is considered an unrecognized subsequent event in accordance with ASC Topic 855, Subsequent Events.
The Company is currently evaluating the provisions of the OBBBA to determine its impact on its financial statements. At this time, the Company is unable to estimate the financial effects of the OBBBA.
F-16
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Neptune Insurance Holdings Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Neptune Insurance Holdings Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income, of changes in redeemable, convertible preferred stock and stockholders’ deficit, and of cash flows for the years then ended, including 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 the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
July 2, 2025, except for the effects of the corporate restructuring described in Note 1 to the consolidated financial statements, as to which the date is August 8, 2025
We have served as the Company’s auditor since 2025.
F-17
Neptune Insurance Holdings Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2023, and 2024
(In thousands, except share and per share data)
|
2023 |
2024 |
|||||||
|
Assets |
|
|
|
|
||||
|
Current assets: |
|
|
|
|
||||
|
Cash and cash equivalents |
$ |
8,133 |
|
$ |
7,094 |
|
||
|
Fiduciary cash |
|
16,187 |
|
|
20,971 |
|
||
|
Fiduciary receivable |
|
3,473 |
|
|
4,096 |
|
||
|
Commissions and fees receivable |
|
941 |
|
|
2,612 |
|
||
|
Prepaid expenses and other current assets |
|
664 |
|
|
452 |
|
||
|
Income tax receivable |
|
462 |
|
|
— |
|
||
|
Total current assets |
|
29,860 |
|
|
35,225 |
|
||
|
|
|
|
|
|||||
|
Intangible assets, net |
|
546 |
|
|
476 |
|
||
|
Internally developed software, net |
|
4,999 |
|
|
5,756 |
|
||
|
Goodwill |
|
3,793 |
|
|
3,793 |
|
||
|
Deferred tax assets |
|
2,191 |
|
|
2,803 |
|
||
|
Deferred financing asset |
|
279 |
|
|
99 |
|
||
|
Total assets |
$ |
41,668 |
|
$ |
48,152 |
|
||
|
|
|
|
|
|||||
|
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit |
|
|
|
|
||||
|
Current liabilities: |
|
|
|
|
||||
|
Accounts payable |
|
5,291 |
|
|
7,165 |
|
||
|
Commissions payable |
|
2,105 |
|
|
2,528 |
|
||
|
Insurance company payables |
|
11,261 |
|
|
13,257 |
|
||
|
Income tax payable |
|
90 |
|
|
4,781 |
|
||
|
Accrued expenses |
|
62 |
|
|
475 |
|
||
|
Premium deposits |
|
8,399 |
|
|
11,810 |
|
||
|
Current portion of debt |
|
1,900 |
|
|
8,550 |
|
||
|
Total current liabilities |
|
29,108 |
|
|
48,566 |
|
||
|
Debt, less current portion |
|
172,963 |
|
|
125,101 |
|
||
|
Total liabilities |
$ |
202,071 |
|
$ |
173,667 |
|
||
|
|
|
|
|
|||||
|
Commitments and contingencies (Notes 13) |
|
|
|
|
||||
|
|
|
|
|
|||||
|
Redeemable, convertible preferred stock, $0.00001 par value, 5% cumulative dividend; 4,185,000 shares authorized, issued and outstanding at December 31, 2023, and 2024 (liquidation preference of $249,552) |
|
227,199 |
|
|
240,473 |
|
||
|
|
|
|
|
|||||
|
Stockholders’ deficit: |
|
|
|
|
||||
|
Common stock, $0.00001 par value, 15,430,000 and 15,430,000 shares authorized; 9,335,000 and 9,335,000 shares issued and outstanding at December 31, 2023 and 2024, respectively |
|
— |
|
|
— |
|
||
|
Accumulated deficit |
|
(387,643 |
) |
|
(366,325 |
) |
||
|
Additional paid-in capital |
|
41 |
|
|
337 |
|
||
|
Total stockholders’ deficit |
|
(387,602 |
) |
|
(365,988 |
) |
||
|
Total liabilities, redeemable, convertible preferred stock, and stockholders’ deficit |
$ |
41,668 |
|
$ |
48,152 |
|
||
See notes to consolidated financial statements.
F-18
Neptune Insurance Holdings Inc. and Subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2023, and 2024
(In thousands, except share and per share data)
|
2023 |
2024 |
|||||||
|
Revenues: |
|
|
|
|
||||
|
Commissions and fees |
$ |
84,870 |
|
$ |
119,299 |
|
||
|
|
|
|
|
|||||
|
Operating expenses: |
|
|
|
|
||||
|
Agent commissions |
|
26,014 |
|
|
35,317 |
|
||
|
Employee compensation and benefits |
|
4,347 |
|
|
4,752 |
|
||
|
General and administrative |
|
6,896 |
|
|
7,757 |
|
||
|
Amortization expense |
|
2,182 |
|
|
3,027 |
|
||
|
Total operating expenses |
|
39,439 |
|
|
50,853 |
|
||
|
Income from operations |
|
45,431 |
|
|
68,446 |
|
||
|
Other income (expense): |
|
|
|
|
||||
|
Interest income |
|
308 |
|
|
880 |
|
||
|
Interest expense |
|
(21,326 |
) |
|
(17,520 |
) |
||
|
Loss on extinguishment of debt |
|
(556 |
) |
|
(5,426 |
) |
||
|
Income before income tax expense |
|
23,857 |
|
|
46,380 |
|
||
|
Income tax expense |
|
5,971 |
|
|
11,788 |
|
||
|
Net income |
$ |
17,886 |
|
$ |
34,592 |
|
||
|
|
|
|
|
|||||
|
Accretion adjustment to redeemable preferred stock |
|
(8,135 |
) |
|
(13,274 |
) |
||
|
Allocation to participating preferred stock |
|
— |
|
|
(6,599 |
) |
||
|
Net income available to common stockholders |
$ |
9,751 |
|
$ |
14,719 |
|
||
|
|
|
|
|
|||||
|
Net income per share of common stock: |
|
|
|
|
||||
|
Basic |
$ |
1.04 |
|
$ |
1.58 |
|
||
|
Diluted |
$ |
1.04 |
|
$ |
1.58 |
|
||
|
Weighted average shares of common stock outstanding: |
|
|
|
|
||||
|
Basic and diluted |
|
9,352,334 |
|
|
9,335,000 |
|
||
See notes to consolidated financial statements.
F-19
Neptune Insurance Holdings Inc. and Subsidiaries
Consolidated Statements of Changes in Redeemable, Convertible Preferred Stock and Stockholders’ Deficit For the years ended December 31, 2023, and 2024
(In thousands)
|
Redeemable |
Stockholders’ Deficit |
||||||||||||||||||||||
|
Common Stock |
Additional |
Accumulated |
Total |
||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||
|
Balance, at December 31, 2022 |
— |
$ |
— |
9,335 |
|
$ |
— |
$ |
— |
|
$ |
(58,371 |
) |
$ |
(58,371 |
) |
|||||||
|
Common stock issued |
— |
|
— |
104 |
|
|
— |
|
10,000 |
|
|
— |
|
|
10,000 |
|
|||||||
|
Rescission of common stock issued |
— |
|
— |
(104 |
) |
|
— |
|
(10,000 |
) |
|
— |
|
|
(10,000 |
) |
|||||||
|
Redeemable, convertible preferred stock issued, net of issuance costs |
4,185 |
|
219,064 |
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|||||||
|
Accretion of redeemable, convertible preferred stock |
— |
|
8,135 |
— |
|
|
— |
|
— |
|
|
(8,135 |
) |
|
(8,135 |
) |
|||||||
|
Cash dividend paid |
— |
|
— |
— |
|
|
— |
|
— |
|
|
(339,023 |
) |
|
(339,023 |
) |
|||||||
|
Share-based compensation |
— |
|
— |
— |
|
|
— |
|
41 |
|
|
— |
|
|
41 |
|
|||||||
|
Net income |
— |
|
— |
— |
|
|
— |
|
— |
|
|
17,886 |
|
|
17,886 |
|
|||||||
|
Balance, at December 31, 2023 |
4,185 |
|
227,199 |
9,335 |
|
|
— |
|
41 |
|
|
(387,643 |
) |
|
(387,602 |
) |
|||||||
|
Accretion of redeemable, convertible preferred stock |
— |
|
13,274 |
— |
|
|
— |
|
— |
|
|
(13,274 |
) |
|
(13,274 |
) |
|||||||
|
Share-based compensation |
— |
|
— |
— |
|
|
— |
|
296 |
|
|
— |
|
|
296 |
|
|||||||
|
Net income |
— |
|
— |
— |
|
|
— |
|
— |
|
|
34,592 |
|
|
34,592 |
|
|||||||
|
Balance at December 31, 2024 |
4,185 |
$ |
240,473 |
9,335 |
|
$ |
— |
$ |
337 |
|
$ |
(366,325 |
) |
$ |
(365,988 |
) |
|||||||
See notes to consolidated financial statements.
F-20
Neptune Insurance Holdings Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2023, and 2024
(In thousands)
|
2023 |
2024 |
|||||||
|
Cash flows from operating activities: |
|
|
|
|
||||
|
Net income |
$ |
17,886 |
|
$ |
34,592 |
|
||
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
||||
|
Amortization expense |
|
2,182 |
|
|
3,027 |
|
||
|
Amortization of deferred financing costs |
|
1,228 |
|
|
905 |
|
||
|
Loss on extinguishment of debt |
|
556 |
|
|
5,426 |
|
||
|
Share-based compensation |
|
41 |
|
|
296 |
|
||
|
Deferred income taxes |
|
(2,193 |
) |
|
(612 |
) |
||
|
(Increase) decrease in operating assets: |
|
|
|
|
||||
|
Commissions and fees receivable |
|
(491 |
) |
|
(1,671 |
) |
||
|
Income tax receivable |
|
(412 |
) |
|
462 |
|
||
|
Prepaid expenses and other current assets |
|
(274 |
) |
|
212 |
|
||
|
Deferred financing asset |
|
(313 |
) |
|
(111 |
) |
||
|
Increase (decrease) in operating liabilities: |
|
|
|
|
||||
|
Accounts payable |
|
1,556 |
|
|
1,873 |
|
||
|
Commissions payable |
|
518 |
|
|
423 |
|
||
|
Income tax payable |
|
(54 |
) |
|
4,691 |
|
||
|
Accrued expenses |
|
(1,583 |
) |
|
413 |
|
||
|
Net cash provided by operating activities |
|
18,647 |
|
|
49,926 |
|
||
|
|
|
|
|
|||||
|
Cash flows from investing activities: |
|
|
|
|
||||
|
Internal developed software |
|
(4,030 |
) |
|
(3,713 |
) |
||
|
Net cash used in investing activities |
|
(4,030 |
) |
|
(3,713 |
) |
||
|
|
|
|
|
|||||
|
Cash flows from financing activities: |
|
|
|
|
||||
|
Change in fiduciary receivables |
|
(939 |
) |
|
(623 |
) |
||
|
Change in fiduciary liabilities |
|
5,399 |
|
|
5,407 |
|
||
|
Repayments of 2021 Term Loan |
|
(69,875 |
) |
|
— |
|
||
|
Proceeds from 2023 Term Loan |
|
190,000 |
|
|
— |
|
||
|
Repayments of 2023 Term Loan |
|
(11,475 |
) |
|
(178,525 |
) |
||
|
Proceeds from 2024 Term Loan |
|
— |
|
|
171,000 |
|
||
|
Repayments of 2024 Term Loan |
|
— |
|
|
(36,000 |
) |
||
|
Payment of deferred financing fees and prepayment penalty |
|
(3,017 |
) |
|
(3,727 |
) |
||
|
Issuance of common stock |
|
10,000 |
|
|
— |
|
||
|
Rescission of common stock |
|
(10,000 |
) |
|
— |
|
||
|
Issuance of redeemable, convertible preferred stock, net of issuance costs |
|
219,064 |
|
|
— |
|
||
|
Cash dividend paid |
|
(339,023 |
) |
|
— |
|
||
|
Net cash used in financing activities |
|
(9,866 |
) |
|
(42,468 |
) |
||
|
|
|
|
|
|||||
|
Net increase in cash and cash equivalents and fiduciary cash |
|
4,751 |
|
|
3,745 |
|
||
|
|
|
|
|
|||||
|
Cash and cash equivalents and fiduciary cash: |
|
|
|
|
||||
|
Beginning of year |
|
19,569 |
|
|
24,320 |
|
||
|
End of year |
$ |
24,320 |
|
$ |
28,065 |
|
||
|
Cash and cash equivalents |
$ |
8,133 |
|
$ |
7,094 |
|
||
|
Fiduciary cash |
|
16,187 |
|
|
20,971 |
|
||
|
Total cash and cash equivalents and fiduciary cash |
$ |
24,320 |
|
$ |
28,065 |
|
||
|
|
|
|
|
|||||
|
Cash paid for: |
|
|
|
|
||||
|
Interest |
$ |
20,098 |
|
$ |
17,067 |
|
||
|
Income taxes |
$ |
8,599 |
|
$ |
7,310 |
|
||
See notes to consolidated financial statements.
F-21
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 1. Nature of Business and Basis of Presentation
Neptune Insurance Holdings Inc. (“Neptune Holdings” or the “Company”) was incorporated in Delaware on March 20, 2025, to serve as the holding company for Neptune Flood Incorporated (“Neptune Flood”). Neptune Flood, incorporated in Delaware on February 10, 2017, is an insurance agency engaged in the business of selling residential and commercial flood insurance policies on behalf of insurance carrier partners throughout the United States.
On April 10, 2025, Neptune Holdings completed a corporate restructuring through a reverse triangular merger (the “Reorganization”) to implement a holding company structure. In connection with the Reorganization, Neptune Insurance Merger Sub Inc. (“Merger Sub”), a wholly-owned subsidiary of Neptune Holdings, merged with and into Neptune Flood, with Neptune Flood continuing as the surviving entity. Each issued and outstanding share of common and preferred stock of Neptune Flood was converted into an equivalent share of common and preferred stock of Neptune Holdings. The outstanding shares of Neptune Holdings previously owned by Neptune Flood were canceled and retired. As a result, Neptune Holdings became the parent holding company, and Neptune Flood became its wholly-owned operating subsidiary. In connection with the Reorganization, the Company filed an amendment to its Articles of Incorporation, effective April 10, 2025, which did not include any material changes other than those necessary to give effect to the new holding company structure. In connection with the Reorganization, Neptune Holdings assumed the Amended and Restated 2019 Stock Plan and amended and restated it in its entirety. The Amended and Restated 2019 Stock Plan, as so amended and restated in connection with the Reorganization, shall be referred to as the Pre-IPO 2025 Plan. Neptune Holdings also assumed Neptune Flood’s obligations under the Pre-IPO Stockholders Agreement that was entered into in connection with the convertible preferred stock financing of Neptune Flood in May 2023 as well as certain common stock and restricted stock purchase agreements and certain indemnification agreements.
The Reorganization was accounted for as a combination of entities under common control in accordance with subsections of Accounting Standards Codification (“ASC”) Topic 805-50, Business Combinations (“ASC 805-50”). Consequently, Neptune Flood was contributed to Neptune Holdings and the Reorganization was recorded at historical carrying amounts and the Company’s Consolidated Financial Statements prior to the Reorganization have been adjusted to reflect the retrospective combination of the entities for all periods presented.
Basis of Presentation: The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements are presented in US Dollars. All amounts are presented in thousands, except per share data and where otherwise noted.
Emerging Growth Company: Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies (“EGC”) from being required to comply with new or revised financial accounting standards until private companies are required to. For the purpose of this section, a private company is one that has not had a Securities Act registration statement declared effective or does not have a class of securities registered under the Securities Exchange Act of 1934, as amended. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company qualifies as an EGC and has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for Public Business Entities (“PBEs”) and Non-PBEs, the Company, as an EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time the Company is no longer considered to be an EGC. At times, the Company may elect to early adopt a new or revised standard.
Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany account balances and transactions have been eliminated in the consolidated financial statements.
Use of Estimates: The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported
F-22
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 1. Nature of Business and Basis of Presentation (cont.)
amounts of revenue and expenses during the reporting period. These estimates, judgments and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. The Company’s most significant estimates and judgments involve the valuation of share-based compensation, including the fair value of common stock, accounting for capitalized internal-use software, including the related estimated useful life, as well as the estimates for policy cancellations.
Note 2. Significant Accounting Policies
Revenue Recognition: The Company recognizes revenue for the transfer of such promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those products or services. Under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when or as the transfer of control of the underlying performance obligations occurs. ASC 606 provides a five-step model for recognizing revenue from contracts with customers as follows:
• Identify the contract with a customer
• Identify the performance obligations in the contract
• Determine the transaction price
• Allocate the transaction price to the performance obligations in the contract
• Recognize revenue when or as the performance obligations are satisfied
The Company recognizes revenues under ASC 606 and associated costs under ASC Topic 340, Incremental Costs to Obtain a Contract. Refer to Note 3 — Revenue to the consolidated financial statements for additional details.
Concentrations of Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk are primarily comprised of cash and cash equivalents and fiduciary cash. Cash deposits may, at times, exceed amounts insured by the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation. However, the Company’s exposure to credit risk in the event of default by the financial institutions is limited to the excess of the amounts recorded on the consolidated balance sheets over the insured amounts. The Company has not experienced any losses on its deposits of cash and cash equivalents or fiduciary cash to date.
Cash and Cash Equivalents: Cash and cash equivalents consist of demand deposits with financial institutions and highly liquid investments with quoted market prices having maturities of three months or less, respectively. At both December 31, 2023 and 2024, the Company held all cash in demand deposits with financial institutions and did not hold any cash equivalents.
Fiduciary Cash and Fiduciary Receivable: In its capacity as a managing general agency (“MGA”), the Company typically collects premiums from insureds and, after deducting the authorized commissions, remits the net premiums to the appropriate insurance company or companies. Accordingly, premiums receivable from insureds are reported as fiduciary receivable and premiums payable to insurance companies are reported as insurance company payables in the accompanying consolidated balance sheets. Unremitted net insurance premiums are held in a fiduciary capacity until the Company disburses them. Net insurance premiums payable to insurance companies together with premium deposits received from customers are held as fiduciary cash on the accompanying consolidated balance sheets. Insurance company payables together with premium deposits are considered fiduciary liabilities. Cash and cash equivalents held in excess of the amount required to meet the Company’s fiduciary obligations are recognized as cash and cash equivalents on the consolidated balance sheets.
Commissions and Fees Receivable: Commissions receivable reflect commissions due from insurance carrier partners. Fees receivable represent fees due from policyholders.
F-23
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 2. Significant Accounting Policies (cont.)
The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for expected credit losses, the Company considers historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considers customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. The allowance for expected credit losses is not material as of December 31, 2023, and 2024. Non-payments are accrued for as part of the Company’s estimate for policy cancellations.
Internally Developed Software, Net: The Company capitalizes certain costs incurred to develop internal use software in accordance with ASC Topic 350-40, Internal Use Software. Costs incurred during the preliminary project stage and post-implementation stage of an internal-use software project are expensed as incurred, while costs incurred during the application development stage of an internal-use software project are capitalized. Costs related to updates and enhancements to the software are only capitalized if they result in additional functionality to the Company. Significant estimates and assumptions include determining the appropriate period over which to amortize the capitalized costs based on the estimated useful lives, estimating the technological feasibility of the internally developed software, and assessing the unamortized cost balances for impairment. The Company considers various factors to project useful life including anticipated changes in technology that may make the product obsolete. A significant change in an estimate related to one or more software products could result in a material change to the Company’s results of operations. The Company amortizes capitalized software on a straight-line basis over an estimated useful life of three years. The total cost of internally developed software was $8,831 and $12,544 as of December 31, 2023 and 2024, respectively. The related accumulated amortization was $3,832 and $6,788 as of December 31, 2023 and 2024, respectively. For the years ended December 31, 2023, and 2024, the Company recorded amortization expense of $2,112 and $2,956 related to internally developed software.
Intangible Assets, Net: Intangible assets are stated at cost, which includes the fair value of intangible assets acquired in business acquisitions, less accumulated amortization, and consist of acquired customer relationships and trade names. Acquired relationships and trade names are amortized on a straight-line basis over estimated useful lives of 10 years.
Impairment of Long-Lived Assets: The Company reviews long-lived assets, including internally developed software and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that an asset’s (asset group) carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analysis in accordance with ASC Topic 360-10, Impairment or Disposal of Long-Lived Assets, which requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, and evaluate the asset group against the sum of the undiscounted future cash flows. If the sum of undiscounted cash flows is below the carrying amount of the asset group, it is deemed not recoverable and an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value. There were no long-lived asset impairments recognized for the years ended December 31, 2023, or 2024.
Goodwill: Goodwill totaled $3,793 as of December 31, 2023 and 2024, with no additions, impairments, or other changes recognized during the years then ended.
Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in a business combination. Goodwill has an indefinite useful life and is not amortized. The Company reviews its goodwill for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of the Company’s reporting unit may exceed its fair value. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount, including goodwill. If that is the case, the Company performs a quantitative impairment test, and, if the carrying amount of the Company’s reporting unit exceeds its fair value, then the Company will recognize an impairment charge for the amount by which its carrying amount exceeds its fair value, not to exceed the carrying amount of the goodwill.
F-24
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 2. Significant Accounting Policies (cont.)
The Company performed a qualitative assessment of goodwill for each of the years ended December 31, 2023, and 2024 and determined that the fair value of its reporting unit exceeded its carrying value, and thus concluded that the carrying value of goodwill was not impaired as of each goodwill impairment test date, which is December 31. Accordingly, no further analysis was required or performed.
Premium Deposits: Premium deposits consist of payments received from the policyholder in advance of performance under the insurance policy contract with the policyholder.
Deferred Financing Fees: The Company capitalizes financing fees incurred in connection with its debt arrangements. For term loans, deferred financing costs are presented as a direct deduction from the carrying amount of the related debt and are amortized using the effective interest method over the term of the loan. For revolving credit facilities, deferred financing costs are recorded as a deferred asset and amortized on a straight-line basis over the availability period of the facility.
Leases: The Company accounts for leases under ASC Topic 842, Leases. A lease is an agreement between two or more parties that creates enforceable rights and obligations that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. ASC Topic 842, Leases requires an entity to determine whether a contract is a lease or contains a lease at the inception of the contract, considering all relevant facts and circumstances.
As of December 31, 2024, the Company’s only lease arrangement is a month-to-month office space lease, which qualifies as a short-term lease under ASC Topic 842, Leases. The office space is leased from a related party. Refer to Note 10 — Related Party Transactions for additional details. The Company elected to not recognize a lease liability or right-of-use asset on the consolidated balance sheets for leases with an initial term of 12 months or less. Operating lease expenses on short-term leases are recognized on a straight-line basis over the respective lease term as a component of general and administrative expense in the consolidated statements of income.
Agent Commissions: Agent commissions are incurred in connection with the placement of residential and commercial property insurance policies by third-party agents. These commissions are expensed as incurred and are presented as agent commissions in the consolidated statements of income. Commissions payable to agents represents amounts due but not yet paid as of the reporting date. These amounts are included in Commissions payable on the consolidated balance sheets.
Fair Value of Financial Instruments: Fair value accounting establishes a framework for measuring fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). This framework includes a fair value hierarchy that prioritizes the inputs to the valuation technique used to measure fair value.
The classification of a financial instrument within the valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels of the hierarchy in order of priority of inputs to the valuation technique are defined as follows:
• Level 1 — Valuations are based on unadjusted quoted prices in active markets for identical financial instruments;
• Level 2 — Valuations are based on quoted market prices, other than quoted prices included in Level 1, in markets that are not active or on inputs that are observable either directly or indirectly for the full term of the financial instrument; and
• Level 3 — Valuations are based on pricing or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management’s own judgement about the assumptions a market participant would use in pricing the financial instrument.
F-25
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 2. Significant Accounting Policies (cont.)
The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measure in its entirety.
The Company’s financial assets and liabilities consist of cash and cash equivalents, fiduciary cash, accounts receivable, accounts payable, commissions payable, insurance company payables, accrued expenses and debt. The carrying value of cash and cash equivalents, accounts receivable, accounts payable, commissions payable, insurance company payables and accrued expenses approximates fair value because of the short-term nature of those instruments. The carrying value of debt approximates fair value due to the variable rate nature of the debt.
Advertising: The Company expenses advertising costs as incurred which are included in general and administrative expense in the consolidated statements of income. For the years ended December 31, 2023, and 2024, advertising costs were $1,568 and $1,597, respectively.
Redeemable, Convertible Preferred Stock: The Company applies ASC Topic 480, Distinguishing Liabilities from Equity, when determining the classification of preferred stock. The Company classifies instruments that are conditionally redeemable for cash or other assets outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer.
The Company classifies redeemable, convertible preferred stock (“Redeemable Preferred Stock”) as temporary equity on the accompanying consolidated balance sheets as it is redeemable solely on the passage of time or upon an event outside the control of the Company. The Company accretes the changes in the redemption value over the period from the original issuance date until the earliest probable redemption date using the interest method. Changes in the redemption value are considered to be changes in accounting estimates.
Income Taxes: The Company accounts for income taxes pursuant to the asset and liability method, which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment.
The Company and its subsidiaries apply ASC Topic 740, Income Taxes. A component of this standard prescribes a recognition and measurement threshold of uncertain tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. Management has evaluated the Company’s tax positions and concluded that the Company has taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance.
Earnings Per Share: Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. The Company’s Redeemable Preferred Stock is classified as temporary equity and is considered probable of becoming redeemable. Additionally, Redeemable Preferred Stock represents participating securities, as holders of the Preferred Stock participate in dividends with holders of common stock on a pro rata basis. Accordingly, the Company used the two-class method of computing basic and diluted earnings per share for common stock. Under this method, net income applicable to holders of common stock is first reduced by the amount of accretion adjustment to the Redeemable Preferred Stock in the current period, and remaining undistributed earnings is then allocated on a pro rata basis to the holders of common stock and Redeemable Preferred Stock to the extent that each class may share income for the period; whereas undistributed net loss is allocated to common stock only because holders of Redeemable Preferred Stock are not contractually obligated to share the loss.
The Company takes a two-step approach to compute the diluted earnings per share, by first applying the treasury stock method and if-converted method, and then the two-class method. The dilutive earnings per share are computed using the more dilutive approach. See Note 12 — Earnings Per Share for additional information about per share data.
F-26
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 2. Significant Accounting Policies (cont.)
Share-Based Compensation: The Company accounts for stock options issued to employees in exchange for services in accordance with ASC 718, Compensation — Stock Compensation. The Company’s stock options are classified as equity and accordingly, fair value of the stock options is measured on their grant date. For stock options that vest based only on continued service, stock-based compensation cost is recognized on a straight-line basis over the requisite service period. For stock options that contain performance and market vesting conditions, stock-based compensation cost is recognized when it is probable the performance condition will be achieved even if the market condition is not satisfied. For performance conditions such as an initial public offering (“IPO”) or a change in control event, the performance condition is not probable of being achieved for accounting purposes until the event occurs. Forfeitures are recorded when they occur. The grant date fair value of stock options is estimated using the Black-Scholes option-pricing model.
Comprehensive Income: Comprehensive income consists of net income and changes in equity during a period from transactions and other equity and circumstances generated from non-owner sources. The Company’s net income equals comprehensive income for all periods presented.
Recently Adopted Accounting Pronouncements:
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, ASC Topic 280, Segment Reporting — Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to enhance the disclosure requirements for reportable segments. ASU 2023-07 requires disclosure of significant segment expenses regularly provided to the chief operating decision maker (“CODM”), as well as an aggregate amount of other segment items included within segment profit or loss and a description of its composition. Additionally, ASU 2023-07 requires disclosure of the title and position of the CODM and a description of how the CODM utilizes the reported measure of segment profit or loss to assess segment performance. ASU 2023-07 requires segment disclosures under ASC Topic 280, Segment Reporting — Improvements to Reportable Segment Disclosures on an annual and interim basis. This guidance is effective for fiscal year end December 31, 2024. The Company has adopted this standard as disclosed in Note 11 — Segment Reporting.
Recent Accounting Pronouncements Not Yet Adopted:
Income Taxes: In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, ASC Topic 740, Income Taxes — Improvements to Income Tax Disclosures. This standard requires the Company to provide further disaggregated income tax disclosures for specific categories on the effective tax rate reconciliation, as well as additional information about federal, state/local and foreign income taxes. The standard also requires the Company to annually disclose its income taxes paid (net of refunds received), disaggregated by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be applied on a prospective basis, although optional retrospective application is permitted. The Company is currently evaluating the impact this guidance will have on its financial statement disclosures.
Disaggregation of Income Statement Expenses: In November 2024, the FASB issued ASU 2024-03, ASC Topic 220-40, Income Statement Reporting — Comprehensive Income — Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses (“ASU 2024-03”). The standard update improves the disclosures about a PBE’s expense by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) included within income statement expense captions. ASU 2024-03 will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and changes are required to be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
Note 3. Revenue
The Company’s revenue is derived from the sale of insurance policies and is primarily comprised of commission income and fee income.
F-27
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 3. Revenue (cont.)
Commission Income
The largest component of the Company’s revenue is commission income from the placement of insurance contracts between insurance carriers and the policyholders who acquire property insurance policies. These commissions are established by the carrier agreement between the Company and the insurance carrier partner and are calculated as a negotiated percentage of premiums for the underlying insurance contract. Commission rates and terms vary across insurance carriers. The Company’s performance obligation under its agreements with insurance carrier partners is selecting, pricing, and placing policyholders’ insurance contracts on their behalf. Each underlying insurance contract is a separate and distinct contract between the policyholder and the insurance carrier partner. The Company collects the full premium for the policy from the policyholder at inception, then remits that premium, net of the commission owed to the Company, to the insurance carrier partner. Commission income is recognized at a point in time upon the effective date of bound insurance coverage, at which point the performance obligation has been met as no performance obligation exists after coverage is bound.
Each policyholder’s insurance contract is for a period of one year and can only be canceled prior to expiration for a limited set of reasons, most often in conjunction with the sale of the underlying insured property. Renewal commissions are recognized at a point in time upon the effective date of the renewal policy, at which point the performance obligation has been met as the Company has no further performance obligations for that renewal policy term.
The transaction price is the total commission the Company expects to receive from the insurance carrier partner for the current term of the policy. The transaction date is determined by the effective date of the insurance policy. Policies are subject to cancellation at the discretion of the insured, and such a cancellation would result in the Company’s commission being limited to the period that the policy was in effect. The Company estimates any expected variable consideration, or cancellations, based on historical information, and records a corresponding deduction in revenue at the time revenue is recognized. The Company bases its estimates on historical cancellation experience by policy type and tenure and adjusts for any known trends or events. The estimation period typically covers the allowable cancellation period. This variable consideration is recognized to the extent that it is probable there will not be a significant reversal of revenue.
The Company also earns small amounts of contingent income from insurance carrier partners in the form of a profit-sharing commission, which is highly variable and based on underwriting results. The Company assesses whether the underlying book of business has attained the profitability criteria set by carriers and that enough time has passed to minimize the risk that sufficient losses will become realized that would negate the profit share. The Company closely monitors the calculations to identify if a profit-sharing commission would be earned and recognizes the profit-sharing commission as the underlying policies are placed, net of a constraint.
Contingent profit-sharing commissions represent a form of variable consideration associated with the placement and profitability of coverage, for which the Company earns commissions. In connection with ASC 606, contingent profit-sharing commissions are estimated with a constraint applied and accrued relative to the recognition of the corresponding commissions for the period over which the contract applies. As contingent commissions are earned in relation to policies placed by the Company with the insurance carrier partner, the timing of recognizing contingent commissions follows a similar pattern as the base commissions on premium described above, with any adjustments recognized when payments are received or as additional information that affects the estimate becomes available.
Fee Income
In addition to commissions on premium, the Company earns fee income. This fee income is established by the carrier agreement between the Company and the insurance carrier partner and represent a fixed charge on each underlying insurance contract. The Company’s performance obligation under its agreements with insurance carrier partners is selecting, pricing, and placing policyholders’ insurance contracts on their behalf. This fee income compensates the Company for the administrative and operational costs associated with the Company’s
F-28
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 3. Revenue (cont.)
placement of the policy. The Company is entitled to the entire fee income for the policy year, even in the event of a cancellation. The Company is also entitled to a non-refundable fee at each annual renewal Fees can vary by product type, underlying risk, and location of the insured property. The fee is non-refundable should the policy be canceled due to home sale or any other type of acceptable mid-term cancelation reason, therefore, fee income is treated as fully earned once a policy has become effective and is recognized as revenue at that time. Similar to the base commissions on premium described above, fees are recognized at a point in time upon the effective date of bound insurance coverage, at which point the performance obligation has been met as no performance obligation exists after coverage is bound.
The Company excludes from revenue any amounts collected from policyholders that are assessed by governmental authorities, such as sales and premium taxes, when the Company acts solely as a collecting agent.
Contract Costs
ASC Topic 340-40, Other Assets and Deferred Costs — Contracts with Customers requires the Company to review certain costs to obtain customer contracts primarily as they relate to agency commission arrangements. The Company pays agent commissions to its distribution partners, such as independent agents, brokers, or referral partners, for selling policies on behalf of the Company. The Company’s agency commission arrangements are the same for both new or renewal business. The Company has elected the practical expedient to expense these costs as incurred since the amortization period related to the resulting asset would be one year or less. The Company has no significant instances of contracts that would be amortized for a period greater than a year and therefore has no contract costs deferred for such arrangements.
Costs to fulfill — Due to the relatively short time period between the information gathering phase and binding insurance coverage, the Company has determined that costs to fulfill contracts are not significant. Therefore, costs to fulfill a contract are expensed as incurred.
Disaggregation of Revenue
The following table disaggregates revenue by source for the years ended December 31:
|
(In thousands) |
2023 |
2024 |
||||
|
Commission income |
$ |
64,349 |
$ |
90,098 |
||
|
Fee income |
|
20,521 |
|
29,201 |
||
|
Total revenues |
$ |
84,870 |
$ |
119,299 |
||
Contract Asset and Premium Deposits
The timing of revenue recognition may not align with the right to invoice the customer. The Company records accounts receivable when it has the unconditional right to issue an invoice and receive payment, regardless of whether revenue has been recognized. Policyholder payments received in advance of commencement of the performance obligation are recorded as premium deposits. No revenue is recognized on these deposits until the performance obligation is complete.
The following table provides information about receivables and premium deposits as of December 31:
|
(In thousands) |
2023 |
2024 |
||||
|
Commissions and fees receivable |
$ |
941 |
$ |
2,612 |
||
|
Premium deposits |
$ |
8,399 |
$ |
11,810 |
||
During the year ended December 31, 2024, the Company recognized revenue of $2,509 related to the premium deposits balance at December 31, 2023.
F-29
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 4. Intangible Assets
Intangible assets consist of the following as of December 31:
|
(In thousands) |
Useful Life |
2023 |
2024 |
|||||||
|
Customer relationships |
10 years |
$ |
104 |
|
$ |
104 |
|
|||
|
Trade name |
10 years |
|
601 |
|
|
601 |
|
|||
|
|
705 |
|
|
705 |
|
|||||
|
Less accumulated amortization |
|
(159 |
) |
|
(229 |
) |
||||
|
Net intangible assets |
$ |
546 |
|
$ |
476 |
|
||||
The weighted average amortization period of intangible assets was 7.75 and 6.75 years for the years ended December 31, 2023, and 2024, respectively. Amortization expense related to intangible assets totaled $70 for each of the years ended December 31, 2023, and 2024.
The following table summarizes the expected amortization of the intangible assets for the next five years and thereafter as of December 31, 2024:
|
(In thousands) |
|||
|
Years ending December 31: |
|
||
|
2025 |
$ |
70 |
|
|
2026 |
|
70 |
|
|
2027 |
|
70 |
|
|
2028 |
|
70 |
|
|
2029 |
|
70 |
|
|
Thereafter |
|
126 |
|
|
$ |
476 |
||
Note 5. Debt
Debt consists of the following as of December 31:
|
(In thousands) |
2023 |
2024 |
||||||
|
2023 Term Loan |
$ |
178,525 |
|
$ |
— |
|
||
|
2024 Term Loan |
|
— |
|
|
135,000 |
|
||
|
Total debt |
|
178,525 |
|
|
135,000 |
|
||
|
Less: unamortized deferred financing fees |
|
(3,662 |
) |
|
(1,349 |
) |
||
|
Less current maturities of debt |
|
(1,900 |
) |
|
(8,550 |
) |
||
|
Debt, net |
$ |
172,963 |
|
$ |
125,101 |
|
||
2021 Credit Agreement
On October 21, 2021, the Company entered into a credit agreement (“2021 Credit Agreement”) providing for a $90,000 term loan (“2021 Term Loan”), with quarterly principal payments of $225 plus interest. Interest was payable at a base rate, as defined in the 2021 Credit Agreement, plus an applicable margin. The loan was scheduled to mature on October 21, 2026, and was secured by substantially all of the Company’s stock and assets. During the year ended December 31, 2023, and prior to the refinancing on May 8, 2023, the Company made aggregate principal prepayments on the 2021 Term Loan of $14,000 and incurred a prepayment penalty of $140 which is included as a loss on extinguishment of debt in the consolidated statements of income.
On May 8, 2023, the Company amended and restated its 2021 Credit Agreement (“Amended and Restated Credit Agreement”) in its entirety with its existing lender increasing its borrowing base on the term loan to $190,000 (“2023 Term Loan”) and providing access to incremental loans and a revolving line of credit of $10,000. As of December 31, 2023, the outstanding 2023 Term Loan accrued interest based on the Secured Overnight Financing
F-30
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 5. Debt (cont.)
Rate (“SOFR”) with an applicable margin of 6.25%, resulting in an interest rate of 11.7%. The 2023 Term Loan required quarterly principal payments equal to 0.25% of the amount borrowed, or approximately $475, with the remaining balance due in a balloon payment on May 8, 2029. For lenders that continued under the Amended and Restated Credit Agreement, the Company applied modification accounting and capitalized $2,657 of deferred financing fees, $313 of deferred financing asset, and recognized interest expense of $3,285 for third party fees related to the Amended and Restated Credit Agreement during 2023. A loss on extinguishment of debt of $196 was recognized in the consolidated statements of income related to unamortized deferred financing costs in connection with a lender in the 2021 Credit Agreement that did not participate in the Amended and Restated Credit Agreement.
As of December 31, 2023, there were no amounts outstanding under the revolver loan, and no amounts were drawn or repaid during the year then ended. During the years ended December 31, 2023 and 2024, and prior to the refinancing on June 13, 2024, the Company made aggregate principal prepayments on the 2023 Term Loan of $11,000 and $4,000, respectively, and incurred prepayment penalties of $220 and $80, respectively, which are included as a loss on extinguishment of debt in the consolidated statements of income. The Company’s effective interest rate for the year ended December 31, 2023, was 12.3%.
2024 Credit Agreement
On June 13, 2024, the Company entered into a credit agreement (“2024 Credit Agreement”) comprised of a $171,000 term loan (“2024 Term Loan”) and a revolving line of credit commitment of $10,000 (“2024 Revolver”) as well as access to incremental loans. The Company used the proceeds from the 2024 Term Loan in part to pay down the remaining balance of the 2023 Term Loan under the Amended and Restated Credit Agreement. A loss on extinguishment of debt of $5,346 was recognized in the consolidated statements of income during the year ended December 31, 2024, related to the pay down of the 2023 Term Loan, consisting of the prepayment penalty of $1,741 and the write-off of unamortized deferred financing fees of $3,348 and deferred financing asset of $257.
At the Company’s election, borrowings under the 2024 Credit Agreement may be based on either the Alternate Base Rate (“ABR”) or Term SOFR. ABR loans bear interest at a variable rate per annum equal to the highest of (a) the prime rate, (b) the New York Federal Reserve Bank (“NYFRB”) rate plus 0.50%, or (c) Term SOFR for a one-month interest period plus 1.00%, subject to a 1.00% floor, in each case plus an applicable margin ranging from 1.25% to 2.75% depending on the Company’s total net leverage ratio for the prior fiscal quarter. Term SOFR loans bear interest at a variable rate equal to Term SOFR, subject to a 1.00% floor, plus an applicable margin ranging from 2.25% to 3.75% depending on the Company’s total net leverage ratio for the prior fiscal quarter. As of December 31, 2024, the 2024 Term Loan was a Term SOFR loan with a margin of 3.0%, resulting in an interest rate of approximately 7.4%. The 2024 Term Loan requires annual amortization payments of 5.0% in years 1 and 2, 7.5% in years 3 and 4, and 10.0% in year 5 of the original principal amount, with a balloon payment due upon maturity on June 13, 2029. The 2024 Term Loan is prepayable at any time by the Company and mandatorily upon certain events, including asset dispositions, casualty or condemnation, equity dispositions by pledgors and debt incurrence. The Company must prepay 100% of the net proceeds received from such events. However, no prepayment is required unless the aggregate net proceeds from assets sales or casualty events exceed the greater of $1,250 or 2.5% of applicable earnings before interest, taxes, depreciation and amortization (“EBITDA”) in a fiscal year. Prepayments of the 2024 Term Loan are made without any penalty or premium. During the year ended December 31, 2024, the Company made aggregate principal repayments of $36,000. The Company capitalized deferred financing fees related to the 2024 Credit Agreement of $1,905. During the year ended December 31, 2024, the Company recorded $556 of amortization expense, resulting in unamortized deferred financing fees of $1,349 as of December 31, 2024. Interest expense related to the 2024 Credit Agreement was $7,974 for the year ended December 31, 2024. The Company’s effective interest rate for the year ended December 31, 2024, was 8.9%.
2024 Revolver: The 2024 Revolver has a maximum availability of $10,000. At the Company’s request, the interest rate on the 2024 Revolver may be based on either ABR or Term SOFR. The minimum borrowing amount on the 2024 Revolver is $5,000 and interest is payable quarterly. Any outstanding principal and accrued interest on
F-31
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 5. Debt (cont.)
the 2024 Revolver is due on June 13, 2029. Further, the 2024 Revolver is subject to an annual unused line fee of 0.5% paid quarterly. As of December 31, 2024, there were no amounts outstanding under the 2024 Revolver, and no amounts were drawn or repaid during the year then ended.
Incremental Loans: The Company may request up to three tranches of incremental term loans (“Incremental Term Loan”) or increases to the existing Revolver (“Additional Revolving Commitment”), subject to lender participation and agent approval. Each Incremental Term Loan request must be for a minimum principal amount of $10,000. The total amount of Additional Revolving Commitments under all such requests shall not exceed $10,000 over the term of the agreement. Any Incremental Term Loan(s) must (a) rank pari passu in right of payment and be secured solely by the existing collateral, (b) have no obligors other than the loan parties, (c) mature no earlier than the latest maturity date of any then-outstanding term loans, and (d) not have a shorter weighted average life to maturity than the existing Term Loans. Incremental Term Loans may be priced differently but must otherwise be treated no more favorably than existing term loans, subject to exceptions for loans maturing after the latest maturity date.
Remaining maturities of debt subsequent to December 31, 2024, are as follows:
|
(In thousands) |
|||
|
Years ending December 31: |
|
||
|
2025 |
|
8,550 |
|
|
2026 |
|
10,688 |
|
|
2027 |
|
12,824 |
|
|
2028 |
|
14,962 |
|
|
2029 |
|
87,976 |
|
|
$ |
135,000 |
||
Borrowings under the 2024 Credit Agreement are secured by a first-priority lien on substantially all of the Company’s stock and assets and are subject to certain restricted covenants primarily relating to net leverage ratios. Under the 2024 Credit Agreement, the Company is subject to two key financial covenants beginning with the fiscal quarter ending June 30, 2024. First, the Company was required to maintain a total net leverage ratio that did not exceed 4.50 to 1.00 through the quarter ending September 30, 2024. This threshold tightens over time, requiring a maximum ratio of 4.25 to 1.00 for quarters ending from December 31, 2024, through March 31, 2025, and further reducing to 4.00 to 1.00 for quarters ending on or after June 30, 2025. Second, the Company is required to maintain an interest coverage ratio of at least 2.00 to 1.00 for any rolling four-quarter period ending on the last day of each fiscal quarter, starting with the quarter ending June 30, 2024. The Company was in compliance with both the covenants as of December 31, 2024.
The 2024 Credit Agreement contains a number of customary negative covenants for agreements of this type that, among other things and subject to certain exceptions, restrict the Company’s ability to: create, incur, or assume any additional indebtedness; create, incur, or assume any liens; engage in mergers, consolidations, or amalgamations; make investments, loans, or advances; pay dividends; sell assets; engage in certain transactions with affiliates; enter in restrictive agreements; enter into sale and leaseback transactions; execute amendments to organizational documents or certain other material agreements; and make certain accounting changes.
Interest expense was $21,326 and $17,520 for the years ended December 31, 2023, and 2024, respectively, of which $1,194 and $871 was attributable to the amortization of the debt issuance costs, respectively, and $34 was attributable to the amortization of the deferred financing asset in both years. Accrued interest associated with the outstanding debt is included within accrued expenses on the consolidated balance sheets. As of December 31, 2023, and 2024, the Company had $0 and $451, respectively, of accrued interest associated with the debt.
F-32
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 6. Redeemable, Convertible Preferred Stock and Stockholders’ Deficit
The total number of shares of all classes of capital stock which the Company has the authority to issue is 19,615,000, consisting of 4,185,000 shares of Redeemable Preferred Stock $0.00001 par value per share and 15,430,000 shares of common stock $0.00001 par value per share (“Common Stock”).
The following shares of Common Stock are reserved for future issuance:
|
Conversion of redeemable, convertible preferred stock |
4,185,000 |
|
|
Stock options issued and outstanding |
1,094,500 |
|
|
Authorized for future grant under 2019 Stock Plan |
81,500 |
|
|
5,361,000 |
On July 28, 2023, the Company amended and restated its certificate of incorporation to effect a 1,000-for-1 forward stock split of the Company’s outstanding and authorized shares of Common Stock and Redeemable Preferred Stock so that the par value of the issued and outstanding shares of the Company’s Common Stock and Redeemable Preferred Stock was reduced from $0.01 per share to $0.00001 per share. All share and per share amounts presented herein have been retroactively adjusted to reflect the impact of this stock split.
Common Stock
On March 10, 2023, the stockholders of the Company entered into a stock purchase agreement and the Company issued 103,720 shares of Common Stock to existing stockholders at a purchase price of approximately $96.41 per share for a total purchase price of $10,000. During May 2023, these funds were returned to the stockholders, and the 103,720 shares of Common Stock were retired.
On May 10, 2023, the Company’s Board approved a cash dividend in the aggregate amount of $339,023, payable to common stockholders of record as of May 10, 2023, contingent on the completed sale of Redeemable Preferred Stock on the same date.
Redeemable, Convertible Preferred Stock
On May 10, 2023 (the “Original Issuance Date”), the Company issued 4,185,000 shares of Redeemable Preferred Stock to a single investor for cash consideration of $229,985 (“Original Issue Price”). The Company paid $10,921 in fees to complete the financing.
Dividends: Each share of Redeemable Preferred Stock is entitled to receive cumulative dividends of 5% per annum accrued daily and compounded quarterly commencing on the Original Issuance Date through the earlier of the eighth anniversary of the Original Issuance Date or the date on which the holder of Redeemable Preferred Stock achieves a multiple on invested capital equal to or exceeding three. The Redeemable Preferred Stock is entitled to participate ratably with the holders of Common Stock on all dividends paid on the shares of Common Stock. Cumulative undeclared dividends totaled $7,740 and $19,567 as of December 31, 2023, and 2024, respectively.
Voting: The holders of shares of Redeemable Preferred Stock are entitled to vote on an as-converted basis together with the holders of Common Stock on all matters submitted to a vote of stockholders of the Company, except as otherwise provided by applicable law. Except as otherwise provided under the terms of the Redeemable Preferred Stock or as required by applicable law, the holders of Redeemable Preferred Stock and the holders of Common Stock vote together as a single class.
Liquidation: Upon a change of control or any voluntary or involuntary liquidation, dissolution or winding up of the Company (“Liquidation”), the Redeemable Preferred Stock shall be paid in preference and prior to any payment made to the holders of Common Stock and any other securities that do not expressly rank senior to the Redeemable Preferred Stock (“Junior Securities”).
F-33
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 6. Redeemable, Convertible Preferred Stock and Stockholders’ Deficit (cont.)
In the event of a Liquidation, including a change of control, holders of Redeemable Preferred Stock are entitled to receive accrued but unpaid dividends and either 1) receive a Liquidation preference in priority to holders of Common Stock and Junior Securities for an amount equal to the Original Issue Price based or 2) legally convert their shares to Common Stock based on what would result in the greatest return to the holders.
Conversion: The holders of Redeemable Preferred Stock shall have the right at any time to convert all or a portion of such shares into an equal number of shares of Common Stock. Upon the consummation of an initial public offering or transaction with a special purpose acquisition company that results in a certain amount of aggregate proceeds and an offering price above a certain threshold (“Qualified IPO”) or on the affirmative vote a majority of the holders of Redeemable Preferred Stock, the Redeemable Preferred Stock will be automatically converted into such number of shares of Common Stock having a value per share equal to the amount that would have been distributed with respect to such share had the Company been sold for cash in a Liquidation for the value of the Company in a Qualified IPO implied by the price per share of Common Stock at which shares are sold to the public in a Qualified IPO.
No fractional shares of Common Stock will be issued upon conversion of any shares of Redeemable Preferred Stock. If more than one share of Redeemable Preferred Stock subject to conversion is held by the same holder, such shares will be aggregated for purposes of conversion. If the conversion of any share or shares of Redeemable Preferred Stock results in a fractional share of Common Stock issuable (after aggregating all shares of Redeemable Preferred Stock held by each holder), the Company will pay a cash amount in lieu of issuing such fractional share in an amount equal to the fair market value of such fractional interest.
The Company will at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting conversion of the Redeemable Preferred Stock into shares of Common Stock a number of shares of Common Stock equal to 110% of the number of shares of Common Stock issuable upon conversion of all then outstanding Redeemable Preferred Stock. All Common Stock that may be issued upon conversion of the Redeemable Preferred Stock will upon issuance be duly authorized, fully paid and non-assessable and will not be subject to preemptive rights or subscription rights of any other stockholder of the Company.
Shares of Redeemable Preferred Stock which have been converted, redeemed, repurchased or otherwise canceled will be retired and have the status of authorized and unissued shares of Redeemable Preferred Stock.
Redemption: In connection with a Change of Control, the holders of shares of Redeemable Preferred Stock are entitled to require the Company to purchase all or any portion of its shares of Redeemable Preferred Stock at a purchase price per share payable in cash equal to the amount per share that is distributable to such share in a Liquidation.
If a Liquidity Transaction has not been consummated on or after the seventh anniversary of the Original Issuance Date, the holder of the Redeemable Preferred Stock may cause the Company to initiate a sale process to sell the Company, whether by merger, consolidation, sale of all or substantially all of the Company’s assets or sale of all of its capital stock.
The Redeemable Preferred Stock is classified as temporary equity on the accompanying consolidated balance sheets as it is redeemable solely on the passage of time or upon an event outside the control of the Company. As of the Original Issuance Date, the Redeemable Preferred Stock was probable of becoming redeemable as potential future redemption is dependent solely on the passage of time. The Company elected to accrete the changes in the redemption value over the period from the Original Issuance Date until the earliest probable redemption date using the interest method. Changes in the redemption value are considered to be changes in accounting estimates. The carrying value of Redeemable Preferred Stock totaled $227,199 and $240,473 as of December 31, 2023, and 2024, respectively. For the years ended December 31, 2023, and 2024, the Company recognized accretion of $8,135 and $13,274, respectively, as an adjustment between Additional Paid-In Capital and Accumulated Deficit.
F-34
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 7. Share-Based Compensation Plan
In 2019, the stockholders of the Company approved the Neptune Flood Incorporated 2019 Stock Plan (the “Plan”), that provides for the granting of restricted stock or options to employees and consultants contingent on performance-based and/or time-based criteria and was subsequently amended and restated in May and November of 2023. The principal purpose of the stock plan is to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, and to promote the success of the Company’s business. The maximum contractual term of the stock options issued under the Plan is 10 years. The number of shares of stock reserved for issuance under the stock plan was 1,280,000 shares. No awards will be granted under the Plan if such awards could result in the issuance of more than 1,176,000 shares pursuant to awards granted after May 8, 2023.
For the years ended December 31, 2023, and 2024, only stock options were issued and outstanding. Stock options issued in 2023 and 2024 consist of two tranches: Time-Based Options and Performance-Based Options. Time-Based Options contain only service conditions and cliff vest on the 5th anniversary date of the grant date. Upon an optionee’s death or disability, or the consummation of a liquidity event by the Company, all of the Time-Based Option will immediately vest and become exercisable. All Time-Based Options have an exercise price of $54.95 per share. Performance-Based Options contain service, performance and market conditions. Subject to the optionee’s continuous service through a liquidity event, Performance-Based Options will vest upon the occurrence of a liquidity event; provided that if the return on the invested capital of preferred stockholders is less than a multiple of 3.0 (as defined in the Plan (referred to herein as the “Preferred Return Multiple”)), the exercise price for the vested options will be $109.9 per share; and if the return on the invested capital of preferred stockholders equals or is more than the Preferred Return Multiple, the exercise price for the vested options will be $54.95 per share. If a liquidity event does not occur before the 5th anniversary date of the grant date, the service condition is considered to be met once a grantee has provided continuous service for 5 years; however, the performance condition is still required to be met for the Performance-Based Options to vest.
A summary of stock option activity for the year ended December 31, 2024, is presented below:
|
Time Based |
Performance Based |
|||||||||||||||
|
Shares |
Weighted |
Weighted |
Shares |
Weighted |
Weighted |
|||||||||||
|
Outstanding as of December 31, 2023 |
511,500 |
|
$ |
54.95 |
511,500 |
|
$ |
82.43 |
||||||||
|
Granted |
45,250 |
|
|
54.95 |
45,250 |
|
|
82.43 |
||||||||
|
Exercised or converted |
— |
|
|
— |
— |
|
|
— |
||||||||
|
Forfeited |
(9,500 |
) |
|
54.95 |
(9,500 |
) |
|
82.43 |
||||||||
|
Expired |
— |
|
|
— |
— |
|
|
— |
||||||||
|
Outstanding as of December 31, 2024 |
547,250 |
|
$ |
54.95 |
8.9 |
547,250 |
|
$ |
82.43 |
8.9 |
||||||
|
Exercisable as of December 31, 2024 |
— |
|
|
— |
— |
|
|
— |
||||||||
The weighted average grant-date fair value of the Time-Based Options issued in 2023 and 2024 is $2.79 and $4.22, respectively. During the years ended December 31, 2023, and 2024, the Company recognized approximately $41 and $296, respectively, in compensation expense related to Time-Based Options which is included in Employee compensation and benefits expenses in the consolidated statements of income. The unrecognized compensation expenses for Time-Based Options is $1,253 as of December 31, 2024, which is expected be recognized over a weighted average period of 3.9 years.
F-35
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 7. Share-Based Compensation Plan (cont.)
The weighted average grant-date fair value of the Performance-Based Options issued in 2023 and 2024 is $0.91 and $1.65, respectively. No compensation expense was recognized for Performance-Based Options because the performance condition was not considered probable to be met. The unrecognized compensation expenses for Performance-Based Options are $1,058 as of December 31, 2024, which will be recognized upon the occurrence of a liquidity event. No stock options were exercised in 2023 and 2024.
As there has been no public market for the Company’s Common Stock to date, the estimated fair value of its Common Stock has been determined by the Company’s board of directors (the “Board”) as of the date of each equity award, with input from management, considering the Company’s most recently available third-party valuations of its Common Stock, and the Board’s assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. The fair value of the Company’s Common Stock in 2023 and 2024 was estimated using a combination of income and market approach based on the most recent transaction that provided an observable market value. A discount for lack of marketability of the Common Stock is then applied to arrive at an indication of value for the Common Stock.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted in the table below. Expected volatility for the Company’s Common Stock was determined based on an average of the historical volatility of a peer group of similar public companies. The expected term of options granted was calculated using the simplified method, which represents the average of the contractual term of the option and the weighted average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. The risk-free rate is based upon the U.S. Treasury yield curve in effect at the time of grant for the period equivalent to the expected term of the option.
Below is a summary of the weighted average assumptions used for the Black-Scholes model valuation of stock options during the years ended December 31:
|
Time-Based |
||||||||
|
2023 |
2024 |
|||||||
|
Expected term in years |
|
7.5 |
|
|
7.4 |
|
||
|
Expected stock price volatility |
|
37.0 |
% |
|
36.5 |
% |
||
|
Dividend yield |
|
0 |
% |
|
0 |
% |
||
|
Risk-free interest rate |
|
4.7 |
% |
|
4.5 |
% |
||
|
Fair value of the underlying share |
$ |
16.8 |
|
$ |
20.3 |
|
||
|
Performance-Based |
||||||||
|
2023 |
2024 |
|||||||
|
Expected term in years |
|
5.0 |
|
|
5.0 |
|
||
|
Expected stock price volatility |
|
38.5 |
% |
|
37.8 |
% |
||
|
Dividend yield |
|
0 |
% |
|
0 |
% |
||
|
Risk-free interest rate |
|
4.7 |
% |
|
4.5 |
% |
||
|
Fair value of the underlying share |
$ |
16.8 |
|
$ |
20.3 |
|
||
F-36
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 8. Income Taxes
Components of income tax expense include the following for the years ended December 31:
|
(In thousands) |
2023 |
2024 |
||||||
|
Current: |
|
|
|
|
||||
|
Federal |
$ |
5,910 |
|
$ |
9,154 |
|
||
|
State |
|
2,254 |
|
|
3,246 |
|
||
|
|
8,164 |
|
|
12,400 |
|
|||
|
Deferred: |
|
|
|
|
||||
|
Federal |
|
(1,752 |
) |
|
(516 |
) |
||
|
State |
|
(441 |
) |
|
(96 |
) |
||
|
|
(2,193 |
) |
|
(612 |
) |
|||
|
$ |
5,971 |
|
$ |
11,788 |
|
|||
A reconciliation of the statutory U.S. federal tax rate and the Company’s effective tax rates is as follows for the years ended December 31:
|
2023 |
2024 |
|||||
|
Statutory federal income tax rate |
21.0 |
% |
21.0 |
% |
||
|
State income tax rate, net of federal income tax effect |
5.3 |
% |
5.2 |
% |
||
|
Research tax credit |
(1.7 |
)% |
(0.7 |
)% |
||
|
Other |
0.4 |
% |
(0.1 |
)% |
||
|
Effective income tax rate |
25.0 |
% |
25.4 |
% |
||
The following table summarizes components of deferred income tax assets and liabilities as of December 31:
|
(In thousands) |
2023 |
2024 |
||||||
|
Deferred tax assets (liabilities): |
|
|
|
|
||||
|
Cancellation reserves |
$ |
275 |
|
$ |
351 |
|
||
|
Acquisition intangibles |
|
40 |
|
|
44 |
|
||
|
163(j) interest expense limitations |
|
2,031 |
|
|
1,811 |
|
||
|
Internally developed software |
|
111 |
|
|
735 |
|
||
|
Stock compensation |
|
11 |
|
|
74 |
|
||
|
Other |
|
7 |
|
|
6 |
|
||
|
Deferred tax assets |
|
2,475 |
|
|
3,021 |
|
||
|
|
|
|
|
|||||
|
Goodwill |
|
(160 |
) |
|
(121 |
) |
||
|
Prepaid expenses |
|
(124 |
) |
|
(97 |
) |
||
|
Deferred tax liabilities |
|
(284 |
) |
|
(218 |
) |
||
|
Net deferred tax assets |
$ |
2,191 |
|
$ |
2,803 |
|
||
Deferred tax balances reflect the impact of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at the tax rates in effect when the temporary differences are expected to be recovered or settled. The Company assessed the future realization of the tax benefit of its existing deferred tax assets and concluded that it is more likely than not that all of the deferred tax assets will be realized in the future. As a result, the Company has not recorded a valuation allowance against its deferred tax assets at December 31, 2023 and 2024.
F-37
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 8. Income Taxes (cont.)
As of December 31, 2024, the Company has not recognized any uncertain tax positions, penalties, or interest as management has concluded that no such positions exist. The Company is subject to federal examination for tax years beginning with the year ended December 31, 2021 and state examination for tax years beginning with the year ended December 31, 2020. The Company is not currently subject to income tax audits in any U.S. or state jurisdictions for any tax year. In addition, all of the Company’s 163(j) interest expense limitations can be carried forward indefinitely.
Note 9. Defined Contribution Plan
The Company adopted the Neptune Flood Incorporated 401(k) Plan (the “401(k) Plan”) on January 1, 2020. The 401(k) Plan is a voluntary defined contribution retirement plan for eligible employees of the Company. All eligible employees become participants unless they elect not to participate. The 401(k) Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974. During the years ended December 31, 2023, and 2024, the Company made nonelective contributions of $175 and $181, respectively, which were included in general and administrative expense in the consolidated statements of income.
Note 10. Related-Party Transactions
Rent Expense
In February 2021, the Company entered into a month-to-month operating lease agreement for office space for management and administrative services at a rate of $12 per month from an affiliate of the Company’s executive and principal stockholder. Rent expense was approximately $144 for each of the years ended December 31, 2023, and 2024, respectively, which was included in general and administrative expense in the consolidated statements of income.
Software Development
In 2022, the Company engaged with a contractor for software development and data analytics that is an affiliate of the Company’s executive and principal stockholder. Payments made to the contractor were approximately $945 and $585 during the years ended December 31, 2023, and 2024, respectively, which were included in general and administrative expense in the consolidated statements of income.
Note 11. Segment Reporting
The Company has one operating segment and therefore one reportable segment relating to its business as an MGA that offers accessible residential and commercial insurance products, including primary and excess flood insurance and parametric earthquake insurance, primarily through a nationwide agency network in the United States. The Company’s chief operating decision maker (“CODM”), the CEO, manages the Company’s operations on a consolidated basis as one operating segment for the purpose of evaluating financial performance and allocating resources.
The accounting policies of the Company’s segment are the same as those described in the summary of significant accounting policies. The CODM uses net income, as reported on the consolidated statements of income, to assess performance and allocate resources. The significant segment expense categories regularly provided to the CODM are the same as those included on the consolidated statements of income. The measure of segment assets is total assets as reported on the consolidated balance sheets.
The CODM uses net income to assess performance by examining period-over-period trends, benchmarking to the Company’s competitors, and monitoring budget versus actual results. The CODM uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the entity.
The Company does not have revenue from any one customer that is greater than 10% of consolidated revenue.
F-38
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 12. Earnings Per Share
The following table sets forth the computation of basic and dilutive earnings per share:
|
(In thousands, except share and per share data) |
2023 |
2024 |
||||||
|
Basic Shares: |
|
|
|
|
||||
|
Numerator: |
|
|
|
|
||||
|
Net income |
$ |
17,886 |
|
$ |
34,592 |
|
||
|
Less: accretion adjustment to redeemable preferred stock(1) |
|
(8,135 |
) |
|
(13,274 |
) |
||
|
Less: allocation to participating preferred stock |
|
— |
|
|
(6,599 |
) |
||
|
Net income available to common stockholders |
$ |
9,751 |
|
$ |
14,719 |
|
||
|
|
|
|
|
|||||
|
Denominator: |
|
|
|
|
||||
|
Weighted average Common Stock outstanding – basic and diluted |
|
9,352,334 |
|
|
9,335,000 |
|
||
|
Basic earnings per share |
$ |
1.04 |
|
$ |
1.58 |
|
||
|
Diluted earnings per share |
$ |
1.04 |
|
$ |
1.58 |
|
||
|
Outstanding as |
Outstanding as |
|||
|
Time Vesting Options(2) |
511,500 |
547,250 |
||
|
Performance Vesting Options(3) |
511,500 |
547,250 |
____________
(1) This adjustment represents the accretion of the redeemable preferred stock to its redemption value and includes both the effect of cumulative undeclared dividends and the accretion of issuance costs for the applicable periods.
(2) Time Vesting Options are excluded from the diluted earnings per share computation because they are out-of-the-money for the years ended December 31, 2023, and December 31, 2024.
(3) Performance Vesting Options have a performance condition. As of December 31, 2023, and 2024 the performance condition was not met and therefore, these options were excluded from the dilutive earnings per share computation.
On May 10, 2023, the Company’s Board approved a cash dividend in the aggregate amount of $339,023, payable to common stockholders of record as of May 10, 2023, contingent on the consummation of the sale of the Redeemable Preferred Stock on the same date. When applying the two-class method in 2023, the cash dividend resulted in an undistributed loss, which was not allocated to holders of the Redeemable Preferred Stock because they did not have the contractual obligation to share in the loss.
Note 13. Commitments and Contingencies
The Company is, from time to time, party to various legal actions and is subject to various claims arising in the ordinary course of business from time to time. Management believes that the resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
Note 14. Subsequent events
In connection with the issuance of the consolidated financial statements of Neptune Holdings, the Company has evaluated subsequent events through July 2, 2025, the date that the consolidated financial statements of Neptune Holdings were available to be issued. The Company did not identify any material subsequent events that required recognition or additional disclosure in these consolidated financial statements except for the following:
On April 9, 2025, the Board of Neptune Holdings authorized and declared a dividend in the aggregate amount of $175,000, or $12.94 per share, payable to its stockholders of record as of April 10, 2025. The dividend was funded from the proceeds of the expanded credit facility and was paid on April 10, 2025.
F-39
Neptune Insurance Holdings Inc.
Notes to Audited Consolidated Financial Statements
Note 14. Subsequent events (cont.)
On April 10, 2025, the Company amended its 2024 Credit Agreement to, among other things, provide for $166,000 of incremental term loans (the loans thereunder, the “2025 Term Loans”), increasing the aggregate principal amount of the Company’s existing $135,000 term loan facility to $301,000 and extending the maturity date to April 30, 2030. The proceeds of the 2025 Term Loans were used to repay in full all outstanding obligations under the 2024 Term Loans and to finance a dividend. There were no changes to the revolving loan commitment, which remains at $10,000, with no amounts drawn as of the amendment date. On June 12, 2025, the Company made a $7,000 principal payment on the term loan issued under the 2024 Credit Agreement.
On April 10, 2025, the Company completed a corporate restructuring through a reverse triangular merger; refer to Note 1 — Nature of Business and Basis of Presentation for additional information.
Events Subsequent to Original Issuance of Financial Statements (Unaudited)
In connection with the reissuance of the financial statements, the Company has evaluated subsequent events through August 8, 2025, the date the financial statements were available to be reissued. The Company did not identify any material subsequent events that required recognition or additional disclosure in these condensed consolidated financial statements except for the following:
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA introduces significant changes to the tax code, including modifications to bonus depreciation and interest expense limitations. As the OBBBA was enacted after the Company’s reporting period ended on December 31, 2024, it is considered an unrecognized subsequent event in accordance with ASC Topic 855, Subsequent Events.
The Company is currently evaluating the provisions of the OBBBA to determine its impact on its financial statements. At this time, the Company is unable to estimate the financial effects of the OBBBA.
F-40

Joint Book-Runners
Morgan Stanley
J.P. Morgan
BofA Securities
BMO Capital Markets
Goldman Sachs & Co. LLC
Evercore ISI
Deutsche Bank Securities
Keefe, Bruyette & Woods
A Stifel Company
Mizuho
Piper Sandler
Raymond James
TD Securities
Co-Manager
Dowling & Partners Securities LLC
________________________
, 2025
Part II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses in connection with the sale of the shares of common stock being registered hereby. All amounts are estimates except for the SEC registration fee and the FINRA filing fee and the listing fee.
|
SEC registration fee |
$ |
* |
|
|
FINRA filing fee |
|
* |
|
|
NYSE listing fee |
|
* |
|
|
Printing and engraving expenses |
|
* |
|
|
Legal fees and expenses |
|
* |
|
|
Accounting fees and expenses |
|
* |
|
|
Transfer agent and registrar fees and expenses |
|
* |
|
|
Road show expenses |
|
* |
|
|
Miscellaneous fees and expenses |
|
* |
|
|
Total |
$ |
* |
____________
* To be provided by amendment.
Item 14. Indemnification of Directors and Officers.
Section 145 of the DGCL authorizes a corporation to indemnify its directors and officers against liabilities arising out of actions, suits and proceedings to which they are made or threatened to be made a party by reason of the fact that they have served or are currently serving as a director or officer to a corporation. The indemnity may cover expenses (including attorneys’ fees) judgments, fines, and amounts paid in settlement actually and reasonably incurred by the director or officer in connection with any such action, suit or proceeding. Section 145 permits corporations to pay expenses (including attorneys’ fees) incurred by directors and officers in advance of the final disposition of such action, suit or proceeding. In addition, Section 145 provides that a corporation has the power to purchase and maintain insurance on behalf of its directors and officers against any liability asserted against them and incurred by them in their capacity as a director or officer, or arising out of their status as such, whether or not the corporation would have the power to indemnify the director or officer against such liability under Section 145.
As permitted by the DGCL, the Registrant’s restated certificate of incorporation that will be in effect upon the completion of the offering contains provisions that eliminate the personal liability of its directors and certain of its officers for monetary damages for any breach of fiduciary duties as a director or officer, except liability for the following:
• any breach of the director’s duty of loyalty to the Registrant or its stockholders;
• acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
• for directors, any under Section 174 of the DGCL (regarding unlawful dividends and stock purchases);
• any transaction from which the director derived an improper personal benefit; or
• for officers, for any action by or in the right of the Company.
As permitted by the DGCL, the Registrant’s restated bylaws that will be in effect upon the completion of the offering provide that:
• the Registrant is required to indemnify its directors and officers to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended;
• the Registrant may indemnify its other employees and agents as set forth in the DGCL;
II-1
• the Registrant is required to advance expenses, as incurred, to its directors and officers in connection with a legal proceeding to the fullest extent permitted by the DGCL, subject to limited exceptions; and
• the rights conferred in the bylaws are not exclusive.
The Registrant has entered, and intends to continue to enter, into separate indemnification agreements with its current directors and executive officers to provide these directors and executive officers additional contractual assurances regarding the scope of the indemnification set forth in the Registrant’s restated certificate of incorporation and restated bylaws and to provide additional procedural protections. The indemnification provisions in the Registrant’s restated certificate of incorporation, restated bylaws and the indemnification agreements entered into or to be entered into between the Registrant and each of its directors and executive officers may be sufficiently broad to permit indemnification of the Registrant’s directors and executive officers for liabilities arising under the Securities Act.
The Registrant has directors’ and officers’ liability insurance that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.
The underwriting agreement filed as Exhibit 1.1 to this registration statement provides for indemnification of the Registrant and its directors and officers by the underwriters against certain liabilities under the Securities Act and the Exchange Act.
Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding shares of capital stock issued by us since January 1, 2022, that were not registered under the Securities Act. Also included is the consideration, if any, received by us for such shares and information relating to the section of the Securities Act or SEC rule under which exemption from registration was claimed.
• From January 1, 2022, to the date of this filing, we granted stock options to purchase an aggregate of 1,778,700 shares of our Class A common stock, with an exercise price of either $54.95 or $109.90 per share, under the Pre-IPO 2025 Plan.
• On May 10, 2023, we issued and sold an aggregate of 4,185,000 shares of our convertible preferred stock, at a purchase price of $54.95 per share for an aggregate purchase price of $230 million.
• On April 10, 2025, pursuant to our corporate reorganization, Neptune Holdings issued 9,335,000 shares of its common stock and 4,185,000 shares of its convertible preferred stock to the prior holders of shares of common stock and convertible preferred stock, respectively, of Neptune Flood. Pursuant to the reorganization, each (i) issued and outstanding share of common stock of Neptune Flood was converted into one share of common stock of Neptune Holdings; (ii) issued and outstanding share of convertible preferred stock of Neptune Flood was converted into one share of convertible preferred stock of Neptune Holdings and (iii) issued, outstanding and unexercised portions, whether or not vested or exercisable, of all options to purchase Neptune Flood common stock granted under the Neptune Flood stock plan were assumed by Neptune Holdings and thereafter became exercisable for the same number of shares of common stock of Neptune Holdings.
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or of Regulation D promulgated thereunder) or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
II-2
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
|
Exhibit |
|
|
|
1.1* |
Form of Underwriting Agreement |
|
|
2.1 |
||
|
3.1 |
Amended and Restated Certificate of Incorporation of the Registrant, dated April 10, 2025 |
|
|
3.2* |
Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant, dated , 2025 |
|
|
3.3 |
||
|
3.4 |
Amended and Restated Bylaws of the Registrant, as currently in effect |
|
|
3.5* |
Form of Second Amended and Restated Bylaws of the Registrant, to be effective upon the completion of this offering |
|
|
4.1* |
Form of Registrant’s Class A Common Stock Certificate |
|
|
4.2* |
Form of Registration Rights Agreement by and among the Registrant and certain investors of the Registrant |
|
|
5.1* |
Opinion of Orrick, Herrington & Sutcliffe LLP |
|
|
10.1* |
Form of Indemnification Agreement entered into between the Registrant and each of its directors and executive officers |
|
|
10.2+ |
Pre-IPO 2025 Plan, as amended and restated, and forms of agreement thereunder |
|
|
10.3*+ |
2025 Equity Incentive Plan, and forms of agreement thereunder |
|
|
10.4*+ |
2025 Employee Stock Purchase Plan |
|
|
10.5*+ |
Executive Incentive Bonus Plan |
|
|
10.6*+ |
Form of Restricted Stock Unit Agreement |
|
|
10.7 |
Commercial Lease Agreement, by and between Neptune Flood Incorporated and TRB Rents, LLC |
|
|
10.8⸸ |
||
|
10.9 |
||
|
10.10 |
Form of Equity Exchange Right Agreement between the Registrant and Trevor Burgess |
|
|
16.1 |
||
|
21.1 |
||
|
23.1* |
Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit 5.1) |
|
|
23.2 |
||
|
24.1 |
Power of Attorney (included on the signature page to this Registration Statement) |
|
|
107 |
____________
* To be filed by amendment.
+ Indicates a management contract or compensatory plan or arrangement.
⸸ Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
(b) Financial Statement Schedules.
All other financial statement schedules are omitted because they are not applicable or because the information is included in the Registrant’s audited consolidated financial statements or related notes.
II-3
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to provisions described in Item 14 above, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-4
Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Petersburg, State of Florida, on September 2, 2025.
|
Neptune Insurance Holdings Inc. |
||||
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By: |
/s/ Trevor Burgess |
|||
|
Trevor Burgess |
||||
|
Chief Executive Officer and Chairman of the Board of Directors |
||||
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Trevor Burgess and Jim Steiner, and each of them, such individual’s true and lawful attorneys-in-fact and agents with full power of substitution, for such individual and in such individual’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to sign any registration statement for the same offering covered by the Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and any and all applications and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such individual might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
|
Name |
Title |
Date |
||
|
/s/ Trevor Burgess |
Chief Executive Officer and Chairman of the |
September 2, 2025 |
||
|
Trevor Burgess |
Board of Directors |
|||
|
/s/ Jim Steiner |
Chief Financial Officer and Director |
September 2, 2025 |
||
|
Jim Steiner |
(principal financial and accounting officer) |
|||
|
/s/ Jonathan Carlon |
Director |
September 2, 2025 |
||
|
Jonathan Carlon |
||||
|
/s/ Blair J. Greenberg |
Director |
September 2, 2025 |
||
|
Blair J. Greenberg |
||||
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/s/ Cristian Melej |
Director |
September 2, 2025 |
||
|
Cristian Melej |
||||
|
/s/ Mike Vostrizansky |
Director |
September 2, 2025 |
||
|
Mike Vostrizansky |
II-5
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this “Agreement”) is entered into as of April 10, 2025, by and among Neptune Flood Incorporated, a Delaware corporation (the “Company”), Neptune Insurance Holdings Inc., a Delaware corporation and a direct, wholly owned subsidiary of the Company (“Holdings”), and Neptune Insurance Merger Sub Inc., a Delaware corporation and a direct, wholly owned subsidiary of Holdings (“Merger Sub”).
Background
WHEREAS, as of the date hereof, the Company’s authorized capital stock under its Amended and Restated Certificate of Incorporation, as amended to date (the “Company Certificate”), consists of (i) 15,430,000 shares of common stock, par value $0.00001 per share (the “Company Common Stock”), of which 9,335,000 shares are outstanding, and (ii) 4,185,000 shares of preferred stock, par value $0.00001 per share, designated as Cumulative Convertible Participating Preferred Stock (the “Company Preferred Stock” and, collectively with the Company Common Stock, the “Company Capital Stock”), all of which are outstanding;
WHEREAS, Holdings and Merger Sub are newly formed corporations organized for the sole purpose of participating in the transactions herein contemplated, own no assets (other than Holdings’ ownership of Merger Sub) and have taken no actions other than those necessary or advisable to organize the corporations and to effect the transactions herein contemplated, and prior to the transactions contemplated hereby, Merger Sub is a direct, wholly owned subsidiary of Holdings and Holdings is a direct, wholly owned subsidiary of the Company;
WHEREAS, the Company desires to reorganize into a holding company structure in accordance with Section 251 of the General Corporation Law of the State of Delaware (the “DGCL”) pursuant to which Merger Sub will be merged with and into the Company (the “Merger”), with the Company as the surviving corporation, such that, following the Merger, (i) Merger Sub will cease to exist, (ii) the Company will be a direct, wholly owned subsidiary of Holdings and (iii) the holders of shares of Company Capital Stock immediately prior to the Merger will receive shares of capital stock of Holdings pursuant to the Merger (with the result that such holders’ rights and obligations with respect to Holdings from and after the Merger will be identical to their rights and obligations with respect to the Company prior to the Merger);
WHEREAS, the Certificate of Incorporation and the Bylaws of Holdings shall each be amended and restated immediately prior to the Effective Time (as defined herein) (as so amended and restated, respectively, the “Holdings Certificate” and the “Holdings Bylaws”) to contain provisions substantially identical to the Company Certificate and the Company’s Amended and Restated Bylaws, each as in effect immediately before the Effective Time;
WHEREAS, upon such amendment and restatement of the Holdings Certificate, the designations, rights, powers and preferences, and the qualifications, limitations and restrictions of, the common stock of Holdings, par value $0.00001 per share (the “Holdings Common Stock”), and the preferred stock of Holdings, par value $0.00001 per share, designated as Cumulative Convertible Participating Preferred Stock (the “Holdings Preferred Stock”), will be substantially the same as those of the Company Common Stock and Company Preferred Stock, respectively;
WHEREAS, the Boards of Directors of the Company, Holdings and Merger Sub have determined that the Merger is advisable and in the best interests of the Company, Holdings and Merger Sub, respectively, and their respective stockholders and has approved the Merger and the Merger Agreement;
WHEREAS, following such approval and declaration by the Board of Directors of the Company, stockholders of the Company constituting the holders of (i) all of the issued and outstanding shares of Company Capital Stock, voting together as a single class on an as-converted to Company Common Stock basis, with holders of Company Preferred Stock entitled to the number of votes per share as specified in the Company Certificate, and (ii) all of the issued and outstanding shares of Company Preferred Stock, voting together as a single class, irrevocably consented, pursuant to Sections 228 and 251 of the DGCL, to the adoption of this Agreement and the approval of the Merger and the transactions contemplated hereby; and
WHEREAS, for U.S. federal income tax purposes, the parties intend that this Agreement shall constitute a “plan of reorganization,” and the Merger shall constitute a “reorganization,” within the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).
Agreement
NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”) and as a direct, wholly owned subsidiary of Holdings. The effects and consequences of the Merger shall be as set forth in this Agreement and the DGCL.
2. Effective Time; Effects of the Merger.
(a) Subject to the provisions of this Agreement, on the date hereof, the parties shall cause the Merger to be consummated by filing a Certificate of Merger (the “Certificate of Merger”) complying with the DGCL with the Secretary of State of the State of Delaware and will make all other filings or recordings required under the DGCL with respect to the Merger. The Merger shall become effective upon the filing of the Certificate of Merger (the “Effective Time”).
(b) The Merger shall have the effects set forth in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, from the Effective Time, (i) all the properties, rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and (ii) all debts, liabilities, obligations and duties of the Company and Merger Sub shall become the debts, liabilities, obligations and duties of the Surviving Corporation.
3. Organizational Documents.
(a) Certificate and Bylaws of Holdings. On or prior to the Effective Time, (i) the Holdings Certificate shall have been filed with the Secretary of State of the State of Delaware and shall have become effective; and (ii) the Holdings Bylaws shall have been adopted and shall be in full force and effect; and
(b) Certificate and Bylaws of the Surviving Corporation. At the Effective Time, (i) the certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall constitute the certificate of incorporation of the Surviving Corporation, from and after the Merger until duly amended in accordance with the provisions thereof and applicable law; and (ii) the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall constitute the bylaws of the Surviving Corporation, from and after the Merger until duly amended in accordance with the provisions thereof and applicable law; provided, however, in each case, that the name of the corporation set forth therein shall be changed to the name of the Company.
2
4. Directors and Officers.
(a) Directors and Officers of Holdings. Prior to the Effective Time, the Company, in its capacity as the sole stockholder of Holdings, agrees to take or cause to be taken all such actions as are necessary to cause (i) those persons serving as the directors of the Company immediately prior to the Effective Time to be elected as the directors of Holdings (to the extent the directors of Holdings and the Company are not already identical), each such person to have the same committee memberships as he or she held with the Company, each to serve until their respective successors are duly elected and qualified in the manner provided in the Holdings Certificate and the Holdings Bylaws or their earlier death, resignation or removal, or as otherwise provided by law; and (ii) those persons serving as the Chief Executive Officer and Chief Financial Officer of the Company immediately prior to the Effective Time to be appointed as the officers of Holdings (to the extent the officers of Holdings and the Company are not already identical), each to hold office in accordance with the Holdings Certificate and the Holdings Bylaws until such officer’s successor is duly elected or appointed and qualified, or their earlier death, resignation or removal, or as otherwise provided by law.
(b) Directors and Officers of the Surviving Corporation. The Company agrees to take or cause to be taken all such actions as are necessary such that, from and after the Effective Time, the directors and officers of the Surviving Corporation will be such individuals as are mutually agreed by the parties, each to hold office in accordance with the certificate of incorporation and the bylaws of the Surviving Corporation until such director’s or officer’s successor is duly elected or appointed and qualified, or until the earlier of his or her death, resignation or removal.
5. Conversion of Capital Stock. At the Effective Time, by virtue of the Merger and without any action or the payment of any further consideration on the part of the Company, Holdings or Merger Sub or the holders of any securities thereof:
(a) Merger Sub. Each share of common stock, par value $0.00001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time, all of which are owned by Holdings, will automatically be converted into and become one newly issued, fully paid and non-assessable share of common stock of the Surviving Corporation;
(b) Holdings. The shares of the capital stock of Holdings issued and outstanding immediately prior to the Effective Time, all of which are owned by the Company, will automatically be canceled and retired and will cease to exist, and no consideration will be delivered in exchange therefor; and
(c) Company.
(i) Common Stock. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time will automatically be converted into and thereafter represent one validly issued, fully paid and nonassessable share of Holdings Common Stock. Each share of Holdings Common Stock issued in respect of a share of Company Common Stock that was issued under the Company Plan (as defined herein) shall remain subject to the same terms and conditions of the Company Plan, as amended and restated by Holdings in accordance with Section 5(c)(iv) below, following the Merger (including any vesting or similar terms).
(ii) Preferred Stock. Each share of Company Preferred Stock issued and outstanding immediately prior to the Effective Time will automatically be converted into and thereafter represent one validly issued, fully paid and nonassessable share of Holdings Preferred Stock.
3
(iii) Rights of Stockholders. Each holder of a certificate representing any such shares of Company Capital Stock shall cease to have any rights with respect to such shares of Company Capital Stock, except, in all cases, as set forth in Section 6 herein. Each outstanding book-entry that, immediately prior to the Effective Time, evidenced shares of Company Common Stock or Company Preferred Stock shall, from and after the Effective Time, be deemed and treated for all corporate purposes to evidence the ownership of the same number of shares of Holdings Common Stock or Holdings Preferred Stock, respectively.
(iv) Options. At the Effective Time, the Neptune Flood Incorporated 2019 Stock Plan, as amended and restated to date (the “Company Plan”) shall be assumed by Holdings (and amended and restated by Holdings to give effect to such assumption) and all outstanding and unexercised portions, whether or not vested or exercisable, of all options to purchase Company Common Stock (each an “Outstanding Option”) granted under the Company Plan shall be assumed by Holdings and shall thereafter be exercisable for the same number of shares of Holdings Common Stock (an “Assumed Option”) as such Outstanding Option was exercisable for Company Common Stock immediately prior to the Merger. No change shall be made to the exercise price of the Assumed Options in connection with the Merger and, to the extent permitted by law, each Assumed Option shall have the same term, exercisability, vesting schedule, acceleration provision, if applicable, status as an “incentive stock option” under Section 422 of the United States Internal Revenue Code of 1986, as amended (the “Code”), if applicable, and all other terms and conditions (including but not limited to the terms and conditions applicable to such options by virtue of the Company Plan) as in effect prior to the Merger, except to the extent such terms are rendered inoperative by reason of the Merger. It is the intent of the parties that the assumption of options pursuant to this Section 5(c)(iv) shall be effected in a manner that satisfies the requirements of Sections 409A and, to the extent applicable, 424(a) of the Code and the Treasury Regulations promulgated thereunder.
6. Stock Certificates.
(a) At and after the Effective Time until thereafter surrendered for transfer or exchange in the ordinary course, each outstanding certificate which immediately prior thereto represented shares of Company Capital Stock is to be deemed for all purposes to evidence ownership of and to represent the corresponding shares of capital stock of Holdings into which the shares of Company Capital Stock represented by such certificate have been converted as provided in this Agreement and are to be so registered on the books and records of Holdings and its transfer agent.
(b) At and after the Effective Time, the shares of capital stock of Holdings will be uncertificated, except that any shares of capital stock of Holdings that are represented by outstanding certificates of the Company in accordance with Section 6(a) above will continue to be represented by certificates as provided therein and will not be uncertificated unless and until a valid certificate representing such shares (or an affidavit of lost, destroyed or otherwise unavailable certificate in form and substance reasonably satisfactory to Holdings) is delivered to Holdings at its principal place of business, at which time that certificate will be canceled and in lieu of the delivery of a certificate representing the applicable shares of capital stock of Holdings, Holdings will (i) issue to such holder the applicable uncertificated shares of capital stock of Holdings by registering those shares in Holdings’ books and records as book-entry shares, upon which such shares will thereafter be uncertificated, and (ii) take all action necessary to provide such holder with evidence of the uncertificated book-entry shares, including any action necessary under applicable law.
7. Assignment and Assumption of Certain Agreements. At the Effective Time, by virtue of the Merger and in accordance with the assignment and assumption agreement to be entered into between Holdings and the Company on or about the date hereof (the “Assignment and Assumption Agreement”), the Company will assign to Holdings, and Holdings will assume and agree to perform, all obligations of the Company pursuant to (i) in accordance with Section 5(c)(iv) hereof, the Company Plan, each equity-based award agreement and/or similar agreement entered into pursuant to the Company Plan and each outstanding award granted thereunder; and (ii) such other agreements as provided in the Assignment and Assumption Agreement.
4
8. Tax Matters. For U.S. federal income tax purposes, (a) the parties hereto intend that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder (the “Intended Tax Treatment”), and (b) this Agreement is intended to be, and is hereby adopted as, a “plan of reorganization” for purposes of Sections 354 and 361 of the Code and Treasury Regulations Sections 1.368-2(g) and 1.368-3(a), to which Holdings, Merger Sub and the Company are parties under Section 368(b) of the Code. The parties hereto shall treat and shall not take any tax reporting position (including during the course of any audit, litigation or other proceeding with respect to taxes) inconsistent with the treatment of the Merger as a reorganization within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes, unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code.
9. Entire Agreement. This Agreement, together with the Certificate of Merger, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and supersedes all prior and contemporaneous understandings, representations and warranties and agreements, both written and oral, with respect to such subject matter.
10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
11. No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.
12. Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
13. Termination. Termination. This Agreement may be terminated, and the Merger and the other transactions provided for herein may be abandoned, at any time prior to the Effective Time by a written agreement signed by each of the parties following approval of the same by the respective Board of Directors of each of the parties hereto. If this Agreement is terminated and the Merger is abandoned, this Agreement will forthwith become void and have no effect, and neither the Company, Holdings, Merger Sub nor their respective stockholders, directors or officers shall have any liability with respect to such termination or abandonment.
14. Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Agreement shall operate or be construed 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.
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15. Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
16. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than those of the State of Delaware.
17. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| COMPANY: | ||
| NEPTUNE FLOOD INCORPORATED | ||
| By: | /s/ Trevor Burgess | |
| Name: | Trevor Burgess | |
| Title: | Chief Executive Officer | |
| HOLDINGS: | ||
| NEPTUNE INSURANCE HOLDINGS INC. | ||
| By: | /s/ Trevor Burgess | |
| Name: | Trevor Burgess | |
| Title: | Chief Executive Officer | |
| MERGER SUB: | ||
| NEPTUNE INSURANCE MERGER SUB INC. | ||
| By: | /s/ Trevor Burgess | |
| Name: | Trevor Burgess | |
| Title: | President and Chief Executive Officer | |
Signature Page to
Agreement and Plan of Merger
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEPTUNE INSURANCE HOLDINGS INC.
The undersigned, Trevor Burgess, hereby certifies that:
| 1. | The undersigned is the duly elected and acting Chief Executive Officer of Neptune Insurance Holdings Inc., a Delaware corporation. |
| 2. | The Certificate of Incorporation of this corporation was originally filed with the Secretary of State of Delaware on March 20, 2025. |
| 3. | The Certificate of Incorporation of this corporation shall be amended and restated to read in full as follows: |
Article I
The name of the corporation is Neptune Insurance Holdings Inc. (the “Corporation”).
Article II
The address of the Corporation’s registered office in the state of Delaware is 8 The Green Ste R, in the city of Dover, county of Kent, Zip Code 19901. The name of its registered agent at such address is Resident Agents Inc.
Article III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.
Article IV
(A) The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 15,430,000 shares of common stock, $0.00001 par value per share (“Common Stock”) and (ii) 4,185,000 shares of preferred stock, $0.00001 par value per share. The following is a statement of the designations and the powers, preferences and special rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.
(B) COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.
2. Voting. The holders of the Common Stock are entitled to one (1) vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one (1) or more series of Preferred Stock that may be required by the terms of this Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.
(C) PREFERRED STOCK
1. General. 4,185,000 shares of preferred stock of the Corporation shall constitute a series of preferred stock designated as Cumulative Convertible Participating Preferred Stock (the “Preferred Stock”).
2. Rank. Each share of Preferred Stock shall rank equally in all respects and shall be subject to the provisions herein. The Preferred Stock shall, with respect to payment of dividends, redemption payments, and rights (including as to the distribution of assets) upon Liquidation (i) rank senior and prior to the Common Stock, and each other class or series of equity securities of the Corporation, whether currently issued or issued in the future, that by its terms does not expressly rank senior to, or on parity with, the Preferred Stock as to payment of dividends, redemption payments, and rights (including as to the distribution of assets) upon Liquidation (all of such equity securities, including the Common Stock, are collectively referred to herein as the “Junior Securities”), (ii) rank junior to each class or series of equity securities of the Corporation issued in the future without violation of this Certificate of Incorporation, that by its terms expressly ranks senior to the Preferred Stock as to payment of dividends, redemption payments, and rights (including as to the distribution of assets) upon Liquidation (all of such equity securities are collectively referred to herein as the “Senior Securities”), and (iii) rank on parity with each class or series of equity securities of the Corporation, whether currently issued or issued in the future without violation of this Certificate of Incorporation, that by its terms expressly provides that it ranks on parity with the Preferred Stock as to payment of dividends, redemption payments and rights (including as to the distribution of assets) upon Liquidation (all of such equity securities are collectively referred to herein as the “Parity Securities”). The respective definitions of Junior Securities, Senior Securities and Parity Securities shall also include any securities, rights or options exercisable or exchangeable for or convertible into any of the Junior Securities, Senior Securities or Parity Securities, as the case may be. At the time of the initial issuance of the Preferred Stock, there are no Senior Securities or Parity Securities issued or outstanding.
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3. Definitions. As used herein, the following terms shall have the meanings set forth below or in the section cross-referenced below, as applicable, whether used in the singular or the plural.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, such Person.
“Available Funds” has the meaning set forth in Section 5(a).
“Base Dividend Rate” means, for any day, 5.00% per annum.
“Board of Directors” means the board of directors of the Corporation or any committee thereof duly authorized to act on behalf of such board of directors for the purposes in question.
“Business Day” means any day that is not a Saturday, a Sunday or any other day on which commercial banks are generally required or authorized by Law to be closed in New York City, New York.
“By-laws” means the By-laws of the Corporation, as amended from time to time.
“Capital Stock” of any Person means any and all shares, interests (including partnership interests), rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, but excluding any debt securities convertible into such equity.
“Certificate of Incorporation” means this Amended and Restated Certificate of Incorporation of the Corporation, as amended from time to time.
“Change of Control” means the occurrence, directly or indirectly, of any of the following in a single transaction or a series of related transactions: (a) the closing of the sale, transfer or other disposition of all or substantially all of the Corporation’s assets, (b) the consummation of the merger or consolidation of the Corporation with or into another entity (whether or not the Corporation is the surviving entity) or the merger or consolidation of another entity with or into the Corporation, in each case, unless the holders of Capital Stock of the Corporation immediately prior to such merger or consolidation continue to hold at least fifty percent (50%) of the voting power of the Capital Stock of the Corporation (or the surviving or acquiring entity), (c) the closing of the transfer (whether by stock purchase, merger, consolidation, De-SPAC Transaction or otherwise), to a Person (other than an underwriter of the Corporation’s securities in connection with an IPO), of the Corporation’s securities if, after such closing, such Person would hold fifty percent (50%) or more of the outstanding Voting Stock of the Corporation (or the surviving or acquiring entity), or (d) the exclusive leasing or licensing of all or substantially all of the Corporation’s intellectual property or assets; provided, however, that a transaction shall not constitute a Change of Control if its sole purpose is to change the state of the Corporation’s incorporation or to create a holding company that will be owned in substantially the same proportions by the Persons who held the Corporation’s securities immediately prior to such transaction.
“Common Stock” has the meaning set forth in the first paragraph of this Article IV.
“control” (including the terms “controlling”, “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.
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“Conversion Date” has the meaning set forth in Section 6(d)(iii).
“Conversion Notice” has the meaning set forth in Section 6(d)(i).
“Conversion Right” has the meaning set forth in Section 6(a)(i).
“Corporation” has the meaning set forth in the preamble.
“Credit Agreement” means that certain Amended and Restated Credit Agreement, dated on or about the date of filing of this Amended and Restated Certificate of Incorporation, by and among the Corporation, as borrower, the other loan parties party thereto, the lenders party thereto from time to time and JP Morgan Chase Bank, N.A., as administrative agent, as amended, restated, supplemented, extended or otherwise modified from time to time, or as refinanced, refunded or replaced from time to time, including by one or more credit agreements, loan agreements, note purchase agreements or similar agreements or indentures extending the maturity of, refinancing, refunding, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder or adding or including direct or indirect Subsidiaries of the Corporation as borrowers or guarantors thereunder) all or any portion of the indebtedness under such agreement or agreements or any successor or replacement agreement or agreements and whether by the same or any other agent, trustee, holders, lender or group of lenders, in each case that is expressly designated in such agreement or indenture as the “Credit Agreement” for purposes hereof, and subject in each case to the restrictions contained in subclauses 10 and (11)(B) of Section 9(b)(i).
“DGCL” has the meaning set forth in the preamble.
“Dividend Rate” means, for any day, the Base Dividend Rate.
“EBITDA” means, for any period with respect to any Person, the consolidated earnings before interest, taxes, depreciation and amortization, restructuring and asset impairment charges, goodwill and intangible asset impairment charges, gains and losses on the disposal of fixed assets, gains and losses on the disposal of equity investments, gains and losses on the disposal of the retirement or extinguishment of debt and gains and losses on divestitures of such Person and its Subsidiaries during such period, in each case, determined in accordance with GAAP and reduced by any capitalized software development costs for the applicable period.
“Effective Date” means the date of filing of this Amended and Restated Certificate of Incorporation.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“Fair Market Value” means, as of any date of determination, (a) the fair market value of any specified security, asset or property as determined in good faith by the Board of Directors (or any committee authorized by the Board of Directors) or (b) if, within (5) five Business Days following notice from the Corporation of the value determined by the Board of Directors pursuant to the foregoing clause (a), the Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock object in good faith to such determination, then the fair market value as determined by a nationally recognized independent investment banking firm that has for this purpose (i) been selected by the Board of Directors and (ii) been consented to by Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock, voting as a separate class.
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“GAAP” means U.S. generally accepted accounting principles.
“Holder” means, at any time, any Person in whose name shares of Preferred Stock are registered, which may be treated by the Corporation as the absolute owner of such shares of Preferred Stock for the purpose of making payment and settling the related conversions and for all other purposes.
“Implied Value” has the meaning set forth in Section 6(a)(ii).
“Investor” means BSIV Hold 102, LP, a Delaware partnership.
“IPO Adjustment” has the meaning set forth in Section 6(a)(ii).
“IPO Price” has the meaning set forth in Section 6(a)(ii).
“IRR” (Internal Rate of Return) means, with respect to each share of Preferred Stock, the internal rate of return on the Original Issue Price of such share of Preferred Stock calculated using the XIRR function in Microsoft Excel 2010, or any subsequent version of Microsoft Excel. In determining the IRR, the following shall apply: (a) IRR shall be expressed on a compounded annual basis; (b) IRR shall be calculated from the Issuance Date; and (c) any amounts received or paid to such Holder in respect of a share of Preferred Stock for purposes of calculating IRR shall be gross of the application of any U.S. federal, state or local taxation (including any withholding or deduction requirements). For the avoidance of doubt, any cash dividends paid or distributed to the Holders of Preferred Stock as prior holders of Cumulative Convertible Participating Preferred Stock of Neptune Flood Incorporated, a Delaware corporation (“Neptune Flood”) shall be included in the calculation of IRR.
“IRR Threshold” means, with respect to each share of Preferred Stock, (a) until May 10, 2026, an IRR of 22.5% and (b) after May 10, 2026, an IRR of 20.0%.
“Issuance Date” means, with respect to a share of Preferred Stock, May 10, 2023; provided that for any shares of Preferred Stock issued after the date of filing of this Amended and Restated Certificate of Incorporation, “Issuance Date” shall mean the date of issuance of such share of Preferred Stock.
“Junior Securities” has the meaning set forth in Section 2.
“Law” has the meaning set forth in the Stockholders Agreement.
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“Liquidation” means a Change of Control or any voluntary or involuntary liquidation, dissolution or winding up of the Corporation. The treatment of any particular class of Preferred Stock in a Liquidation may be waived with respect to such class of Preferred Stock only by the vote or written consent of the holders of a majority of such class of Preferred Stock.
“MOIC” means, as of any measurement date, with respect to each share of Preferred Stock, a multiple on invested capital equal to the quotient determined by dividing (a) the sum of (i) any cash dividends paid or distributed to the Holders in respect of such share of Preferred Stock pursuant to Section 4 hereof (which, for the avoidance of doubt, shall include any cash dividends paid or distributed to such Holders as prior holders of Cumulative Convertible Participating Preferred Stock of Neptune Flood) and (ii) any other cash amounts paid or distributed in respect of such share of Preferred Stock pursuant to Section 5 hereof, by (b) the Original Issue Price of such share of Preferred Stock.
“NASDAQ” means The Nasdaq Stock Market, LLC (or its successor).
“NYSE” means The New York Stock Exchange, Inc. (or its successor).
“Original Issuance Date” means May 10, 2023.
“Original Issue Price” means, with respect to each share of Preferred Stock, $54.9544724 per share.
“Parity Securities” has the meaning set forth in Section 2.
“Person” means an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).
“Preferred Dividends” has the meaning set forth in Section 4(a)(i).
“Preferred Stock” has the meaning set forth in Section (C)(1) of this Article IV.
“Purchase Agreement” means that certain Preferred Stock Purchase Agreement, dated as of May 10, 2023, by and between the Investor and Neptune Flood Incorporated, a Delaware corporation.
“Qualified De-SPAC Transaction” means any merger, acquisition, business combination or similar transaction or series of related transactions with a special purpose acquisition company as a result of which the Corporation’s (or its successor’s) outstanding shares of Common Stock are exchanged for or otherwise converted into securities that are publicly listed on the NYSE or NASDAQ (a “De-SPAC Transaction”), and pursuant to which each Holder receives, for each share of Preferred Stock held by such Holder, aggregate net cash proceeds not less than 2.5 times the Original Issue Price for each such share of Preferred Stock.
“Qualified IPO” means (a) the Corporation’s (or its successor’s) first firm commitment underwritten public offering of its shares of Common Stock on the NYSE or NASDAQ pursuant to an effective registration statement under the Securities Act (an “IPO”), in which the offering price per share of Common Stock is not less than an amount equal to 2.5 times the Original Issue Price and which results in aggregate cash proceeds to the Corporation (or its successor) and/or to stockholders of the Corporation of at least $250,000,000.00 (net of underwriting discounts and commissions and out-of-pocket expenses) or (b) a Qualified De-SPAC Transaction.
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“Register” means the securities register maintained in respect of the Preferred Stock by the Corporation, or to the extent the Corporation has engaged a transfer agent, such transfer agent.
“Reorganization Event” means any of the following transactions:
(i) any reorganization, consolidation, merger, share exchange, statutory exchange, tender or exchange offer or other similar business combination involving the Corporation with or into another Person, in each case, pursuant to which the Common Stock will be converted into, or exchanged for, cash, securities or other property of the Corporation or another Person;
(ii) any reclassification, recapitalization or reorganization of the Common Stock into securities other than the Common Stock; or
(iii) any direct or indirect sale, assignment, conveyance, transfer, lease or other disposition (including in connection with any Liquidation) by the Corporation of all or substantially all of its assets or business, in each case under this clause (c), pursuant to which the Common Stock will be converted into cash, securities or other property.
“Securities Act” means the Securities Act of 1933, as amended.
“Senior Securities” has the meaning set forth in Section 2.
“Stock Plan” means the Corporation’s Amended and Restated 2025 Stock Plan, as amended.
“Stockholders Agreement” means the Stockholders Agreement, dated as of May 10, 2023, by and among Neptune Flood Incorporated, a Delaware corporation (“Neptune”) and the certain other parties thereto (which agreement has been assumed by the Corporation pursuant to an Assignment and Assumption Agreement between the Corporation and Neptune dated on or about the date of filing of this Amended and Restated Certificate of Incorporation), and any Person who becomes a party thereto after the date hereof in accordance with its terms, as the same may be amended, restated or supplemented from time to time in accordance with its terms.
“Subsidiary” or “Subsidiaries” means, with respect to any Person, any other Person of which (a) if a corporation, a majority of the total voting power of shares of capital stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more other Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons owns a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entity’s gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation). For the purposes hereof, the term “Subsidiary” shall include all Subsidiaries of such Subsidiary.
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“Transfer Restrictions” means the restrictions on transfer set forth in Section 3.1 of the Stockholders Agreement.
“Triggering Event” means (a) the Corporation’s failure to pay dividends pursuant to, and in accordance with, Section 4(a); (b) the Corporation’s violation of any restrictions set forth in this Certificate relating to payment of dividends or distributions to the holders of Junior Securities, including Common Stock or other Capital Stock; (c) the Corporation’s failure to comply in any material respect with its obligations under Section 3.7 of the Stockholders Agreement; (d) the Corporation’s failure to comply with its obligations to effect the conversion of shares of Preferred Stock (including to reserve and keep available for issuance the requisite number of shares of Common Stock and Preferred Stock) in compliance with Section 6 or (e) the Corporation taking any action described in either the Stockholders Agreement or this Certificate that expressly requires the prior affirmative vote or written consent of the Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock, voting as a separate class, without first obtaining such prior affirmative vote or written consent.
“Voting Stock” means Capital Stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances (determined without regard to any classification of directors) to elect one or more members of the Board of Directors (without regard to whether or not, at the relevant time, Capital Stock of any other class or classes (other than Common Stock) shall have or might have voting power by reason of the happening of any contingency).
In addition to the above definitions, unless the context requires otherwise:
(i) any reference to any statute, regulation, rule or form as of any time shall mean such statute, regulation, rule or form as amended or modified and shall also include any successor statute, regulation, rule or form from time to time;
(ii) the word “including” shall be deemed to be followed by the words “without limitation”;
(iii) references to “$” or “dollars” means the lawful currency of the United States of America; and
(iv) references to “Section” are references to Sections of this Certificate of Incorporation.
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4. Dividends.
(a) Preferred Dividends.
(i) Dividends on each outstanding share of Preferred Stock shall accrue and accumulate on a daily basis from the Issuance Date of such share, whether or not declared and whether or not the Corporation has funds legally available for the payment of such dividends, at a rate per annum equal to the then-applicable Dividend Rate, compounded quarterly, on the sum of (x) the Original Issue Price of such share of Preferred Stock and (y) the amount of dividends previously accrued and unpaid on such share of Preferred Stock as of the last day of the immediately preceding calendar quarter, less the amount of any dividends paid to such share of Preferred Stock since such day (such accrued dividends, the “Preferred Dividends”). Any Preferred Dividend payments shall be (a) payable in cash when required pursuant to Section 5 or Section 6, as applicable, and at such other times as may be authorized by the Board of Directors pursuant to Section 4(b), (b) aggregated per Holder and (c) made to the nearest cent (with $.005 being rounded upward). The Preferred Dividends will be cumulative and will accrue on each share of Preferred Stock, commencing on the Issuance Date of such share of Preferred Stock, whether or not earned or declared. No Preferred Dividend shall be declared or paid at any time when such declaration or payment would violate the Credit Agreement, provided (1) for the avoidance of doubt, dividends on each outstanding share of Preferred Stock shall continue to accrue, accumulate and compound pursuant to the foregoing provisions of this Section 4(a)(i) and any such violation or potential violation of the Credit Agreement shall not affect such accrual, accumulation or compounding and (2) in the event declaration or payment of Preferred Dividends would violate the Credit Agreement, Preferred Dividends shall be paid as and when due under this Certificate of Incorporation pursuant to clause (a) of this Section 4(a)(i) in the maximum amount possible without violating the Credit Agreement and the remainder of Preferred Dividends not timely paid due to this sentence shall be paid promptly following the time such payment would no longer violate the Credit Agreement.
(ii) From and after the earlier of (x) the eighth (8th) anniversary of the Original Issuance Date, and (y) such time after the Original Issuance Date when each Holder has, with respect to each share of Preferred Stock held by such Holder, achieved a MOIC equal to or exceeding three (3), so long as a Triggering Event is not occurring, the Dividend Rate shall be reduced to 0.00%.
(b) Dividends Generally. Any dividends paid by the Corporation to the holders of Capital Stock shall be paid only when, as and if declared by the Board of Directors, out of any funds and assets legally available therefor, and all such dividends shall be treated as an advance of the amounts payable by the Corporation to the holders of Capital Stock upon a Liquidation pursuant to Section 5(a). Holders of shares of Preferred Stock shall be entitled to participate ratably, with the holders of shares of Common Stock in all dividends paid on the shares of Common Stock.
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5. LIQUIDATION RIGHTS.
(a) Subject to Section 5(b), in the event of any Liquidation, the cash and assets (other than cash) of the Corporation legally available for distribution to its stockholders (the “Available Funds”), shall be distributed in the following order of priority:
(i) First, to the Holders (ratably among such Holders based on the number of shares of Preferred Stock held by each such Holder), prior and in preference to any payment or distribution of any Available Funds to holders of any Junior Securities, until each share of Preferred Stock shall have received an amount equal to the Preferred Dividends accrued but unpaid for such share of Preferred Stock as of the date of the Liquidation, plus an amount equal to any declared but unpaid dividends on such share of Preferred Stock; provided, however, that if the Holders would, with respect to each share of Preferred Stock held by such Holder, achieve a MOIC exceeding three (3) in a Liquidation (for avoidance of doubt, including any Preferred Dividends paid in the past to such Holder), then the amount of Preferred Dividends paid per share of Preferred Stock pursuant to this Section 5(a)(i) in such Liquidation shall be reduced to an amount per share (not less than zero) such that the Holders would, with respect to each share of Preferred Stock held by such Holder, achieve a MOIC equal to three (3) in such Liquidation; provided that, for the avoidance of doubt, if the Holders would, with respect to each share of Preferred Stock held by such Holder, achieve a MOIC exceeding three (3) in a Liquidation in which the amount of Preferred Dividends paid per share of Preferred Stock pursuant to this Section 5(a)(i) were zero (0), then the Holders shall not receive any payments with respect to Preferred Dividends pursuant to this Section 5(a)(i) in such Liquidation (and instead shall only receive an amount equal to any declared but unpaid dividends on such share of Preferred Stock). In the event that the Available Funds are insufficient to pay in full the amounts payable with respect to all outstanding shares of Preferred Stock pursuant to this Section 5(a)(i), such Available Funds shall be distributed among the Holders ratably in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled upon such Liquidation pursuant to this Section 5(a)(i).
(ii) Second, after payment to the Holders of the amounts (if any) set forth in Section 5(a)(i), to the Holders (ratably among such Holders based on the number of shares of Preferred Stock held by each such Holder), prior and in preference to any payment or distribution of any Available Funds to holders of any Junior Securities, until each share of Preferred Stock shall have received (taking into account any prior payment or distribution paid to such share of Preferred Stock prior to the date of the Liquidation in excess of the amounts required to be paid to such share of Preferred Stock pursuant to Section 5(a)(i)) an amount equal to the Original Issue Price for such share of Preferred Stock; provided, however, that, notwithstanding the foregoing, if the Holders would receive a greater amount of liquidating distributions per share of Preferred Stock in a Liquidation if such shares of Preferred Stock were converted into shares of Common Stock immediately prior to payment pursuant to this Section 5(a)(ii), then, following such Liquidation, the Holders shall not receive any payments pursuant to this Section 5(a)(ii) and, instead, each share of Preferred Stock held by such Holder shall be converted into shares of Common Stock as if such Holder had exercised its Conversion Right pursuant to Section 6(a)(i) immediately after payment of any amounts pursuant to Section 5(a)(i) and each such share shall participate together with any Junior Securities in any remaining Available Funds paid pursuant to Section 5(a)(iii) and Section 5(a)(v). In the event that the Available Funds are insufficient to pay in full the amounts payable with respect to all outstanding shares of Preferred Stock pursuant to this Section 5(a)(ii), such Available Funds shall be distributed among the Holders ratably in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled upon such Liquidation pursuant to this Section 5(a)(ii).
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(iii) Third, after payment to the Holders of the amounts set forth in Sections 5(a)(i) and 5(a)(ii), until the IRR Threshold is met with respect to each share of Preferred Stock issued and outstanding, any remaining Available Funds shall be distributed ratably to the holders of Junior Securities, including holders of shares of Common Stock (including, for the avoidance of doubt, shares of Common Stock issued upon conversion of the Preferred Stock pursuant to Section 5(a)(ii)), based on the number of shares of Common Stock held by such holders of Junior Securities (or, with respect to holders of any Junior Securities convertible into shares of Common Stock, the number of shares of Common Stock held by such holder had such shares of Junior Securities been converted into shares of Common Stock immediately prior to payment pursuant to this Section 5(a)(iii)). In the event that the Available Funds are insufficient to pay in full the amounts payable pursuant to this Section 5(a)(iii), such Available Funds shall be distributed among the holders of Capital Stock ratably in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled upon such Liquidation pursuant to this Section 5(a)(iii).
(iv) Fourth, after payment to the Holders of the amounts set forth in Sections 5(a)(i) through 5(a)(iii), any remaining Available Funds shall be distributed ratably to the holders of Junior Securities, including the holders of shares of Common Stock (but excluding any shares issued upon conversion of the Preferred Stock pursuant to Section 5(a)(ii)), based on the number of shares of Common Stock held by such holders of Junior Securities (or, with respect to holders of any shares of Junior Securities convertible into shares of Common Stock, the number of shares of Common Stock held by such holder had such shares of Junior Securities been converted into shares of Common Stock immediately prior to payment pursuant to Section 5(a)(iii)), until the aggregate amount paid to each share of Junior Securities pursuant to this Section 5(a)(iv) equals the amount paid to each share of Preferred Stock pursuant to Section 5(a)(i) (as adjusted for any recapitalizations, stock splits or combinations). In the event that the Available Funds are insufficient to pay in full the amounts payable with respect to all outstanding shares of Junior Securities, including Common Stock, pursuant to this Section 5(a)(iv), such Available Funds shall be distributed among the holders of such Junior Securities ratably in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled upon such Liquidation pursuant to this Section 5(a)(iv).
(v) Thereafter, any remaining Available Funds shall be distributed ratably to the holders of shares of Junior Securities, including the Common Stock (including, for the avoidance of doubt, shares of Common Stock issued upon conversion of the Preferred Stock pursuant to Section 5(a)(ii)), based on the number of shares of Common Stock held by such holders of Junior Securities (or, with respect to holders of any shares of Junior Securities convertible into shares of Common Stock, the number of shares of Common Stock held by such holder had such shares of Junior Securities been converted into shares of Common Stock immediately prior to payment pursuant to Section 5(a)(iii)).
(vi) For the avoidance of doubt, in connection with a Change of Control, the holders of shares of Preferred Stock shall be entitled to require the Corporation (or the successor thereto) to purchase, to the extent permitted by applicable Law, all or any portion of its shares of Preferred Stock at a purchase price per share, payable in cash, equal to the amount per share that is distributable to such share in connection with such Change of Control pursuant to this Section 5(a).
(b) Distribution and Valuation of Non-Cash Assets. Notwithstanding anything in this Certificate of Incorporation to the contrary, the Corporation shall not distribute assets other than cash or Marketable Securities to the Holders or the holders of Junior Securities without the prior written consent of a majority of the then-issued and outstanding shares of Preferred Stock. For purposes of Section 5(a), Marketable Securities will be valued at the average of the closing prices of the securities on such exchange or market over the thirty (30) day period ending on the Business Day immediately prior to date of determination, and any other assets to be distributed by the Corporation shall be valued as mutually agreed between the Board of Directors and the Holders. The term “Marketable Securities” shall refer to readily marketable equity securities that are traded on the NYSE or NASDAQ.
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6. CONVERSION OF PREFERRED STOCK.
(a) Subject to and in accordance with the provisions of this Section 6, shares of Preferred Stock may be converted into shares of Common Stock as follows:
(i) Voluntary Conversion. Subject to and in accordance with the provisions of this Section 6(a)(i), each Holder shall have the right (the “Conversion Right”), at any time and from time to time, at such Holder’s option, to convert all or any portion of such Holder’s shares of Preferred Stock into fully paid and non-assessable shares of Common Stock. Except in connection with a conversion pursuant to Section 6(a)(ii), each share of Preferred Stock shall be converted into such number of shares of Common Stock (calculated as to each conversion to the nearest 1/10,000th of a share) equal to the quotient of (x) the Original Issue Price divided by (y) the Conversion Price as of immediately prior to the time of conversion. The “Conversion Price” shall initially be the Original Issue Price and shall be subject to adjustment as set forth in Section 8.
(ii) Mandatory Conversion. Upon (i) the consummation of a Qualified IPO or (ii) the affirmative vote or written consent of the Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock, voting as a separate class, the shares of Preferred Stock shall automatically be converted into such number of shares of Common Stock (calculated as to each conversion to the nearest 1/10,000th of a share) having a value per share equal to the amount (the “Implied Value”) that would have been distributed with respect to such share pursuant to Section 5 had the Corporation been sold for cash in a Liquidation for the value of the Corporation in the Qualified IPO implied by the price per share of Common Stock at which shares are sold to the public in the Qualified IPO (the “IPO Price”). Immediately prior to any such automatic conversion, the Corporation shall split or reverse split the Common Stock, as necessary in the discretion of the Board of Directors (an “IPO Adjustment”), so that, immediately following the IPO Adjustment, the shares of Common Stock outstanding have a value, at the IPO Price, equal to the Implied Value of the Common Stock outstanding immediately prior to the IPO Adjustment. For the avoidance of any doubt, if the Implied Value of any share of the Corporation’s Capital Stock is equal to zero in any Qualified IPO pursuant to this Section 6(a)(ii), then such share shall automatically and without any further action by any party be cancelled for no consideration upon consummation of such Qualified IPO.
(b) Fractional Shares. No fractional shares of Common Stock shall be issued upon the conversion of any shares of Preferred Stock. If more than one share of Preferred Stock subject to conversion is held by the same Holder, such shares shall be aggregated for purposes of the conversion. If the conversion of any share or shares of Preferred Stock results in a fractional share of Common Stock issuable after application of the immediately preceding sentence, the Corporation shall pay a cash amount in lieu of issuing such fractional share in an amount equal to the Fair Market Value of such fractional interest.
(c) Common Stock Reserve. The Corporation will at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting conversions of the Preferred Stock into shares of Common Stock, a number of shares of Common Stock equal to 110% of the number of shares of Common Stock issuable upon conversion of all then outstanding shares of Preferred Stock. The Corporation shall take all action permitted by Law, including calling meetings of stockholders of the Corporation and soliciting proxies for any necessary vote of the stockholders of the Corporation, to amend this Certificate of Incorporation to increase the number of authorized and unissued shares of Common Stock, if at any time there shall be insufficient authorized and unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Preferred Stock. The Corporation covenants that the Preferred Stock and all Common Stock that may be issued upon conversion of Preferred Stock shall upon issuance be duly authorized, fully paid and non-assessable and will not be subject to preemptive rights or subscription rights of any other stockholder of the Corporation. The Corporation further covenants that, if at any time the Common Stock shall be listed on the NYSE, NASDAQ or any other securities exchange or quoted on an automated quotation system, the Corporation shall, if permitted by the rules of such national exchange or automated quotation system, at its sole expense, cause to be authorized for listing or quotation on such exchange or automated quotation system, all Common Stock issuable upon conversion of the Preferred Stock, subject to official notice of issuance. The Corporation will use its reasonable best efforts to ensure that such Common Stock may be issued without violation of any applicable Law or regulation.
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(d) Mechanics of Conversion.
(i) The Conversion Right of a Holder of Preferred Stock shall be exercised by the Holder by delivering written notice to the Corporation that the Holder elects to convert all or a portion of the shares of Preferred Stock held by such Holder (a “Conversion Notice”) and specifying the name or names (with address or addresses) in which a certificate or certificates for shares of Common Stock are to be issued and (if so required by the Corporation or the Corporation’s transfer agent, if any) by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation or the transfer agent, as applicable, duly executed by the Holder or its legal representative.
(ii) As promptly as practicable after receipt of the Conversion Notice, and the payment of required taxes or duties pursuant to Section 10(i), if applicable, and in no event later than three (3) Business Days thereafter, the Corporation shall issue and shall deliver or cause to be issued and delivered to such Holder, or to such other Person on such Holder’s written order (A) one or more certificates representing the number of validly issued, fully paid and nonassessable whole shares of Common Stock to which the Holder of the Preferred Stock being converted, or the Holder’s transferee, shall be entitled, (B) if less than the full number of shares of Preferred Stock evidenced by one or more certificates is being converted, a new certificate or certificates, of like tenor, for the number of shares of Preferred Stock evidenced by such certificate(s), less the number of shares being converted and (C) cash for any fractional interest in respect of a share of Common Stock arising upon such conversion settled as provided in Section 6(b).
(iii) The conversion of any share of Preferred Stock shall be deemed to have been made (A) in connection with any exercise of the Conversion Right, at the close of business on the date of giving the Conversion Notice and (B) in connection with a Qualified IPO, immediately prior to the consummation of such Qualified IPO (the “Conversion Date”). Until the Conversion Date with respect to any share of Preferred Stock has occurred, such share of Preferred Stock will remain outstanding and will be entitled to all of the powers, designations, preferences and other rights provided herein, including that such share (x) shall accrue and accumulate Preferred Dividends and participate in any other dividends pursuant to Section 4 and (y) entitle the Holder thereof to the voting rights provided in Section 9.
(e) Corporation’s Obligations to Issue Common Stock. The Corporation’s obligations to issue and deliver shares of Common Stock upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by any Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by any Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of Law by any Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to any Holder in connection with the issuance of such shares of Common Stock.
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7. REORGANIZATION EVENT.
(a) Treatment of Preferred Stock Upon a Reorganization Event. Subject to applicable Law, upon the occurrence of any Reorganization Event, (i) if the Corporation is the surviving company in such Reorganization Event, each share of Preferred Stock outstanding immediately prior to such Reorganization Event shall remain outstanding following such Reorganization Event (or be exchanged for an equivalent share of Preferred Stock governed by the terms herein); provided that appropriate adjustments shall be made to the conversion provisions set forth in Section 6 and the adjustment to Conversion Price provisions set forth in Section 8 to place the Holders in an equivalent position with respect to such matters following such Reorganization Event as compared to immediately prior to such Reorganization Event (and, for the avoidance of doubt, the Holders shall continue to receive the benefit of all Preferred Dividends following such Reorganization Event), or (ii) if the Corporation is not the surviving company in such Reorganization Event or will be dissolved in connection with such Reorganization Event, each share of Preferred Stock outstanding immediately prior to such Reorganization Event shall be converted or exchanged into a security of the Person surviving such Reorganization Event or such other continuing entity in such Reorganization Event having rights, powers and preferences, and the qualifications, limitations and restrictions thereof, equivalent to those provided herein.
(b) Successive Reorganization Events. The provisions of this Section 7 shall similarly apply to successive Reorganization Events.
(c) Notice of Reorganization Events. The Corporation (or any successor) shall, within ten (10) days following the consummation of any Reorganization Event, provide written notice to the Holders of such consummation of such event and of the kind and amount of the cash, securities or other property to be received in connection with such Reorganization Event. Failure to deliver such notice shall not affect the operation of this Section 7.
(d) Change of Control. For the sake of clarity, if a Reorganization Event constitutes a Change of Control, then Section 5 shall take precedence over this Section 7 and the transactions comprising such Reorganization Event shall be deemed a Liquidation.
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8. Adjustments to Conversion Price.
(a) Except as provided in Section 8(d), the Conversion Price shall be subject to the following adjustments:
(i) Adjustment for Stock Splits and Stock Dividends. Except for an IPO Adjustment, if at any time or from time to time the Corporation should fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock without payment of any consideration by such holder for the additional shares of Common Stock, then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such decrease in the Conversion Price.
(ii) Adjustment for Reverse Stock Splits and Combinations. Except for an IPO Adjustment, if the number of shares of Common Stock outstanding at any time after the first issue date of any shares of Preferred Stock is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such increase in the Applicable Conversion Price.
(iii) Adjustment for Reclassification, Exchange or Substitution. If the Common Stock issuable upon the conversion of any shares of Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for above), then and in each such event each holder of shares of Preferred Stock shall have the right thereafter to convert such shares into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change by holders of the number of shares of Common Stock into which the shares of the Preferred Stock might have been converted immediately prior to the reorganization, reclassification or other change, all subject to further adjustment as provided herein.
(iv) Adjustment Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issuance Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 8), without consideration or for a consideration per share that is less than the Conversion Price in effect immediately prior to such issuance or deemed issuance, then the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:
CP2 = CP1* (A + B) ÷ (A + C).
For purposes of the foregoing formula, the following definitions shall apply:
“CP2” shall mean the Conversion Price in effect immediately after such issuance or deemed issuance of Additional Shares of Common Stock;
“CP1” shall mean the Conversion Price in effect immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock;
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“A” shall mean the number of shares of Common Stock outstanding immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issuance or deemed issuance or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);
“B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued or deemed issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and
“C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.
(b) Other Adjustments. If the Corporation takes any action affecting the Common Stock, other than an action described in Section 8(a), which upon a determination by the Board of Directors in good faith (such determination intended to be a “fact” for purposes of Section 151(a) of the DGCL), would materially adversely affect the conversion rights of the Holders of shares of Preferred Stock, the Conversion Price shall be adjusted, to the extent permitted by Law, in such manner, if any, and at such time, as the Board of Directors determines in good faith to be equitable in the circumstances.
(c) Successive Adjustments. Successive adjustments in the Conversion Price shall be made, without duplication, whenever any event specified in Section 8(a) or Section 8(b) shall occur.
(d) Statement Regarding Adjustments; Notices. Whenever the Conversion Price is to be adjusted in accordance with one or more of Section 8(a) or Section 8(b) the Corporation shall: (i) compute the Conversion Price in accordance with Section 8(a) or Section 8(b); (ii) (A) in the event that the Corporation shall give notice or make a public announcement to the holders of Common Stock of any action of the type described in Section 8(a) (but only if the action of the type described in Section 8(a) would result in an adjustment to the Conversion Price or a change in the type of securities or property to be delivered upon conversion of the Preferred Stock), the Corporation shall, at the time of such notice or announcement, and in the case of any action which would require the fixing of a record date, at least ten (10) days prior to such record date, give notice to each Holder by mail, first class postage prepaid, at the address appearing in the Register, which notice shall specify the record date, if any, with respect to any such action, the approximate date on which such action is to take place and the facts with respect to such action as shall be reasonably necessary to indicate the effect on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon conversion or redemption of the Preferred Stock or (B) in the event that the Corporation does not give notice or make a public announcement as set forth in subclause (A) of this clause (ii), the Corporation shall, as soon as practicable following the occurrence of an event that requires an adjustment to the Conversion Price pursuant to one or more of Section 8(a) or Section 8(b) (or if the Corporation is not aware of such occurrence, as soon as practicable after becoming so aware), provide, or cause to be provided, a written notice to the Holders of the occurrence of such event, in the same manner and with the same detail as the notice set forth in subclause (A) of this clause (ii); and (iii) whenever the Conversion Price shall be adjusted pursuant to one or more of Section 8(a) or Section 8(b), the Corporation shall, as soon as practicable following the determination of the revised Conversion Price, (x) file at the principal office of the Corporation, a statement showing in reasonable detail the facts requiring such adjustment, the Conversion Price that shall be in effect after such adjustment and the method by which the adjustment to the Conversion Price was determined and (y) cause a copy of such statement to be sent in the manner set forth in subclause (A) of clause (ii) to each Holder.
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(e) Certain Adjustment Rules. As a condition precedent to the taking of any action which would require an adjustment pursuant to this Section 8, the Corporation shall use its best efforts to take any and all actions which may be necessary, including obtaining regulatory, NYSE, NASDAQ (or such exchange or automated quotation system on which the Common Stock is then listed) or stockholder approvals or exemptions, in order that the Corporation may thereafter validly and legally issue as fully paid and nonassessable all shares of Common Stock issuable upon conversion of the Preferred Stock.
(f) Special Definitions. For purposes of this Section 8, the following definitions shall apply:
“Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 8(g) below, deemed to be issued) by the Corporation after the Original Issuance Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”): (i) shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Preferred Stock; (ii) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Section 8(a)(i) or (ii); (iii) shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its Subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors and pursuant to the terms of this Certificate of Incorporation; (iv) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors, (v) shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors,(vi) shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security, (iv) shares of Common Stock, Options or Convertible Securities solely as consideration for an acquisition, investment or similar transaction, in each case that is approved by the Board of Directors and pursuant to the terms of this Certificate of Incorporation, or (v) shares of Common Stock, Options or Convertible Securities issued to issued pursuant to a Qualified IPO.
“Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.
“Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
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(g) Deemed Issue of Additional Shares of Common Stock.
(i) If the Corporation at any time or from time to time after the Original Issuance Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.
(ii) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price pursuant to the terms of Section 8(a) or (b), are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (g)(ii) shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.
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(iii) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price pursuant to the terms of Section 8(a) or Section 8(b) (either because the consideration per share of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price then in effect, or because such Option or Convertible Security was issued before the Original Issuance Date), are revised after the Original Issuance Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 8(g)(i)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
(iv) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price pursuant to the terms of Section 8(a)(iii), the Conversion Price shall be readjusted to such Conversion Price as would have been obtained had such Option or Convertible Security (or portion thereof) never been issued.
(v) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series A Conversion Price provided for in this Section 8(g) shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (ii) and (ii) of this Section 8(g)). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price that would result under the terms of this Section 8(g) at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
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(h) Determination of Consideration. For purposes of this Section 8, the consideration received by the Corporation for the issuance or deemed issuance of any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(1) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;
(2) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors; and
(3) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (1) and (2) above, as determined in good faith by the Board of Directors.
(ii) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 8(g), relating to Options and Convertible Securities, shall be determined by dividing:
(1) The total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(2) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.
9. VOTING RIGHTS.
(a) General. The Holders of shares of Preferred Stock shall be entitled to vote with the holders of the Common Stock on all matters submitted to a vote of stockholders of the Corporation, except as otherwise provided herein or as required by applicable Law, voting together with the holders of Common Stock as a single class. For such purposes, each Holder shall be entitled to a number of votes in respect of the shares of Preferred Stock owned of record by it equal to the number of shares of Common Stock into which such shares of Preferred Stock could be converted as of the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, as of the date such vote is taken or any written consent of stockholders is solicited. The Holders of shares of Preferred Stock shall be entitled to notice of any stockholders’ meeting in accordance with this Certificate of Incorporation and the By-laws as if they were holders of record of Common Stock for such meeting.
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(b) Class Voting Rights.
(i) So long as at least 25% of the shares of Preferred Stock issued as of the Effective Date remain outstanding, in addition to any other vote required by applicable Law, the Corporation shall not take (and shall not permit any of its Subsidiaries to take) any of the following actions (including by means of merger, consolidation, reorganization, recapitalization or otherwise) without the prior affirmative vote or written consent of the Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock, voting as a separate class:
(1) alter or change the powers, rights, privileges or preferences of the Preferred Stock or amend, alter, repeal or modify any provision of this Certificate of Incorporation or the By-laws or any of the governing documents of any Subsidiary of the Corporation;
(2) enter into any transaction or series of related transactions that constitutes (x) a business combination, investment in another Person, acquisition, disposition, merger or similar business combination, in each case, that does not result in a Change of Control, (1) with any Person that has, in the twelve (12) months prior to the date of such transaction, negative EBITDA or negative free cash flow or (2) in respect of which the consideration to be paid by the Corporation or its Subsidiary, individually or in the aggregate with all such transactions, exceeds $50,000,000 or (y) a Reorganization Event to the extent such Reorganization Event disproportionally adversely affects the Holders of Preferred Stock;
(3) declare or pay any dividend or distribution on, or redeem or repurchase, any Capital Stock, except declaring or paying dividends or distributions on the Preferred Stock as expressly permitted pursuant to this Certificate of Incorporation;
(4) register any securities under the Securities Act in connection with an initial public offering of Common Stock or enter into a merger, acquisition, business combination, or similar transaction, in each case, with a special purpose acquisition company, other than pursuant to a Qualified IPO or Qualified De-SPAC Transaction;
(5) enter into any transaction or series of transactions that would result in a Liquidation, including any Change of Control, in which cash (or marketable securities) proceeds to be received by each Holder for its Preferred Stock would be less than two (2) times the Original Issue Price for each share of Preferred Stock held by such Holder;
(6) adopt (other than the Stock Plan) or amend any equity option plan, profits interest plan, restricted stock or phantom restricted unit plan, or issue any Capital Stock or other equity securities to employees of or other service providers to the Corporation under any such plan other than Capital Stock or other equity securities which it is permitted to issue under the terms of the Stock Plan;
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(7) appoint any person to the position of, remove, enter into any new employment arrangement with, or materially change the compensation payable or benefits provided to, the Corporation’s Chief Executive Officer;
(8) make a tax election that would change the U.S. federal income tax characterization of the Corporation from being treated as a corporation to a partnership for U.S. federal income tax purposes or any other material tax election that would be adverse to the Holders of Preferred Stock;
(9) authorize, create, increase the authorized amount of, or issue any Capital Stock (other than issuing (x) equity incentive awards to employees of or other service providers to the Corporation pursuant to the terms of the Stock Plan and approved by the Board of Directors or (y) any Capital Stock of any of the Corporation’s Subsidiaries that are issued to the Corporation);
(10) enter into, modify in any material respect or terminate any arrangement or transaction or series of related transactions with any related party including with any director, officer, or senior member of management of the Corporation or any direct or indirect equityholder or other Affiliate of the Corporation or any of its Subsidiaries or any of their respective directors, officers, senior members of management or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such Person, other than transactions that have been disclosed to Investor in the disclosure schedules to the Purchase Agreement (provided that any amendments to such disclosed transactions that are not material shall not be subject to the consent right set forth in this clause (10));
(11) (A) create, incur, assume, guarantee or otherwise become directly or indirectly liable for any indebtedness for borrowed money (which shall include for purposes hereof notes and similar instruments, capitalized lease obligations and guarantees or other contingent obligations for the foregoing indebtedness but shall exclude indebtedness owing by any wholly owned (except for any qualifying director shares or de minimis equity interests) Subsidiary to the Corporation or any other wholly owned (except for any qualifying director shares or de minimis equity interests) Subsidiary and trade payables to non-Affiliates incurred in the ordinary course of business); provided, however, that the foregoing shall not restrict the incurrence, assumption or guaranteeing of indebtedness to the extent that (x) such indebtedness is permitted to be incurred under the Credit Agreement (including under any incremental loan facilities provided for by the Credit Agreement) or (y) after giving effect to the recurrence and use of proceeds of such indebtedness, the Total Net Leverage Ratio (as defined in the Credit Agreement), calculated on a pro forma basis as of the last day of the most recently ended fiscal quarter for which financial statements have been delivered to the Holders, does not exceed the Total Net Leverage Ratio as specified in the applicable sections of the Credit Agreement; or (B) enter into any material amendment, restatement, waiver, supplement or other modification to the Credit Agreement (or series of amendments, restatements, waivers, supplements, or other modifications that, in the aggregate, are material), or refinance, refund or replace the Credit Agreement with one or more other Credit Agreements; and
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(12) adopt any plan of liquidation, dissolution or winding up of the Corporation or file any voluntary petition for bankruptcy, receivership or any similar proceeding.
For purposes of clause (11) of this Section 9(b)(i), (x) the Corporation may elect to treat any indebtedness arising under revolving loan commitments or delayed draw term loan commitments (assuming the full amount of such commitments are drawn for purposes of calculating the Total Net Leverage Ratio) as incurred by the Corporation or its Subsidiaries in the full amount of such commitments on the date such commitments are entered into by the applicable lenders (any such commitments, “Designated Lending Commitments”) and (y) no consent of any Holder shall be required under clause (11) of this Section 9(b)(i), in order for the Corporation and its Subsidiaries to borrow, repay and reborrow loans or request other extensions of credit under such Designated Lending Commitments so long as at the time such Designated Lending Commitments were entered into, the incurrence of indebtedness thereunder was permitted by clause (11) of this Section 9(b)(i) (after giving effect to clause (x) of this paragraph).
(c) The consent or votes required in this Section 9(b) shall be in addition to any approval of stockholders of the Corporation which may be required by Law or pursuant to any provision of this Certificate of Incorporation, the Stockholders Agreement or the By-laws. Each Holder of shares of Preferred Stock will have one vote per share on any matter on which Holders of shares of Preferred Stock are entitled to vote separately as a class, whether at a meeting or by written consent.
10. CERTIFICATES.
(a) Transfer Agent. The Corporation may, in its sole discretion, and shall, following an initial public offering of Common Stock pursuant to an effective registration statement under the Securities Act, appoint a transfer agent and remove such transfer agent in accordance with the agreement between the Corporation and such transfer agent; provided that the Corporation shall appoint a successor transfer agent of recognized standing who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Corporation shall send notice thereof by first-class mail, postage prepaid, to the Holders.
(b) Form and Dating. The Preferred Stock shall be initially issued and thereafter evidenced only in definitive, electronic certificated form. Each Preferred Stock certificate shall be dated the date of its authentication.
(c) Execution and Authentication. Two officers of the Corporation shall sign any Preferred Stock certificate for the Corporation by manual or electronic signature.
(d) Transfer and Exchange. Subject to the Transfer Restrictions, when (i) a Preferred Stock certificate is presented to the Corporation or the Corporation’s transfer agent, if any, with a request to register the transfer of such Preferred Stock certificate, or (ii) Preferred Stock certificates are presented to the Corporation or the Corporation’s transfer agent, if any, with a request to exchange such Preferred Stock certificates for a Preferred Stock certificate representing a number of shares of Preferred Stock equal to the combined number of shares of Preferred Stock represented by such presented certificates, the Corporation or the Corporation’s transfer agent, as applicable, shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Preferred Stock certificates surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Corporation and the Corporation’s transfer agent, if any, duly executed by the holder thereof or its attorney duly authorized in writing;
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(ii) are being transferred or exchanged in accordance with the Transfer Restrictions; and
(iii) if such Preferred Stock certificates are being delivered to the Corporation or the Corporation’s transfer agent, if any, by a Holder for registration in the name of such holder, without transfer, a certification from such holder to that effect.
(e) Obligations with Respect to Transfers of Preferred Stock.
(i) To permit registrations of transfers and exchanges, the Corporation shall execute, and the Corporation’s transfer agent, if any, shall authenticate, Preferred Stock certificates as required pursuant to the provisions of this Section 10(e).
(ii) All Preferred Stock certificates issued upon any registration of transfer or exchange of Preferred Stock certificates in accordance with Section 10(d) shall be the valid obligations of the Corporation, entitled to the same benefits under this Certificate of Incorporation as the Preferred Stock certificates surrendered upon such registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any shares of Preferred Stock, the Corporation and the Corporation’s transfer agent, if any, may deem and treat the Person in whose name such shares of Preferred Stock are registered as the absolute owner of such Preferred Stock, and neither such transfer agent nor the Corporation shall be affected by notice to the contrary. All notices and communications to be given to the Holders and all payments to be made to Holders under the Preferred Stock shall be given or made only to the Holders.
(f) Replacement Certificates. If any Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation will issue, in exchange and in substitution for and upon cancellation of the mutilated certificate, or in lieu of and substitution for the certificate lost, stolen or destroyed, and the Corporation’s transfer agent, if any, or duly authorized officers shall countersign a replacement Preferred Stock certificate of like tenor and representing an equivalent amount of Preferred Stock. If required by the transfer agent or the Corporation, such Holder shall furnish evidence of loss, theft or destruction of such certificate and, if requested by the Corporation, an indemnity on customary terms for such situations reasonably satisfactory to the Corporation.
(g) Temporary Certificates. Until definitive Preferred Stock certificates are ready for delivery, the Corporation may prepare and the Corporation’s transfer agent, if any, or duly authorized officers shall countersign temporary Preferred Stock certificates. Temporary Preferred Stock certificates shall be substantially in the form of definitive Preferred Stock certificates but may have variations that the Corporation considers appropriate for temporary Preferred Stock certificates. Without unreasonable delay, the Corporation shall prepare and the Corporation’s transfer agent, if any, or duly authorized officers shall countersign definitive Preferred Stock certificates and deliver them in exchange for temporary Preferred Stock certificates.
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(h) Cancellation. In the event the Corporation shall redeem or otherwise acquire Preferred Stock, the Preferred Stock certificates representing such redeemed or acquired shares shall thereupon be delivered to the Corporation for cancellation.
(i) Taxes. The issuance or delivery of shares of Preferred Stock, shares of Common Stock or other securities issued on account of Preferred Stock pursuant hereto, or certificates representing such shares or securities, shall be made without charge to the Holder for such shares or certificates or for any share transfer, documentary, stamp or similar tax in respect of the issuance or delivery of such certificates or the securities represented thereby, provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Preferred Stock, shares of Common Stock or other securities in a name other than that in which the shares of Preferred Stock with respect to which such shares or other securities were issued, delivered or registered, or in respect of any payment to any Person other than a payment to the Holder thereof, and the transferee or payee, as the case may be, shall pay or bear the cost of any such tax, and the Corporation shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.
11. Miscellaneous.
(a) Good Faith. The Corporation shall not, by amendment of this Certificate of Incorporation or through reorganization, consolidation, merger, dissolution, sale of assets, or otherwise, avoid or seek to avoid the observance or performance of any of the terms of this Certificate of Incorporation, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders of Preferred Stock against dilution or other impairment as set forth in this Certificate of Incorporation.
(b) Status of Shares. Shares of Preferred Stock which have been converted, redeemed, repurchased or otherwise cancelled shall be retired and, following the filing of any certificate required by the DGCL, have the status of authorized and unissued shares of Preferred Stock, without designation as to series until such shares are once more, subject to and in accordance with the provisions of Section 9, designated as part of a particular series of Preferred Stock by the Board of Directors.
(c) Notices. All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three (3) Business Days after the mailing thereof if sent by registered or certified mail (or by first class mail if the same shall be specifically permitted for such notice under the terms of this Certificate of Incorporation) with postage prepaid, addressed: (i) if to the Corporation, to its principal executive offices, or to any transfer or other agent of the Corporation designated to receive such notice as permitted by this Certificate of Incorporation, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the Register or (iii) to such other address as the Corporation or any such Holder, as the case may be, shall have designated by written notice similarly given.
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(d) Severability. If any right, preference or limitation of the Preferred Stock set forth in this Certificate of Incorporation (as amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of Law or public policy, all other rights, preferences and limitations set forth in this Certificate of Incorporation (as so amended) which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be deemed dependent upon any other such right, preference or limitation unless so expressed herein.
(e) Headings. The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.
12. The Corporation and the Investor intend that the Preferred Stock held by the Investor shall be treated for U.S. federal income tax purposes as stock that is not “preferred stock” within the meaning of Section 305 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations issued thereunder, and the Corporation and the Investor each agree to file its respective tax returns in a manner consistent with such intent, unless otherwise required by a taxing authority or a change in applicable law after the Effective Date.
Article V
The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Elections of directors need not be by written ballot unless otherwise provided in the Bylaws of the Corporation.
Article VI
Subject to any additional vote required by this Certificate of Incorporation, the Stockholders Agreement or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation; provided, however, the Corporation shall not, by amendment of this Certificate of Incorporation or through reorganization, consolidation, merger, dissolution, sale of assets, or otherwise, avoid or seek to avoid the observance or performance of any of the terms of this Certificate of Incorporation, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders of Preferred Stock against dilution or other impairment as set forth in this Certificate of Incorporation.
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Article VII
Subject to any additional vote required by this Certificate of Incorporation or the Stockholders Agreement, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.
Article VIII
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
Article IX
To the fullest extent permitted by law, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article IX to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director or officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.
Article X
To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.
Any repeal or modification of the foregoing provisions of this Article X by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of, or increase the liability of any director or officer of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.
Article XI
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (A) any derivative action or proceeding asserting a claim on behalf of the Corporation, (B) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (C) any action or proceeding asserting a claim against the Corporation arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s Certificate of Incorporation or Bylaws, (D) any action or proceeding asserting a claim as to which the Delaware General Corporation Law confers jurisdiction upon the Court of Chancery of the State of Delaware, or (E) any action or proceeding asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.
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The foregoing Amended and Restated Certificate of Incorporation has been duly adopted by this corporation’s Board of Directors and stockholders in accordance with the applicable provisions of Sections 228, 242 and 245 of the Delaware General Corporation Law.
| Executed on April 10, 2025. | ||
| By: | /s/ Trevor Burgess | |
| Trevor Burgess, Chief Executive Officer | ||
Exhibit 3.3
FORM
OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
NEPTUNE INSURANCE HOLDINGS INC.
Neptune Insurance Holdings Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:
(A) The name of this Corporation is Neptune Insurance Holdings Inc. Its original certificate of incorporation was filed with the Secretary of State of the State of Delaware on March 20, 2025. The Corporation filed an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware on April 10, 2025 (the “First Amended and Restated Certificate”).
(B) This second amended and restated certificate of incorporation (this “Second Amended and Restated Certificate”) was duly adopted by the Board of Directors of this Corporation and by the stockholders in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, with the approval of the stockholders of this Corporation having been given by written consent without a meeting in accordance with Section 228 of the General Corporation Law of the State of Delaware.
(C) The text of the First Amended and Restated Certificate is hereby amended and restated in its entirety to read as follows:
Article I
The name of this Corporation is Neptune Insurance Holdings Inc.
Article II
The address of the Corporation’s registered office in the State of Delaware is 8 The Green Ste R, in the city of Dover, county of Kent, 19901. The name of its registered agent at such address is Resident Agents Inc.
Article III
The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).
Article IV
Section 4.1 Total Authorized
4.1.1 The total number of shares of all classes of stock that the Corporation has authority to issue is shares, consisting of (i) shares of common stock, par value $0.00001 per share (the “Common Stock”), shares of which are designated as Class A Common Stock, par value $0.00001 per share (the “Class A Common Stock”) and shares of which are designated as Class B Common Stock, par value $0.00001 per share (the “Class B Common Stock”), and (ii) shares of Preferred Stock, par value $0.00001 per share (the “Preferred Stock”).
4.1.2 Immediately upon the effectiveness of this Second Amended and Restated Certificate for filing by the Secretary of State of the State of Delaware (the “Effective Time”), each share of the Corporation’s common stock issued and outstanding or held as treasury stock immediately prior to the Effective Time, shall, automatically and without further action by any stockholder, be reclassified as, and shall become, one (1) share of Class A Common Stock. Any stock certificate that immediately prior to the Effective Time represented shares of the Corporation’s Common Stock shall from and after the Effective Time be deemed to represent shares of Class A Common Stock, without the need for surrender or exchange thereof.
4.1.3 The number of authorized shares of Class A Common Stock or Class B Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of capital stock representing a majority of the voting power of all the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the DGCL, and no vote of the holders of the Class A Common Stock or Class B Common Stock voting separately as a class shall be required therefor.
Section 4.2 Preferred Stock
4.2.1 The Corporation’s Board of Directors (the “Board”) is authorized, subject to any limitations prescribed by the laws of the State of Delaware, by resolution or resolutions adopted from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, and, by filing a certificate of designation pursuant to the applicable law of the State of Delaware (the “Certificate of Designation”), to establish from time to time the number of shares to be included in each such series, to fix the designation, vesting, powers (including voting powers), preferences and relative, participating, optional, or other rights (and the qualifications, limitations, or restrictions thereof) of the shares of each such series, and to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The number of authorized shares of Preferred Stock may also be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a separate vote of the holders of the Preferred Stock or any series thereof, irrespective of the provisions of Section 242(b)(2) of the DGCL, unless a vote of any such holders is required pursuant to the terms of any Certificate of Designation designating a series of Preferred Stock.
4.2.2 Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, (i) any new series of Preferred Stock may be designated, fixed, and determined as provided herein by the Board without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and (ii) any such new series may have powers, preferences, and rights, including, without limitation, voting rights, dividend rights, liquidation rights, redemption rights, and conversion rights, senior to, junior to, or pari passu with the rights of the Common Stock, the Preferred Stock, or any future class or series of Preferred Stock or Common Stock.
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Section 4.3 Rights of Class A Common Stock and Class B Common Stock.
4.3.1 Except as otherwise provided in this Second Amended and Restated Certificate or required by applicable law, shares of Class A Common Stock and Class B Common Stock shall have the same rights and powers, rank equally (including as to dividends and distributions, and upon any liquidation, dissolution, or winding up of the Corporation), share ratably, and be identical in all respects and as to all matters.
4.3.2 Except as otherwise expressly provided by this Second Amended and Restated Certificate or as provided by law, the holders of shares of Class A Common Stock and Class B Common Stock shall (a) at all times vote together as a single class on all matters (including the election of directors) submitted to a vote of the stockholders of the Corporation, (b) be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation (the “Bylaws”), and (c) be entitled to vote upon such matters and in such manner as may be provided by applicable law; provided, however, that, except as otherwise required by law, holders of Class A Common Stock and Class B Common Stock shall not be entitled to vote on any amendment to this Second Amended and Restated Certificate (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Second Amended and Restated Certificate (including any Certificate of Designation relating to any series of Preferred Stock). Except as otherwise expressly provided herein or required by applicable law, each holder of Class A Common Stock shall have the right to one (1) vote per share of Class A Common Stock held of record by such holder as of the applicable record date and each holder of Class B Common Stock shall have the right to ten (10) votes per share of Class B Common Stock held of record by such holder as of the applicable record date.
4.3.3 Shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically, and ratably, on a per share basis, with respect to any dividends or distributions as may be declared and paid from time to time by the Board out of any assets of the Corporation legally available therefor; provided, however, that in the event a dividend is paid in the form of shares of Class A Common Stock or Class B Common Stock (or rights to acquire such shares), then holders of Class A Common Stock shall receive shares of Class A Common Stock (or rights to acquire such shares, as the case may be) and holders of Class B Common Stock shall receive shares of Class B Common Stock (or rights to acquire such shares, as the case may be), with holders of shares of Class A Common Stock and Class B Common Stock receiving, on a per share basis, an identical number of shares of Class A Common Stock or Class B Common Stock, as applicable. Notwithstanding the foregoing, the Board may pay or make a disparate dividend or distribution per share of Class A Common Stock or Class B Common Stock (whether in the amount of such dividend or distribution payable per share, the form in which such dividend or distribution is payable, the timing of the payment, or otherwise) if such disparate dividend or distribution is approved in advance by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of Class A Common Stock and the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of Class B Common Stock, each voting separately as a class.
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4.3.4 Shares of Class A Common Stock or Class B Common Stock may not be subdivided, combined, or reclassified unless the shares of the other class are concurrently therewith proportionately subdivided, combined, or reclassified in a manner that maintains the same proportionate equity ownership between the holders of the outstanding Class A Common Stock and the holders of the outstanding Class B Common Stock on the record date for such subdivision, combination, or reclassification; provided, however, that shares of one such class may be subdivided, combined, or reclassified in a different or disproportionate manner if such subdivision, combination, or reclassification is approved in advance by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of Class A Common Stock and the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of Class B Common Stock, each voting separately as a class.
4.3.5 Subject to any preferential or other rights of any holders of Preferred Stock then outstanding, upon the liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, holders of Class A Common Stock and Class B Common Stock will be entitled to receive ratably all assets of the Corporation available for distribution to its stockholders unless disparate or different treatment of the shares of each such class with respect to distributions upon any such liquidation, dissolution, or winding up is approved in advance by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of Class A Common Stock and the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of Class B Common Stock, each voting separately as a class.
4.3.6 In the case of any distribution or payment in respect of the shares of Class A Common Stock or Class B Common Stock upon the merger or consolidation of the Corporation with or into any other entity, or in the case of any other transaction having an effect on stockholders substantially similar to that resulting from a merger or consolidation, such distribution or payment shall be made ratably on a per share basis among the holders of the Class A Common Stock and Class B Common Stock as a single class; provided, however, that shares of one such class may receive different or disproportionate distributions or payments in connection with such merger, consolidation, or other transaction if (a) the only difference in the per share distribution to the holders of the Class A Common Stock and Class B Common Stock is that any securities distributed to the holder of a share Class B Common Stock have ten (10) times the voting power of any securities distributed to the holder of a share of Class A Common Stock, or (b) such merger, consolidation, or other transaction is approved by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of Class A Common Stock and the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of Class B Common Stock, each voting separately as a class.
Article V
Section 5.1 Each share of Class B Common Stock shall be convertible into one (1) fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the Corporation. Before any holder of Class B Common Stock shall be entitled to convert any of such holder’s shares of such Class B Common Stock into shares of Class A Common Stock, such holder shall deliver an instruction and the certificate or certificates therefor (if any), duly endorsed, to the principal corporate office of the Corporation or of any transfer agent for the Class B Common Stock, and shall give written notice to the Corporation at its principal corporate office of such holder’s election to convert the same and shall state therein the name or names in which the shares of Class A Common Stock issuable on conversion thereof are to be registered on the books of the Corporation. The Corporation shall, as soon as practicable thereafter, register on the Corporation’s books ownership of the number of shares of Class A Common Stock to which such record holder of Class B Common Stock, or to which the nominee or nominees of such record holder, shall be entitled as aforesaid. Such conversion shall be deemed to have occurred immediately prior to the close of business on the date such notice of the election to convert is received by the Corporation or, if the notice of conversion specifies a different future effective time, including a time determined by the happening of a future event, such conversion shall be deemed to have occurred at such time, or on the happening of such event, and the person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock as of such time.
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Section 5.2 Each share of Class B Common Stock will automatically convert into one fully paid and nonassessable share of Class A Common Stock on the Final Conversion Date. After the Final Conversion Date, the reissuance of all shares of Class B Common Stock shall be prohibited, and any shares of Class B Common Stock issued prior to the Final Conversion Date shall be retired and cancelled in accordance with Section 243 of the DGCL and the filing with the Secretary of State of the State of Delaware required thereby.
Section 5.3 The Corporation may, from time to time, establish such policies and procedures, not in violation of applicable law or this Second Amended and Restated Certificate or the Bylaws, relating to the administration of the conversion of shares of Class B Common Stock into shares of Class A Common Stock as it may deem necessary or advisable. If the Corporation has reason to believe that a Transfer of Class B Common Stock that is not a Permitted Transfer has occurred, the Corporation shall promptly notify the purported transferor initiating such Transfer in writing and may request that such purported transferor furnish affidavits or other evidence to the Corporation as it reasonably deems necessary to determine whether a Transfer that is not a Permitted Transfer has occurred. The transferor will have ten (10) days from receipt of such notice to either (i) furnish sufficient (as determined in good faith by the Board) evidence to the Corporation (in the manner provided in the request) to enable the Corporation to determine that the Transfer was a Permitted Transfer, or (ii) unwind or otherwise reverse the Transfer so that ownership of such shares is restored to the transferor or a Permitted Transferee. If (1) after the expiration of such ten (10)-day period, the Corporation determines in good faith that neither condition (i) nor (ii) has been satisfied, or (2) at any time, the transferor notifies the Corporation that a Transfer is not a Permitted Transfer, then any such shares of Class B Common Stock, to the extent not previously converted, will automatically and immediately, without further action by the Corporation or the holder thereof, convert into an equal number of fully paid and nonassessable shares of Class A Common Stock, effective as of the time of such Transfer, and such conversion shall be registered on the books and records of the Corporation.
Section 5.4 In connection with any action of stockholders taken at a meeting or by written consent (if action by written consent of stockholders is permitted at such time under this Certificate of Incorporation), the stock ledger of the Corporation shall be presumptive evidence as to who are the stockholders entitled to vote in person or by proxy at any meeting of stockholders and the classes of shares held by each such stockholder and the number of shares of each class held by such stockholder.
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Section 5.5 The Corporation shall not (by amendment, merger, consolidation, or otherwise), without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the outstanding shares of Class B Common Stock, voting as a single class, amend, alter, repeal, or waive this Article V; provided, however, that from and after the Final Conversion Date, this Article V may be amended, altered, repealed, or waived in accordance with Article XIII.
Section 5.6 Certain Definitions.
“Disability” shall mean, with respect to Founder, the permanent and total disability of Founder such that Founder is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death within 12 months or which has lasted or can be expected to last for a continuous period of at least 12 months as determined by a licensed medical practitioner jointly selected by a majority of the independent directors of the Board and Founder. If Founder is incapable of selecting a licensed medical practitioner, then Founder’s spouse shall make the selection on behalf of Founder, or in the absence or incapacity of Founder’s spouse, Founder’s adult children by majority vote shall make the selection on behalf of Founder, or in the absence of adult children of Founder or their inability to act by majority vote, a natural person then acting as the successor trustee of a revocable living trust which was created by Founder and which holds in the aggregate more shares of all classes of capital stock of the Corporation than any other revocable living trust created by Founder shall make the selection on behalf of Founder, or in the absence of any such successor trustee, the legal guardian or conservator of the estate of Founder shall make the selection on behalf of Founder.
“Family Member” shall mean, with respect to a natural person, the spouse, domestic partner or spousal equivalent, parents, grandparents, lineal descendants, siblings, and lineal descendants of siblings of such natural person. Lineal descendants shall include adopted persons, but only so long as they are adopted during minority. Family Member shall further include any other of such natural person’s family members as defined in Rule 701 of the Securities Act.
“Final Conversion Date” shall mean the earliest of:
| (i) | 12 months following the death or Disability of Founder; or |
| (ii) | upon the first trading day on or after such date that the outstanding shares of Class B Common Stock represent less than % of the aggregate shares of the then-outstanding Class A Common Stock and Class B Common Stock; |
provided that, the Final Conversion Date may be extended to a date that is up to 18 months after the date contemplated by the foregoing clause (i) or (ii), as applicable, upon affirmative approval of a majority of the independent directors then serving on the Board.
“Founder” shall mean Trevor Burgess.
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“Founder’s Estate” shall mean the estate of Founder or any Family Member thereof, so long as a Permitted Holder retains sole dispositive power and Voting Control with respect to the shares of Class B Common Stock held by such estate.
“Parent” of an entity shall mean any entity that directly or indirectly owns or controls a majority of the voting power of the voting securities of such entity.
“Permitted Entity” shall mean a corporation, partnership, or limited liability company owned or controlled, directly or indirectly, by Founder or his Permitted Transferees, in each case, so long as a Permitted Holder retains sole dispositive power and Voting Control with respect to the shares of Class B Common Stock held by such corporation, partnership, or limited liability company.
“Permitted Foundation” shall mean any charitable organization, private foundation, supporting organization, donor advised or donor directed fund, or any other charitable fund or similar entity that is tax-exempt under Section 501(c)(3) of the Code, which is established by Founder, so long as a Permitted Holder retains sole dispositive power and Voting Control with respect to the shares of Class B Common Stock held by such organization.
“Permitted Holder” shall mean Founder, his Family Members, or a trustee of a Permitted Trust described in clause (i), (iii), or (iv) of the definition thereof.
“Permitted IRA” shall mean an Individual Retirement Account, as defined in Section 408(a) of the Internal Revenue Code (the “Code”), or a pension, profit sharing, stock bonus, or other type of plan or trust of which Founder or his Permitted Transferees are participants or beneficiaries and which satisfies the requirements for qualification under Section 401 of the Code, so long as a Permitted Holder retains sole dispositive power and Voting Control with respect to the shares of Class B Common Stock held by such Individual Retirement Account.
“Permitted Transfer” shall mean, and be restricted to, any Transfer of a share of Class B Common Stock by Founder or any Permitted Transferee to: (i) a Family Member of Founder, (ii) a Permitted Entity, (iii) a Permitted Foundation, (iv) a Permitted IRA, (v) a Permitted Trust, or (vi) Founder’s Estate.
“Permitted Transferee” shall mean a transferee of shares of Class B Common Stock received in a Permitted Transfer.
“Permitted Trust” shall mean with respect to Founder: (i) a trust for the benefit of Founder, provided Founder or his Permitted Transferees do not receive consideration in exchange for the Transfer (other than as a settlor or beneficiary of such trust); (ii) a trust for the benefit of persons other than Founder, provided Founder or his Permitted Transferees do not receive consideration in exchange for the Transfer (other than as a settlor or beneficiary of such trust); (iii) a trust under the terms of which Founder or his Family Members have retained a “qualified interest” within the meaning of Section 2702(b)(1) of the Code and/or a reversionary interest; or (iv) any revocable or irrevocable trust for the primary benefit of Founder or one or more of Founder’s Family Members or the spouses of such Family Members, in each case, so long as a Permitted Holder retains sole dispositive power and Voting Control with respect to the shares of Class B Common Stock held by such trust.
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“Securities Act” shall mean the Securities Act of 1933, as amended.
“Transfer” of a share of Class B Common Stock shall mean any sale, assignment, transfer, conveyance, pledge, hypothecation, or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law, including, without limitation, a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether there is a corresponding change in beneficial ownership), or the transfer of, or entering into a binding agreement with respect to, Voting Control over such share by proxy or otherwise; provided, however, that the following shall not be considered a “Transfer” within the meaning of this Section 5.5:
(a) the granting of a revocable proxy to officers or directors of the Corporation at the request of the Board in connection with actions to be taken at an annual or special meeting of stockholders;
(b) entering into a voting trust, agreement, or arrangement (with or without granting a proxy) solely with stockholders who are holders of Class B Common Stock that (i) is disclosed either in a Schedule 13D filed with the SEC or in writing to the Secretary of the Corporation, (ii) either has a term not exceeding one (1) year or is terminable by the holder of the shares subject thereto at any time, and (iii) does not involve any payment of cash, securities, property, or other consideration to the holder of the shares subject thereto other than the mutual promise to vote shares in a designated manner;
(c) entering into a voting trust, agreement, or arrangement (with or without granting a proxy) pursuant to a written agreement to which the Corporation is a party;
(d) the fact that, as of the Effective Time or at any time after the Effective Time, the spouse of any holder of Class B Common Stock possesses or obtains an interest in such holder’s shares of Class B Common Stock arising solely by reason of the application of the community property laws of any jurisdiction, so long as no other event or circumstance shall exist or have occurred that constitutes a Transfer of such shares of Class B Common Stock (including a Transfer by operation of law pursuant to a qualified domestic order or in connection with a divorce settlement or any other court order); or
(e) in connection with a merger or consolidation of the Corporation with or into any other entity that has been approved by the Board, or in the case of any other transaction having an effect on stockholders substantially similar to that resulting from a merger or consolidation that has been approved by the Board, the entering into a support, voting, tender, or similar agreement or arrangement (in each case, with or without the grant of a proxy) that has also been approved by the Board.
A Transfer shall also be deemed to have occurred with respect to a share of Class B Common Stock beneficially held by an entity that is a Permitted Trust, Permitted IRA, Permitted Entity, or Permitted Foundation, if there occurs any act or circumstance that causes such entity to no longer be a Permitted Trust, Permitted IRA, Permitted Entity, or Permitted Foundation or if there occurs a Transfer on a cumulative basis, from and after the Effective Time, of a majority of the voting power of the voting securities of such entity or any direct or indirect Parent of such entity, other than a Transfer to parties that are, as of the Effective Time, holders of voting securities of any such entity or Parent of such entity.
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“Voting Control” shall mean, with respect to a share of Class B Common Stock, the power (whether exclusive or shared) to vote or direct the voting of such share by proxy, voting agreement, or otherwise.
“Voting Threshold Date” shall mean the first date falling after 11:59 p.m. (Eastern Time) on the date on which the outstanding shares of Class B Common Stock represent less than a majority of the total voting power of the then outstanding shares of the Corporation then entitled to vote generally in the election of directors.
Section 5.7 In the event any shares of Class B Common Stock are converted into shares of Class A Common Stock pursuant to this Article V, the shares of Class B Common Stock so converted shall be retired and shall not be reissued by the Corporation.
Section 5.8 Notwithstanding anything to the contrary in Section 5.1 or Section 5.2, if the date on which any share of Class B Common Stock is converted into Class A Common Stock pursuant to the provisions of Section 5.1 or Section 5.2 occurs after the record date for the determination of the holders of Class B Common Stock entitled to receive any dividend or distribution to be paid on the shares of Class B Common Stock, the holder of such share of Class B Common Stock as of such record date will be entitled to receive such dividend or distribution on such payment date; provided, that, notwithstanding any other provision of this Second Amended and Restated Certificate, to the extent that any such dividend or distribution is payable in shares of Class B Common Stock, such dividend or distribution in respect of such share of Class B Common Stock shall be deemed to have been declared, and shall be payable in, shares of Class A Common Stock and no shares of Class B Common Stock shall be issued in payment thereof.
Section 5.9 The Corporation shall at all times reserve and keep available, out of its authorized and unissued shares of Class A Common Stock, solely for the purpose of effecting conversions of shares of Class B Common Stock into Class A Common Stock, such number of duly authorized shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all then-outstanding shares of Class B Common Stock. If at any time the number of authorized and unissued shares of Class A Common Stock shall not be sufficient to effect the conversion of all then-outstanding shares of Class B Common Stock, the Corporation shall promptly take such corporate action as may be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, obtaining the requisite stockholder approval of any necessary amendment to this Second Amended and Restated Certificate. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and non-assessable shares. The Corporation shall take all such action as may be necessary to ensure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or regulation.
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Article VI
Section 6.1 The business and affairs of the Corporation shall be managed by or under the direction of the Board, except as otherwise provided by law. In addition to the powers and authority expressly conferred upon them by statute or by this Second Amended and Restated Certificate or the Bylaws, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation pursuant to applicable law.
Section 6.2 Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the total number of directors constituting the Whole Board shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board. For purposes of this Second Amended and Restated Certificate, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.
Section 6.3 Subject to the special rights of the holders of any series of Preferred Stock to elect directors, the directors shall be divided, with respect to the time for which they severally hold office, into three classes designated as Class I, Class II, and Class III, respectively (the “Classified Board”). The Board is authorized to assign members of the Board already in office to such classes of the Classified Board, which assignments shall become effective at the same time the Classified Board becomes effective. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board, with the number of directors in each class to be divided as nearly equal as reasonably possible. The initial term of office of the Class I directors shall expire at the Corporation’s first annual meeting of stockholders following the closing of the Corporation’s initial public offering pursuant to an effective registration statement under the Securities Act relating to the offer and sale of Common Stock to the public (the “Initial Public Offering Closing”), the initial term of office of the Class II directors shall expire at the Corporation’s second annual meeting of stockholders following the Initial Public Offering Closing, and the initial term of office of the Class III directors shall expire at the Corporation’s third annual meeting of stockholders following the Initial Public Offering Closing. At each annual meeting of stockholders following the Initial Public Offering Closing, directors elected to succeed those directors of the class whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. In the event of any increase or decrease in the authorized number of directors (a) each director then serving as such shall nevertheless continue as a director of the class of which the director is a member and (b) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of office are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board. No decrease in the authorized number of directors constituting the Board shall shorten the term of any incumbent director.
Section 6.4 Each director shall hold office until the annual meeting at which such director’s term expires and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation, disqualification, or removal. Any director may resign at any time upon notice to the Corporation given in writing or by any electronic transmission permitted by the Bylaws. Subject to the special rights of the holders of any series of Preferred Stock, no director may be removed from the Board except for cause and only by the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors voting together as a single class.
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Section 6.5 Subject to the special rights of the holders of any series of Preferred Stock to elect directors, any vacancy occurring in the Board for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall, unless (a) the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders or (b) as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even if less than a quorum and even if by a sole remaining director, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which the director has been assigned expires or until such director’s successor shall have been duly elected and qualified, or until such director’s earlier death, resignation, disqualification, or removal.
Section 6.6 Election of directors need not be by written ballot unless the Bylaws shall so provide.
Article VII
To the fullest extent permitted by the DGCL as the same exists or as may hereafter be amended, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer. If the DGCL is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors or officers, then the liability of the directors or officers of the Corporation shall be limited or eliminated to the fullest extent permitted by the DGCL, as so amended from time to time. Any amendment or repeal of this Article VII, or the adoption of any provision of this Second Amended and Restated Certificate inconsistent with this Article VII, shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such amendment or repeal or adoption of such inconsistent provision with respect to acts or omissions occurring prior to such amendment or repeal or adoption of such inconsistent provision.
Article VIII
Notwithstanding any other provision of this Second Amended and Restated Certificate or the Bylaws, prior to the Voting Threshold Date, the Corporation elects not to be governed by Section 203 of the DGCL.
Article IX
The Board shall have the power to adopt, amend, or repeal the Bylaws. Any adoption, amendment, or repeal of the Bylaws by the Board shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend, or repeal the Bylaws. Prior to the Voting Threshold Date, in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Second Amended and Restated Certificate (including any Preferred Stock issued pursuant to a Certificate of Designation), such adoption, amendment, or repeal of the Bylaws by the stockholders shall require the affirmative vote of a majority in voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. From and after the Voting Threshold Date, in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Second Amended and Restated Certificate (including any Preferred Stock issued pursuant to a Certificate of Designation), such adoption, amendment, or repeal of the Bylaws by the stockholders shall require the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
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Article X
Section 10.1 Subject to the rights of any series of Preferred Stock then outstanding, from and after the Voting Threshold Date, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Prior to the Voting Threshold Date, any action required or permitted to be taken by the stockholders of the Corporation at a meeting may be effected by consent in writing, by remote communication or electronic transmission of such stockholders in compliance with Section 228 of the DGCL, without prior notice and without a vote, if such consent or consents, setting forth the action so taken, are: (i) signed by the holders of the outstanding shares of stock of the Corporation representing not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock of the Corporation then outstanding and entitled to vote thereon were present and voted, and (ii) delivered to the Corporation in accordance with applicable law.
Section 10.2 Special meetings of stockholders of the Corporation may be called only by the Chairperson of the Board, the Chief Executive Officer, or the Board acting pursuant to a resolution adopted by a majority of the Whole Board, and may not be called by any other person or persons. Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting.
Section 10.3 Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner and to the extent provided in the Bylaws.
Article XI
Section 11.1 Unless the Corporation 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 lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) and any appellate court therefrom, to the fullest extent permitted by law, shall be the sole and exclusive forum for: (a) any derivative action, suit, or proceeding brought on behalf of the Corporation; (b) any action, suit, or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee, agent, or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, or any action asserting a claim for aiding and abetting any such breach of fiduciary duty; (c) any action, suit, or proceeding asserting a claim against the Corporation or any current or former director, officer, or employee of the Corporation arising out of or pursuant to, or seeking to enforce any right, obligation, or remedy under, or to interpret, apply, or determine the validity of, any provision of the DGCL, this Second Amended and Restated Certificate, or the Bylaws (as each may be amended from time to time); (d) any action, suit, or proceeding as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (e) any action, suit, or proceeding asserting a claim against the Corporation or any current or former director, officer, or employee of the Corporation governed by the internal affairs doctrine, in all cases subject to the court having personal jurisdiction over the indispensable parties named as defendants. If any action, suit, or proceeding the subject matter of which is within the scope of the preceding sentence is filed in a court other than the courts in the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (x) the personal jurisdiction of the state and federal courts in the State of Delaware in connection with any action, suit, or proceeding brought in any such court to enforce the provisions of the preceding sentence and (y) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. This Section 11.1 shall not apply to actions, suits, or proceedings brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction.
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Section 11.2 Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by the Corporation, its directors and officers, the underwriters to any offering giving rise to such complaint, and any other professional or entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying such offering.
Section 11.3 Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article XI.
Section 11.4 Failure to enforce the foregoing provisions of this Article XI would cause the Corporation irreparable harm, and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
Article XII
Section 12.1 If any provision of this Second Amended and Restated Certificate shall be held to be invalid, illegal, or unenforceable, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of this Second Amended and Restated Certificate (including without limitation, all portions of any section of this Second Amended and Restated Certificate containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) shall remain in full force and effect.
Article XIII
Section 13.1 The Corporation reserves the right to amend or repeal any provision contained in this Second Amended and Restated Certificate in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Second Amended and Restated Certificate (including any Certificate of Designation) or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Second Amended and Restated Certificate (including any Certificate of Designation), and subject to Section 4.2, from and after the Voting Threshold Date, the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal or adopt any provision inconsistent with this Article XIII or Section 4.1.3 and Section 4.2, Article V, Article VI, Article VII, Article IX, Article X, Article XI, or Article XII (the “Specified Provisions”); provided, further, if two-thirds (2/3) of the Whole Board has approved such amendment or repeal of, or any provision inconsistent with, the Specified Provisions, then only the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, repeal, or adopt any provision inconsistent with, the Specified Provisions.
***
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IN WITNESS WHEREOF, Neptune Insurance Holdings Inc. has caused this Second Amended and Restated Certificate to be signed by Trevor Burgess, a duly authorized officer of the Corporation, on this [___][th] day of [____________], 2025.
Trevor Burgess Chief Executive Officer |
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Exhibit 3.4
AMENDED AND RESTATED BYLAWS
OF
NEPTUNE INSURANCE HOLDINGS INC.
(April 10, 2025)
TABLE OF CONTENTS
| Page | |||
| ARTICLE I CORPORATE OFFICES | 1 | ||
| 1.1 | Offices | 1 | |
| ARTICLE II MEETINGS OF STOCKHOLDERS | 2 | ||
| 2.1 | Place Of Meetings | 2 | |
| 2.2 | Annual Meeting | 2 | |
| 2.3 | Special Meeting | 2 | |
| 2.4 | Notice Of Stockholders’ Meetings | 3 | |
| 2.5 | Manner Of Giving Notice; Affidavit Of Notice | 3 | |
| 2.6 | Quorum | 3 | |
| 2.7 | Adjourned Meeting; Notice | 3 | |
| 2.8 | Organization; Conduct of Business | 4 | |
| 2.9 | Voting | 4 | |
| 2.10 | Waiver Of Notice | 5 | |
| 2.11 | Stockholder Action By Written Consent Without A Meeting | 5 | |
| 2.12 | Record Date For Stockholder Notice; Voting; Giving Consents | 6 | |
| 2.13 | Proxies | 7 | |
| ARTICLE III DIRECTORS | 7 | ||
| 3.1 | Powers | 7 | |
| 3.2 | Number Of Directors | 7 | |
| 3.3 | Election, Qualification And Term Of Office Of Directors | 7 | |
| 3.4 | Resignation And Vacancies | 7 | |
| 3.5 | Place Of Meetings; Meetings By Telephone | 8 | |
| 3.6 | Regular Meetings | 8 | |
| 3.7 | Special Meetings; Notice | 9 | |
| 3.8 | Quorum | 9 | |
| 3.9 | Waiver Of Notice | 9 | |
| 3.10 | Board Action By Written Consent Without A Meeting | 10 | |
| 3.11 | Fees And Compensation Of Directors | 10 | |
| 3.12 | Approval Of Loans To Officers | 10 | |
| 3.13 | Removal Of Directors | 11 | |
| 3.14 | Chairperson Of The Board Of Directors | 11 | |
| ARTICLE IV COMMITTEES | 11 | ||
| 4.1 | Committees Of Directors | 11 | |
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| 4.2 | Committee Minutes | 12 | |
| 4.3 | Meetings And Action Of Committees | 12 | |
| ARTICLE V OFFICERS | 12 | ||
| 5.1 | Officers | 12 | |
| 5.2 | Appointment Of Officers | 13 | |
| 5.3 | Subordinate Officers | 13 | |
| 5.4 | Removal And Resignation Of Officers | 13 | |
| 5.5 | Vacancies In Offices | 13 | |
| 5.6 | Chief Executive Officer | 13 | |
| 5.7 | President | 14 | |
| 5.8 | Vice Presidents | 14 | |
| 5.9 | Secretary | 14 | |
| 5.10 | Chief Financial Officer | 15 | |
| 5.11 | Treasurer | 15 | |
| 5.12 | Representation Of Shares Of Other Corporations | 16 | |
| 5.13 | Authority And Duties Of Officers | 16 | |
| ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS | 16 | ||
| 6.1 | Indemnification Of Directors And Officers | 16 | |
| 6.2 | Indemnification Of Others | 16 | |
| 6.3 | Payment Of Expenses In Advance | 17 | |
| 6.4 | Indemnity Not Exclusive | 17 | |
| 6.5 | Insurance | 17 | |
| 6.6 | Conflicts | 17 | |
| ARTICLE VII RECORDS AND REPORTS | 18 | ||
| 7.1 | Maintenance And Inspection Of Records | 18 | |
| 7.2 | Inspection By Directors | 18 | |
| ARTICLE VIII GENERAL MATTERS | 18 | ||
| 8.1 | Checks | 18 | |
| 8.2 | Execution Of Corporate Contracts And Instruments | 18 | |
| 8.3 | Stock Certificates and Notices; Uncertificated Stock; Partly Paid Shares | 19 | |
| 8.4 | Special Designation On Certificates and Notices of Issuance | 19 | |
| 8.5 | Lost Certificates | 20 | |
| 8.6 | Construction; Definitions | 20 | |
| 8.7 | Dividends | 20 | |
| 8.8 | Fiscal Year | 20 | |
| 8.9 | Transfer Of Stock | 20 | |
| 8.10 | Stock Transfer Agreements | 21 | |
| 8.11 | Stockholders of Record | 21 | |
| 8.12 | Electronic Signature | 21 | |
| ARTICLE IX AMENDMENTS | 21 | ||
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AMENDED AND RESTATED BYLAWS
OF
NEPTUNE INSURANCE HOLDINGS INC.
These Amended and Restated Bylaws (these “Bylaws”) of Neptune Insurance Holdings Inc., a Delaware corporation (the “Corporation”), are subject to, and are governed by, the statutes, regulations, common law and other laws of the State of Delaware, including, without limitation, the General Corporation Law of the State of Delaware, the Amended and Restated Certificate of Incorporation of the Corporation (as amended from time to time, the “Certificate of Incorporation”) and the Stockholders Agreement, dated as of May 10, 2023, among Neptune Flood Incorporated, a Delaware corporation (“Neptune”) and certain of its stockholders (which agreement has been assumed by the Corporation pursuant to an Assignment and Assumption Agreement between the Corporation and Neptune dated on or about the date of these Amended and Restated Bylaws) (as amended from time to time, the “Stockholders Agreement”). In the event of a conflict between the provisions of these Bylaws and the mandatory provisions of the statutes, regulations, common law and other laws of the State of Delaware, or the provisions of the Certificate of Incorporation or the Stockholders Agreement, such provisions of the statutes, regulations, common law and other laws of the State of Delaware, the Certificate of Incorporation or the Stockholders Agreement, as the case may be, shall control. Capitalized terms used herein without definition shall have the meanings given to them in the Stockholders Agreement.
Article I
CORPORATE OFFICES
1.1 Offices
In addition to the Corporation’s registered office set forth in the Certificate of Incorporation, the Board of Directors may at any time establish other offices at any place or places where the Corporation is qualified to do business.
Article II
MEETINGS OF STOCKHOLDERS
2.1 Place Of Meetings
Meetings of stockholders shall be held at any place, within or outside the state of Delaware, designated by the Board of Directors. The stockholders may participate in and act at any meeting of the stockholders through video conference or the use of a conference telephone or other communications equipment, in each case by means of which all persons participating in the meeting can hear each other, and participation in the meeting by such means shall constitute presence in person at the meeting.
2.2 Annual Meeting
An annual meeting of stockholders shall be held on such date, time and place, either within or without the state of Delaware, as may be designated by resolution of the Board of Directors each year. At the meeting, directors shall be elected and any other proper business may be transacted.
2.3 Special Meeting
A special meeting of the stockholders may be called at any time by the Board of Directors, the chairperson of the board, the chief executive officer, the president or by one or more stockholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting.
If a special meeting is called by any person or persons other than the Board of Directors, the chairperson of the board, the chief executive officer or the president, the request shall be in writing, specifying the time of such meeting and the nature of the business proposed to be transacted in reasonable detail, and shall be delivered personally or sent by registered mail or by email or other electronic transmission to the chairperson of the board, the chief executive officer, the president or the secretary of the Corporation. No business may be transacted at such special meeting other than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than 35 nor more than 60 days after the receipt of the request. If the notice is not given within 20 days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.
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2.4 Notice Of Stockholders’ Meetings
Unless otherwise provided by law, all notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting, as of the record date for determining the stockholders entitled to notice of the meeting. The notice shall specify the place (if any), date and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called in reasonable detail.
2.5 Manner Of Giving Notice; Affidavit Of Notice
Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic mail or other electronic transmission, in the manner provided in Section 232 of the Delaware General Corporation Law. An affidavit of the secretary or an assistant secretary or of the transfer agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
2.6 Quorum
The holders of a majority of the shares of stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, by the Certificate of Incorporation or by the Stockholders Agreement. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (a) the chairperson of the meeting or (b) holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, shall have power to, and shall, adjourn the meeting to another place (if any), date or time.
2.7 Adjourned Meeting; Notice
When a meeting is adjourned to another place (if any), date or time, unless these Bylaws otherwise require, with respect to stockholders who were present at such adjourned meeting, notice need not be given of the adjourned meeting if the time and place (if any), thereof and the means of remote communications (if any) by which stockholders and proxyholders may be deemed to be present and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. With respect to stockholders who were not present at such adjourned meeting, a notice shall be given, on the same terms set forth in Section 2.5 above. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the place (if any), date and time of the adjourned meeting and the means of remote communications (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
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2.8 Organization; Conduct of Business
Such person as the Board of Directors may have designated or, in the absence of such a person, the chief executive officer, or in his or her absence, the president or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairperson of the meeting. In the absence of the secretary of the Corporation, the secretary of the meeting shall be such person as the chairperson of the meeting appoints.
The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including the manner of voting and the conduct of business. The date and time of opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.
2.9 Voting
(a) The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 of these Bylaws, subject to the provisions of (i) Sections 217 and 218 of the Delaware General Corporation Law (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements) and (ii) the Certificate of Incorporation.
(b) Except as may be otherwise provided in the Certificate of Incorporation, the Stockholders Agreement, or by applicable law, with respect to any matter submitted to a vote at any meeting of stockholders, (i) each holder of record of shares of Preferred Stock shall be entitled to such number of votes for each such share outstanding in the name of such holder on the books of the Corporation as may be fixed in the Certificate of Incorporation and (ii) each holder of record of shares of common stock of the Corporation shall be entitled to one vote for each such share outstanding in the name of such holder on the books of the Corporation.
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(c) Except as otherwise required by applicable law, the Certificate of Incorporation, these Bylaws, the Stockholders Agreement, or pursuant to any other law, rule or regulation applicable to the Corporation or its stockholders, with respect to any matter presented to the stockholders at any meeting of stockholders at which a quorum is present, the vote of shares of capital stock of the Corporation representing in the aggregate a majority of the total voting power of the shares of capital stock of the Corporation represented in person or by proxy at such meeting and entitled to vote thereon, voting as a single class, shall be sufficient to take action with respect to such matter; provided, however, that where a separate vote by a class or series of capital stock of the Corporation is required on any matter, the vote of shares of such class or series representing in the aggregate a majority of the voting power of the shares of such class or series present in person or represented by proxy at any meeting at which a quorum is present and entitled to vote thereon shall constitute the act of such class or series with respect to such matter. Except as otherwise required by applicable law, the Certificate of Incorporation, these Bylaws (including, without limitation, Section 2.03 hereof), the Stockholders Agreement, or pursuant to any other rule or regulation applicable to the Corporation or its stockholders, all elections shall be determined by a plurality of the votes cast, provided that the stockholders do not have the right to cumulate their votes for the election of directors.
2.10 Waiver Of Notice
Whenever notice is required to be given under any provision of the Delaware General Corporation Law or of the Certificate of Incorporation, the Stockholders Agreement, or these Bylaws, a written waiver thereof, signed by the person entitled to notice, or waiver by electronic mail or other electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice, or any waiver of notice by electronic transmission, unless so required by the Certificate of Incorporation, the Stockholders Agreement, or these Bylaws.
2.11 Stockholder Action By Written Consent Without A Meeting
Unless otherwise provided in the Certificate of Incorporation or in the Stockholders Agreement, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is (a) signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and (b) delivered to the Corporation in accordance with Section 228(a) of the Delaware General Corporation Law.
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No written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the first date a written consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the Corporation in the manner prescribed in this Section. An electronic mail or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written and signed for purposes of this Section to the extent permitted by law. Any such consent shall be delivered in accordance with Section 228(d)(1) of the Delaware General Corporation Law.
Any copy or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy or other reproduction shall be a complete reproduction of the entire original writing.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing (including by electronic mail or other electronic transmission as permitted by law). If the action which is consented to is such as would have required the filing of a certificate under any section of the Delaware General Corporation Law if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written consent has been given as provided in Section 228 of the Delaware General Corporation Law.
2.12 Record Date For Stockholder Notice; Voting; Giving Consents
(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date: (1) in the case of determination of stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, shall, unless otherwise required by law, not be more than 60 nor less than 10 days before the date of such meeting and, unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for determining the stockholders entitled to vote at such meeting, the record date for determining the stockholders entitled to notice of such meeting shall also be the record date for determining the stockholders entitled to vote at such meeting; (2) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than 10 days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (3) in the case of any other action, shall not be more than 60 days prior to such other action.
(b) If the Board of Directors does not so fix a record date: (1) the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action of the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
(c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for the stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for the determination of stockholders entitled to vote in accordance with the foregoing provisions of this Section 2.12 at the adjourned meeting.
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2.13 Proxies
Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by an instrument in writing or by an electronic transmission permitted by law filed with the secretary of the Corporation, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, electronic transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the Delaware General Corporation Law.
Article III
DIRECTORS
3.1 Powers
Subject to the provisions of the Delaware General Corporation Law and any limitations in the Certificate of Incorporation or these Bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.
3.2 Number Of Directors
The number of directors constituting the entire Board of Directors is 6, and subject to the rights of the holders of shares of Preferred Stock pursuant to the Certificate of Incorporation or the provisions of the Stockholders Agreement, including, but not limited to, Section 2.1 of the Stockholders Agreement, such number may be changed by a resolution of the Board of Directors or stockholders, subject to Section 3.4 of these Bylaws. No reduction of the authorized number of directors shall have the effect of removing any director before such director’s term of office expires.
3.3 Election, Qualification And Term Of Office Of Directors
Except as provided in Section 3.4 of these Bylaws and subject to the rights of the holders of shares of Preferred Stock pursuant to the Certificate of Incorporation, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting, provided that the election of any director shall be subject to the applicable provisions of the Stockholders Agreement. Directors need not be stockholders unless so required by the Certificate of Incorporation or these Bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal.
Unless otherwise specified in the Certificate of Incorporation, elections of directors need not be by written ballot.
3.4 Resignation And Vacancies
Any director may resign at any time upon written notice to the attention of the Secretary of the Corporation. Notwithstanding the provisions of Section 223(a)(1) and 223(a)(2) of the Delaware General Corporation Law, and subject to the provisions of the Stockholders Agreement, any vacancy or newly created directorship may be filled by a majority of the directors then in office (including any directors that have tendered a resignation effective at a future date), though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced; provided, however, that each of (i) a vacancy with respect to a Preferred Director or (ii) a vacancy created by an increase in the size of the Board of Directors, shall be filled in accordance with the applicable provisions of the Stockholders Agreement.
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If at any time, by reason of death or resignation or other cause, the Corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the Delaware General Corporation Law.
If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board of Directors (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the Delaware General Corporation Law as far as applicable and shall observe the provisions of the Stockholders Agreement.
3.5 Place Of Meetings; Meetings By Telephone
The Board of Directors of the Corporation may hold meetings, both regular and special, either within or outside the state of Delaware.
Unless otherwise restricted by the Certificate of Incorporation, the Stockholders Agreement, or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of video conference, telephone conference or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
3.6 Regular Meetings
Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board.
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3.7 Special Meetings; Notice
Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairperson of the board, the chief executive officer, the president, the secretary or any director.
Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or electronic transmission, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the Corporation. If the notice is mailed, it shall be deposited in the United States mail at least 8 days before the time of the holding of the meeting. If the notice is delivered personally or by electronic transmission or telephone, it shall be delivered at least 48 hours before the time of the holding of the meeting. The notice shall specify the purpose of the meeting in reasonable detail, as well as the place of the meeting and/or any information required for the use of video conference, conference telephone or other communications equipment. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.
3.8 Quorum
A quorum for meetings of the Board of Directors shall consist of a majority of the total number of duly elected directors then in office (but in no case less than 1/3 of the total number of authorized directors), subject to the requirements set forth in the applicable provisions of the Certificate of Incorporation and the Stockholders Agreement, including, but not limited to, Section 2.5 of the Stockholders Agreement. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, by the Certificate of Incorporation or the Stockholders Agreement. Subject to the provisions of the Stockholders Agreement, if a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting, subject to the provisions of the Stockholders Agreement.
3.9 Waiver Of Notice
Whenever notice is required to be given under any provision of the Delaware General Corporation Law or of the Certificate of Incorporation, the Stockholders Agreement, or these Bylaws, a written waiver thereof, signed by the person entitled to notice, or waiver by electronic mail or other electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the Certificate of Incorporation, the Stockholders Agreement, or these Bylaws.
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3.10 Board Action By Written Consent Without A Meeting
Unless otherwise restricted by the Certificate of Incorporation, the Stockholders Agreement, or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Any copy or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy or other reproduction shall be a complete reproduction of the entire original writing.
3.11 Fees And Compensation Of Directors
Unless otherwise restricted by the Certificate of Incorporation, the Stockholders Agreement, or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. No such compensation shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.
3.12 Approval Of Loans To Officers
Subject to the provisions of the Certificate of Incorporation, the Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiary, including any officer or employee who is a director of the Corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this Section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute.
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3.13 Removal Of Directors
Subject to (a) the applicable provisions of the Stockholders Agreement and (b) the rights of the holders of shares of Preferred Stock to remove Directors pursuant to the Certificate of Incorporation or to the Stockholders Agreement, including, but not limited to, Section 2.2(a) of the Stockholders Agreement, any director or the entire Board of Directors may be removed, with or without cause, by, and only by, the affirmative vote of the holders of the shares of the class or series of stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders, and any vacancy thereby created may be filled by the holders of that class or series of stock represented at the meeting or pursuant to written consent.
No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.
3.14 Chairperson Of The Board Of Directors
The Corporation may also have, at the discretion of the Board of Directors, a chairperson of the Board of Directors who shall not be considered an officer of the Corporation.
Article IV
COMMITTEES
4.1 Committees Of Directors
The Board of Directors may designate one or more committees. Each committee shall consist of such number of Directors and shall have such members as from time to time may be determined by the Board of Directors, subject to the rights of the holders of shares of Preferred Stock under the Certificate of Incorporation and the applicable provisions of the Stockholders Agreement. The Board may designate 1 or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, subject to the Stockholders Agreement, including, but not limited to, Section 2.6 of the Stockholders Agreement. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these Bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporate Law of Delaware to be submitted to stockholders for approval or (ii) adopting, amending or repealing any Bylaw of the Corporation.
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4.2 Committee Minutes
Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
4.3 Meetings And Action Of Committees
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting) of these Bylaws, with such changes in the context of such provisions as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the Board of Directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws, the Certificate of Incorporation and the Stockholders Agreement. Notwithstanding the foregoing, the rights of the holders of shares of Preferred Stock with respect to any Transaction Committee (as defined in the Stockholders Agreement) under the Stockholders Agreement shall be respected.
Article V
OFFICERS
5.1 Officers
The officers of the Corporation shall be a president and a secretary. The Corporation may also have, at the discretion of the Board of Directors, a chief executive officer, a chief financial officer, a treasurer, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.2 of these Bylaws. Any number of offices may be held by the same person.
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5.2 Appointment Of Officers
The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these Bylaws, shall be appointed by the Board of Directors, subject to the rights (if any) of an officer under any contract of employment.
5.3 Subordinate Officers
The Board of Directors may appoint, or empower the chief executive officer or the president to appoint, such other officers and agents as the business of the Corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine.
5.4 Removal And Resignation Of Officers
Subject to the rights (if any) of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board of Directors at any regular or special meeting of the board or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom the power of removal is conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Corporation (including written notice by email or other electronic transmission). Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights (if any) of the Corporation under any contract to which the officer is a party.
5.5 Vacancies In Offices
Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors.
5.6 Chief Executive Officer
Subject to such supervisory powers (if any) as may be given by the Board of Directors to the chairperson of the board (if any), the chief executive officer of the Corporation (if such an officer is appointed) shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and the officers of the Corporation and shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws.
The person serving as chief executive officer shall also be the acting president of the Corporation whenever no other person is then serving in such capacity.
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5.7 President
Subject to such supervisory powers (if any) as may be given by the Board of Directors to the chairperson of the board (if any) or the chief executive officer, the president shall have general supervision, direction, and control of the business and other officers of the Corporation. He or she shall have the general powers and duties of management usually vested in the office of president of a corporation and such other powers and duties as may be prescribed by the Board of Directors or these Bylaws.
The person serving as president shall also be the acting chief executive officer, secretary or treasurer of the Corporation, as applicable, whenever no other person is then serving in such capacity.
5.8 Vice Presidents
In the absence or disability of the chief executive officer and president, the vice presidents (if any) in order of their rank as fixed by the Board of Directors or, if not ranked, a vice president designated by the Board of Directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors, these Bylaws, the president or the chairperson of the board.
5.9 Secretary
The secretary shall keep or cause to be kept, at the principal executive office of the Corporation or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation’s transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates (if any) evidencing such shares, and the number and date of cancellation of every certificate (if any) surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required to be given by law or by these Bylaws. He or she shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws.
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5.10 Chief Financial Officer
The chief financial officer (if such an officer is appointed) shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any member of the Board of Directors.
The chief financial officer shall render to the chief executive officer, the president, or the Board of Directors, upon request, an account of all his or her transactions as chief financial officer and of the financial condition of the Corporation. He or she shall have the general powers and duties usually vested in the office of chief financial officer of a corporation and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws.
The person serving as the chief financial officer shall also be the acting treasurer of the Corporation whenever no other person is then serving in such capacity. Subject to such supervisory powers (if any) as may be given by the Board of Directors to another officer of the Corporation, the chief financial officer shall supervise and direct the responsibilities of the treasurer whenever someone other than the chief financial officer is serving as treasurer of the Corporation.
5.11 Treasurer
The treasurer (if such an officer is appointed) shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records with respect to all bank accounts, deposit accounts, cash management accounts and other investment accounts of the Corporation. The books of account shall at all reasonable times be open to inspection by any member of the Board of Directors.
The treasurer shall deposit, or cause to be deposited, all moneys and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board of Directors. He or she shall disburse the funds of the Corporation as may be ordered by the Board of Directors and shall render to the chief financial officer, the chief executive officer, the president or the Board of Directors, upon request, an account of all his or her transactions as treasurer. He or she shall have the general powers and duties usually vested in the office of treasurer of a corporation and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws.
The person serving as the treasurer shall also be the acting chief financial officer of the Corporation whenever no other person is then serving in such capacity.
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5.12 Representation Of Shares Of Other Corporations
The chairperson of the board, the chief executive officer, the president, any vice president, the chief financial officer, the secretary or assistant secretary of the Corporation, or any other person authorized by the Board of Directors or the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of the Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by the person having such authority.
5.13 Authority And Duties Of Officers
In addition to the foregoing authority and duties, all officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board of Directors or the stockholders.
Article VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 Indemnification Of Directors And Officers
The Corporation shall, to the maximum extent and in the manner permitted by the Delaware General Corporation Law, indemnify each of its directors and officers against expenses (including attorneys’ fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the Corporation. For purposes of this Section 6.1, a “director” or “officer” of the Corporation includes any person (a) who is or was a director or officer of the Corporation, (b) who is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was a director or officer of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.
6.2 Indemnification Of Others
The Corporation shall have the power, to the maximum extent and in the manner permitted by the Delaware General Corporation Law, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys’ fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the Corporation. For purposes of this Section 6.2, an “employee” or “agent” of the Corporation (other than a director or officer) includes any person (a) who is or was an employee or agent of the Corporation, (b) who is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was an employee or agent of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.
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6.3 Payment Of Expenses In Advance
Expenses incurred in defending any action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the Corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that the indemnified party is not entitled to be indemnified as authorized in this Article VI.
6.4 Indemnity Not Exclusive
The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Certificate of Incorporation.
6.5 Insurance
The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the Delaware General Corporation Law.
6.6 Conflicts
No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the Certificate of Incorporation, these Bylaws, a resolution of the stockholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
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Article VII
RECORDS AND REPORTS
7.1 Maintenance And Inspection Of Records
The Corporation shall, either at its principal executive offices or at such place or places as designated by the Board of Directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books, and other records.
A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in each such stockholder’s name, shall be open to the examination of any such stockholder for a period of at least 10 days prior to the meeting in the manner provided by law. The stock list shall also be open to the examination of any stockholder during the whole time of the meeting as provided by law. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
If and so long as there are fewer than one hundred (100) holders of record of the Corporation’s shares, any state law requirement of sending of an annual report to the stockholders of the Corporation is hereby expressly waived, to the extent permitted.
7.2 Inspection By Directors
Any director shall have the right to examine the Corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the Corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.
Article
VIII
GENERAL MATTERS
8.1 Checks
From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the Corporation, and only the persons so authorized shall sign or endorse those instruments.
8.2 Execution Of Corporate Contracts And Instruments
The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
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8.3 Stock Certificates and Notices; Uncertificated Stock; Partly Paid Shares
The shares of the Corporation may be certificated or uncertificated, as provided under Delaware law, and shall be entered in the books of the Corporation and recorded as they are issued. Any duly appointed officer of the Corporation is authorized to sign share certificates. Any or all of the signatures on any certificate may be an electronic signature. In case any officer, transfer agent or registrar who has signed or whose electronic signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.
Within a reasonable time after the issuance or transfer of uncertificated stock and upon the request of a stockholder, the Corporation shall send to the record owner thereof a written notice that shall set forth the name of the Corporation, that the Corporation is organized under the laws of Delaware, the name of the stockholder, the number and class (and the designation of the series, if any) of the shares, and any restrictions on the transfer or registration of such shares of stock imposed by the Corporation’s certificate of incorporation, these Bylaws, any agreement among stockholders or any agreement between stockholders and the Corporation.
The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate (if any) issued to represent any such partly paid shares, or upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
8.4 Special Designation On Certificates and Notices of Issuance
If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock or the notice of issuance to the record owner of uncertificated stock; provided, however, that, except as otherwise provided in Section 202 of the Delaware General Corporation Law, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock or the notice of issuance to the record owner of uncertificated stock, or the purchase agreement for such stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
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8.5 Lost Certificates
Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or notice of uncertificated stock in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or the owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
8.6 Construction; Definitions
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.
8.7 Dividends
The directors of the Corporation, subject to any restrictions contained in (a) the Delaware General Corporation Law or (b) the Certificate of Incorporation may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the Corporation’s capital stock.
The directors of the Corporation may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.
8.8 Fiscal Year
The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors.
8.9 Transfer Of Stock
Upon receipt by the Corporation or the transfer agent of the Corporation of proper transfer instructions from the record holder of uncertificated shares or upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate or, in the case of uncertificated securities and upon request, a notice of issuance of shares, to the person entitled thereto, cancel the old certificate (if any) and record the transaction in its books.
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8.10 Stock Transfer Agreements
The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the Delaware General Corporation Law.
8.11 Stockholders of Record
The Corporation shall be entitled to recognize the exclusive right of a person recorded on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person recorded on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
8.12 Electronic Signature
In addition to the provisions for use of electronic signatures elsewhere specifically authorized in these Bylaws, electronic signatures of any stockholder, director or officer of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.
Article IX
AMENDMENTS
The Bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal Bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal Bylaws.
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Exhibit 10.2
Neptune INSURANCE HOLDINGS INC.
AMENDED AND RESTATED 2025 stock plan
(As Amended and Restated as of April 10, 2025)
1. Purposes and History of the Plan.
(a) The purposes of this Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants, and to promote the success of the Company’s business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant of an Option and subject to the applicable provisions of Section 422 of the Code and the regulations promulgated thereunder. Restricted Stock may also be granted under the Plan.
(b) This Plan amends and restates the Amended and Restated 2019 Stock Plan (the “Pre-Existing Plan”) of Neptune Flood Incorporated, a Delaware corporation (“Neptune Flood”). Pursuant to an Agreement and Plan of Merger dated as of April 10, 2025 by and among the Company, Neptune Flood and Neptune Insurance Merger Sub Inc., a Delaware corporation, the Company assumed the Pre-Existing Plan and all Awards previously granted by Neptune Flood under the Pre-Existing Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) “Administrator” means the Board or a Committee.
(b) “Affiliate” means (i) an entity other than a Subsidiary which, together with the Company, is under common control of a third person or entity and (ii) an entity other than a Subsidiary in which the Company and /or one or more Subsidiaries own a controlling interest.
(c) “Applicable Laws” means all applicable laws, rules, regulations and requirements, including, but not limited to, all applicable U.S. federal or state laws, any Stock Exchange rules or regulations, and the applicable laws, rules or regulations of any other country or jurisdiction where Options or Restricted Stock are granted under the Plan or Participants reside or provide services, as such laws, rules, and regulations shall be in effect from time to time.
(d) “Award” means any award of an Option or Restricted Stock under the Plan.
(e) “Board” means the Board of Directors of the Company.
(f) “California Participant” means a Participant whose Award is issued in reliance on Section 25102(o) of the California Corporations Code.
(g) “Cashless Exercise” means a program approved by the Administrator in which payment of the Option exercise price or tax withholding obligations or other required deductions may be satisfied, in whole or in part, with Shares subject to the Option, including by delivery of an irrevocable direction to a securities broker (on a form prescribed by the Company) to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of such amount.
(h) “Cause” for termination of a Participant’s Continuous Service Status will exist (unless another definition is provided in an applicable Option Agreement, Restricted Stock Purchase Agreement, employment agreement or other applicable written agreement) if the Participant’s Continuous Service Status is terminated for any of the following reasons: (i) any material breach by Participant of any material written agreement between Participant and the Company and Participant’s failure to cure such breach within 30 days after receiving written notice thereof; (ii) any failure by Participant to comply with the Company’s material written policies or rules as they may be in effect from time to time; (iii) neglect or persistent unsatisfactory performance of Participant’s duties and Participant’s failure to cure such condition within 30 days after receiving written notice thereof; (iv) Participant’s repeated failure to follow reasonable and lawful instructions from the Board or Chief Executive Officer and Participant’s failure to cure such condition within 30 days after receiving written notice thereof; (v) Participant’s conviction of, or plea of guilty or nolo contendere to, any crime that results in, or is reasonably expected to result in, material harm to the business or reputation of the Company; (vi) Participant’s commission of or participation in an act of fraud against the Company; (vii) Participant’s intentional material damage to the Company’s business, property or reputation; or (viii) Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company. For purposes of clarity, a termination without “Cause” does not include any termination that occurs as a result of Participant’s death or disability. The determination as to whether a Participant’s Continuous Service Status has been terminated for Cause shall be made in good faith by the Company and shall be final and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s employment or consulting relationship at any time, and the term “Company” will be interpreted to include any Subsidiary, Parent, Affiliate, or any successor thereto, if appropriate.
(i) “Change of Control” means (i) a sale of all or substantially all of the Company’s assets other than to an Excluded Entity (as defined below), (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, limited liability company or other entity other than an Excluded Entity, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of all of the Company’s then outstanding voting securities.
Notwithstanding the foregoing, a transaction shall not constitute a Change of Control if its purpose is to (A) change the jurisdiction of the Company’s incorporation, (B) create a holding company that will be owned in substantially the same proportions by the persons who hold the Company’s securities immediately before such transaction, or (C) obtain funding for the Company in a financing that is approved by the Company’s Board. An “Excluded Entity” means a corporation or other entity of which the holders of voting capital stock of the Company outstanding immediately prior to such transaction are the direct or indirect holders of voting securities representing at least a majority of the votes entitled to be cast by all of such corporation’s or other entity’s voting securities outstanding immediately after such transaction.
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(j) “Code” means the Internal Revenue Code of 1986, as amended.
(k) “Committee” means one or more committees or subcommittees of the Board consisting of two (2) or more Directors (or such lesser or greater number of Directors as shall constitute the minimum number permitted by Applicable Laws to establish a committee or sub-committee of the Board) appointed by the Board to administer the Plan in accordance with Section 4 below.
(l) “Common Stock” means the Company’s common stock.
(m) “Company” means Neptune Insurance Holdings Inc., a Delaware corporation.
(n) “Consultant” means (i) any person or entity, including an advisor but not an Employee, that renders, or has rendered, services to the Company, or any Parent, Subsidiary or Affiliate and is compensated for such services, including, without limitation, any person or entity that renders, or has rendered, such services to the Company, or any Parent, Subsidiary or Affiliate as an employee of a third-party staffing agency, professional employer organization (PEO), employer of record (EOR), consulting firm or similar entity or arrangement, and (ii) any Director whether compensated for such services or not.
(o) “Continuous Service Status” means the absence of any interruption or termination of service as an Employee or Consultant. Continuous Service Status as an Employee or Consultant shall not be considered interrupted or terminated in the case of: (i) Company approved sick leave; (ii) military leave; (iii) any other bona fide leave of absence approved by the Company, provided that, if an Employee is holding an Incentive Stock Option and such leave exceeds 3 months then, for purposes of Incentive Stock Option status only, such Employee’s service as an Employee shall be deemed terminated on the 1st day following such 3-month period and the Incentive Stock Option shall thereafter automatically become a Nonstatutory Stock Option in accordance with Applicable Laws, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to a written Company policy. Also, Continuous Service Status as an Employee or Consultant shall not be considered interrupted or terminated in the case of a transfer between locations of the Company or between the Company, its Parents, Subsidiaries or Affiliates, or their respective successors, or a change in status from an Employee to a Consultant or from a Consultant to an Employee.
(p) “Director” means a member of the Board.
(q) “Disability” means “disability” within the meaning of Section 22(e)(3) of the Code.
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(r) “Employee” means any person employed by the Company, or any Parent, Subsidiary or Affiliate, with the status of employment determined pursuant to such factors as are deemed appropriate by the Company in its sole discretion, subject to any requirements of Applicable Laws, including the Code. The payment by the Company of a director’s fee shall not be sufficient to constitute “employment” of such director by the Company or any Parent, Subsidiary or Affiliate.
(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(t) “Fair Market Value” means, as of any date, the per share fair market value of the Common Stock, as determined by the Administrator in good faith on such basis as it deems appropriate and applied consistently with respect to Participants. Whenever possible, the determination of Fair Market Value shall be based upon the per share closing price for the Shares as reported in The Wall Street Journal for the applicable date.
(u) “Family Members” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Participant, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons (or the Participant) have more than 50% of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than 50% of the voting interests.
(v) “Incentive Stock Option” means an Option intended to, and which does, in fact, qualify as an incentive stock option within the meaning of Section 422 of the Code.
(w) “Involuntary Termination” means (unless another definition is provided in the applicable Option Agreement, Restricted Stock Purchase Agreement, employment agreement or other applicable written agreement) the termination of a Participant’s Continuous Service Status other than for (i) death, (ii) Disability or (iii) for Cause by the Company or a Parent, Subsidiary, Affiliate or successor thereto, as appropriate.
(x) “Listed Security” means any security of the Company that is listed or approved for listing on a national securities exchange or designated or approved for designation as a national market system security on an interdealer quotation system by the Financial Industry Regulatory Authority (or any successor thereto).
(y) “Nonstatutory Stock Option” means an Option that is not intended to, or does not, in fact, qualify as an Incentive Stock Option.
(z) “Option” means a stock option granted pursuant to the Plan.
(aa) “Option Agreement” means a written document, the form(s) of which shall be approved from time to time by the Administrator, reflecting the terms of an Option granted under the Plan and includes any documents attached to or incorporated into such Option Agreement, including, but not limited to, a notice of stock option grant and a form of exercise notice.
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(bb) “Option Exchange Program” means a program approved by the Administrator whereby outstanding Options (i) are exchanged for Options with a lower exercise price, Restricted Stock, cash or other property or (ii) are amended to decrease the exercise price as a result of a decline in the Fair Market Value.
(cc) “Optioned Stock” means Shares that are subject to an Option or that were issued pursuant to the exercise of an Option.
(dd) “Optionee” means an Employee or Consultant who receives an Option.
(ee) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of grant of the Award, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.
(ff) “Participant” means any holder of one or more Awards or Shares issued pursuant to an Award.
(gg) “Plan” means this Amended and Restated 2025 Stock Plan, as amended and restated from time to time.
(hh) “Restricted Stock” means Shares acquired pursuant to a right to purchase or receive Common Stock granted pursuant to Section 8 below.
(ii) “Restricted Stock Purchase Agreement” means a written document, the form(s) of which shall be approved from time to time by the Administrator, reflecting the terms of Restricted Stock granted under the Plan and includes any documents attached to such agreement.
(jj) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, as amended from time to time, or any successor provision.
(kk) “Share” means a share of Common Stock, as adjusted in accordance with Section 10 below.
(ll) “Stock Exchange” means any stock exchange or consolidated stock price reporting system on which prices for the Common Stock are quoted at any given time.
(mm) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of grant of the Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.
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(nn) “Ten Percent Holder” means a person who owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary measured as of an Award’s date of grant.
3. Stock Subject to the Plan.
(a) The number of Shares reserved for issuance pursuant to the Plan is 2,379,000, which was the share reserve under the assumed Pre-Existing Plan and, for the avoidance of doubt, includes Shares subject to equity awards issued or granted under the Pre-Existing Plan that are outstanding as of April 10, 2025 (the “Effective Date”) and Shares that remained unissued and available for grant under the Pre-Existing Plan as of the Effective Date (all of which Shares may be issued under the Plan pursuant to Incentive Stock Options); provided that no Awards shall be granted under the Plan if such Awards could result in the issuance of more than 1,176,000 Shares pursuant to Awards granted after May 8, 2023 (which shall include, for the avoidance of doubt, Awards granted by Neptune Flood prior to the assumption of the Plan by the Company from Neptune Flood). The Shares issued under the Plan may be authorized, but unissued, or reacquired Shares. If an Award should expire or become unexercisable for any reason without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unissued Shares that were subject thereto shall, unless the Plan shall have been terminated, continue to be available under the Plan for issuance pursuant to future Awards. In addition, any Shares which are retained by the Company upon exercise of an Award in order to satisfy the exercise or purchase price for such Award or any withholding taxes due with respect to such Award shall be treated as not issued and shall continue to be available under the Plan for issuance pursuant to future Awards. Shares issued under the Plan and later forfeited to the Company due to the failure to vest or repurchased by the Company at the original purchase price paid to the Company for the Shares (including, without limitation, upon forfeiture to or repurchase by the Company in connection with the termination of a Participant’s Continuous Service Status) shall again be available for future grant under the Plan. Notwithstanding the foregoing, subject to the provisions of Section 10 below, in no event shall the maximum aggregate number of Shares that may be issued under the Plan pursuant to Incentive Stock Options exceed the number set forth in the first sentence of this Section 3 plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that again become available for issuance pursuant to the remaining provisions of this Section 3.
(b) For purposes of share counting under this Section 3, all shares of Common Stock issued prior to May 8, 2023 pursuant to Awards granted by Neptune Flood prior to the assumption of the Pre-Existing Plan by the Company shall be excluded, and any repurchases or forfeitures of such shares shall not be available under the Plan for issuance pursuant to future Awards.
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4. Administration of the Plan.
(a) General. The Plan shall be administered by the Board, a Committee appointed by the Board, or any combination thereof, as determined by the Board. The Plan may be administered by different administrative bodies with respect to different classes of Participants and, if permitted by Applicable Laws, the Board may authorize one or more officers of the Company to make Awards under the Plan to Employees and Consultants (who are not subject to Section 16 of the Exchange Act) within parameters specified by the Board.
(b) Committee Composition. If a Committee has been appointed pursuant to this Section 4, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of any Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies (however caused) and dissolve a Committee and thereafter directly administer the Plan, all to the extent permitted by Applicable Laws and, in the case of a Committee administering the Plan in accordance with the requirements of Rule 16b-3 or Section 162(m) of the Code, to the extent permitted or required by such provisions.
(c) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its sole discretion:
(i) to determine the Fair Market Value in accordance with Section 2(t) above, provided that such determination shall be applied consistently with respect to Participants under the Plan;
(ii) to select the Employees and Consultants to whom Awards may from time to time be granted;
(iii) to determine the number of Shares to be covered by each Award;
(iv) to approve the form(s) of agreement(s) and other related documents used under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder, which terms and conditions include but are not limited to the exercise or purchase price, the time or times when Awards may vest and/or be exercised (which may be based on performance criteria), the circumstances (if any) when vesting will be accelerated or forfeiture restrictions will be waived, and any restriction or limitation regarding any Award, Optioned Stock, or Restricted Stock;
(vi) to amend any outstanding Award or agreement related to any Optioned Stock or Restricted Stock, including any amendment adjusting vesting (e.g., in connection with a change in the terms or conditions under which such person is providing services to the Company), provided that no amendment shall be made that would materially and adversely affect the rights of any Participant without his or her consent;
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(vii) to determine whether and under what circumstances an Option may be settled in cash under Section 7(c)(iii) below instead of Common Stock;
(viii) subject to Applicable Laws, to implement an Option Exchange Program and establish the terms and conditions of such Option Exchange Program without consent of the holders of capital stock of the Company, provided that no amendment or adjustment to an Option that would materially and adversely affect the rights of any Participant shall be made without his or her consent;
(ix) to approve addenda pursuant to Section 18 below or to grant Awards to, or to modify the terms of, any outstanding Option Agreement or Restricted Stock Purchase Agreement or any agreement related to any Optioned Stock or Restricted Stock held by Participants who are foreign nationals or employed outside of the United States with such terms and conditions as the Administrator deems necessary or appropriate to accommodate differences in local law, tax policy or custom which deviate from the terms and conditions set forth in this Plan to the extent necessary or appropriate to accommodate such differences; and
(x) to construe and interpret the terms of the Plan, any Option Agreement or Restricted Stock Purchase Agreement, and any agreement related to any Optioned Stock or Restricted Stock, which constructions, interpretations and decisions shall be final and binding on all Participants.
(d) Indemnification. To the maximum extent permitted by Applicable Laws, each member of the Committee (including officers of the Company, if applicable), or of the Board, as applicable, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or pursuant to the terms and conditions of any Award except for actions taken in bad faith or failures to act in good faith, and (ii) any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided that such member shall give the Company an opportunity, at its own expense, to handle and defend any such claim, action, suit or proceeding before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any other power that the Company may have to indemnify or hold harmless each such person.
5. Eligibility.
(a) Recipients of Grants. Nonstatutory Stock Options and Restricted Stock may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees, provided that Employees of Affiliates shall not be eligible to receive Incentive Stock Options.
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(b) Type of Option. Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
(c) ISO $100,000 Limitation. Notwithstanding any designation under Section 5(b) above, to the extent that the aggregate Fair Market Value of Shares with respect to which options designated as incentive stock options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess options shall be treated as nonstatutory stock options. For purposes of this Section 5(c), incentive stock options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares subject to an incentive stock option shall be determined as of the date of the grant of such option.
(d) No Employment Rights. Neither the Plan nor any Award shall confer upon any Employee or Consultant any right with respect to continuation of an employment or consulting relationship with the Company (any Parent, Subsidiary or Affiliate), nor shall it interfere in any way with such Employee’s or Consultant’s right or the Company’s (Parent’s, Subsidiary’s or Affiliate’s) right to terminate his or her employment or consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by the Board and shall continue in effect for a term of 10 years unless sooner terminated under Section 14 below.
7. Options.
(a) Term of Option. The term of each Option shall be the term stated in the Option Agreement; provided that the term shall be no more than 10 years from the date of grant thereof or such shorter term as may be provided in the Option Agreement and provided further that, in the case of an Incentive Stock Option granted to a person who at the time of such grant is a Ten Percent Holder, the term of the Option shall be 5 years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.
(b) Option Exercise Price and Consideration.
(i) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to the exercise of an Option shall be such price as is determined by the Administrator and set forth in the Option Agreement, but shall be subject to the following:
(1) In the case of an Incentive Stock Option
a. granted to an Employee who at the time of grant is a Ten Percent Holder, the per Share exercise price shall be no less than 110% of the Fair Market Value on the date of grant;
b. granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value on the date of grant;
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(2) Except as provided in subsection (3) below, in the case of a Nonstatutory Stock Option the per Share exercise price shall be such price as is determined by the Administrator, provided that, if the per Share exercise price is less than 100% of the Fair Market Value on the date of grant, it shall otherwise comply with all Applicable Laws, including Section 409A of the Code; and
(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.
(ii) Permissible Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option and to the extent required by Applicable Laws, shall be determined at the time of grant) and may consist entirely of (1) cash; (2) check; (3) to the extent permitted under, and in accordance with, Applicable Laws, delivery of a promissory note with such recourse, interest, security and redemption provisions as the Administrator determines to be appropriate (subject to the provisions of Section 152 of the Delaware General Corporation Law); (4) cancellation of indebtedness; (5) other previously owned Shares that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option is exercised; (6) a Cashless Exercise; (7) such other consideration and method of payment permitted under Applicable Laws; or (8) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company and the Administrator may, in its sole discretion, refuse to accept a particular form of consideration at the time of any Option exercise.
(c) Exercise of Option.
(i) General.
(1) Exercisability. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, consistent with the terms of the Plan and reflected in the Option Agreement, including vesting requirements and/or performance criteria with respect to the Company, and Parent, Subsidiary or Affiliate, and/or the Optionee.
(2) Leave of Absence. The Administrator shall have the discretion to determine at any time whether and to what extent the vesting of Options shall be tolled during any leave of absence; provided, however, that in the absence of such determination, vesting of Options shall continue during any paid leave and shall be tolled during any unpaid leave (unless otherwise required by Applicable Laws). Notwithstanding the foregoing, in the event of military leave, vesting shall toll during any unpaid portion of such leave, provided that, upon an Optionee’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended), he or she shall be given vesting credit with respect to Options to the same extent as would have applied had the Optionee continued to provide services to the Company (or any Parent, Subsidiary or Affiliate, if applicable) throughout the leave on the same terms as he or she was providing services immediately prior to such leave.
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(3) Minimum Exercise Requirements. An Option may not be exercised for a fraction of a Share. The Administrator may require that an Option be exercised as to a minimum number of Shares, provided that such requirement shall not prevent an Optionee from exercising the full number of Shares as to which the Option is then exercisable.
(4) Procedures for and Results of Exercise. An Option shall be deemed exercised when written notice of such exercise has been received by the Company in accordance with the terms of the Option Agreement by the person entitled to exercise the Option and the Company has received full payment for the Shares with respect to which the Option is exercised and has paid, or made arrangements to satisfy, any applicable taxes, withholding, required deductions or other required payments in accordance with Section 9 below. The exercise of an Option shall result in a decrease in the number of Shares that thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(5) Rights as Holder of Capital Stock. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a holder of capital stock shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock is issued, except as provided in Section 10 below.
(ii) Termination of Continuous Service Status. The Administrator shall establish and set forth in the applicable Option Agreement the terms and conditions upon which an Option shall remain exercisable, if at all, following termination of an Optionee’s Continuous Service Status, which provisions may be waived or modified by the Administrator at any time. To the extent that an Option Agreement does not specify the terms and conditions upon which an Option shall terminate upon termination of an Optionee’s Continuous Service Status, the following provisions shall apply:
(1) General Provisions. If the Optionee (or other person entitled to exercise the Option) does not exercise the Option to the extent so entitled within the time specified below, the Option shall terminate and the Optioned Stock underlying the unexercised portion of the Option shall revert to the Plan. In no event may any Option be exercised after the expiration of the Option term as set forth in the Option Agreement (and subject to this Section 7).
(2) Termination other than Upon Disability or Death or for Cause. In the event of termination of an Optionee’s Continuous Service Status other than under the circumstances set forth in the subsections (3) through (5) below, such Optionee may exercise any outstanding Option at any time within 3 months following such termination to the extent the Optionee is vested in the Optioned Stock.
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(3) Disability of Optionee. In the event of termination of an Optionee’s Continuous Service Status as a result of his or her Disability, such Optionee may exercise any outstanding Option at any time within 12 months following such termination to the extent the Optionee is vested in the Optioned Stock.
(4) Death of Optionee. In the event of the death of an Optionee during the period of Continuous Service Status since the date of grant of any outstanding Option, or within 3 months following termination of the Optionee’s Continuous Service Status, the Option may be exercised by any beneficiaries designated in accordance with Section 16 below, or if there are no such beneficiaries, by the Optionee’s estate, or by a person who acquired the right to exercise the Option by bequest or inheritance, at any time within 12 months following the date the Optionee’s Continuous Service Status terminated, but only to the extent the Optionee is vested in the Optioned Stock.
(5) Termination for Cause. In the event of termination of an Optionee’s Continuous Service Status for Cause, any outstanding Option (including any vested portion thereof) held by such Optionee shall immediately terminate in its entirety upon first notification to the Optionee of termination of the Optionee’s Continuous Service Status for Cause. If an Optionee’s Continuous Service Status is suspended pending an investigation of whether the Optionee’s Continuous Service Status will be terminated for Cause, all the Optionee’s rights under any Option, including the right to exercise the Option, shall be suspended during the investigation period. Nothing in this Section 7(c)(ii)(5) shall in any way limit the Company’s right to purchase unvested Shares issued upon exercise of an Option as set forth in the applicable Option Agreement.
(iii) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted under the Plan based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.
8. Restricted Stock.
(a) Rights to Purchase. When a right to purchase or receive Restricted Stock is granted under the Plan, the Company shall advise the recipient in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, if any (which shall be as determined by the Administrator, subject to Applicable Laws, including any applicable securities laws), and the time within which such person must accept such offer. The permissible consideration for Restricted Stock shall be determined by the Administrator and shall be the same as is set forth in Section 7(b)(ii) above with respect to exercise of Options. The offer to purchase Shares shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.
(b) Repurchase Option.
(i) General. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the Participant’s Continuous Service Status for any reason (including death or Disability) at a purchase price for Shares equal to the original purchase price paid by the purchaser to the Company for such Shares and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine.
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(ii) Leave of Absence. The Administrator shall have the discretion to determine at any time whether and to what extent the lapsing of Company repurchase rights shall be tolled during any leave of absence; provided, however, that in the absence of such determination, such lapsing shall continue during any paid leave and shall be tolled during any unpaid leave (unless otherwise required by Applicable Laws). Notwithstanding the foregoing, in the event of military leave, the lapsing of Company repurchase rights shall toll during any unpaid portion of such leave, provided that, upon a Participant’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended), he or she shall be given vesting credit with respect to Shares purchased pursuant to the Restricted Stock Purchase Agreement to the same extent as would have applied had the Participant continued to provide services to the Company (or any Parent, Subsidiary or Affiliate, if applicable) throughout the leave on the same terms as he or she was providing services immediately prior to such leave.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock Purchase Agreements need not be the same with respect to each Participant.
(d) Rights as a Holder of Capital Stock. Once the Restricted Stock is purchased, the Participant shall have the rights equivalent to those of a holder of capital stock, and shall be a record holder when his or her purchase and the issuance of the Shares is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Restricted Stock is purchased, except as provided in Section 10 below.
9. Taxes.
(a) As a condition of the grant, vesting and exercise of an Award, the Participant (or in the case of the Participant’s death or a permitted transferee, the person holding or exercising the Award) shall make such arrangements as the Administrator may require for the satisfaction of any applicable U.S. federal, state, local or foreign tax, withholding, and any other required deductions or payments that may arise in connection with such Award. The Company shall not be required to issue any Shares under the Plan until such obligations are satisfied.
(b) The Administrator may, to the extent permitted under Applicable Laws, permit a Participant (or in the case of the Participant’s death or a permitted transferee, the person holding or exercising the Award) to satisfy all or part of his or her tax, withholding, or any other required deductions or payments by Cashless Exercise or by surrendering Shares (either directly or by stock attestation) that he or she previously acquired; provided that, unless specifically permitted by the Company, any such Cashless Exercise must be an approved broker-assisted Cashless Exercise or the Shares withheld in the Cashless Exercise must be limited to avoid financial accounting charges under applicable accounting guidance and any such surrendered Shares must have been previously held for any minimum duration required to avoid financial accounting charges under applicable accounting guidance. Any payment of taxes by surrendering Shares to the Company may be subject to restrictions, including, but not limited to, any restrictions required by rules of the Securities and Exchange Commission.
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10. Adjustments Upon Changes in Capitalization, Merger or Certain Other Transactions.
(a) Changes in Capitalization. Subject to any action required under Applicable Laws by the holders of capital stock of the Company, (i) the numbers and class of Shares or other stock or securities: (x) available for future Awards under Section 3 above and (y) covered by each outstanding Award, (ii) the exercise price per Share of each such outstanding Option, and (iii) any repurchase price per Share applicable to Shares issued pursuant to any Award, shall be automatically proportionately adjusted in the event of a stock split, reverse stock split, stock dividend, combination, consolidation, reclassification of the Shares or subdivision of the Shares. In the event of any increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, a declaration of an extraordinary dividend with respect to the Shares payable in a form other than Shares in an amount that has a material effect on the Fair Market Value, a recapitalization (including a recapitalization through a large nonrecurring cash dividend), a rights offering, a reorganization, merger, a spin-off, split-up, change in corporate structure or a similar occurrence, the Administrator shall make appropriate adjustments, in its discretion, in one or more of (i) the numbers and class of Shares or other stock or securities: (x) available for future Awards under Section 3 above and (y) covered by each outstanding Award, (ii) the exercise price per Share of each outstanding Option and (iii) any repurchase price per Share applicable to Shares issued pursuant to any Award, and any such adjustment by the Administrator shall be made in the Administrator’s sole and absolute discretion and shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award. If, by reason of a transaction described in this Section 10(a) or an adjustment pursuant to this Section 10(a), a Participant’s Award agreement or agreement related to any Optioned Stock or Restricted Stock covers additional or different shares of stock or securities, then such additional or different shares, and the Award agreement or agreement related to the Optioned Stock or Restricted Stock in respect thereof, shall be subject to all of the terms, conditions and restrictions which were applicable to the Award, Optioned Stock and Restricted Stock prior to such adjustment.
(b) Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company, each Award will terminate immediately prior to the consummation of such action, unless otherwise determined by the Administrator.
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(c) Corporate Transactions. In the event of (i) a transfer of all or substantially all of the Company’s assets, (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, entity or person, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of more than 50% of the Company’s then outstanding capital stock (a “Corporate Transaction”), each outstanding Award (vested or unvested) will be treated as the Administrator determines, which determination may be made without the consent of any Participant and need not treat all outstanding Awards (or portion thereof) in an identical manner. Such determination, without the consent of any Participant, may provide (without limitation) for one or more of the following in the event of a Corporate Transaction: (A) the continuation of such outstanding Awards by the Company (if the Company is the surviving corporation); (B) the assumption of such outstanding Awards by the surviving corporation or its parent; (C) the substitution by the surviving corporation or its parent of new options or equity awards for such Awards; (D) the cancellation of such Awards in exchange for a payment to the Participants equal to the excess of (1) the Fair Market Value of the Shares subject to such Awards as of the closing date of such Corporate Transaction over (2) the exercise price or purchase price paid or to be paid for the Shares subject to the Awards; or (E) the cancellation of any outstanding Options or an outstanding right to purchase Restricted Stock, in either case, for no consideration. Notwithstanding anything under this Plan, any Award agreement or otherwise, any escrow, holdback, earn-out or similar provisions agreed to pursuant to, or in connection with, a Corporate Transaction shall, unless otherwise determined by the Board, apply to any payment or other right a Participant may be entitled to under this Plan, if any, to the same extent and in the same manner as such provisions apply generally to the holders of the Company’s Common Stock with respect to the Corporate Transaction, but only to the extent permitted by Applicable Laws, including (without limitation), Section 409A of the Code.
11. Non-Transferability of Awards.
(a) General. Except as set forth in this Section 11, Awards (or any rights of such Awards) may not be sold, pledged, encumbered, assigned, hypothecated, or disposed of or otherwise transferred in any manner other than by will or by the laws of descent or distribution. The designation of a beneficiary by a Participant will not constitute a transfer. An Option may be exercised, during the lifetime of the holder of the Option, only by such holder or a transferee permitted by this Section 11.
(b) Limited Transferability Rights. Notwithstanding anything else in this Section 11, the Administrator may in its sole discretion provide that any Nonstatutory Stock Options may be transferred by instrument to an inter vivos or testamentary trust in which the Options are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift to Family Members. Further, beginning with (i) the period when the Company begins to rely on the exemption described in Rule 12h-1(f)(1) promulgated under the Exchange Act, as determined by the Board in its sole discretion, and (ii) ending on the earlier of (A) the date when the Company ceases to rely on such exemption, as determined by the Board in its sole discretion, or (B) the date when the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, an Option, or prior to exercise, the Shares subject to the Option, may not be pledged, hypothecated or otherwise transferred or disposed of, in any manner, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than to (i) persons who are Family Members through gifts or domestic relations orders, or (ii) to an executor or guardian of the Participant upon the death or disability of the Participant. Notwithstanding the foregoing sentence, the Board, in its sole discretion, may permit transfers of Nonstatutory Stock Options to the Company or in connection with a Change of Control or other acquisition transactions involving the Company to the extent permitted by Rule 12h-1(f).
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12. Non-Transferability of Stock Underlying Awards.
(a) General. Notwithstanding anything to the contrary, no Participant or other stockholder shall Transfer (as such term is defined below) any Shares (or any rights of or interests in such Shares) acquired pursuant to any Award (including, without limitation, Shares acquired upon exercise of an Option) to any person or entity unless such Transfer is approved by the Company prior to such Transfer, which approval may be granted or withheld in the Company’s sole and absolute discretion. “Transfer” shall mean, with respect to any security, the direct or indirect assignment, sale, transfer, tender, pledge, hypothecation, or the grant, creation or suffrage of a lien or encumbrance in or upon, or the gift, placement in trust, or the Constructive Sale (as such term is defined below) or other disposition of such security (including transfer by testamentary or intestate succession, merger or otherwise by operation of law) or any right, title or interest therein (including, but not limited to, any right or power to vote to which the holder thereof may be entitled, whether such right or power is granted by proxy or otherwise), or the record or beneficial ownership thereof, the offer to make such a sale, transfer, Constructive Sale or other disposition, and each agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. “Constructive Sale” shall mean, with respect to any security, a short sale with respect to such security, entering into or acquiring an offsetting derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security, or entering into any other hedging or other derivative transaction that has the effect of materially changing the economic benefits and risks of ownership. Any purported Transfer effected in violation of this Section 12 shall be null and void and shall have no force or effect and the Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of the Plan or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
(b) Approval Process. Any Participant or stockholder seeking the approval of the Company to Transfer some or all of its Shares shall give written notice thereof to the Secretary of the Company that shall include: (1) the name of the stockholder; (2) the proposed transferee; (3) the number of shares of the Transfer of which approval is thereby requested; and (4) the purchase price, if any, of the shares proposed for Transfer. The Company may require the Participant to supplement its notice with such additional information as the Company may request or as may otherwise be required by the applicable Option Agreement, Restricted Stock Purchase Agreement, Restricted Stock Unit Agreement or other applicable written agreement. In addition such request for Transfer shall be subject to such right of first refusal, transfer provisions and any other terms and conditions as may be set forth in the applicable Option Agreement, Restricted Stock Purchase Agreement, Restricted Stock Unit Agreement or other applicable written agreement.
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13. Time of Granting Awards. The date of grant of an Award shall, for all purposes, be the date on which the Administrator makes the determination granting such Award, or such other date as is determined by the Administrator.
14. Amendment and Termination of the Plan. The Board may at any time amend or terminate the Plan, but no amendment or termination shall be made that would materially and adversely affect the rights of any Participant under any outstanding Award, without his or her consent. In addition, to the extent necessary and desirable to comply with Applicable Laws, the Company shall obtain the approval of holders of capital stock with respect to any Plan amendment in such a manner and to such a degree as required.
15. Conditions Upon Issuance of Shares. Notwithstanding any other provision of the Plan or any agreement entered into by the Company pursuant to the Plan, the Company shall not be obligated, and shall have no liability for failure, to issue or deliver any Shares under the Plan unless such issuance or delivery would comply with Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel. As a condition to the exercise of any Option or purchase of any Restricted Stock, the Company may require the person exercising the Option or purchasing the Restricted Stock to represent and warrant at the time of any such exercise or purchase that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is advisable or required by Applicable Laws. Shares issued upon exercise of Options or purchase of Restricted Stock prior to the date, if ever, on which the Common Stock becomes a Listed Security shall be subject to a right of first refusal in favor of the Company pursuant to which the Participant will be required to offer Shares to the Company before selling or transferring them to any third party on such terms and subject to such conditions as is reflected in the applicable Option Agreement or Restricted Stock Purchase Agreement.
16. Beneficiaries. If permitted by the Company, a Participant may designate one or more beneficiaries with respect to an Award by timely filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant’s death. Except as otherwise provided in an Award agreement, if no beneficiary was designated or if no designated beneficiary survives the Participant, then after a Participant’s death any vested Award(s) shall be transferred or distributed to the Participant’s estate or to any person who has the right to acquire the Award by bequest or inheritance.
17. Approval of Holders of Capital Stock. If required by Applicable Laws, continuance of the Plan shall be subject to approval by the holders of capital stock of the Company within 12 months before or after the date the Plan is adopted or, to the extent required by Applicable Laws, any date the Plan is amended. Such approval shall be obtained in the manner and to the degree required under Applicable Laws.
18. Addenda. The Administrator may approve such addenda to the Plan as it may consider necessary or appropriate for the purpose of granting Awards to Employees or Consultants, which Awards may contain such terms and conditions as the Administrator deems necessary or appropriate to accommodate differences in local law, tax policy or custom, which may deviate from the terms and conditions set forth in this Plan. The terms of any such addenda shall supersede the terms of the Plan to the extent necessary to accommodate such differences but shall not otherwise affect the terms of the Plan as in effect for any other purpose.
19. Information to Holders of Options. In the event the Company is relying on the exemption provided by Rule 12h-1(f) under the Exchange Act, the Company shall provide the information described in Rule 701(e)(3), (4) and (5) of the Securities Act of 1933, as amended, to all holders of Options in accordance with the requirements thereunder until such time as the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. The Company may request that holders of Options agree to keep the information to be provided pursuant to this Section confidential. If the holder does not agree to keep the information to be provided pursuant to this Section confidential, then the Company will not be required to provide the information unless otherwise required pursuant to Rule 12h-1(f)(1) of the Exchange Act.
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ADDENDUM A
Amended and Restated 2025 Stock Plan
(California Participants)
Prior to the date, if ever, on which the Common Stock becomes a Listed Security and/or the Company is subject to the reporting requirements of the Exchange Act, the terms set forth herein shall apply to Awards issued to California Participants. All capitalized terms used herein but not otherwise defined shall have the respective meanings set forth in the Plan.
1. The following rules shall apply to any Option in the event of termination of the Participant’s Continuous Service Status:
(a) If such termination was for reasons other than death, “Permanent Disability” (as defined below), or Cause, the Participant shall have at least 30 days after the date of such termination to exercise his or her Option to the extent the Participant is entitled to exercise on his or her termination date, provided that in no event shall the Option be exercisable after the expiration of the term as set forth in the Option Agreement.
(b) If such termination was due to death or Permanent Disability, the Participant shall have at least 6 months after the date of such termination to exercise his or her Option to the extent the Participant is entitled to exercise on his or her termination date, provided that in no event shall the Option be exercisable after the expiration of the term as set forth in the Option Agreement.
“Permanent Disability” for purposes of this Addendum shall mean the inability of the Participant, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of the Participant’s position with the Company or any Parent or Subsidiary because of the sickness or injury of the Participant.
2. Notwithstanding anything to the contrary in Section 10(a) of the Plan, the Administrator shall in any event make such adjustments as may be required by Section 25102(o) of the California Corporations Code.
3. Notwithstanding anything stated herein to the contrary, no Option shall be exercisable on or after the 10th anniversary of the date of grant and any Award agreement shall terminate on or before the 10th anniversary of the date of grant.
4. The Company shall furnish summary financial information (audited or unaudited) of the Company’s financial condition and results of operations, consistent with the requirements of Applicable Laws, at least annually to each California Participant during the period such Participant has one or more Awards outstanding, and in the case of an individual who acquired Shares pursuant to the Plan, during the period such Participant owns such Shares; provided, however, the Company shall not be required to provide such information if (i) the issuance is limited to key persons whose duties in connection with the Company assure their access to equivalent information or (ii) the Plan or any agreement complies with all conditions of Rule 701 of the Securities Act of 1933, as amended; provided that for purposes of determining such compliance, any registered domestic partner shall be considered a “family member” as that term is defined in Rule 701.
Exhibit 10.7
FLORIDA COMMERCIAL LEASE
This lease is made between TRB Rents, LLC, herein called Lessor, and Neptune Flood Incorporated, herein called Lessee. Lessee hereby offers to lease from Lessor the premises situated in the City of St. Petersburg, County of Pinellas, State of Florida, described as 400 6th St. S., Second Floor Offices - totaling approximately 2,000 SF - upon the following TERMS:
| 1. | Term and Rent. Lessor offers the above premises for Month to Month lease beginning on February 5, 2021. Rent will be payable on the 1st of each month with the first payment being due upon signing at the pro-rated monthly rate. |
Month to Month Lease will continue in perpetuity until terminated by either party. Lease will be considered terminated upon notification of Lessor of Lessee’s intent to vacate OR upon Lessee’s failure to make monthly rent payment by the 15th Day of the subject month.
The monthly rent will be $12,000.
The Security Deposit due will be NA.
All rental payments shall be made to Lessor at the address below.
TRB Rents, LLC
400 6th St. S.,
St. Petersburg, FL 33701
| 2. | Use. Lessee shall use the premises for Office Space, Meeting, Sales, Customer Service or other Business related use. Lessee shall be entitled to the use of common space throughout the building, exterior premises, as well as parking, as necessary. |
| 3. | Care and Maintenance of Premises. Lessee acknowledges that the premises are in good order and repair, unless otherwise indicated herein. Lessee will maintain the premises in good and safe condition. |
| 4. | Alterations. Lessee will not, without first obtaining the consent of Lessor, make any alterations, or improvements, in, to or about the premises. |
| 5. | Ordinances and Statutes. Lessee shall comply with all statutes, ordinances and requirements of all local, state and federal authorities now and in the future, relating to the premises, affecting the use thereof by Lessee. |
| 6. | Assignment and Subletting. Lessee will not assign this lease or sublet any portion of the premises without prior consent of the Lessor. Any such assignment or subletting without consent will, at the option of the Lessor, terminate this lease. |
| 7. | Utilities & Maintenance. Lessee will not be responsible for general building utilities or maintenance during the lease period. Lessee may, at their expense, establish High-Speed internet access within the building. |
| 8. | Possession. If Lessor is unable to deliver possession of the premises at the commencement, Lessor shall not be liable for any damage caused, nor will this lease be void or voidable. |
| 9. | Trade Fixtures. All improvements made by Lessee to the premises which are attached to the premises such that they cannot be removed without material injury to the premises, will become the property of Lessor upon installation. Not later than the last day of the term, Lessee will, at Lessee’s expense, remove all of Lessee’s personal property and those improvements made by Lessee which have not become the property of Lessor, including trade fixtures, movable paneling, partitions, and the like; repair all injury done by or in connection with the installation or removal of such property and improvements; and return the premises in as good condition as they were at the beginning of the term. All property of Lessee remaining on the premises after the last day of the term of this lease will be considered abandoned and may be removed by Lessor, and |
Lessee will reimburse Lessor for the cost of such removal.
| 10. | Eminent Domain. If the premises or any part thereof or any estate therein, or any other part of the building materially affecting Lessee’s use of the premises, are taken by eminent domain, this lease will terminate on the date when title vests pursuant to such taking. The rent, and any additional rent, will be apportioned as of the termination date, and any rent paid for any period beyond that date will be repaid to Lessee. Lessee will not be entitled to any part of the award for such taking or any payment in lieu thereof, but Lessee may file a claim for any taking of fixtures and improvements owned by Lessee, and for moving expenses. |
| 11. | Destruction of Premises. In the event of a partial destruction of the premises during the term hereof, from any cause, Lessor will forthwith repair the same, provided that such repairs can be made within ninety (90) days under existing governmental laws and regulations, but such partial destruction will not terminate this lease. |
| 12. | Lessor’s Remedies on Default. If Lessee defaults in the payment of rent, or any additional rent, or defaults in the performance of any of the other covenants or conditions hereto, Lessor may give Lessee notice of such default and if Lessee does not cure any such default within 15 days, after the giving of such notice (or if such other default is of such nature that it cannot be completely cured within such period, if Lessee does not commence such curing within such days and thereafter proceed with reasonable diligence and in good faith to cure such default), then Lessor may terminate this lease on not less than 15 days’ notice to Lessee. On the date specified in such notice, the term of this lease shall terminate, and Lessee shall then quit and surrender the premises to Lessor, but Lessee shall remain liable as hereinafter provided. If this lease shall have been so terminated by Lessor, Lessor may at any time thereafter resume possession of the premises by lawful means and remove Lessee or other occupants and their effects. |
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| 13. | Attorney’s Fees. In case suit should be brought for recovery of the premises, or for any sum due hereunder, or because of any act which may arise out of the possession of the premises, by either party, the prevailing party shall be entitled to all costs incurred in connection with such action, including a reasonable attorney’s fee. |
| 14. | Waiver. No failure of Lessor to enforce any term hereof shall be deemed to be a waiver. |
| 15. | Notices. Any notice which either party may or is required to give, shall be given by mailing the same, postage prepaid, to Lessee at the premises, or Lessor at the address shown below, or at such other places as may be designated by the parties from time to time. |
| 16. | Heirs, Assigns, Successors. This lease is binding upon and inures to the benefit of the heirs, assigns and successors in interest to the parties. |
| 17. | Entire Agreement. The foregoing constitutes the entire agreement between the parties and may be modified only by a writing signed by both parties. The following Exhibits, if any have been made a part of this lease before the parties’ execution hereof: |
3
SIGNATURE PAGE
| February 5, 2021 | 02/05/2021 | |
| Dated | Dated | |
| /s/ Jonathan Carlon | /s/ Neptune Flood Incorporated | |
| Lessor | Lessee | |
| TRB Rents, LLC - Jonathan Carlon, Manager | Neptune Flood Incorporated | |
| Lessor’s Name (Printed) | Lessee’s Name (Printed) | |
| 400 6th St. S., St. Petersburg, FL 33701 | 400 6th St. S., St. Petersburg, FL 33701 | |
| Address | Address | |
| [PERSONAL CONTACT INFORMATION REDACTED] | [PERSONAL CONTACT INFORMATION REDACTED] | |
| Phone | Phone |
4
Exhibit 10.8
CERTAIN OF THE EXHIBITS AND SCHEDULES TO THIS EXHIBIT HAVE BEEN OMITTED IN ACCORDANCE WITH REGULATION S-K ITEM 601(A)(5). THE REGISTRANT AGREES TO FURNISH A COPY OF ALL OMITTED EXHIBITS AND SCHEDULES TO THE SEC UPON ITS REQUEST. SUCH OMITTED INFORMATION IS IDENTIFIED BY BRACKETED ASTERISKS ([***]).
Florida documentary stamp tax required by law in the amount of $7,350.00 has been paid or will be paid directly to the Department of Revenue. Certificate of Registration #78-8015377427-3.
EXECUTION VERSION

AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
April 10, 2025
among
NEPTUNE INSURANCE HOLDINGS INC.,
as Holdings
NEPTUNE FLOOD INCORPORATED,
as the Borrower
The other Loan Parties Party Hereto,
The Lenders Party Hereto
and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
___________________________
JPMORGAN CHASE BANK, N.A.,
as Sole Bookrunner
___________________________
JPMORGAN CHASE BANK, N.A, BOFA SECURITIES, INC.,
BMO CAPITAL MARKETS CORP. and CAPITAL ONE, NATIONAL ASSOCIATION
as Joint Lead Arrangers
TABLE OF CONTENTS
| Page | ||
| ARTICLE I Definitions | ||
| SECTION 1.01. | Defined Terms | 1 |
| SECTION 1.02. | Classification of Loans and Borrowings | 42 |
| SECTION 1.03. | Terms Generally | 43 |
| SECTION 1.04. | Accounting Terms; GAAP | 43 |
| SECTION 1.05. | Pro Forma Adjustments | 44 |
| SECTION 1.06. | Status of Obligations | 45 |
| SECTION 1.07. | Interest Rates; Benchmark Notification | 45 |
| SECTION 1.08. | Letter of Credit Amounts | 46 |
| SECTION 1.09. | Divisions | 46 |
| ARTICLE II The Credits | 48 | |
| SECTION 2.01. | Commitments | 48 |
| SECTION 2.02. | Loans and Borrowings | 49 |
| SECTION 2.03. | Requests for Borrowings | 49 |
| SECTION 2.04. | [Intentionally Omitted] | 50 |
| SECTION 2.05. | Swingline Loans | 50 |
| SECTION 2.06. | Letters of Credit | 51 |
| SECTION 2.07. | Funding of Borrowings | 56 |
| SECTION 2.08. | Interest Elections | 57 |
| SECTION 2.09. | Termination and Reduction of Commitments; Increase in Revolving Commitments; Incremental Term Loans | 58 |
| SECTION 2.10. | Repayment and Amortization of Loans; Evidence of Debt | 61 |
| SECTION 2.11. | Prepayment of Loans | 62 |
| SECTION 2.12. | Fees | 64 |
| SECTION 2.13. | Interest | 65 |
| SECTION 2.14. | Alternate Rate of Interest | 66 |
| SECTION 2.15. | Increased Costs | 68 |
| SECTION 2.16. | Break Funding Payments | 69 |
| SECTION 2.17. | Taxes | 70 |
| SECTION 2.18. | Payments Generally; Allocation of Proceeds; Sharing of Set-offs | 73 |
| SECTION 2.19. | Mitigation Obligations; Replacement of Lenders | 75 |
| SECTION 2.20. | Defaulting Lenders | 76 |
| SECTION 2.21. | Returned Payments | 78 |
| SECTION 2.22. | Banking Services and Swap Agreements | 78 |
| ARTICLE III Representations and Warranties | 79 | |
| SECTION 3.01. | Organization; Powers | 79 |
| SECTION 3.02. | Authorization; Enforceability | 79 |
| SECTION 3.03. | Governmental Approvals; No Conflicts | 79 |
| SECTION 3.04. | Financial Condition; No Material Adverse Change | 79 |
| SECTION 3.05. | Properties | 80 |
| SECTION 3.06. | Litigation and Environmental Matters | 80 |
| SECTION 3.07. | Compliance with Laws and Agreements; No Default | 80 |
| SECTION 3.08. | Investment Company Status | 80 |
| SECTION 3.09. | Taxes | 80 |
| SECTION 3.10. | ERISA | 76 |
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| SECTION 3.11. | Disclosure | 81 |
| SECTION 3.12. | Material Agreements | 81 |
| SECTION 3.13. | Solvency | 82 |
| SECTION 3.14. | Insurance | 82 |
| SECTION 3.15. | Capitalization and Subsidiaries | 82 |
| SECTION 3.16. | Security Interest in Collateral | 83 |
| SECTION 3.17. | Employment Matters | 83 |
| SECTION 3.18. | Margin Regulations | 83 |
| SECTION 3.19. | Use of Proceeds | 83 |
| SECTION 3.20. | No Burdensome Restrictions | 83 |
| SECTION 3.21. | Anti-Corruption Laws and Sanctions | 83 |
| SECTION 3.22. | Affected Financial Institutions | 84 |
| SECTION 3.23. | Plan Assets; Prohibited Transactions | 84 |
| SECTION 3.24. | Affiliate Transactions | 84 |
| ARTICLE IV Conditions | 84 | |
| SECTION 4.01. | Effective Date | 84 |
| SECTION 4.02. | Each Credit Event | 87 |
| ARTICLE V Affirmative Covenants | 88 | |
| SECTION 5.01. | Financial Statements and Other Information | 88 |
| SECTION 5.02. | Notices of Material Events | 91 |
| SECTION 5.03. | Existence; Conduct of Business | 91 |
| SECTION 5.04. | Payment of Obligations | 91 |
| SECTION 5.05. | Maintenance of Properties | 92 |
| SECTION 5.06. | Books and Records; Inspection Rights | 92 |
| SECTION 5.07. | Compliance with Laws and Material Contractual Obligations | 92 |
| SECTION 5.08. | Use of Proceeds | 92 |
| SECTION 5.09. | Accuracy of Information | 93 |
| SECTION 5.10. | Insurance | 93 |
| SECTION 5.11. | Casualty and Condemnation | 93 |
| SECTION 5.12. | Depository Banks | 93 |
| SECTION 5.13. | Subsidiary Guarantors; Additional Collateral; Further Assurances | 94 |
| SECTION 5.14. | Post-Closing Requirements | 95 |
| ARTICLE VI Negative Covenants | 95 | |
| SECTION 6.01. | Indebtedness | 95 |
| SECTION 6.02. | Liens | 97 |
| SECTION 6.03. | Fundamental Changes | 99 |
| SECTION 6.04. | Investments, Loans, Advances, Guarantees and Acquisitions | 100 |
| SECTION 6.05. | Asset Sales | 103 |
| SECTION 6.06. | Sale and Leaseback Transactions | 104 |
| SECTION 6.07. | Swap Agreements | 104 |
| SECTION 6.08. | Restricted Payments; Certain Payments of Junior Indebtedness | 104 |
| SECTION 6.09. | Transactions with Affiliates | 106 |
| SECTION 6.10. | Restrictive Agreements | 107 |
| SECTION 6.11. | Amendment of Material Documents | 107 |
| SECTION 6.12. | Financial Covenants | 107 |
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| ARTICLE VII Events of Default | 108 | |
| ARTICLE VIII The Administrative Agent | 112 | |
| SECTION 8.01. | Authorization and Action | 106 |
| SECTION 8.02. | Administrative Agent’s Reliance, Limitation of Liability, Indemnification, Etc | 115 |
| SECTION 8.03. | Posting of Communications | 116 |
| SECTION 8.04. | The Administrative Agent Individually | 117 |
| SECTION 8.05. | Successor Administrative Agent | 118 |
| SECTION 8.06. | Acknowledgments of Lenders and Issuing Banks | 119 |
| SECTION 8.07. | Collateral Matters | 121 |
| SECTION 8.08. | Credit Bidding | 121 |
| SECTION 8.09. | Certain ERISA Matters | 122 |
| SECTION 8.10. | Flood Laws | 123 |
| ARTICLE IX Miscellaneous | 124 | |
| SECTION 9.01. | Notices | 124 |
| SECTION 9.02. | Waivers; Amendments | 125 |
| SECTION 9.03. | Expenses; Limitation of Liability; Indemnity; Etc | 128 |
| SECTION 9.04. | Successors and Assigns | 130 |
| SECTION 9.05. | Survival | 137 |
| SECTION 9.06. | Counterparts; Integration; Effectiveness; Electronic Execution | 138 |
| SECTION 9.07. | Severability | 139 |
| SECTION 9.08. | Right of Setoff | 139 |
| SECTION 9.09. | Governing Law; Jurisdiction; Consent to Service of Process | 139 |
| SECTION 9.10. | WAIVER OF JURY TRIAL | 140 |
| SECTION 9.11. | Headings | 140 |
| SECTION 9.12. | Confidentiality | 141 |
| SECTION 9.13. | Several Obligations; Nonreliance; Violation of Law | 142 |
| SECTION 9.14. | USA PATRIOT Act | 142 |
| SECTION 9.15. | Disclosure | 142 |
| SECTION 9.16. | Appointment for Perfection | 142 |
| SECTION 9.17. | Interest Rate Limitation | 142 |
| SECTION 9.18. | No Fiduciary Duty, etc | 143 |
| SECTION 9.19. | Marketing Consent | 143 |
| SECTION 9.20. | Acknowledgment and Consent to Bail-In of Affected Financial Institutions | 144 |
| SECTION 9.21. | Acknowledgement Regarding Any Supported QFCs | 144 |
| ARTICLE X Loan Guaranty | 145 | |
| SECTION 10.01. | Guaranty | 145 |
| SECTION 10.02. | Guaranty of Payment | 145 |
| SECTION 10.03. | No Discharge or Diminishment of Loan Guaranty | 145 |
| SECTION 10.04. | Defenses Waived | 146 |
| SECTION 10.05. | Rights of Subrogation | 146 |
| SECTION 10.06. | Reinstatement; Stay of Acceleration | 146 |
| SECTION 10.07. | Information | 147 |
| SECTION 10.08. | Release of Loan Guarantors | 147 |
| SECTION 10.09. | Taxes | 147 |
| SECTION 10.10. | Maximum Liability | 147 |
| SECTION 10.11. | Contribution | 148 |
| SECTION 10.12. | Liability Cumulative | 148 |
| SECTION 10.13. | Keepwell | 148 |
iii
| SCHEDULES: | ||
| Commitment Schedule | ||
| Schedule 3.05 | – | Properties, etc. |
| Schedule 3.12 | – | Material Contracts |
| Schedule 3.14 | – | Insurance |
| Schedule 3.15 | – | Capitalization and Subsidiaries |
| Schedule 3.24 | – | Affiliate Transactions |
| Schedule 5.14 | – | Post-Closing Requirements |
| Schedule 6.01 | – | Existing Indebtedness |
| Schedule 6.02 | – | Existing Liens |
| Schedule 6.04 | – | Existing Investments |
| Schedule 6.10 | – | Existing Restrictions |
| Schedule 9.22 | – | Released Pledgor Documents |
EXHIBITS:
| Exhibit A | – | Assignment and Assumption |
| Exhibit B-1 | – | U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes) |
| Exhibit B-2 | – | U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes) |
| Exhibit B-3 | – | U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes) |
| Exhibit B-4 | – | U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes) |
| Exhibit C | – | Compliance Certificate |
| Exhibit D | – | Joinder Agreement |
| Exhibit E | – | Intercompany Note |
iv
AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 10, 2025 (as it may be amended, restated, supplemented or modified from time to time, this “Agreement”), among NEPTUNE INSURANCE HOLDINGS INC., a Delaware corporation, as Holdings, NEPTUNE FLOOD INCORPORATED, a Delaware corporation, as Borrower, the other Loan Parties party hereto, the Lenders party hereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
WHEREAS, the Borrower, certain of the Subsidiary Guarantors party hereto, the Administrative Agent and certain of the Lenders (the “Continuing Lenders”) are party to that certain Credit Agreement dated as of June 13, 2024 (the “Original Effective Date”) (as amended, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”);
WHEREAS, Holdings, the Borrower, the Subsidiary Guarantors, the Administrative Agent, the Continuing Lenders and the other Lenders have agreed to enter into this Agreement in order to (i) amend and restate the Existing Credit Agreement in its entirety, (ii) extend the maturity date in respect of the existing credit facilities under the Existing Credit Agreement, (iii) re-evidence the “Obligations” under, and as defined in, the Existing Credit Agreement, which shall be repayable in accordance with the terms of this Agreement and (iv) set forth the terms and conditions under which the Lenders will, from time to time, make loans and extend other financial accommodations to or for the benefit of the Borrower;
WHEREAS, it is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities of the parties under the Existing Credit Agreement or be deemed to evidence or constitute full repayment of such obligations and liabilities, but that this Agreement amend and restate in its entirety the Existing Credit Agreement and re-evidence the obligations and liabilities of the Borrower and the other Loan Parties outstanding thereunder, which shall be payable in accordance with the terms hereof;
WHEREAS, it is also the intent of the Borrower and the other Loan Parties to confirm that, except as explicitly set forth herein, all obligations and Liens under the applicable “Loan Documents” (as referred to and defined in the Existing Credit Agreement) shall continue in full force and effect as modified or restated by the Loan Documents (as referred to and defined herein) and that, from and after the Effective Date, all references to the “Credit Agreement” contained in any such existing “Loan Documents” shall be deemed to refer to this Agreement; and
WHEREAS, (i) the financial institutions identified on the Commitment Schedule which are not Continuing Lenders wish to become “Lenders” hereunder and accept and assume the obligations of “Lenders” hereunder with the Commitments specified on such schedule and (ii) the Loan Parties party hereto which are not party to the Existing Credit Agreement wish to become “Loan Parties” hereunder and accept and assume the obligations of “Loan Parties” hereunder and under the other Loan Documents to which they are a party;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements made herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Existing Credit Agreement is hereby amended and restated in its entirety as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
“ABR”, when used in reference to (a) a rate of interest, refers to the Alternate Base Rate, and (b) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, is bearing interest at a rate determined by reference to the Alternate Base Rate.
1
“Account” has the meaning assigned to such term in the Security Agreement.
“Account Debtor” means any Person obligated on an Account.
“Acquisition” means any transaction, or any series of related transactions, consummated on or after the Effective Date, by which any Loan Party or Subsidiary (a) acquires any going concern business or all or substantially all of the assets of any Person, whether through purchase of assets, merger or otherwise or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the Equity Interests of a Person which has ordinary voting power for the election of directors or other similar management personnel of a Person (other than Equity Interests having such power only by reason of the happening of a contingency) or a majority of the outstanding Equity Interests of a Person.
“Administrative Agent” means JPMorgan Chase Bank, N.A. (or any of its designated branch offices or affiliates), in its capacity as administrative agent for the Lenders hereunder.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent to the Borrower or any Lender, as the context requires.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the specified Person.
“Affiliated Lender” means a Lender that is a Permitted Holder or any Affiliate thereof (other than the Borrower, any other Subsidiary of the Borrower, or any Bona Fide Debt Fund).
“Affiliated Lender Cap” has the meaning assigned to it in Section 9.04(f).
“Agent-Related Person” has the meaning assigned to it in Section 9.03(d).
“Aggregate Credit Exposure” means, at any time, the aggregate Credit Exposure of all the Lenders at such time.
“Aggregate Revolving Exposure” means, at any time, the aggregate Revolving Exposure of all the Lenders at such time.
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus ½ of 1%, and (c) the Term SOFR Rate for a one-month Interest Period as published two U.S. Government Securities Business Days prior to such day (or if such day is not a U.S. Government Securities Business Day, the immediately preceding U.S. Government Securities Business Day) plus 1%; provided that, for the purpose of this definition, the Term SOFR Rate for any day shall be based on the Term SOFR Reference Rate at approximately 5:00 a.m. Chicago time on such day (or any amended publication time for the Term SOFR Reference Rate, as specified by the CME Term SOFR Administrator in the Term SOFR Reference Rate methodology). Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Term SOFR Rate shall be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Term SOFR Rate, respectively. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 2.14 (for the avoidance of doubt, only until the Benchmark Replacement has been determined pursuant to Section 2.14(b)), then the Alternate Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the Alternate Base Rate as determined pursuant to the foregoing would be less than 1.00% per annum, such rate shall be deemed to be 1.00% per annum for purposes of this Agreement.
2
“Ancillary Document” has the meaning assigned to it in Section 9.06(b).
“Annual Budget” has the meaning assigned to such term in Section 5.01(e).
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to any Loan Party or any of its Affiliates from time to time concerning or relating to bribery or corruption.
“Applicable EBITDA” means, at any time, Consolidated EBITDA for the period of four consecutive fiscal quarters ended on or most recently prior to such time for which financial statements have been delivered (or are required to have been delivered) to the Administrative Agent pursuant to Section 5.01(a) or (b) (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.01(a) or (b), the most recent financial statements referred to in Section 3.04(a)).
“Applicable Parties” has the meaning assigned to it in Section 8.03(c).
“Applicable Percentage” means, at any time, (a) with respect to any Revolving Lender, a percentage equal to a fraction the numerator of which is such Lender’s Revolving Commitment at such time and the denominator of which is the aggregate Revolving Commitments at such time (provided that, if the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon such Lender’s share of the Aggregate Revolving Exposure at such time); provided that, in accordance with Section 2.20, so long as any Lender shall be a Defaulting Lender, such Defaulting Lender’s Revolving Commitment shall be disregarded in the calculations under clause (a) above, and (b) with respect to any Term Lender, a percentage equal to a fraction the numerator of which is the aggregate outstanding principal amount of the Term Loans of such Lender at such time and the denominator of which is the aggregate outstanding principal amount of the Term Loans of all Term Lenders at such time; provided that, in accordance with Section 2.20, so long as any Lender shall be a Defaulting Lender, such Defaulting Lender’s Term Loans shall be disregarded in the calculations under clause (b) above; provided further that, for purposes of Section 9.03(d), the Applicable Percentages shall be determined based upon such Lender’s share of the aggregate exposure under clauses (a) and (b) above.
3
“Applicable Rate” means, for any day, with respect to any ABR Loan, Term Benchmark Loan or RFR Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption “ABR Spread”, “Term Benchmark and RFR Spread” or “Commitment Fee Rate”, as the case may be, based upon the Total Net Leverage Ratio as of the most recent determination date, provided that, until the delivery to the Administrative Agent of the Financial Statements pursuant to Section 5.01(a) or (b) for the first fiscal quarter of Holdings ending after the Effective Date, the “Applicable Rate” shall be the applicable rates per annum set forth below in Category 4:
| Total Net Leverage Ratio | ABR Spread | Term Benchmark and RFR Spread | Commitment Fee Rate | |||||||||
| Category 1 < 1.50 to 1.00 | 1.25 | % | 2.25 | % | 0.20 | % | ||||||
| Category 2 ≥ 1.50 to 1.00 but < 2.00 to 1.00 | 1.50 | % | 2.50 | % | 0.25 | % | ||||||
| Category 3 ≥ 2.00 to 1.00 but < 3.00 to 1.00 | 1.75 | % | 2.75 | % | 0.30 | % | ||||||
| Category 4 ≥ 3.00 to 1.00 but < 4.00 to 1.00 | 2.00 | % | 3.00 | % | 0.35 | % | ||||||
| Category 5 ≥ 4.00 to 1.00 | 2.50 | % | 3.50 | % | 0.40 | % | ||||||
For purposes of the foregoing, (a) the Applicable Rate shall be determined as of the end of each fiscal quarter of Holdings, based upon the Financial Statements delivered pursuant to Section 5.01(a) or (b) for such fiscal quarter (provided that, if the Financial Statements for two different periods are received pursuant to any of Sections 5.01(a) and (b) on the same date, the Financial Statements relating to the period ending on the latest such date controls for purposes of this clause (a)) and (b) each change in the Applicable Rate resulting from a change in the Total Net Leverage Ratio shall be effective during the period commencing on and including the date that is three (3) Business Days after the date of delivery to the Administrative Agent of such Financial Statements indicating such change and ending on the date immediately preceding the effective date of the next such change, provided that at the option of the Administrative Agent or at the request of the Required Lenders, if Holdings fails to deliver the annual or quarterly Financial Statements required to be delivered by it pursuant to Section 5.01(a) or (b), the Total Net Leverage Ratio shall be deemed to be in Category 5 during the period from the expiration of the time for delivery thereof until the third Business Day following the date on which such consolidated financial statements are delivered.
If at any time the Administrative Agent determines that the Financial Statements upon which the Applicable Rate was determined were incorrect (whether based on a restatement, fraud or otherwise), or any ratio or compliance information in a Compliance Certificate or other certification was incorrectly calculated, relied on incorrect information or was otherwise not accurate, true or correct, the Borrower shall be required to retroactively pay any additional amount that the Borrower would have been required to pay if such Financial Statements, Compliance Certificate or other information had been accurate and/or computed correctly at the time they were delivered.
“Approved Borrower Portal” has the meaning assigned to it in Section 8.11(a).
“Approved Electronic Platform” has the meaning assigned to it in Section 8.03(a).
“Approved Fund” has the meaning assigned to the term in Section 9.04(b).
“Arrangers” means (i) JPMorgan Chase Bank, N.A., in its capacity as sole bookrunner and joint lead arranger and (ii) BofA Securities, Inc., BMO Capital Markets Corp. and Capital One, National Association, each in its capacity as joint lead arranger for the credit facilities evidenced by this Agreement.
4
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form (including electronic records generated by the use of an electronic platform) approved by the Administrative Agent.
“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Revolving Credit Maturity Date and the date of termination of the Revolving Commitments (and, if such day is not a Business Day, then on the immediately preceding Business Day).
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, any tenor for such Benchmark (or component thereof) or payment period for interest calculated with reference to such Benchmark (or component thereof), as applicable, that is or may be used for determining the length of an Interest Period for any term rate or otherwise, for determining any frequency of making payments of interest calculated pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 2.14(e).
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Banking Services” means each and any of the following bank services provided to any Loan Party or any Subsidiary by any Lender or any of its Affiliates: (a) credit cards for commercial customers (including, without limitation, “commercial credit cards” and purchasing cards), (b) stored value cards, (c) merchant processing services, and (d) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, any direct debit scheme or arrangement, overdrafts and interstate depository network services and cash pooling services).
“Banking Services Obligations” means any and all obligations of the Loan Parties or its Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor thereto, as hereafter amended.
“Bankruptcy Event” means, with respect to any Person, when such Person becomes the subject of a voluntary or involuntary bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business, appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment or has had any order for relief in such proceeding entered in respect thereof, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, unless such ownership interest results in or provides such Person with immunity from the jurisdiction of courts within the U.S. or from the enforcement of judgments or writs of attachment on its assets or permits such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.
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“Benchmark” means, initially, with respect to any (i) RFR Loan, Daily Simple SOFR or (ii) Term Benchmark Loan, the Term SOFR Rate; provided that, if a Benchmark Transition Event and the related Benchmark Replacement Date have occurred with respect to the Term SOFR Rate or Daily Simple SOFR, as applicable, or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.14(b).
“Benchmark Replacement” means, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:
(1) Daily Simple SOFR; or
(2) the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for dollar-denominated syndicated credit facilities in the United States at such time; and (b) the related Benchmark Replacement Adjustment.
If the Benchmark Replacement as determined pursuant to clause (1) or (2) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable Benchmark Replacement Date and/or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for syndicated credit facilities denominated in Dollars at such time.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement and/or any Term Benchmark Loan, any technical, administrative or operational changes (including changes to the definition of “Alternate Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides in its reasonable discretion that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines in its reasonable discretion that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
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“Benchmark Replacement Date” means, with respect to any Benchmark, the earliest to occur of the following events with respect to such then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or
(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the first date on which such Benchmark (or the published component used in the calculation thereof) has been, or if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) have been, determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be no longer representative; provided, that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (3) and even if such Benchmark (or such component thereof), or if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component thereof), continues to be provided on such date.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means, with respect to any Benchmark, the occurrence of one or more of the following events with respect to such then-current Benchmark:
(1) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component thereof);
(2) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the NYFRB, the CME Term SOFR Administrator, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), in each case, which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component thereof); or
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(3) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such Benchmark (or such component thereof) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) are no longer, or as of a specified future date will no longer be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Unavailability Period” means, with respect to any Benchmark, the period (if any) (x) beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at such time, no Benchmark Replacement has replaced such then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.14 and (y) ending at the time that a Benchmark Replacement has replaced such then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.14.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code to which Section 4975 of the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Bona Fide Debt Fund” means any debt fund or other Person that is engaged in, or advises funds or other investment vehicles that are engaged in, making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course and whose managers have fiduciary duties to the third-party investors in such fund or investment vehicle independent of their duties to the Borrower; provided, however, in no event shall (x) any natural Person or (y) the Borrower or any Subsidiary thereof be a “Bona Fide Debt Fund.”
“Borrower” means Neptune Flood Incorporated, a Delaware corporation.
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“Borrower Communications” means, collectively, any Borrowing Request, request for a Swingline Loan, Interest Election Request, notice of prepayment, notice requesting the issuance, amendment or extension of a Letter of Credit or other notice, demand, communication, information, document or other material provided by or on behalf of the Borrower pursuant to any Loan Document or the transactions contemplated therein which is distributed by the Borrower to the Administrative Agent through an Approved Borrower Portal.
“Borrowing” means (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Term Benchmark Loans, as to which a single Interest Period is in effect, (b) Term Loans of the same Type, made, converted or continued on the same date and, in the case of Term Benchmark Loans, as to which a single Interest Period is in effect, or (c) a Swingline Loan.
“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03, which shall be substantially in the form approved by the Administrative Agent and separately provided to the Borrower.
“Burdensome Restrictions” means any consensual encumbrance or restriction of the type described in clause (a) or (b) of Section 6.10.
“Business Day” means, any day (other than a Saturday or a Sunday) on which banks are open for business in New York City; provided that, in addition to the foregoing, a Business Day shall be any such day that is only a U.S. Government Securities Business Day (a) in relation to RFR Loans and any interest rate settings, fundings, disbursements, settlements or payments of any such RFR Loan, or any other dealings of such RFR Loan and (b) in relation to Loans referencing the Term SOFR Rate and any interest rate settings, fundings, disbursements, settlements or payments of any such Loans referencing the Term SOFR Rate or any other dealings of such Loans referencing the Term SOFR Rate.
“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital lease obligations or finance lease obligations on a balance sheet of such Person under GAAP (as in effect on the date of determination), and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
“Cash Equivalents” means, as to any Person, (i) securities issued or directly and fully guaranteed or insured by the U.S. or any agency or instrumentality thereof (provided that the full faith and credit of the U.S. is pledged in support thereof) having maturities of not more than twelve (12) months from the date of acquisition, (ii) marketable direct obligations issued by any state of the U.S. or any political subdivision of any such state or any public instrumentality thereof maturing within twelve (12) months from the date of acquisition thereof and, at the time of the acquisition, having one of the two highest ratings obtainable from either S&P or Moody’s, (iii) Dollar denominated time deposits, certificates of deposit and bankers acceptances of any Lender or any commercial bank having, or which is the principal banking subsidiary of a bank holding company having, a long-term unsecured debt rating of at least “A” or the equivalent thereof from S&P or “A2” or the equivalent thereof from Moody’s with maturities of not more than six (6) months from the date of acquisition by such Person, (iv) repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iii) above, (v) commercial paper issued by any Person incorporated in the U.S. rated at least A-1 or the equivalent thereof by S&P or at least P 1 or the equivalent thereof by Moody’s and in each case maturing not more than six (6) months after the date of acquisition by such Person and (vi) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (v) above, and with respect to any Foreign Subsidiary, the approximate non-U.S. equivalent of any of the foregoing.
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“CFC” means a Foreign Subsidiary of the Borrower that is a “controlled foreign corporation” within the meaning of Section 957 of the Code.
“CFC Holding Company” means a Domestic Subsidiary of the Borrower that (a) has no material assets other than (i) the Equity Interests in one or more (x) Foreign Subsidiaries that are CFCs or (y) other CFC Holding Companies and (ii) cash and Permitted Investments and other assets being held on a temporary basis incidental to the holding of assets described in clause (i) of this definition, and (b) does not Guarantee or otherwise provide any credit support for any Material Indebtedness, Disqualified Stock or Subordinated Indebtedness of the Borrower or any Domestic Subsidiary.
“Change in Control” means the occurrence of any of the following: (a) (i) at any time prior to the consummation of a Qualified IPO, the Permitted Holders shall cease to Control and own Equity Interests representing at least 65% of the outstanding voting power and economic interests of Holdings on a fully diluted basis or (ii) upon and at any time after the consummation of a Qualified IPO, the Control or acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (other than the Permitted Holders) of Equity Interests representing more than 35% of the outstanding voting power and economic interests of the Relevant Public Company on a fully diluted basis; (b) at any time prior to the consummation of a Qualified IPO, occupation at any time of a majority of the seats (other than vacant seats) on the board of directors of Holdings (or, upon and at any time after the consummation of a Qualified IPO, the Relevant Public Company) by Persons who were not (i) directors of Holdings (or the Relevant Public Company, as applicable) on the date of this Agreement or nominated or appointed by the board of directors of Holdings (or the Relevant Public Company, as applicable) or (ii) appointed by directors so nominated or appointed; (c) (i) at any time prior to the consummation of a Qualified IPO, Holdings shall cease to Control and own, directly or indirectly, free and clear of all Liens and other encumbrances (other than Liens in favor of the Administrative Agent securing the Secured Obligations), Equity Interests representing 100% of the aggregate voting power and economic interests represented by the issued and outstanding Equity Interests of the Borrower on a fully diluted basis and (ii) upon and after the consummation of a Qualified IPO and so long as the Borrower is not the Relevant Public Company, the Relevant Public Company shall cease to Control and own, directly or indirectly, free and clear of all Liens and other encumbrances (other than Liens in favor of the Administrative Agent securing the Secured Obligations), Equity Interests representing 100% of the aggregate voting power and economic interests represented by the issued and outstanding Equity Interests of the Borrower on a fully diluted basis; or (d) the Borrower ceases to Control and own, free and clear of all Liens or other encumbrances (other than Liens permitted under Section 6.02), 100% of the Equity Interests of each Subsidiary of the Borrower, except as may be required by applicable law and dispositions and investments permitted by this Agreement.
For purposes of this definition, including other defined terms used therein in connection with this definition and notwithstanding anything to the contrary in this definition, (i) “beneficial ownership” shall be as defined in Rules 13(d)-3 and 13(d)-5 under the Securities Exchange Act of 1934 and the rules of the SEC thereunder, (ii) the words “Person” and “group” shall be within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 and the rules of the SEC thereunder, but shall exclude (x) any employee benefit plan of such Person or group or its subsidiaries and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan and (y) any underwriter in connection with any Qualified IPO, (iii) a Person or group shall not be deemed to beneficially own Equity Interests (x) to be acquired by such Person or group pursuant to a stock or asset purchase agreement, merger agreement, option agreement, warrant agreement or similar agreement (or voting or option or similar agreement related thereto) until the consummation of the acquisition of Equity Interests in connection with the transactions contemplated by such agreement or (y) solely as a result of veto or approval rights in any joint venture agreement, shareholder agreement, investor rights agreement or similar agreement, (iv) a Person or group will not be deemed to beneficially own the voting Equity Interests of another Person as a result of its ownership of Equity Interests or other securities of such other Person’s direct or indirect parent company (a “Parent Entity”) (or related contractual rights) unless it owns more than 50% of the total voting power of the Equity Interests of such Parent Entity and (v) the right to acquire voting Equity Interests (so long as such Person does not have the right to direct the voting of the Equity Interests subject to such right) or any veto power in connection with the acquisition or disposition of voting Equity Interests will not cause a Person or group to be a beneficial owner.
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“Change in Law” means the occurrence after the date of this Agreement of any of the following: (a) the adoption of 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) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, rules, guideline, requirement or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof, and (y) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the U.S. 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, issued or implemented.
“Charges” has the meaning assigned to such term in Section 9.17.
“Chase” means JPMorgan Chase Bank, N.A., a national banking association, in its individual capacity, and its successors.
“Class”, when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term Loans or Swingline Loans, (b) any Commitment, refers to whether such Commitment is a Revolving Commitment or a Term Loan Commitment and (c) any Lender, refers to whether such Lender is a Revolving Lender or a Term Lender.
“Closing Date Dividend” means a one-time cash Restricted Payment made by the Borrower as a dividend to the holders of record of Borrower’s stock at the time immediately preceding the filing of the Certificate of Merger of Neptune Insurance Merger Sub Inc. with and into Borrower to be filed on or about the date hereof pursuant to Section 251 of the Delaware General Corporation Law, which shall be made no later than five (5) Business Days after the Effective Date in an aggregate amount not to exceed $175,000,000.
“CME Term SOFR Administrator” means CME Group Benchmark Administration Limited as administrator of the forward-looking term SOFR (or a successor administrator).
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” means any and all property owned, leased or operated by a Person covered by the Collateral Documents and any and all other property of any Loan Party, now existing or hereafter acquired, that may at any time be, become or be intended to be, subject to a security interest or Lien in favor of the Administrative Agent, on behalf of itself and the other Secured Parties, to secure the Secured Obligations; provided that the Collateral shall not include any Excluded Property.
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“Collateral Access Agreement” has the meaning assigned to such term in the Security Agreement.
“Collateral Documents” means, collectively, the Security Agreement and all other agreements, instruments and documents executed, delivered or otherwise prepared in connection with this Agreement that are intended to create, perfect or evidence Liens to secure the Secured Obligations, including, without limitation, all other security agreements, pledge agreements, deeds of trust, loan agreements, notes, guarantees, subordination agreements, pledges, powers of attorney, consents, assignments, contracts, fee letters, notices, leases, financing statements and all other written matter whether heretofore, now or hereafter executed by any Loan Party and delivered to the Administrative Agent.
“Commitment” means, with respect to each Lender, the sum of such Lender’s Revolving Commitment and Term Loan Commitment.
“Commitment Schedule” means the Schedule attached hereto identified as such.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Communications” has the meaning assigned to such term in Section 8.03(c).
“Compliance Certificate” means a certificate of a Financial Officer of Holdings in substantially the form of Exhibit C or any other form approved by the Administrative Agent.
“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 EBITDA” means, for any period, Consolidated Net Income for such period
plus
(a) without duplication and (other than clause (a)(vii) and clause (a)(ix) below) to the extent deducted (but not excluded) in determining Consolidated Net Income for such period, the sum of:
(i) Consolidated Interest Expense for such period, plus
(ii) income and foreign withholding tax expense for such period net of tax refunds, plus
(iii) all amounts attributable to depreciation and amortization expense for such period including goodwill or asset impairment charges, write-downs, write-offs or write-ups (other than impairment charges and write-downs related to inventory and receivables), plus
(iv) any reasonable and customary non-recurring fees, expenses or charges (other than depreciation or amortization expense as described in the preceding clause (a)(iii)) actually incurred and paid in cash during such period in connection with any of the following:
(A) any Permitted Acquisition or any other investment permitted hereunder; provided that the aggregate of all amounts added back to Consolidated EBITDA pursuant to this clause (a)(iv)(A) during any period of four consecutive fiscal quarters of Holdings for Permitted Acquisitions or any other investment permitted hereunder that are not consummated shall not exceed $1,000,000;
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(B) any permitted sale or other Disposition of assets (whether or not consummated); and
(C) any permitted issuance, incurrence or assumption of Indebtedness or issuance of Equity Interests (whether or not consummated); provided that the aggregate of all amounts added back to Consolidated EBITDA pursuant to this clause (a)(iv)(C) during any period of four consecutive fiscal quarters of Holdings shall not exceed $500,000, plus
(v) any non-recurring cash fees, cash charges and other cash expenses made or incurred during such period in connection with any of the following: (A) the Transactions to occur on the Effective Date that are paid or otherwise accounted for within 180 days of the Effective Date in an aggregate amount not to exceed $2,500,000; and (B) amendments, waivers or other modifications in respect of the Loan Documents (whether or not consummated) in an aggregate amount not to exceed $500,000 during any period of four consecutive fiscal quarters of Holdings, plus
(vi) any unusual or non-recurring charges or expenses for such period (including (A) non-recurring expenses relating to severance liabilities, and (B) restructuring, transition and start-up costs, fees, charges, reserves, accruals or expenses (including those relating to (1) business optimization and other restructuring and integration, set-up, recertification and integration, (2) retention and retirement, (3) systems and information technology procurement, establishment and optimization, including any non-recurring costs and expenses associated with information technology systems (hardware and software) build out and integration and license consent fees, (4) rebranding and new product startup costs, (5) contract termination, (6) the start-up, closure, relocation or reconfiguration or consolidation of facilities and future lease commitments, non-recurring costs related to entry into new markets, (7) recruiting, relocation, signing bonuses and salary for interim employees, severance payments and modifications to pension and post-retirement employee benefit plans, (8) consulting fees and expenses, (9) interim salary and bonus and (10) settlement costs, transaction costs and other comparable charges and expenses), but, in each case, excluding any non-cash charge in respect of an item that was included in Consolidated Net Income in a prior period; provided that the aggregate of all amounts added back to Consolidated EBITDA pursuant to this clause (a)(vi) during any period of four consecutive fiscal quarters of Holdings, when taken together with the aggregate of all amounts added to Consolidated EBITDA pursuant to clause (a)(vii) below during such period, shall not exceed 25% of Consolidated EBITDA for such period (calculated before giving effect to such additions), plus
(vii) the amount of “run rate” cost savings, operating expense reductions, and expenses and cost synergies related to any Permitted Acquisition or other investment permitted hereunder and consummated after the Effective Date (without duplication of any amounts added back pursuant to clause (a)(v) above), in each case, projected by the Borrower in good faith to be realized within twelve (12) months after such transaction is consummated as a result of specified actions taken in connection therewith (which “run rate” cost savings, operating expense reductions and expenses and cost synergies shall be calculated on a pro forma basis as though such “run rate” cost savings, restructuring charges and expenses, operating expense reductions and expenses and cost synergies had been realized on the first day of the period for which Consolidated EBITDA is being determined), net of the amount of actual benefits realized during such period from such actions; provided that (x) such “run rate” cost savings, restructuring charges and expenses, operating expense reductions and expenses and cost synergies are reasonably expected and factually supportable (in the good faith determination of the Borrower) and (y) to the extent the aggregate of all amounts added to Consolidated EBITDA pursuant to this clause (a)(vii) during any period of four consecutive fiscal quarters of Holdings exceeds 5% of Consolidated EBITDA for such period (calculated before giving effect to such additions), the Borrower shall have delivered to the Administrative Agent a certificate signed by a Financial Officer of the Borrower certifying as to the satisfaction of the conditions and requirements set forth in this clause (a)(vii), together with all supporting documentation and calculations with respect thereto as may be requested by the Administrative Agent; provided further that (A) the aggregate of all amounts added to Consolidated EBITDA pursuant to this clause (a)(vii) during any period of four consecutive fiscal quarters of Holdings shall not exceed 20% of Consolidated EBITDA for such period (calculated before giving effect to such additions), and (B) the aggregate of all amounts added to Consolidated EBITDA pursuant to this clause (a)(vii) during any period of four consecutive fiscal quarters of Holdings, when taken together with the aggregate of all amounts added back to Consolidated EBITDA pursuant to clause (a)(vi) above during such period, shall not exceed 25% of Consolidated EBITDA for such period (calculated before giving effect to such additions and add-backs), plus
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(viii) any non-cash losses or charges (less any non-cash gains), plus
(ix) all other add-backs or adjustments for such period which are set forth in any quality of earnings report with respect to the Borrower delivered to the Administrative Agent after the Effective Date that is requested by the Borrower and acceptable to the Administrative Agent in its reasonable discretion (including as to the identity of the provider of such quality of earnings report); provided that the aggregate of all such adjustments and amounts added back to Consolidated EBITDA pursuant to this clause (a)(ix) during any period of four consecutive fiscal quarters of Holdings shall not exceed 5% of Consolidated EBITDA for such period (calculated before giving effect to such adjustments and add-backs), plus
(x) any one-time charges of up to 5% of Consolidated EBITDA for any period of four consecutive fiscal quarters of Holdings (calculated before giving effect to such additions and add-backs) which are approved in writing by the Required Lenders, in their reasonable discretion, plus
(xi) any charges related to insurance or derivatives purchased by the Borrower or any of its Subsidiaries for the purpose of managing catastrophic loss risk in the ordinary course of business; provided that the aggregate of all amounts added back to Consolidated EBITDA pursuant to this clause (a)(xi) during any period of four consecutive fiscal quarters of Holdings shall not exceed $500,000, plus
(xii) Public Company Costs paid in cash during such period, plus
(xiii) all non-cash expenses realized or incurred in connection with or resulting from equity or equity-linked compensation plans, employee benefit plans or agreements or post-employment benefit plans or agreements, or grants or sales of stock, stock appreciation, awards under any successor plans of Holdings or its Subsidiaries’ option or equity plans or similar rights, stock options, restricted stock, preferred stock, stock appreciation or other similar rights,
minus
(b) without duplication and to the extent included (and not deducted in the case of clause (b)(iv) below) in Consolidated Net Income, the sum of:
(i) any unusual or non-recurring gains or income and any non-cash gains or items of income for such period, plus
(ii) all cash payments made during such period on account of non-cash charges that were accruals or reserves added to Consolidated Net Income pursuant to any of clauses (a)(iv) and (a)(viii) above in a prior period, plus
(xiv) refunds of Taxes based on income or profits or capital, plus franchise taxes, plus foreign withholding taxes and foreign unreimbursed value added taxes and tariffs, of Holdings and its Subsidiaries for such period (including, in each case, of any penalties and interest related to such taxes or arising from tax examinations), in each case, to the extent not netted in calculating Consolidated Net Income or from the amount included in clause (a)(ii) above, plus
(iv) capitalized software costs,
all calculated for Holdings and its Subsidiaries on a consolidated basis in accordance with GAAP.
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“Consolidated Interest Expense” means, for any period, total interest expense (including that attributable to Capital Lease Obligations) of Holdings and its Subsidiaries for such period with respect to all outstanding Indebtedness of Holdings and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptances and net costs under Swap Agreements in respect of interest rates, to the extent such net costs are allocable to such period in accordance with GAAP), net of total interest income of Holdings and its Subsidiaries for such period, in each case calculated for Holdings and its Subsidiaries on a consolidated basis for such period in accordance with GAAP.
“Consolidated Net Income” means, for any period, the consolidated net income (or loss) determined for Holdings and its Subsidiaries, on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with Holdings or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary) in which Holdings or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by Holdings or such Subsidiary in the form of dividends or similar distributions derived from earned income, and (c) the undistributed earnings of any Subsidiary of Holdings to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation (other than any Loan Document) or Requirement of Law applicable to such Subsidiary.
“Consolidated Total Funded Indebtedness” means, at any date, the aggregate principal amount of all Indebtedness of the type described in any of clauses (a), (b), (f), (h), (i) (to the extent unreimbursed for more than three (3) Business Days, and excluding, for the avoidance of doubt, the face amount of any issued and undrawn letters of credit or any letters of credit cash collateralized), (j) (to the extent unreimbursed for more than three (3) Business Days), (k) (to the extent due and unpaid for more than ten (10) days) and (m) of the definition of “Indebtedness”, together with all Guarantees in respect of any of the foregoing, all determined for Holdings and its Subsidiaries on a consolidated basis at such date, determined in accordance with GAAP; provided that in no event shall Banking Services Obligations be included in Consolidated Total Funded Indebtedness.
“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.
“Controlled Investment Affiliate” means, with respect to any Person, any other investment fund or similar Person that (i) is organized for the purpose of making equity investments in one or more companies and (ii) is controlled by, or is under common control with, such Person (in each case, excluding any portfolio company thereof). For purposes of this definition “control” means the power to direct or cause the direction of management and policies of a Person, whether by contract or otherwise.
“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.
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“Covered Entity” means any of the following:
(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Covered Party” has the meaning assigned to it in Section 9.21.
“Credit Exposure” means, as to any Lender at any time, the sum of (a) such Lender’s Revolving Exposure at such time plus (b) an amount equal to the aggregate principal amount of its Term Loans outstanding at such time.
“Credit Party” means the Administrative Agent, the Issuing Bank, the Swingline Lender or any other Lender.
“Cure Expiration Date” shall have the meaning provided in Section 7.03.
“Cure Right” shall have the meaning provided in Section 7.03.
“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum equal to SOFR for the day (such day, the “SOFR Determination Date”) that is five (5) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website; provided that if Daily Simple SOFR as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement. Any change in Daily Simple SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower. If by 5:00 p.m. (New York City time) on the second (2nd) U.S. Government Securities Business Day immediately following any SOFR Determination Date, SOFR in respect of such SOFR Determination Date has not been published on the SOFR Administrator’s Website and a Benchmark Replacement Date with respect to Daily Simple SOFR has not occurred, then SOFR for such SOFR Determination Date will be SOFR as published in respect of the first preceding U.S. Government Securities Business Day for which such SOFR was published on the SOFR Administrator’s Website.
“Debt Fund Affiliate” means any Affiliate of a Disqualified Institution that is a Bona Fide Debt Fund or an investment vehicle that is engaged in the making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course which is managed, sponsored or advised by any Person controlling, controlled by or under common control with such Disqualified Institution, and for which no personnel involved with the investment of such Disqualified Institution (i) makes any investment decisions or (ii) has access to any information (other than information publicly available) relating to Holdings or the Borrower or any entity that forms a part of the Borrower’s business (including Subsidiaries of the Borrower); it being understood and agreed that the term “Debt Fund Affiliate” shall not include any Person that is separately identified to the Administrative Agent in accordance with clause (a) of the definition of “Disqualified Institution” or any Affiliate of any such Person.
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“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” means any Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a Loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three (3) Business Days after request by a Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations as of the date of certification) to fund prospective Loans and participations in then outstanding Letters of Credit and Swingline Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has become (or has a Parent that has become) the subject of (i) a Bankruptcy Event or (ii) a Bail-In Action.
“Discretionary Guarantor” means any Subsidiary that would otherwise constitute an Excluded Subsidiary and which (a) is reasonably acceptable to the Administrative Agent and (b) the Borrower, in its sole discretion, elected to become, and has become, a Loan Party in accordance with Section 5.13; provided that the parties hereto acknowledge and agree that, without limitation, it shall be reasonable for the Administrative Agent to withhold its consent to the designation of any Subsidiary as a Designated Guarantor if, in the reasonable credit judgment of the Administrative Agent, joining such Subsidiary as a Loan Party would result in a violation of applicable law or such Subsidiary would not otherwise provide customary credit support for the Secured Obligations substantially similar to that provided by Loan Parties organized under the laws of the United States of America, Canada or England and Wales, which determination may give consideration to (x) the amount and enforceability of, and any limitations applicable to, the Guarantee that would be provided by the relevant Person, (y) the value (including after giving consideration to the extent of perfection and priority of Liens on such Collateral) and enforceability of, and any limitations applicable to, any security interest that may be granted with respect to any Collateral of the relevant Person and (z) any political risk, Requirement of Law or duties (fiduciary, trustee or otherwise) associated with the relevant jurisdiction.
“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (in one transaction or in a series of transactions and whether effected pursuant to a division or otherwise) of any property by any Person (including any Sale and Leaseback Transaction and any issuance of Equity Interests by a Subsidiary of such Person), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, but excluding any sales of inventory in the ordinary course of business.
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“Disqualified Institution” means (a) Persons that are specifically identified by the Borrower to the Administrative Agent in writing prior to the Original Effective Date, (b) any Person that is reasonably determined by the Borrower after the Original Effective Date to be a competitor of the Borrower or its Subsidiaries and which is specifically identified in a written supplement to the list of “Disqualified Institutions”, which supplement shall become effective three (3) Business Days after delivery thereof to the Administrative Agent and the Lenders in accordance with Section 9.01 and (c) in the case of the foregoing clauses (a) and (b), any of such entities’ Affiliates to the extent such Affiliates (x) are clearly identifiable as Affiliates of such Persons based solely on the similarity of such Affiliates’ and such Persons’ names and (y) are not Bona Fide Debt Funds. It is understood and agreed that (i) any supplement to the list of Persons that are Disqualified Institutions contemplated by the foregoing clause (b) shall not apply retroactively to disqualify any Persons that have entered into a trade to acquire or previously acquired an assignment or participation interest in the Commitments or Loans (but solely with respect to such Commitments and Loans), (ii) the Borrower’s failure to deliver such list (or supplement thereto) in accordance with Section 9.01 shall render such list (or supplement) not received and not effective and (iii) “Disqualified Institution” shall exclude any Person that the Borrower has designated as no longer being a “Disqualified Institution” by written notice delivered to the Administrative Agent from time to time in accordance with Section 9.01.
“Disqualified Stock” means any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests 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 (other than solely for Qualified Stock), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control, initial public offering or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control, initial public offering or asset sale event shall be subject to the prior Payment in Full of the Secured Obligations, (b) is redeemable at the option of the holder thereof (other than solely for Qualified Stock and other than as a result of a change of control, initial public offering or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control, initial public offering or asset sale event shall be subject to the prior Payment in Full of the Secured Obligations, in whole or in part, or (c) is or becomes automatically or at the option of the holder convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Stock, in the case of each of clauses (a), (b) and (c), prior to the date that is ninety-one (91) days after the latest Maturity Date in effect at the time of issuance; provided that if such Equity Interests are issued to any current or former employees, consultants, directors, officers or members of management or pursuant to a plan for the benefit of current or former employees, consultants, directors, officers or members of management of Holdings or its Subsidiaries or by any such plan to such current or former employees, consultants, directors, officers or members of management, such Equity Interests shall not constitute Disqualified Stock solely because they may be required to be repurchased by Holdings or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employees’, consultants’, directors’, officers’ or management members’ termination, death or disability.
“Dollars”, “dollars” or “$” refers to lawful money of the U.S.
“Domestic Subsidiary” means a Subsidiary organized under the laws of a jurisdiction located in the United States of America.
“DQ List” has the meaning assigned to such term in Section 9.04(e)(iv).
“ECP” means an “eligible contract participant” as defined in Section 1(a)(18) of the Commodity Exchange Act or any regulations promulgated thereunder and the applicable rules issued by the Commodity Futures Trading Commission and/or the SEC.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
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“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.
“Electronic System” means any electronic system, including e-mail, e-fax, web portal access for any Loan Party and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Administrative Agent or the Issuing Bank and any of its respective Related Parties or any other Person, providing for access to data protected by passcodes or other security system.
“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to (i) the environment, (ii) preservation or reclamation of natural resources, (iii) the management, Release or threatened Release of any Hazardous Material or (iv) health and safety matters.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Loan Party or any Subsidiary directly or indirectly resulting from or based upon (a) any violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any 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.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing, but excluding any debt securities convertible into any of the foregoing.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with Holdings or the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or Section 4001(14) of ERISA or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
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“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by Holdings, the Borrower or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Holdings, the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by Holdings, the Borrower or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal of Holdings, the Borrower or any ERISA Affiliate from any Plan or Multiemployer Plan; or (g) the receipt by Holdings, the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from Holdings, the Borrower or any ERISA Affiliate of any notice, concerning the imposition upon Holdings, the Borrower or any ERISA Affiliate of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in critical status, within the meaning of Title IV of ERISA.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“Event of Default” has the meaning assigned to such term in Section 7.01.
“Excluded Account” has the meaning assigned to such term in the Security Agreement.
“Excluded Property” has the meaning assigned to such term in the Security Agreement.
“Excluded Subsidiary” means any (a) Immaterial Subsidiary, (b) Subsidiary of the Borrower where the provision of a Guarantee by such Subsidiary would result in materially adverse tax consequences to the Borrower, its direct or indirect parent entities and/or any of its direct or indirect Subsidiaries, in each case as mutually agreed by the Borrower and the Administrative Agent, (c) Foreign Subsidiary, CFC or CFC Holding Company and (d) other Subsidiary to the extent the Administrative Agent and the Borrower reasonably determine that the cost and/or burden of obtaining the Guarantee outweigh the benefit to the Secured Parties, taken as a whole. Notwithstanding the foregoing, (i) no Intermediate Holdco shall constitute an Excluded Subsidiary and (ii) no Subsidiary shall constitute an Excluded Subsidiary if (either at the time of designation or thereafter) (x) the primary purpose of such designation is (A) to evade the collateral or guarantee requirements under the Loan Documents for such Subsidiary with no other justifiable business purpose, or (B) to raise (or to facilitate the raising of) capital for (or any parent of) the Borrower or its Subsidiaries or (y) such Subsidiary Guarantees or otherwise provides credit support for any Material Indebtedness, Disqualified Stock or Subordinated Indebtedness of the Borrower or any Subsidiary; provided that, notwithstanding the foregoing, following the satisfaction of the applicable requirements set forth in Section 5.13, any Discretionary Guarantor that would otherwise constitute an Excluded Subsidiary pursuant to any of the foregoing clauses shall no longer constitute an Excluded Subsidiary under the Loan Documents for any purpose unless and until such Subsidiary becomes an Immaterial Subsidiary (based on the financial statements of Holdings as of the end of the most recent fiscal quarter of Holdings, for the period of four consecutive fiscal quarters then ended, for which financial statements have been delivered (or are required to have been delivered) pursuant to Section 5.01(a) or (b) (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.01(a) or (b), the most recent financial statements referred to in Section 3.04(a)) following the date such Subsidiary became a Discretionary Guarantor) and is released from its obligations as a Subsidiary Guarantor pursuant to Section 10.08.
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“Excluded Swap Obligation” means, with respect to any Loan Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Loan Guarantor of, or the grant by such Loan Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Guarantor’s failure for any reason to constitute an ECP at the time the Guarantee of such Loan Guarantor or the grant of such security interest becomes or would become effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan, Letter of Credit or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan, Letter of Credit or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.17, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan, Letter of Credit or Commitment or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.17(f) and (d) any withholding Taxes imposed under FATCA.
“Existing Credit Agreement” has the meaning set forth in the recitals hereto.
“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 agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions, as determined in such manner as shall be set forth on the NYFRB’s Website from time to time, and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate; provided that, if the Federal Funds Effective Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of Holdings or the Borrower, as the case may be.
“Financial Statements” has the meaning assigned to such term in Section 5.01.
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“Flood Insurance Requirements” means the Administrative Agent has received evidence indicating whether the improvements or any part thereof on any real property required to be subject to a Lien in favor of the Administrative Agent are or will be located within a “Special Flood Hazard Area” as designated on maps prepared by the Federal Emergency Management Agency, and, if so, a flood notification form signed by the Borrower and evidence that a flood insurance policy or policies are in place for such improvements on the property and contents or other Collateral, as applicable, all in form, substance and amount satisfactory to the Administrative Agent and at a minimum in compliance with applicable Flood Laws.
“Flood Laws” means the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973, the National Flood Insurance Reform Act of 1994, the Biggert-Waters Flood Insurance Act of 2012, as such statutes may be amended or re-codified from time to time, any substitutions, any regulations promulgated under such Flood Laws, and all other legal requirements relating to flood insurance.
“Floor” means the benchmark rate floor, if any, provided in this Agreement (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to the Term SOFR Rate or Daily Simple SOFR, as applicable. For the avoidance of doubt, the initial Floor for each of the Term SOFR Rate and Daily Simple SOFR shall be zero.
“Foreign Lender” means any Lender that is not a U.S. Person.
“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.
“Funding Account” has the meaning assigned to such term in Section 4.01(h).
“GAAP” means generally accepted accounting principles in the United States of America.
“Governmental Authority” means the government of the U.S., any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. 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.
“Guaranteed Obligations” means (i) with respect to the Borrower, the Specified Ancillary Obligations and (ii) with respect to any Loan Party other than the Borrower, the Secured Obligations, and, in each case, all costs and expenses including, without limitation, all court costs and reasonable attorneys’ and paralegals’ fees (including allocated costs of in-house counsel and paralegals) and expenses paid or incurred by the Administrative Agent, the Issuing Bank and the Lenders in endeavoring to collect all or any part of the Secured Obligations from, or in prosecuting any action against, the Borrower, any Loan Guarantor or any other guarantor of all or any part of the Secured Obligations; provided that, in each case, the definition of “Guaranteed Obligations” shall not create any guarantee by any Loan Guarantor of (or grant of security interest by any Loan Guarantor to support, as applicable) any Excluded Swap Obligations of such Loan Guarantor for purposes of determining any obligations of any Loan Guarantor.
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“Hazardous Materials” means: (a) any substance, material, or waste that is included within the definitions of “hazardous substances,” “hazardous materials,” “hazardous waste,” “toxic substances,” “toxic materials,” “toxic waste,” or words of similar import in any Environmental Law; (b) those substances listed as hazardous substances by the United States Department of Transportation (or any successor agency) (49 C.F.R. 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) (40 C.F.R. Part 302 and amendments thereto); and (c) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos-containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas, radon, or a pesticide, herbicide, or any other agricultural chemical.
“Holdings” means Neptune Insurance Holdings Inc., a Delaware corporation.
“Hostile Acquisition” means (a) the acquisition of the Equity Interests of a Person through a tender offer or similar solicitation of the owners of such Equity Interests which has not been approved (prior to such acquisition) by the board of directors (or any other applicable governing body) of such Person or by similar action if such Person is not a corporation and (b) any such acquisition as to which such approval has been withdrawn.
“Immaterial Subsidiary” means, at any time of determination, any Subsidiary that is not a Material Subsidiary.
“Incremental Facility Amendment” has the meaning assigned to such term in Section 2.09.
“Incremental Term Loan” has the meaning assigned to such term in Section 2.09.
“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit, demand guarantees and similar independent undertakings, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, (k) obligations under any earn-out (which for all purposes of this Agreement, other than the definition of Consolidated Total Funded Indebtedness, shall be valued at the maximum potential amount payable with respect to each such earn-out, and with respect to the definition of Consolidated Total Funded Indebtedness, shall be valued in accordance with GAAP), (l) any other Off-Balance Sheet Liability, (m) all Disqualified Stock of such Person and (n) obligations, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Swap Agreements, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Swap Agreement transaction. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.
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“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in the foregoing clause (a), Other Taxes.
“Indemnitee” has the meaning assigned to such term in Section 9.03(c).
“Ineligible Institution” has the meaning assigned to such term in Section 9.04(b).
“Information” has the meaning assigned to such term in Section 9.12.
“Intercompany Loans” has the meaning provided in Section 6.04(c).
“Intercompany Note” means a promissory note evidencing Intercompany Loans, duly executed and delivered substantially in a form attached hereto as Exhibit E (or such other form as shall be reasonably satisfactory to the Administrative Agent).
“Interest Coverage Ratio” means, for any period of four consecutive fiscal quarters of Holdings, the ratio of (a) Consolidated EBITDA for such period to (b) cash Consolidated Interest Expense for such period, all calculated for Holdings and its Subsidiaries on a consolidated basis in accordance with GAAP.
“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.08, which shall be substantially in the form approved by the Administrative Agent and separately provided to the Borrower.
“Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swingline Loan), the first day of each calendar quarter and the applicable Maturity Date, (b) with respect to any RFR Loan, each date that is on the numerically corresponding day in each calendar month that is one month after the Borrowing of such Loan (or, if there is no such numerically corresponding day in such month, then the last day of such month) and the applicable Maturity Date, (c) with respect to any Term Benchmark Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Term Benchmark Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period and the applicable Maturity Date, and (d) with respect to any Swingline Loan, the day that such Loan is required to be repaid and the Revolving Credit Maturity Date.
“Interest Period” means with respect to any Term Benchmark Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, three or six months thereafter (in each case, subject to the availability for the Benchmark applicable to the relevant Loan or Commitment), as the Borrower may elect; provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, and (iii) no tenor that has been removed from this definition pursuant to Section 2.14(e) shall be available for specification in such Borrowing Request or Interest Election Request. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter, in the case of any Borrowing other than a Swingline Loan, shall be the effective date of the most recent conversion or continuation of such Borrowing.
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“Interest Rate Protection Agreement” means any interest rate swap agreement, interest rate cap agreement, interest collar agreement, interest rate hedging agreement or other similar agreement or arrangement.
“Intermediate Holdco” means any Person that is (x) a direct or indirect wholly-owned Domestic Subsidiary of Holdings and (y) a direct or indirect parent of Borrower; provided that each such Intermediate Holdco shall have become a Loan Party in accordance with Section 5.13.
“Inventory” has the meaning assigned to such term in the Security Agreement.
“IRS” means the United States Internal Revenue Service.
“Issuing Bank” means, individually and collectively, each of Chase (or any of its designated branch offices or affiliates), in its capacity as the issuer of Letters of Credit hereunder, and any other Revolving Lender from time to time designated by the Borrower as an Issuing Bank, with the consent of such Revolving Lender and the Administrative Agent, and their respective successors in such capacity as provided in Section 2.06(i). Any Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by its Affiliates, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate (it being agreed that such Issuing Bank shall, or shall cause such Affiliate to, comply with the requirements of Section 2.06 with respect to such Letters of Credit). At any time there is more than one Issuing Bank, all singular references to the Issuing Bank shall mean any Issuing Bank, either Issuing Bank, each Issuing Bank, the Issuing Bank that has issued the applicable Letter of Credit, or both (or all) Issuing Banks, as the context may require.
“Issuing Bank Sublimit” means, as of the Effective Date, (i) $2,500,000, in the case of Chase and (ii) in the case of any other Issuing Bank, such amount as shall be designated to the Administrative Agent and the Borrower in writing by such Issuing Bank; provided that any Issuing Bank shall be permitted at any time to increase or reduce its Issuing Bank Sublimit upon providing five (5) days’ prior written notice thereof to the Administrative Agent and the Borrower.
“Joinder Agreement” means a Joinder Agreement in substantially the form of Exhibit D or any other form approved by the Administrative Agent.
“Junior Indebtedness” means (i) any Subordinated Indebtedness, (ii) any Indebtedness that is secured by a Lien on the Collateral that pursuant to an intercreditor or subordination agreement between the holders of such Indebtedness (or the agent or other representative of such holders) and the Administrative Agent is junior in priority to the Lien on the Collateral securing the Secured Obligations and (iii) any Disqualified Stock.
“LC Collateral Account” has the meaning assigned to such term in Section 2.06(j).
“LC Disbursement” means any payment made by an Issuing Bank pursuant to a Letter of Credit.
“LC Exposure” means at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the aggregate LC Exposure at such time.
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“Lender” means, as of any date of determination, a Person listed on the Commitment Schedule (or, if the Commitments of any Class have terminated or expired, a Person holding Credit Exposure of such Class) and any other Person that shall have become a Lender hereunder pursuant to Section 2.09 or an Assignment and Assumption or other documentation contemplated hereby, other than any such Person that ceases to be a Lender hereunder pursuant to an Assignment and Assumption or other documentation contemplated hereby. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender and the Issuing Bank.
“Lender-Related Person” has the meaning assigned to such term in Section 9.03(b).
“Letter of Credit Agreement” has the meaning assigned to it in Section 2.06(b).
“Letters of Credit” means the letters of credit issued pursuant to this Agreement, and the term “Letter of Credit” means any one of them or each of them singularly, as the context may require.
“Liabilities” means any losses, claims (including intraparty claims), demands, damages or liabilities of any kind.
“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
“Limited Condition Transaction” means any Permitted Acquisition or other investment that the Borrower or one or more of its Subsidiaries is contractually committed to consummate (it being understood that such commitment may be subject to conditions precedent, which conditions precedent may be amended, satisfied or waived in accordance with the terms of the applicable agreement) and whose consummation is not conditioned on the availability of, or on obtaining, third party financing; provided that, in the event the consummation of any such Permitted Acquisition or investment shall not have occurred within ninety (90) days following the signing of the applicable contractual commitment (which time period may be extended to one hundred eighty (180) days by the Administrative Agent in its sole discretion), such Permitted Acquisition or investment shall no longer constitute a Limited Condition Transaction for any purpose.
“Loan Documents” means, collectively, this Agreement, each promissory note issued pursuant to this Agreement, each Letter of Credit Agreement, each Collateral Document, each Compliance Certificate, the Loan Guaranty and each other agreement, fee letter, instrument, document and certificate executed and delivered to, or in favor of, the Administrative Agent or any Lender and including each other pledge, power of attorney, consent, assignment, contract, notice, letter of credit agreement, letter of credit applications and any agreements between the Borrower and the Issuing Bank regarding the Issuing Bank’s Issuing Bank Sublimit or the respective rights and obligations between the Borrower and the Issuing Bank in connection with the issuance of Letters of Credit, and each other written matter whether heretofore, now or hereafter executed by or on behalf of any Loan Party, or any employee of any Loan Party, and delivered to the Administrative Agent or any Lender in connection with this Agreement or the commercial lending facility made available hereunder. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.
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“Loan Guarantor” means each Loan Party.
“Loan Guaranty” means Article X of this Agreement.
“Loan Parties” means, collectively, Holdings, the Borrower and the Subsidiary Guarantors and their successors and assigns, and the term “Loan Party” shall mean any one of them or all of them individually, as the context may require.
“Loans” means the loans and advances made by the Lenders to the Borrower pursuant to this Agreement, including Swingline Loans.
“Margin Stock” means margin stock within the meaning of Regulations T, U and X, as applicable.
“Material Acquisition” means any Acquisition in respect of which the aggregate consideration paid or payable (including without limitation, all transaction costs, any management fees, assumed Indebtedness and liabilities incurred, assumed or reflected on a consolidated balance sheet of Holdings and its Subsidiaries after giving effect to such Acquisition and the maximum amount (to the extent such maximum amount is stated, and if not stated, then the reasonably anticipated amount) of all earn-out obligations and other deferred payments) exceeds $75,000,000.
“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of Holdings and its Subsidiaries taken as a whole, (b) the ability of any Loan Party to perform any of its Obligations, (c) the Collateral, or the Administrative Agent’s Liens (on behalf of itself and the other Secured Parties) on the Collateral or the priority of such Liens, or (d) the rights of or benefits available to the Administrative Agent, the Issuing Bank or the Lenders under any of the Loan Documents.
“Material Contract” means (a) any contract listed on Schedule 3.12 or (b) any other contract, agreement, permit or license, written or oral, of any Loan Party or any of its Subsidiaries as to which the breach, nonperformance, cancellation or failure to renew by any party thereto, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of Holdings and its Subsidiaries in an aggregate principal amount exceeding $5,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of Holdings or any of its Subsidiaries in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.
“Material Subsidiary” means, as of any date of determination, each Subsidiary (together with its Subsidiaries), which, (i) as of the end of the most recent fiscal quarter of Holdings, for the period of four consecutive fiscal quarters then ended, for which financial statements have been delivered (or are required to have been delivered) pursuant to Section 5.01(a) or (b) (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.01(a) or (b), the most recent financial statements referred to in Section 3.04(a)), contributed greater than one percent (1.0%) of consolidated revenues of Holdings and its Subsidiaries on a consolidated basis for such period or (ii) is the legal owner or exclusive licensee of any intellectual property that is material to the business of Holdings and its Subsidiaries; provided that, if at any time the aggregate amount of revenues attributable to all Subsidiaries that are not Material Subsidiaries exceeds two and one half percent (2.5%) of the consolidated revenues of Holdings and its Subsidiaries on a consolidated basis for any such period, Holdings (or, in the event Holdings has failed to do so within ten (10) days, the Administrative Agent) shall designate sufficient Subsidiaries as “Material Subsidiaries” to eliminate such excess, and such designated Subsidiaries shall for all purposes of this Agreement constitute Material Subsidiaries.
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“Maturity Date” means the Revolving Credit Maturity Date or the Term Loan Maturity Date, as applicable.
“Maximum Rate” has the meaning assigned to such term in Section 9.17.
“Moody’s” means Moody’s Investors Service, Inc.
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
“Net Proceeds” means, with respect to any event, (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but excluding any interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, minus (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other Disposition of an asset (including pursuant to a Sale and Leaseback Transaction or a casualty or a taking by eminent domain, condemnation or similar proceeding), the amount of all payments required to be made as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event and (iii) the amount of all taxes paid (or reasonably estimated to be payable) and the amount of any reserves established to fund contingent liabilities reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by a Financial Officer of Holdings).
“Non-Consenting Lender” has the meaning assigned to such term in Section 9.02(d).
“Not Otherwise Applied” means, with reference to any amount of proceeds of any sale or issuance of Equity Interests or any other transaction or event that is proposed to be applied to a particular use or transaction, that such amount has not previously been (and is not simultaneously being) applied for any other purposes under this Agreement and the other Loan Documents, other than that such particular use or transaction.
“NYFRB” means the Federal Reserve Bank of New York.
“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day(or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. (New York City time) on such day received by the Administrative Agent from a federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates as so determined would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
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“NYFRB’s Website” means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
“Obligated Party” has the meaning assigned to such term in Section 10.02.
“Obligations” means all unpaid principal of and accrued and unpaid interest on the Loans, all LC Exposure, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations and indebtedness (including interest and fees accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), obligations and liabilities of any of the Loan Parties to any of the Lenders, the Administrative Agent, the Issuing Bank or any Indemnitee, individually or collectively, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Agreement or any of the other Loan Documents or in respect of any of the Loans made or reimbursement or other obligations incurred or any of the Letters of Credit or other instruments at any time evidencing any thereof.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“Off-Balance Sheet Liability” of a Person means (a) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (b) any indebtedness, liability or obligation under any so-called “synthetic lease” transaction entered into by such Person, or (c) any indebtedness, liability or obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person (other than operating leases).
“Original Effective Date” has the meaning set forth in the recitals hereto.
“Original Indebtedness” has the meaning assigned to such term in Section 6.01(f).
“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 a connection 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, Letter of Credit, or any Loan Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19).
“Outbound Investment Rules” means the regulations administered and enforced, together with any related public guidance issued, by the United States Treasury Department under U.S. Executive Order 14105 of August 9, 2023, or any similar law or regulation, as of the Effective Date, and as codified at 31 C.F.R. § 850.101 et seq.
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight eurodollar transactions denominated in Dollars by U.S.-managed banking offices of depository institutions (as such composite rate shall be determined by the NYFRB as set forth on the NYFRB’s Website from time to time) and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate.
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“Parent” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a subsidiary.
“Parent Company” means (a) any holding company established by any Permitted Holder for purposes of holding its investment in any other Parent Company and (b) any other Person of which Holdings is a direct or indirect wholly-owned subsidiary.
“Participant” has the meaning assigned to such term in Section 9.04(c).
“Participant Register” has the meaning assigned to such term in Section 9.04(c).
“Payment” has the meaning assigned to it in Section 8.06(c).
“Payment in Full of the Secured Obligations” means, (i) the payment in full in cash of all outstanding Loans and LC Disbursements, together with accrued and unpaid interest thereon, (ii) the termination, expiration, or cancellation and return of all outstanding Letters of Credit (or alternatively, with respect to each such Letter of Credit, the furnishing to the Administrative Agent of a cash deposit, or at the discretion of the Administrative Agent a back up standby letter of credit satisfactory to the Administrative Agent and the Issuing Bank, in an amount equal to 105% of the LC Exposure as of the date of such payment), (iii) the payment in full in cash of the accrued and unpaid fees, (iv) the payment in full in cash of all reimbursable expenses and other Secured Obligations (other than Unliquidated Obligations for which no claim has been made and other obligations expressly stated to survive such payment and termination of this Agreement), together with accrued and unpaid interest thereon, (v) the termination of all Commitments, and (vi) the termination of the Swap Agreement Obligations and the Banking Services Obligations or entering into other arrangements satisfactory to the Secured Parties counterparties thereto.
“Payment Notice” has the meaning assigned to it in Section 8.06(c).
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“Permitted Acquisition” means any Acquisition by any Loan Party in a transaction that satisfies each of the following requirements:
(a) such Acquisition is not a Hostile Acquisition;
(b) the business or Person whose Equity Interests are acquired in connection with such Acquisition is not engaged, directly or indirectly, in any line of business other than the businesses in which the Loan Parties are engaged on the Effective Date and any business activities that are substantially similar, related, or incidental thereto;
(c) the aggregate consideration paid or payable (including without limitation, all Indebtedness incurred or assumed by all Subsidiaries in connection with such Acquisition and the maximum amount (to the extent such maximum amount is stated, and if not stated, then the reasonably anticipated amount) of all earn-out obligations and other deferred payments) in respect of all Permitted Acquisitions of Subsidiaries that are not Loan Parties and assets that do not constitute Collateral shall not exceed the greater of $8,000,000 or 10% of Applicable EBITDA;
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(d) both before and immediately after giving effect (including giving effect on a pro forma basis) to such Acquisition and any Indebtedness incurred or assumed in connection therewith, (i) each of the representations and warranties in the Loan Documents is true and correct (except any such representation or warranty which relates to a specified prior date, which representation and warranty shall be true and correct as of such prior date) and (ii) no Default or Event of Default then exists or would result therefrom;
(e) as soon as available, but not less than fifteen (15) Business Days prior to such Acquisition (or such shorter period as agreed by the Administrative Agent in its sole discretion), the Borrower has provided the Administrative Agent (i) notice of such Acquisition, (ii) a copy of all business and financial information with respect to the Person or business to be acquired that has been made available to the Borrower, and (iii) in the case of any Material Acquisition, a quality of earnings report for the business and/or Persons acquired in connection with such Acquisition prepared by an accounting firm of national reputation (or otherwise acceptable to the Administrative Agent) in form and substance reasonably satisfactory to the Administrative Agent; provided, that, notwithstanding anything to the contrary set forth in this clause (e), in the event that the Borrower does prepare or receive a quality of earnings report for the business and/or Persons acquired in connection with such Acquisition, it shall deliver such quality of earnings report to the Administrative Agent;
(f) both before and immediately after giving effect (including giving effect on a pro forma basis) to such Acquisition and any Indebtedness incurred or assumed in connection therewith, (i) the Total Net Leverage Ratio is not greater than 3.75 to 1.00 and (ii) Holdings is in compliance with the financial covenants set forth in Section 6.12;
(g) [reserved];
(h) if such Acquisition is an acquisition of assets, such Acquisition is structured so that a Loan Party shall acquire such assets;
(i) if such Acquisition is an acquisition of Equity Interests, such Acquisition will not result in any violation of Regulation U;
(j) if such Acquisition involves a merger or a consolidation involving any Loan Party, such Loan Party shall be the surviving entity (provided that any such merger or consolidation involving the Borrower shall result in the Borrower as the surviving entity);
(k) no Loan Party shall, as a result of or in connection with any such Acquisition, assume or incur any direct or contingent liabilities (whether relating to environmental, tax, litigation, or other matters) that could have a Material Adverse Effect;
(l) in connection with an Acquisition of the Equity Interests of any Person, all Liens on any property of such Person shall be terminated unless the Administrative Agent and the Lenders in their sole discretion consent otherwise, and in connection with an Acquisition of the assets of any Person, all Liens on such assets shall be terminated;
(m) all actions required to be taken with respect to any newly acquired or formed Subsidiary of a Loan Party required under Section 5.13 shall have been taken; and
(n) Holdings shall have delivered to the Administrative Agent the final executed documentation relating to such Acquisition promptly following the consummation thereof.
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“Permitted Encumbrances” means:
(a) Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 5.04;
(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than thirty (30) days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;
(e) judgment Liens in respect of judgments that do not constitute an Event of Default under Section 7.01(k); and
(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of any Loan Party or any Subsidiary;
provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness, except with respect to clause (e) above.
“Permitted Holders” means the Shareholders.
“Permitted Investments” means:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the U.S. (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the U.S.), in each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;
(c) investments in certificates of deposit, bankers’ acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the U.S. or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and
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(e) money market funds that (i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which Holdings, the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.
“Pledgor” means each Shareholder or other “Pledgor” party to and as defined in the Shareholder Pledge Agreement immediately prior to the Effective Date.
“Prepayment Event” means:
(a) any sale, transfer or other Disposition (including pursuant to a Sale and Leaseback Transaction) of any property or asset of any Loan Party or any Subsidiary, other than (i) Dispositions described in Section 6.05(a), (ii) the Disposition of any assets acquired pursuant to a Permitted Acquisition consummated after the Effective Date that is financed solely with the proceeds of Qualified Stock of Holdings issued substantially concurrently with the consummation of such Permitted Acquisition and (iii) the Disposition of any asset resulting in Net Proceeds less than the greater of (A) $1,500,000 and (B) 2% of Applicable EBITDA; or
(b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of any Loan Party or any Subsidiary; or
(c) the incurrence by any Loan Party or any Subsidiary of any Indebtedness, other than Indebtedness permitted under Section 6.01.
“Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent). Each change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being effective.
“Proceeding” means any claim, litigation, investigation, action, suit, arbitration or administrative, judicial or regulatory action or proceeding in any jurisdiction.
“Projections” means the projected consolidated balance sheet, income statement and cash flow statement of Holdings and its Subsidiaries in form and substance reasonably satisfactory to the Administrative Agent.
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“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Public Company Costs” means, as to any Person, costs associated with, or in anticipation of, or preparation for, compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith and costs relating to compliance with the provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, or the rules of any national securities exchange, or any other comparable body of laws, rules or regulations, as are applicable to companies with listed equity or debt securities, directors’ compensation, fees and expense reimbursement, costs relating to enhanced accounting functions and investor relations, shareholder meetings and reports to shareholders, directors’ and officers’ insurance and other executive costs, costs and expenses related to the formation and organization of Holdings, the reorganization of the corporate structure of the Loan Parties to incorporate Holdings and Holdings’ joinder as a Loan Party hereunder, and legal, audit, accounting and other professional fees, listing fees and other transaction costs related to the process of undertaking a Qualified IPO.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” has the meaning assigned to it in Section 9.21.
“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Loan Guaranty or grant of the relevant security interest becomes or would become effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Qualified IPO” means any transaction (other than any merger, amalgamation or consolidation with a special purpose acquisition company or a subsidiary thereof) after which any of the common Equity Interests of the Relevant Public Company (and/or any permitted successor thereto) are initially publicly registered on any United States national securities exchange.
“Qualified Stock” of any Person means Equity Interests of such Person other than Disqualified Stock of such Person.
“Recipient” means, as applicable, (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, or any combination thereof (as the context requires).
“Reference Time” with respect to any setting of the then-current Benchmark means (1) if such Benchmark is the Term SOFR Rate, 5:00 a.m. (Chicago time) on the day that is two U.S. Government Securities Business Days preceding the date of such setting, (2) following a Benchmark Transition Event and a Benchmark Replacement Date with respect to the Term SOFR Rate, if such Benchmark is Daily Simple SOFR, then four U.S. Government Securities Business Days prior to such setting or (3) if such Benchmark is none of the Term SOFR Rate or Daily Simple SOFR, the time determined by the Administrative Agent in its reasonable discretion.
“Refinance Indebtedness” has the meaning assigned to such term in Section 6.01(f).
“Register” has the meaning assigned to such term in Section 9.04(b).
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“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Reinsurance Vehicle” means an entity established by Holdings and one or more of its Shareholders or their Affiliates for the purpose of reinsuring, solely or on a segregated basis, risks of the type that are insured by carriers who issue insurance policies sold, brokered or distributed by the Borrower or any of its Subsidiaries; provided, however, that a Reinsurance Vehicle may not be a Subsidiary of Holdings.
“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, partners, members, trustees, employees, agents, administrators, managers, representatives and advisors of such Person and such Person’s Affiliates.
“Release” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, disposing, or dumping of any substance into the environment.
“Relevant Governmental Body” means the Federal Reserve Board and/or the NYFRB, or a committee officially endorsed or convened by the Federal Reserve Board and/or the NYFRB or, in each case, any successor thereto.
“Relevant Public Company” means Holdings or any Parent Company (and/or any permitted successor thereto) that is (or is to be) the registrant with respect to a Qualified IPO.
“Relevant Rate” means (i) with respect to any Term Benchmark Borrowing, the Term SOFR Rate, and (ii) with respect to any RFR Borrowing, Daily Simple SOFR, as applicable.
“Required Lenders” means, subject to Section 2.20: (a) at any time prior to the earlier of the Loans becoming due and payable pursuant to Section 7.02 or the Commitments terminating or expiring, Lenders having Credit Exposures and Unfunded Revolving Commitments representing more than 50% of the sum of the Aggregate Credit Exposure and aggregate Unfunded Revolving Commitments at such time, provided that, solely for purposes of declaring the Loans to be due and payable pursuant to Section 7.02, the Unfunded Revolving Commitment of each Lender shall be deemed to be zero in determining the Required Lenders; and (b) for all purposes after the Loans become due and payable pursuant to Section 7.02 or the Commitments expire or terminate, Lenders having Credit Exposures representing more than 50% of the sum of the Aggregate Credit Exposure at such time; provided that, in the case of clauses (a) and (b) above, (i) the Revolving Exposure of any Lender that is a Swingline Lender shall be deemed to exclude any amount of its Swingline Exposure in excess of its Applicable Percentage of all outstanding Swingline Loans, adjusted to give effect to any reallocation under Section 2.20 of the Swingline Exposures of Defaulting Lenders in effect at such time, and the Unfunded Revolving Commitment of such Lender shall be determined on the basis of its Revolving Exposure excluding such excess amount and (ii) for the purpose of determining the Required Lenders needed for any waiver, amendment, modification or consent of or under this Agreement or any other Loan Document, any Affiliated Lender shall be disregarded except as expressly permitted under Section 9.04(f); provided, further, that if at any time there are two or more Lenders that are not Affiliates of each other, then “Required Lenders” shall include at least two such Lenders that are not Affiliates.
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“Requirement of Law” means, with respect to any Person, (a) the charter, articles or certificate of organization or incorporation and bylaws or operating, management or partnership agreement, or other organizational or governing documents of such Person and (b) any statute, law (including common law), treaty, rule, regulation, code, ordinance, order, decree, writ, judgment, injunction or determination of any arbitrator or court or other Governmental Authority (including Environmental Laws), in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” means the president, Financial Officer or other executive officer of Holdings or the Borrower, as applicable.
“Restricted Payment” means, as the case may be, (i) any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in any Loan Party or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in any Loan Party or any Subsidiary or any option, warrant or other right to acquire any such Equity Interests in any Loan Party or any Subsidiary or (ii) the payment to any Affiliate of Holdings of any management, advisory, transaction services, monitoring, bonus or similar fees, howsoever designated, or the payment to any Affiliate of Holdings of any costs, expenses and indemnities under any management, advisory, monitoring or similar agreement.
“Revolving Commitment” means, with respect to each Lender, the amount set forth on the Commitment Schedule opposite such Lender’s name as a “Revolving Commitment”, or in the Assignment and Assumption or other documentation or record (as such term is defined in Section 9-102(a)(70) of the New York UCC) as provided in Section 9.04(b)(ii)(C), pursuant to which such Lender shall have assumed its Revolving Commitment pursuant to the terms hereof, as applicable, as such Revolving Commitment may be reduced or increased from time to time pursuant to (a) Section 2.09 and (b) assignments by or to such Lender pursuant to Section 9.04; provided that at no time shall the Revolving Exposure of any Lender exceed its Revolving Commitment. The initial aggregate amount of the Lenders’ Revolving Commitments is $10,000,000.
“Revolving Credit Maturity Date” means April 10, 2030 (if the same is a Business Day, or if not then the immediately next preceding Business Day), or any earlier date on which the Revolving Commitments are reduced to zero or otherwise terminated pursuant to the terms hereof.
“Revolving Exposure” means, with respect to any Lender, at any time, the sum of the aggregate outstanding principal amount of such Lender’s Revolving Loans and its LC Exposure and its Swingline Exposure at such time.
“Revolving Lender” means, as of any date of determination, a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure.
“Revolving Loan” means a Loan made pursuant to Section 2.01(a).
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“RFR” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to Daily Simple SOFR (excluding, for the avoidance of doubt, any ABR Loan or Borrowing).
“S&P” means Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business.
“Sale and Leaseback Transaction” has the meaning assigned to such term in Section 6.06.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of this Agreement, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, the Crimea, Zaporizhzhia and Kherson Regions of Ukraine, Cuba, Iran, North Korea and Syria).
“Sanctioned Person” means, at any time, any Person subject or target of any Sanctions, including (a) any Person listed in any Sanctions-related list of designated Persons maintained by the U.S. government, including by OFAC, the U.S. Department of State or the U.S. Department of Commerce, or by the United Nations Security Council, the European Union, any European Union member state, His Majesty’s Treasury of the United Kingdom, the Canadian government or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country, or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b) (including, without limitation for purposes of defining a Sanctioned Person, as ownership and control may be defined and/or established in and/or by any applicable laws, rules, regulations, or orders).
“Sanctions” means all economic or financial sanctions, trade embargoes or similar restrictions imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC, the U.S. Department of State or the U.S. Department of Commerce, (b) the United Nations Security Council, the European Union, any European Union member state or His Majesty’s Treasury of the United Kingdom or other relevant sanctions authority or (c) the Canadian government.
“SEC” means the Securities and Exchange Commission of the U.S.
“Secured Obligations” means all Obligations, together with all Banking Services Obligations and Swap Agreement Obligations owing to one or more Lenders or their respective Affiliates; provided that the definition of “Secured Obligations” shall not create any guarantee by any Loan Guarantor of (or grant of security interest by any Loan Guarantor to support, as applicable) any Excluded Swap Obligations of such Loan Guarantor for purposes of determining any obligations of any Loan Guarantor.
“Secured Parties” means (a) the Lenders, (b) the Administrative Agent, (c) each Issuing Bank, (d) each provider of Banking Services, to the extent the Banking Services Obligations in respect thereof constitute Secured Obligations, (e) each counterparty to any Swap Agreement, to the extent the obligations thereunder constitute Secured Obligations, (f) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (g) the successors and assigns of each of the foregoing.
“Security Agreement” means that certain Amended and Restated Pledge and Security Agreement (including any and all supplements thereto), dated as of the date hereof, among the Loan Parties and the Administrative Agent, for the benefit of the Administrative Agent and the other Secured Parties, and any other pledge or security agreement entered into, after the date of this Agreement by any other Loan Party (as required by this Agreement or any other Loan Document) or any other Person for the benefit of the Administrative Agent and the other Secured Parties, as the same may be amended, restated, supplemented or otherwise modified from time to time.
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“Shareholder” means: (a) any Person that, on the Effective Date, owns any of the Equity Interests of Holdings; (b) any Controlled Investment Affiliate of any Person described in the immediately preceding clause (a); or (c) any trust established for the primary benefit of any natural person described in the immediately preceding clause (a).
“Shareholder Pledge Agreement” means that certain Shareholder Pledge Agreement, dated as of the Original Effective Date, by and among the Pledgors, the Borrower and the Administrative Agent, as amended, restated, supplemented or modified from time to time.
“SOFR” means a rate per annum equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the NYFRB (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the NYFRB’s Website, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“SOFR Rate Day” has the meaning assigned to it under the definition of Daily Simple SOFR.
“Specified Ancillary Obligations” means all obligations and liabilities (including interest and fees accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) of Holdings or any Subsidiary of the Borrower, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, to the Lenders or any of their Affiliates in respect of any Swap Agreement Obligations or any Banking Services Obligations.
“Specified Equity Contribution” means any, direct or indirect, cash contribution by Holdings to the common equity or capital of the Borrower and/or any purchase in cash by Holdings of, or investment in cash by Holdings in, any Qualified Stock of the Borrower, in each case, to the extent (a) such contribution, purchase or investment is made by Holdings in cash with the proceeds of any direct or indirect cash contribution by any Permitted Holder to the common equity or capital of Holdings and/or any purchase in cash by the Permitted Holders of, or investment in cash by any Permitted Holder in, any Qualified Stock of Holdings, (b) designated as a “Specified Equity Contribution” in accordance with Section 7.03 and (c) Not Otherwise Applied.
“Specified Representations” means the representations and warranties in respect of the Loan Parties made pursuant to Sections 3.01, 3.02, 3.03(b) (solely as it relates to the organizational documents of the Loan Parties), 3.08, 3.13, 3.16, 3.18, 3.19 and 3.21.
“Statement” has the meaning assigned to such term in Section 2.18(f).
“Subordinated Indebtedness” of a Person means any Indebtedness of such Person, the payment of which is subordinated to payment of the Secured Obligations to the written satisfaction of the Administrative Agent.
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“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent and/or one or more subsidiaries of the parent.
“Subsidiary” means any direct or indirect subsidiary of Holdings.
“Subsidiary Guarantor” means the Borrower’s Material Subsidiaries party hereto as Subsidiary Guarantors as of the Effective Date and any other Material Subsidiary of the Borrower and any Intermediate Holdco that becomes a party to this Agreement pursuant to a Joinder Agreement; provided that in no event shall any Excluded Subsidiary constitute a Subsidiary Guarantor.
“Supported QFC” has the meaning assigned to it in Section 9.21.
“Swap Agreement” means any agreement with respect to any swap, forward, spot, future, credit default or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Holdings, the Borrower or the Subsidiaries shall be a Swap Agreement.
“Swap Agreement Obligations” means any and all obligations of the Loan Parties and their Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any Swap Agreement permitted hereunder with a Lender or an Affiliate of a Lender, and (b) any cancellations, buy backs, reversals, terminations or assignments of any Swap Agreement transaction permitted hereunder with a Lender or an Affiliate of a Lender.
“Swap Obligation” means, with respect to any Loan Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act or any rules or regulations promulgated thereunder.
“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be the sum of (a) its Applicable Percentage of the aggregate principal amount of all Swingline Loans outstanding at such time (excluding, in the case of any Lender that is a Swingline Lender, Swingline Loans made by such Lender in its capacity as a Swingline Lender that are outstanding at such time to the extent that the other Lenders shall not have funded their participations in such Swingline Loans), adjusted to give effect to any reallocation under Section 2.20 of the Swingline Exposure of Defaulting Lenders in effect at such time, and (b) in the case of any Lender that is a Swingline Lender, the aggregate principal amount of all Swingline Loans made by such Lender as a Swingline Lender outstanding at such time, less the amount of participations funded by the other Lenders in such Swingline Loans.
“Swingline Lender” means Chase (or any of its designated branch offices or affiliates), in its capacity as lender of Swingline Loans hereunder. Any consent required of the Administrative Agent or the Issuing Bank shall be deemed to be required of the Swingline Lender and any consent given by Chase in its capacity as Administrative Agent or Issuing Bank shall be deemed given by Chase in its capacity as Swingline Lender as well.
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“Swingline Loan” means a Loan made pursuant to Section 2.05.
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), value added taxes, or any other goods and services, use or sales taxes, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term Benchmark”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bear interest at a rate determined by reference to the Term SOFR Rate.
“Term Lender” means a Lender having a Term Loan Commitment or holding an outstanding Term Loan.
“Term Loan” means a Loan made pursuant to Section 2.01(b).
“Term Loan Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make Term Loans, expressed as an amount representing the maximum principal amount of the Term Loans to be made by such Lender, as such commitment may be reduced or increased from time to time pursuant to assignments by or to such Lenders pursuant to Section 9.04. The initial amount of each Lender’s Term Loan Commitment is set forth on the Commitment Schedule or in the most recent Assignment and Assumption or other documentation or record (as such term is defined in Section 9-102(a)(70) of the UCC) as provided in Section 9.04, executed by such Term Lender, as applicable. The aggregate amount of the Lenders’ Term Loan Commitments on the Effective Date is $301,000,000. After advancing the Term Loan, each reference to a Term Lender’s Term Loan Commitment shall refer to that Term Lender’s Applicable Percentage of the Term Loans.
“Term Loan Maturity Date” means April 10, 2030 (if the same is a Business Day, or if not then the immediately next preceding Business Day).
“Term SOFR Determination Day” has the meaning assigned to it under the definition of Term SOFR Reference Rate.
“Term SOFR Rate” means, with respect to any Term Benchmark Borrowing and for any tenor comparable to the applicable Interest Period or for any ABR Borrowing based on the Term SOFR Rate, an interest rate per annum equal to the Term SOFR Reference Rate at approximately 5:00 a.m., Chicago time, two U.S. Government Securities Business Days prior to the commencement of such tenor comparable to the applicable Interest Period, as such rate is published by the CME Term SOFR Administrator; provided that if the Term SOFR Rate as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Term SOFR Reference Rate” means, for any day and time (such day, the “Term SOFR Determination Day”), with respect to any Term Benchmark Borrowing and for any tenor comparable to the applicable Interest Period, the rate per annum published by the CME Term SOFR Administrator and identified by the Administrative Agent as the forward-looking term rate based on SOFR. If by 5:00 pm (New York City time) on such Term SOFR Determination Day, the “Term SOFR Reference Rate” for the applicable tenor has not been published by the CME Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Rate has not occurred, then, so long as such day is otherwise a U.S. Government Securities Business Day, the Term SOFR Reference Rate for such Term SOFR Determination Day will be the Term SOFR Reference Rate as published in respect of the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate was published by the CME Term SOFR Administrator, so long as such first preceding U.S. Government Securities Business Day is not more than five (5) U.S. Government Securities Business Days prior to such Term SOFR Determination Day.
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“Total Net Leverage Ratio” means, on any date, the ratio of (a) the difference of (i) Consolidated Total Funded Indebtedness on such date minus (ii) Unrestricted Cash on such date in an aggregate amount not to exceed 50% of Applicable EBITDA to (b) Applicable EBITDA, all calculated for Holdings and its Subsidiaries on a consolidated basis in accordance with GAAP.
“Transactions” means the execution, delivery and performance by the Loan Parties of this Agreement and the other Loan Documents, the borrowing of Loans and other credit extensions, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Term SOFR Rate, Daily Simple SOFR or the Alternate Base Rate.
“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or in any other state, the laws of which are required to be applied in connection with the issue of perfection of security interests.
“UK Financial Institutions” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Unfunded Revolving Commitment” means, with respect to each Lender at any time, the Revolving Commitment of such Lender at such time, less its Revolving Exposure at such time.
“Unliquidated Obligations” means, at any time, any Secured Obligations (or portion thereof) that are contingent in nature or unliquidated at such time, including any Secured Obligation that is: (i) an obligation to reimburse a bank for drawings not yet made under a letter of credit issued by it; (ii) any other obligation (including any guarantee) that is contingent in nature at such time; or (iii) an obligation to provide collateral to secure any of the foregoing types of obligations.
“Unrestricted Cash” means, as of any date of determination, an amount equal to the aggregate amount of the Loan Parties’ unrestricted cash and Permitted Investments that is (a) on deposit with one or more financial institutions in the U.S., (b) to the extent such account is not maintained with Chase, maintained in an account that is subject to an Account Control Agreement and (c) not encumbered by or subject to any other Lien, setoff, counterclaim, recoupment, defense or other right in favor of any Person (other than (i) a Lien securing the Secured Obligations, and (ii) Liens in favor of banks and securities intermediaries relating to the establishment of depository, brokerage or asset management relations in the ordinary course and not given in connection with the issuance of Indebtedness).
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“U.S.” means the United States of America.
“U.S. Government Securities Business Day” means any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Person” means (i) for purposes of Sections 3.26 and 6.13 hereof, any United States citizen, lawful permanent resident, entity organized under the laws of the United States or any jurisdiction within the United States, including any foreign branch of any such entity, or any person in the United States and (ii) for all other purposes, a “United States person” within the meaning of Section 7701(a)(30) of the Code.
“U.S. Special Resolution Regime” has the meaning assigned to it in Section 9.21.
“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.17(f)(ii)(B)(3).
“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
“Write-Down and Conversion Powers” means (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Term Benchmark Loan”) or by Class and Type (e.g., a “Term Benchmark Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Term Benchmark Borrowing”) or by Class and Type (e.g., a “Term Benchmark Revolving Borrowing”).
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SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “law” shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations thereunder having the force of law or with which affected Persons customarily comply) and all judgments, orders and decrees of all Governmental Authorities. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein), (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignments set forth herein) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (f) any reference in any definition to the phrase “at any time” or “for any period” shall refer to the same time or period for all calculations or determinations within such definition, and (g) 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.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP as in effect from time to time; provided that, if after the date hereof there occurs any change in GAAP or in the application thereof on the operation of any provision hereof and the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of such change in GAAP or in the application thereof (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Financial Accounting Standards Board Accounting Standards Codification 825 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Loan Party or any of its Subsidiaries at “fair value”, as defined therein and (ii) without giving effect to any treatment of Indebtedness under Financial Accounting Standards Board Accounting Standards Codification 470-20 or 2015-03 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.
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SECTION 1.05. Pro Forma Adjustments.
(a) To the extent Holdings, the Borrower or any Subsidiary (a) makes any acquisition permitted pursuant to Section 6.04 or Disposition of assets outside the ordinary course of business permitted by Section 6.05 during the period of four fiscal quarters of Holdings most recently ended or (b) consummates any transaction that requires any pro forma calculation as a condition thereto or in connection therewith under the terms of this Agreement, then, in each case, (i) the Total Net Leverage Ratio and Interest Coverage Ratio and the definition of Material Subsidiary, in each case, shall be calculated after giving pro forma effect thereto (including pro forma adjustments arising out of events which are directly attributable to the acquisition or the Disposition of assets, are factually supportable and are expected to have a continuing impact, in each case as determined on a basis consistent with (but without giving effect to any “management’s adjustments” under) Article 11 of Regulation S-X of the Securities Act of 1933, as amended, as interpreted by the SEC, and as certified by a Financial Officer of Holdings), as if such acquisition, such Disposition or such other transaction (and any related incurrence, repayment or assumption of Indebtedness) had occurred in the first day of such four-quarter period, but in all cases (excluding consolidated revenues) subject to the terms and conditions (including any caps or other limitations) set forth in the definition of Consolidated EBITDA and any defined terms used therein, (ii) unless otherwise expressly required hereunder, such pro forma calculation shall be determined by reference to the financial statements for the period of four consecutive fiscal quarters of Holdings ended on or most recently prior to such calculation for which financial statements have been delivered (or are required to have been delivered) to the Administrative Agent pursuant to Section 5.01(a) or (b) (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.01(a) or (b), the most recent financial statements referred to in Section 3.04(a)) and (iii) any such calculation made by reference to, or requiring pro forma compliance with, any of the financial covenants shall be made by reference to the applicable financial covenant levels required under Section 6.12 for the quarter during which such acquisition, Disposition or other transaction was consummated (or, if there is no financial covenant required to be tested during such fiscal quarter, the financial covenant level for the first testing period scheduled to occur after the date of such calculation). In addition to the foregoing, and notwithstanding anything in this Agreement to the contrary, to the extent any Indebtedness is incurred or assumed in connection with any transaction permitted hereunder, any pro forma determination of the Total Net Leverage Ratio or compliance with the financial covenants required to be made under this Agreement in connection with such transaction shall be made without including the proceeds of such incurred or assumed Indebtedness as Unrestricted Cash. Notwithstanding anything in this clause (a) to the contrary, when calculating the Total Net Leverage Ratio for purposes of the definition of “Applicable Rate” and when calculating the Total Net Leverage Ratio or the Interest Coverage Ratio for purposes of Section 6.12 (other than for the purpose of determining pro forma compliance with Section 6.12 as a condition to taking any action under this Agreement), the events described in this clause (a) that occurred subsequent to the end of the applicable testing period shall not be given pro forma effect.
(b) In connection with any action being taken in connection with a Limited Condition Transaction, for purposes of:
(i) determining compliance with any provision of this Agreement which requires the calculation of any financial ratio or test, including the Total Net Leverage Ratio and Interest Coverage Ratio;
(ii) testing availability under baskets set forth in this Agreement (including baskets measured as a percentage of Consolidated EBITDA); or
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(iii) determining the accuracy of any representation or warranty or the existence of any Default or Event of Default,
in each case, at the option of the Borrower (the Borrower’s election to exercise such option in connection with any Limited Condition Transaction, an “LCT Election”), the date of determination of whether any such action is permitted hereunder shall be deemed to be the date the definitive agreement for such Limited Condition Transaction is entered into (the “LCT Test Date”), and if, after giving pro forma effect to the Limited Condition Transaction, the Borrower or any of its Subsidiaries would have been permitted to take such action on the relevant LCT Test Date in compliance with such ratio, test or basket or other provision, such ratio, test or basket shall be deemed to have been complied with; provided, however, that notwithstanding the foregoing and/or any LCT Election, no Event of Default pursuant to Section 7.01(a), (b), (h), (i) or (m) shall be continuing immediately prior to or after giving effect (including giving effect on a pro forma basis) to the consummation of any Limited Condition Transaction on the date of such consummation. For the avoidance of doubt, if the Borrower has made an LCT Election and any of the ratios, tests or baskets or other provision for which compliance was determined or tested as of the LCT Test Date would have failed to have been satisfied as a result of fluctuations in any such ratio, test or basket or other provision, including due to fluctuations in Consolidated EBITDA or Consolidated Interest Expense, at or prior to the consummation of the relevant transaction or action, such baskets, tests or ratios will not be deemed to have failed to have been satisfied as a result of such fluctuations. If the Borrower has made an LCT Election for any Limited Condition Transaction, then in connection with any event or transaction occurring after the relevant LCT Test Date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the date that the definitive agreement for such Limited Condition Transaction is terminated or expires without consummation of such Limited Condition Transaction (a “Subsequent Transaction”) for which a ratio, test or basket availability calculation must be made on a pro forma basis or giving pro forma effect to such Subsequent Transaction, for purposes of determining whether such ratio, test or basket availability has been complied with under this Agreement, any such ratio, test or basket shall be required to be satisfied on a pro forma basis assuming such Limited Condition Transaction and the other transactions (including any funding, incurrence or assumption of Commitments, Loans, Incremental Facilities (or commitments in respect thereof) or other Indebtedness) in connection therewith have been consummated. Notwithstanding the foregoing, no LCT Election may be made in respect of the conditions set forth in Section 4.02 except as expressly provided under Section 4.02.
SECTION 1.06. Status of Obligations. In the event that Holdings, the Borrower or any other Loan Party shall at any time issue or have outstanding any Subordinated Indebtedness, such Loan Party shall take or cause such other Loan Party to take all such actions as shall be necessary to cause the Secured Obligations to constitute senior indebtedness (however denominated) in respect of such Subordinated Indebtedness and to enable the Administrative Agent and the Lenders to have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under the terms of such Subordinated Indebtedness. Without limiting the foregoing, the Secured Obligations are hereby designated as “senior indebtedness” and as “designated senior indebtedness” and words of similar import under and in respect of any indenture or other agreement or instrument under which such Subordinated Indebtedness is outstanding and are further given all such other designations as shall be required under the terms of any such Subordinated Indebtedness in order that the Lenders may have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under the terms of such Subordinated Indebtedness.
SECTION 1.07. Interest Rates; Benchmark Notification. The interest rate on a Loan may be derived from an interest rate benchmark that may be discontinued or is, or may in the future become, the subject of regulatory reform. Upon the occurrence of a Benchmark Transition Event, Section 2.14(b) provides a mechanism for determining an alternative rate of interest. The Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission, performance or any other matter related to any interest rate used in this Agreement, or with respect to any alternative or successor rate thereto, or replacement rate thereof, including without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, the existing interest rate being replaced or have the same volume or liquidity as did any existing interest rate prior to its discontinuance or unavailability. The Administrative Agent and its affiliates and/or other related entities may engage in transactions that affect the calculation of any interest rate used in this Agreement or any alternative, successor or alternative rate (including any Benchmark Replacement) and/or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain any interest rate used in this Agreement, any component thereof, or rates referenced in the definition thereof, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, 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.
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SECTION 1.08. Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit available to be drawn at such time; provided that with respect to any Letter of Credit that, by its terms, provides for one or more automatic increases in the available amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum amount is available to be drawn at such time. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Article 29(a) of the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 600 (or such later version thereof as may be in effect at the applicable time) or Rule 3.13 or Rule 3.14 of the International Standby Practices, International Chamber of Commerce Publication No. 590 (or such later version thereof as may be in effect at the applicable time) or similar terms in the governing rules or laws or of the Letter of Credit itself, or if compliant documents have been presented but not yet honored, such Letter of Credit shall be deemed to be “outstanding” and “undrawn” in the amount so remaining available to be paid, and the obligations of the Borrower and each Lender shall remain in full force and effect until the Issuing Bank and the Lenders shall have no further obligations to make any payments or disbursements under any circumstances with respect to any Letter of Credit.
SECTION 1.09. Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized and acquired on the first date of its existence by the holders of its Equity Interests at such time.
SECTION 1.10. Amendment and Restatement.
(a) The parties to this Agreement agree that, on the Effective Date, the terms and provisions of the Existing Credit Agreement shall be and hereby are amended, superseded and restated in their entirety by the terms and provisions of this Agreement. Neither the execution, delivery and acceptance of this Agreement nor any of the terms, covenants, conditions or other provisions set forth herein are intended, nor shall they be deemed or construed, to effect a novation of any liens or indebtedness or other obligations under the Existing Credit Agreement or any other Loan Document (as defined in the Existing Credit Agreement) or to pay, extinguish, release, satisfy or discharge (i) all or any part of the indebtedness or other obligations evidenced by the Existing Credit Agreement, (ii) the liability of any Person under the Existing Credit Agreement or the Loan Documents (as defined under the Existing Credit Agreement) executed and delivered in connection therewith, (iii) the liability of any Person with respect to the Existing Credit Agreement or any indebtedness or other obligations evidenced thereby, or (iv) any deeds of trust, mortgages, liens, security interests or contractual or legal rights securing all or any part of such indebtedness or other obligations. All “Loans” made, and “Obligations” incurred, under and as defined in the Existing Credit Agreement which are outstanding on the Effective Date (and not terminated or otherwise repaid with the proceeds of any Loans made hereunder on the Effective Date) shall be re-evidenced as Loans of the applicable Class and Obligations, respectively, under (and shall be governed by the terms of) this Agreement and the other Loan Documents, all as further provided below.
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(b) Without limiting the foregoing, upon the effectiveness of the amendment and restatement contemplated hereby on the Effective Date and except as otherwise expressly provided herein:
(i) all references in the “Loan Documents” (as defined in the Existing Credit Agreement) to the “Administrative Agent”, the “Credit Agreement” and the “Loan Documents” shall be deemed to refer to the Administrative Agent, this Agreement and the Loan Documents;
(ii) subject to Section 1.10(d) below and the reallocations and other related actions to occur on the Effective Date as contemplated hereby, the “Revolving Commitments” (as defined in the Existing Credit Agreement) shall continue as Revolving Commitments hereunder as set forth on the Commitment Schedule;
(iii) subject to Section 1.10(d) below and the reallocations and other related actions to occur on the Effective Date as contemplated hereby, (A) the “Revolving Loans” (as defined in the Existing Credit Agreement) outstanding under the Existing Credit Agreement, if any, shall continue as Revolving Loans hereunder on the Effective Date and (B) the “Term Loans” (as defined in the Existing Credit Agreement) outstanding under the Existing Credit Agreement, if any, shall continue as Term Loans hereunder on the Effective Date;
(iv) the Administrative Agent shall make such reallocations, sales, assignments or other relevant actions in respect of the “Commitments” and “Credit Exposure” (each as defined in and in effect under the Existing Credit Agreement) as are necessary in order that each Lender’s Credit Exposure hereunder reflects such Lender’s Applicable Percentage thereof on the Effective Date (and in no event exceeds each such Lender’s Commitment of the applicable Class), and each Loan Party and each Lender that was a “Lender” under the Existing Credit Agreement (constituting the “Required Lenders” under and as defined therein) hereby agrees (with effect immediately prior to the Effective Date) that (A) such reallocation, sales and assignments shall be deemed to have been effected by way of, and subject to the terms and conditions of, Assignment and Assumptions, without the payment of any related assignment fee, and no other documents or instruments shall be, or shall be required to be, executed in connection with such assignments (all of which are hereby waived), (B) such reallocation shall satisfy the assignment provisions of Sections 9.02(d) and 9.04 of the Existing Credit Agreement and (C) in connection with such reallocation, sales, assignments or other relevant actions, the Loan Parties shall pay all interest and fees outstanding under the Existing Credit Agreement and accrued to the date hereof to the Administrative Agent for the account of the Lenders party hereto, together with any losses, costs and expenses incurred by Lenders under Section 2.16 of the Existing Credit Agreement;
(v) each of the signatories hereto that is also a party to the Existing Credit Agreement hereby consents to any of the actions described in the foregoing clause (iv) and agrees that any and all required notices and required notice periods under the Existing Credit Agreement in connection with any of the actions described in the foregoing clause (iv) on the Effective Date are hereby waived and of no force and effect; and
(vi) (A) the Borrower shall repay in full the “Revolving Loans” and “Term Loans” (each as defined in the Existing Credit Agreement) previously made to the Borrower by each Departing Lender under the Existing Credit Agreement which remain outstanding as of the Effective Date (accompanied by any accrued and unpaid interest and fees thereon), (B) each Departing Lender’s “Revolving Commitments” under the Existing Credit Agreement shall be terminated, (C) no Departing Lender shall be a Lender for any purpose hereunder (except to the extent of any indemnification of the Existing Credit Agreement that is meant to continue to apply to the applicable Departing Lender by its express terms), and (D) each Departing Lender shall be released from any obligation or liability under the Existing Credit Agreement.
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(c) Without limiting the foregoing, each Loan Party party hereto, as debtor, grantor, pledgor, guarantor, or another similar capacity in which such Loan Party grants liens or security interests in its properties or otherwise acts as a guarantor, joint or several obligor or other accommodation party, as the case may be, in each case under the “Loan Documents” as defined in the Existing Credit Agreement, hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the “Loan Documents” as defined in the Existing Credit Agreement to which it is a party and (ii) to the extent such Loan Party granted liens on or security interests in any of its properties pursuant to any of the “Loan Documents” as defined in the Existing Credit Agreement, hereby ratifies and reaffirms such grant of security (and any filings with Governmental Authorities made in connection therewith) and confirms that such liens and security interests continue to secure the obligations hereunder as further provided in the Collateral Documents.
(d) All indemnification obligations of the Loan Parties pursuant to the Existing Credit Agreement (including any arising from a breach of the representations thereunder) shall survive the amendment and restatement of the Existing Credit Agreement pursuant to this Agreement.
ARTICLE II
The Credits
SECTION 2.01. Commitments.
(a) Subject to the terms and conditions set forth herein, each Revolving Lender severally (and not jointly) agrees to make Revolving Loans in dollars to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result (after giving effect to any application of proceeds of such Borrowing pursuant to Section 2.10(a)) in (i) such Lender’s Revolving Exposure exceeding such Lender’s Revolving Commitment or (ii) the Aggregate Revolving Exposure exceeding the aggregate Revolving Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.
(b) Subject to the terms and conditions set forth herein, each Term Lender severally (and not jointly) agrees to make a Term Loan in dollars to the Borrower, on the Effective Date, in a principal amount not to exceed such Lender’s Term Loan Commitment, by making immediately available funds available to the Administrative Agent’s designated account not later than the time specified by the Administrative Agent. Amounts prepaid or repaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans and Borrowings.
(a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the applicable Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required. Any Swingline Loan shall be made in accordance with the procedures set forth in Section 2.05. The Term Loans shall amortize as set forth in Section 2.10.
(b) Subject to Section 2.14, each Revolving Borrowing and each Term Loan Borrowing shall be comprised entirely of ABR Loans or Term Benchmark Loans as the Borrower may request in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan (and in the case of an Affiliate, the provisions of Sections 2.14, 2.15, 2.16 and 2.17 shall apply to such Affiliate to the same extent as to such Lender); provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.
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(c) At the commencement of each Interest Period for any Term Benchmark Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $200,000. At the time that each ABR Borrowing or RFR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $200,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e). Each Swingline Loan shall be in an amount that is an integral multiple of $100,000 and not less than $200,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of ten (10) Term Benchmark Borrowings and RFR Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date applicable to such Class of Borrowings.
(e) To the extent the Borrower directs the Administrative Agent or the Lenders to remit the proceeds of any Loans hereunder to a Person other than the Borrower, in each such case, the Borrower hereby acknowledges and agrees that (i) all Loans constitute direct obligations of the Borrower, (ii) all Loans are made for the account of the Borrower and (iii) the deposit of the proceeds of the Loans as so provided directly benefits the Borrower.
SECTION 2.03. Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by submitting a Borrowing Request signed by a Responsible Officer of the Borrower or through any Electronic System or an Approved Borrower Portal, in each case, if arrangements for doing so have been approved by the Administrative Agent, (a) in the case of a Term Benchmark Borrowing, not later than 10:00 a.m., New York City time, three U.S. Government Securities Business Days before the date of the proposed Borrowing (or, in the case of any Term Benchmark Borrowing to be made on the Effective Date, such shorter period as agreed by the Administrative Agent in its sole discretion) or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e) may be given not later than 9:00 a.m., New York City time, on the date of the proposed Borrowing; provided further that, if such Borrowing Request is submitted through an Approved Borrower Portal, the foregoing signature requirement may be waived at the sole discretion of the Administrative Agent. Each such Borrowing Request shall be irrevocable. Each such Borrowing Request shall specify the following information in compliance with Section 2.02:
(i) the Class of the Borrowing and the aggregate principal amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Term Benchmark Borrowing;
(iv) in the case of a Term Benchmark Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and
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(v) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.07, and a breakdown of the separate wires comprising such Borrowing.
If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Term Benchmark Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.
Notwithstanding the foregoing, prior to a Benchmark Transition Event and Benchmark Replacement Date with respect to the Term SOFR Rate, in no event shall the Borrower be permitted to request an RFR Loan pursuant to this Section 2.03 (it being understood and agreed that Daily Simple SOFR shall only apply to the extent provided in Sections 2.14(a) and 2.14(f)).
SECTION 2.04. [Intentionally Omitted].
SECTION 2.05. Swingline Loans.
(a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period, the Swingline Lender may agree, but shall have no obligation, to make Swingline Loans in dollars to the Borrower, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $2,500,000, (ii) the Swingline Lender’s Revolving Exposure exceeding its Revolving Commitment, or (iii) the Aggregate Revolving Exposure exceeding the aggregate Revolving Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans. To request a Swingline Loan, the Borrower shall submit a written notice to the Administrative Agent of such request by fax or through any Electronic System or an Approved Borrower Portal, in each case, if arrangements for doing so have been approved by the Administrative Agent, not later than 12:00 noon, New York City time, on the day of a proposed Swingline Loan. Each such notice shall be in a form approved by the Administrative Agent, shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower, to the extent the Swingline Lender elects to make such Swingline Loan, by means of a credit to the Funding Account(s) (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.06(e), by remittance to the Issuing Bank, and in the case of repayment of another Loan or fees or expenses as provided by Section 2.18(c), by remittance to the Administrative Agent to be distributed to the applicable Lenders) by 2:00 p.m., New York City time, on the requested date of such Swingline Loan.
(b) The Swingline Lender may by written notice given to the Administrative Agent require the Revolving Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which the Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, promptly upon receipt of such notice from the Administrative Agent (and in any event, if such notice is received by 11:00 a.m., New York City time, on a Business Day no later than 4:00 p.m., New York City time on such Business Day and if received after 11:00 a.m., New York City time, “on a Business Day” shall mean no later than 9:00 a.m., New York City time on the immediately succeeding Business Day), to pay to the Administrative Agent in dollars, for the account of the Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its obligations to acquire participations in Swingline Loans pursuant to this paragraph and to make payments in respect of such acquired participations are absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Revolving Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer in dollars of immediately available funds, in the same manner as provided in Section 2.07 with respect to Revolving Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.
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(c) The Swingline Lender may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Swingline Lender and the successor Swingline Lender. The Administrative Agent shall notify the Revolving Lenders of any such replacement of the Swingline Lender. At the time any such replacement shall become effective, the Borrower shall pay all unpaid interest accrued for the account of the replaced Swingline Lender pursuant to Section 2.13(a). From and after the effective date of any such replacement, (x) the successor Swingline Lender shall have all the rights and obligations of the replaced Swingline Lender under this Agreement with respect to Swingline Loans made thereafter and (y) references herein to the term “Swingline Lender” shall be deemed to refer to such successor or to any previous Swingline Lender, or to such successor and all previous Swingline Lenders, as the context shall require. After the replacement of the Swingline Lender hereunder, the replaced Swingline Lender shall remain a party hereto and shall continue to have all the rights and obligations of a Swingline Lender under this Agreement with respect to Swingline Loans made by it prior to its replacement, but shall not be required to make additional Swingline Loans.
(d) Subject to the appointment and acceptance of a successor Swingline Lender, the Swingline Lender may resign as Swingline Lender at any time upon thirty days’ prior written notice to the Administrative Agent, the Borrower and the Revolving Lenders, in which case, the Swingline Lender shall be replaced in accordance with Section 2.05(c) above.
SECTION 2.06. Letters of Credit.
(a) General. Subject to the terms and conditions set forth herein, the Borrower may request the Issuing Bank to issue Letters of Credit denominated in dollars as the applicant thereof for the support of its or its Subsidiaries’ obligations, in a form reasonably acceptable to the Issuing Bank, at any time and from time to time during the Availability Period; provided that there shall not at any time be more than a total of ten (10) Letters of Credit outstanding.
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(b) Notice of Issuance, Amendment, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or fax (or transmit through any Electronic System or an Approved Borrower Portal, in each case, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment or extension, but in any event no less than three Business Days) a written notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended or extended, and specifying the date of issuance, amendment or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof, and such other information as shall be necessary to prepare, amend or extend such Letter of Credit. In addition, as a condition to any such Letter of Credit issuance, the Borrower shall have entered into a continuing agreement (or other letter of credit agreement) for the issuance of letters of credit and/or shall submit a letter of credit application, in each case, as required by the Issuing Bank and using such Issuing Bank’s standard form (each, a “Letter of Credit Agreement”). In the event of any conflict between the terms and conditions of this Agreement and the terms and conditions of any Letter of Credit Agreement, the terms and conditions of this Agreement shall control. A Letter of Credit shall be issued, amended or extended only if (and upon issuance, amendment or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment or extension (i) the aggregate LC Exposure shall not exceed $2,500,000, (ii) no Lender’s Revolving Exposure shall exceed its Revolving Commitment and (iii) the Aggregate Revolving Exposure shall not exceed the aggregate Revolving Commitments. Notwithstanding the foregoing or anything to the contrary contained herein, no Issuing Bank shall be obligated to issue or modify any Letter of Credit if, immediately after giving effect thereto, the outstanding LC Exposure in respect of all Letters of Credit issued by such Person and its Affiliates would exceed such Issuing Bank’s Issuing Bank Sublimit. Without limiting the foregoing and without affecting the limitations contained herein, it is understood and agreed that the Borrower may from time to time request that an Issuing Bank issue Letters of Credit in excess of its individual Issuing Bank Sublimit in effect at the time of such request, and each Issuing Bank agrees to consider any such request in good faith. Any Letter of Credit so issued by an Issuing Bank in excess of its individual Issuing Bank Sublimit then in effect shall nonetheless constitute a Letter of Credit for all purposes of this Agreement, and shall not affect the Issuing Bank Sublimit of any other Issuing Bank, subject to the limitations set forth in clauses (i) through (iii) of this Section 2.06(b).
The Issuing Bank shall not be under any obligation to issue, amend or extend any Letter of Credit if:
(i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing, amending or extending such Letter of Credit, or request that the Issuing Bank refrain from issuing, amending or extending such Letter of Credit, or any Requirement of Law relating to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, the issuance, amendment or extension of letters of credit generally or such Letter of Credit in particular, or any such order, judgment, decree, Requirement of Law, request or directive shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital or liquidity requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense that was not applicable on the Effective Date and that the Issuing Bank in good faith deems material to it; or
(ii) the issuance, amendment or extension of such Letter of Credit would violate one or more policies of the Issuing Bank applicable to letters of credit generally.
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(c) Expiration Date. Each Letter of Credit shall expire (or be subject to termination or non-extension by notice from the Issuing Bank to the beneficiary thereof) at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any extension of the expiration thereof, including, without limitation, any automatic extension provision, one year after such extension) and (ii) the date that is five Business Days prior to the Revolving Credit Maturity Date; provided that any Letter of Credit with a one-year tenor may provide for the extension thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (ii) above).
(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount or extending the term thereof) and without any further action on the part of the Issuing Bank or the Revolving Lenders, the Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason, including after the Revolving Credit Maturity Date. Each Revolving Lender acknowledges and agrees that its obligations to acquire participations pursuant to this paragraph in respect of Letters of Credit and to make payments in respect of such acquired participations are absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Revolving Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 11:00 a.m., New York City time, on (i) the Business Day that the Borrower receives notice of such LC Disbursement, if such notice is received prior to 9:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is received after 9:00 a.m., New York City time, on the day of receipt; provided that, if such LC Disbursement is greater than or equal to $1,000,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.05 that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount of such LC Disbursement and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof, and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank, as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.
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(f) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement or this Agreement, or any term or provision therein or herein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) any payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. None of the Administrative Agent, the Revolving Lenders or the Issuing Bank, or any of their respective Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit, or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, document, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms, any error in translation or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to special, indirect, consequential or punitive damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a nonappealable judgment of a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank for any Letter of Credit shall, within the time allowed by applicable law or the specific terms of such Letter of Credit following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly after such examination notify the Administrative Agent and the Borrower by telephone (confirmed by fax or through Electronic Systems) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that such notice need not be given prior to payment by the Issuing Bank and any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans and such interest shall be due and payable on the date when such reimbursement is due; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(d) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.
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(i) Replacement and Resignation of the Issuing Bank.
(i) The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Revolving Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement, (x) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (y) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit then outstanding and issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit or extend or otherwise amend any existing Letter of Credit.
(ii) Subject to the appointment and acceptance of a successor Issuing Bank, the Issuing Bank may resign as an Issuing Bank at any time upon thirty days’ prior written notice to the Administrative Agent, the Borrower and the Revolving Lenders, in which case, such resigning Issuing Bank shall be replaced in accordance with Section 2.06(i)(i) above.
(j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the aggregate LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Revolving Lenders (the “LC Collateral Account”), an amount in cash in dollars equal to 105% of the amount of the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to Holdings or the Borrower described in Section 7.01(h) or (i). The Borrower also shall deposit cash collateral in accordance with this paragraph as and to the extent required by Section 2.11(b) or 2.20. Each such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the Secured Obligations. In addition, and without limiting the foregoing or paragraph (c) of this Section, if any LC Exposure remains outstanding after the expiration date specified in said paragraph (c), the Borrower shall immediately deposit into the LC Collateral Account an amount in cash equal to 105% of such LC Exposure as of such date plus any accrued and unpaid interest thereon. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over the LC Collateral Account and the Borrower hereby grants the Administrative Agent a security interest in the LC Collateral Account and all moneys or other assets on deposit therein or credited thereto. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed, together with related fees, costs, and customary processing charges, and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the aggregate LC Exposure), be applied to satisfy other Secured Obligations. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all such Events of Default have been cured or waived as confirmed in writing by the Administrative Agent.
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(k) Issuing Bank Reports to the Administrative Agent. In the event Chase is not the only Issuing Bank, and unless otherwise agreed by the Administrative Agent, each Issuing Bank other than Chase shall, in addition to its notification obligations set forth elsewhere in this Section, report in writing to the Administrative Agent (i) periodic activity (for such period or recurrent periods as shall be requested by the Administrative Agent) in respect of Letters of Credit issued by such Issuing Bank, including all issuances, extensions and amendments, all expirations and cancelations and all disbursements and reimbursements, (ii) reasonably prior to the time that such Issuing Bank issues, amends or extends any Letter of Credit, the date of such issuance, amendment or extension, and the stated amount of the Letters of Credit issued, amended or extended by it and outstanding after giving effect to such issuance, amendment or extension (and whether the amounts thereof shall have changed), (iii) on each Business Day on which such Issuing Bank makes any LC Disbursement, the date and amount of such LC Disbursement, (iv) on any Business Day on which the Borrower fails to reimburse an LC Disbursement required to be reimbursed to such Issuing Bank on such day, the date of such failure and the amount of such LC Disbursement, and (v) on any other Business Day, such other information as the Administrative Agent shall reasonably request as to the Letters of Credit issued by such Issuing Bank.
(l) Letters of Credit Issued for Account of Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder supports any obligations of, or is for the account of, a Subsidiary, or states that a Subsidiary is the “account party,” “applicant,” “customer,” “instructing party,” or the like of or for such Letter of Credit, and without derogating from any rights of the applicable Issuing Bank (whether arising by contract, at law, in equity or otherwise) against such Subsidiary in respect of such Letter of Credit, the Borrower (i) shall reimburse, indemnify and compensate the applicable Issuing Bank hereunder for such Letter of Credit (including to reimburse any and all drawings thereunder) as if such Letter of Credit had been issued solely for the account of the Borrower and (ii) irrevocably waives any and all defenses that might otherwise be available to it as a guarantor or surety of any or all of the obligations of such Subsidiary in respect of such Letter of Credit. The Borrower hereby acknowledges that the issuance of such Letters of Credit for its Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.
SECTION 2.07. Funding of Borrowings.
(a) Each Lender shall make each Loan to be made by such Lender hereunder on the proposed date thereof solely by wire transfer of immediately available funds by 1:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders in an amount equal to such Lender’s Applicable Percentage; provided that (i) Term Loans shall be made as provided in Section 2.01(b) and (ii) Swingline Loans shall be made as provided in Section 2.05. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the funds so received in the aforesaid account of the Administrative Agent to the Funding Account(s); provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.06(e) shall be remitted by the Administrative Agent to the Issuing Bank.
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(b) 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 paragraph (a) of this Section 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 each severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the NYFRB Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing; provided, that any interest received from the Borrower by the Administrative Agent during the period beginning when Administrative Agent funded the Borrowing until such Lender pays such amount shall be solely for the account of the Administrative Agent.
SECTION 2.08. Interest Elections.
(a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Term Benchmark Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Term Benchmark Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election either in writing (delivered by hand or fax) by delivering an Interest Election Request signed by a Responsible Officer of the Borrower or through any Electronic System or an Approved Borrower Portal, in each case, if arrangements for doing so have been approved by the Administrative Agent, by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election; provided that, if such Interest Election Request is submitted through an Approved Borrower Portal, the foregoing signature requirement may be waived at the sole discretion of the Administrative Agent. Each such Interest Election Request shall be irrevocable. Notwithstanding any contrary provision herein, this Section shall not be construed to permit the Borrower to (i) elect an Interest Period for Term Benchmark Loans that does not comply with Section 2.02(d), (ii) convert any Borrowing to a Borrowing of a Type not available under the Class of Commitments pursuant to which such Borrowing was made or (iii) prior to a Benchmark Transition Event and Benchmark Replacement Date with respect to the Term SOFR Rate, elect Daily Simple SOFR pursuant to this Section 2.08 (it being understood and agreed that Daily Simple SOFR shall only apply to the extent provided in Sections 2.14(a) and 2.14(f)).
(c) Each Interest Election Request (including requests submitted through any Electronic System or Approved Borrower Portal) shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
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(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Term Benchmark Borrowing; and
(iv) if the resulting Borrowing is a Term Benchmark Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which Interest Period shall be a period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request requests a Term Benchmark Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the applicable Class of the details thereof and of such Lender’s portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Term Benchmark Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be deemed to have an Interest Period that is one month. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Term Benchmark Borrowing and (ii) unless repaid, (A) each Term Benchmark Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto and (B) each RFR Borrowing shall be converted to an ABR Borrowing immediately.
SECTION 2.09. Termination and Reduction of Commitments; Increase in Revolving Commitments; Incremental Term Loans.
(a) Unless previously terminated, (i) the Term Loan Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date and (ii) all the Revolving Commitments shall terminate on the Revolving Credit Maturity Date.
(b) The Borrower may at any time terminate the Revolving Commitments upon the (i) payment in full in cash of all outstanding Revolving Loans, Swingline Loans and LC Disbursements, together with accrued and unpaid interest thereon, (ii) termination, expiration, or cancellation and return of all outstanding Letters of Credit (or alternatively, with respect to each such Letter of Credit, the furnishing to the Administrative Agent of a cash deposit, or at the discretion of the Administrative Agent a back up standby letter of credit satisfactory to the Administrative Agent and the Issuing Bank, in an amount equal to 105% of the LC Exposure as of the date of such payment), (iii) payment in full in cash of the accrued and unpaid fees in respect of any of the foregoing, (iv) payment in full in cash of all reimbursable expenses and other Secured Obligations in respect of any of the foregoing (other than Unliquidated Obligations for which no claim has been made and other obligations expressly stated to survive such payment and termination of this Agreement), together with accrued and unpaid interest thereon and (v) termination of all Commitments.
(c) The Borrower may at any time and from time to time reduce the Revolving Commitments; provided that (i) each reduction of the Revolving Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.11, (x) the Aggregate Revolving Exposure would exceed the aggregate Revolving Commitments or (y) the Revolving Exposure of any Lender would exceed the Revolving Commitment of such Lender.
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(d) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Commitments under paragraph (b) or (c) of this Section at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities or other transactions specified therein, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Revolving Commitments shall be permanent. Each reduction of the Revolving Commitments shall be made ratably among the Lenders in accordance with their respective Revolving Commitments.
(e) The Borrower shall have the right to increase the Revolving Commitments or enter into one or more new tranches of term loans (or increase any existing Class of Term Loans, each such new tranche of term loans or increase in any existing Class of Term Loans, an “Incremental Term Loan”), in each case by obtaining additional Revolving Commitments or participations in such Incremental Term Loans, either from one or more of the Lenders or another lending institution (other than any Ineligible Institution), provided that (i) any such request for an increase or tranche of Incremental Term Loans shall be in a minimum amount of $10,000,000, (ii) the Borrower may make a maximum of three (3) such requests during the term of this Agreement, (iii) after giving effect thereto, the sum of the total of the additional Revolving Commitments does not exceed $10,000,000 during the term of this Agreement, (iv) the Administrative Agent and, only in the case of any increase in the Revolving Commitments, the Swingline Lender and the Issuing Bank, have approved the identity of any such new Lender, such approvals not to be unreasonably withheld, conditioned or delayed, (v) any such new Lender assumes all of the rights and obligations of a “Lender” hereunder, (vi) any Affiliated Lender providing any portion of an Incremental Facility shall be required to first comply with Section 9.04(f), (vii) Affiliated Lenders may not extend any Revolving Commitments pursuant to this Section 2.09 and (viii) the conditions and procedures described in Section 2.09(f) have been satisfied. Nothing contained in this Section 2.09 shall constitute, or otherwise be deemed to be, a commitment on the part of any Lender to increase its Revolving Commitment or participate in any tranche of Incremental Term Loans hereunder at any time.
(f) As a condition precedent to such an increase of the Revolving Commitments or tranche of Incremental Term Loans or commitments in respect thereof, (i) the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party signed by an authorized officer of such Loan Party (A) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase or tranche, and (B) in the case of the Borrower, certifying as to the matters set forth in the following clause (ii), (ii) both before and immediately after giving effect (including giving effect on a pro forma basis) to such increase or tranche or commitments in respect thereof (as the case may be), (1) the representations and warranties contained in Article III and the other Loan Documents are true and correct, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, (2) no Default or Event of Default exists, (3) the Total Net Leverage Ratio is not greater than 3.75 to 1.00 and (4) Holdings is in compliance with the covenants contained in Section 6.12 (which calculations in the foregoing clauses (3) and (4) shall assume that such increase of the Revolving Commitments is fully drawn or such tranche of Incremental Term Loans and any commitments in respect thereof are fully funded and drawn, as the case may be) and (iii) the Borrower shall deliver to the Administrative Agent legal opinions and documents consistent with those delivered on the Effective Date, to the extent requested by the Administrative Agent.
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(g) On the effective date of any such increase of Revolving Commitments or incurrence of Incremental Term Loans, (i) any Lender increasing (or, in the case of any newly added Lender, extending) its Revolving Commitment shall make available to the Administrative Agent such amounts in immediately available funds as the Administrative Agent shall determine, for the benefit of the other Lenders, as being required in order to cause, after giving effect to such increase or addition and the use of such amounts to make payments to such other Lenders, each Lender’s portion of the outstanding Revolving Loans of all the Lenders to equal its revised Applicable Percentage of such outstanding Revolving Loans, and the Administrative Agent shall make such other adjustments among the Lenders with respect to the Revolving Loans then outstanding and amounts of principal, interest, commitment fees and other amounts paid or payable with respect thereto as shall be necessary, in the opinion of the Administrative Agent, in order to effect such reallocation and (ii) except in the case of any Incremental Term Loans, the Borrower shall be deemed to have repaid and reborrowed all outstanding Revolving Loans as of the date of any increase (or addition) in the Revolving Commitments (with such reborrowing to consist of the Types of Revolving Loans, with related Interest Periods if applicable, specified by the Borrower to the Administrative Agent). The deemed payments made pursuant to clause (ii) of the immediately preceding sentence shall be accompanied by payment of all accrued interest on the amount prepaid and, to the extent applicable, shall be subject to indemnification by the Borrower pursuant to the provisions of Section 2.16. The Incremental Term Loans (A) shall rank pari passu in right of payment with the Revolving Loans, the initial Term Loans, and any other tranche of Incremental Term Loans hereunder, (B) shall be evidenced by this Agreement, (C) shall not be secured by any assets other than the Collateral, (D) shall have no obligors (directly or indirectly) other than the Loan Parties, (E) shall not mature earlier than the latest Maturity Date in effect at such time or any other maturity date applicable to any other Incremental Term Loans (if any) outstanding at such time (but may have amortization prior to such date so long as the weighted average life to maturity of any Incremental Term Loans shall be no shorter than the remaining weighted average life to maturity of the initial Term Loans outstanding at such time) and (F) except as otherwise set forth in this Section 2.09, shall be treated substantially the same as (and in any event no more favorably than) and subject to the same terms and conditions as the Revolving Loans, the initial Term Loans, and any other Incremental Term Loans (if any) outstanding at such time; provided that (x) the terms and conditions applicable to any tranche of Incremental Term Loans maturing after the latest Maturity Date (or such later maturity date applicable to any other Incremental Term Loans (if any) outstanding at such time, as the case may be) in effect at such time may provide for material additional or different financial or other covenants or prepayment requirements, in each case, applicable only during periods after such Maturity Date and (y) the Incremental Term Loans may be priced differently than the Revolving Loans, the initial Term Loans, and any other Incremental Term Loans (if any) outstanding at such time.
(h) Subject to the foregoing conditions, any Incremental Term Loans or increase in the Revolving Commitments may be made hereunder pursuant to an amendment or restatement (an “Incremental Facility Amendment”) of this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Lender participating in such tranche and the Administrative Agent. The Incremental Facility Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent, to effect the provisions of this Section 2.09 and reflect the applicable Incremental Term Loans and increase in the Revolving Commitments. Within a reasonable time after the effective date of any increase or addition, the Administrative Agent shall, and is hereby authorized and directed to, revise the Commitment Schedule to reflect such increase or addition and shall distribute such revised Commitment Schedule to each of the Lenders and the Borrower, whereupon such revised Commitment Schedule shall replace the old Commitment Schedule and become part of this Agreement.
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(i) In connection with any increase of the Revolving Commitments or Incremental Term Loans pursuant to this Section 2.09, any new lending institution becoming a party hereto shall (i) execute such documents and agreements as the Administrative Agent may reasonably request and (ii) provide to the Administrative Agent, its name, address, tax identification number and/or such other information as shall be necessary for the Administrative Agent to comply with “know your customer” and anti-money laundering rules and regulations, including without limitation, the USA PATRIOT Act.
SECTION 2.10. Repayment and Amortization of Loans; Evidence of Debt.
(a) The Borrower hereby unconditionally promises to pay in dollars (i) to the Administrative Agent for the account of each Revolving Lender the then unpaid principal amount of each Revolving Loan on the Revolving Credit Maturity Date, and (ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Credit Maturity Date and the fifth Business Day after such Swingline Loan is made; provided that on each date that a Revolving Loan is made, the Borrower shall repay all Swingline Loans then outstanding and the proceeds of any such Revolving Loan shall be applied by the Administrative Agent to repay any Swingline Loans outstanding.
(b) The Borrower hereby unconditionally promises to pay in dollars to the Administrative Agent for the account of each Term Lender on each date set forth below the aggregate principal amount set forth opposite such date (as adjusted from time to time pursuant to Section 2.11(d) or 2.18(b)):
Date | Amount | |||
| September 30, 2025 | $ | 3,762,500 | ||
| December 31, 2025 | $ | 3,762,500 | ||
| March 31, 2026 | $ | 3,762,500 | ||
| June 30, 2026 | $ | 3,762,500 | ||
| September 30, 2026 | $ | 3,762,500 | ||
| December 31, 2026 | $ | 3,762,500 | ||
| March 31, 2027 | $ | 3,762,500 | ||
| June 30, 2027 | $ | 3,762,500 | ||
| September 30, 2027 | $ | 5,643,750 | ||
| December 31, 2027 | $ | 5,643,750 | ||
| March 31, 2028 | $ | 5,643,750 | ||
| June 30, 2028 | $ | 5,643,750 | ||
| September 30, 2028 | $ | 5,643,750 | ||
| December 31, 2028 | $ | 5,643,750 | ||
| March 31, 2029 | $ | 5,643,750 | ||
| June 30, 2029 | $ | 5,643,750 | ||
| September 30, 2029 | $ | 7,525,000 | ||
| December 31, 2029 | $ | 7,525,000 | ||
| March 31, 2030 | $ | 7,525,000 | ||
| Term Loan Maturity Date | The entire unpaid principal amount of all Term Loans | |||
; provided that, if any date set forth above is not a Business Day, then payment shall be due and payable on the Business Day immediately preceding such date. To the extent not previously paid, all unpaid Term Loans shall be paid in full in cash in dollars by the Borrower on the Term Loan Maturity Date.
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(c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(d) Prior to any repayment of any Term Loan Borrowings under this Section, the Borrower shall select the Borrowing or Borrowings of the Term Loans to be repaid and shall notify the Administrative Agent by fax or through any Electronic System or an Approved Borrower Portal, in each case, if arrangements for doing so have been approved by the Administrative Agent, of such selection not later than 11:00 a.m., New York City time, three (3) Business Days before the scheduled date of such repayment. Each repayment of a Term Loan Borrowing shall be applied ratably to the Loans included in the repaid Term Loan Borrowing. Repayments of Term Loan Borrowings shall be accompanied by accrued interest on the amounts repaid.
(e) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, if any, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.
(f) The entries made in the accounts maintained pursuant to paragraph (c) or (e) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the Obligations.
(g) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form.
SECTION 2.11. Prepayment of Loans.
(a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (e) of this Section and, if applicable, payment of any break funding expenses under Section 2.16; provided that all such prepayments shall be applied to reduce the immediately succeeding four scheduled installments of principal of the Term Loans, with any excess applied pro rata to all remaining scheduled installments of principal of Term Loans, including at the Term Loan Maturity Date.
(b) In the event and on such occasion that the Aggregate Revolving Exposure exceeds the aggregate Revolving Commitments, the Borrower shall prepay the Revolving Loans, LC Exposure and/or Swingline Loans (or, if no such Borrowings are outstanding, deposit cash collateral in the LC Collateral Account in an aggregate amount equal to such excess, in accordance with Section 2.06(j)) in an aggregate principal amount sufficient to cause the aggregate principal amount of all Revolving Exposures to be less than or equal to the aggregate Revolving Commitments.
(c) In the event and on each occasion that any Net Proceeds are received by or on behalf of any Loan Party or any Subsidiary in respect of any Prepayment Event, the Borrower shall, immediately after such Net Proceeds are received by any Loan Party or Subsidiary, prepay the Obligations and cash collateralize the LC Exposure as set forth in Section 2.11(d) below in an aggregate amount equal to 100% of such Net Proceeds; provided that, notwithstanding the foregoing, in the case of any event described in clause (a) or (b) of the definition of the term “Prepayment Event”:
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(i) the Borrower shall not be obligated to make any such prepayment required by this Section 2.11(c) during any fiscal year of Holdings unless and until the aggregate amount of Net Proceeds from all such Prepayment Events described in any of clauses (a) and (b) of the definition of the term Prepayment Event during such fiscal year exceeds an amount equal to the greater of (A) $2,000,000 and (B) 2.5% of Applicable EBITDA (with respect to any fiscal year of Holdings, the “Prepayment Trigger”), at which time all such Net Proceeds from any Prepayment Event described in any of clauses (a) and (b) of the definition of the term Prepayment Event for such fiscal year (excluding amounts below the Prepayment Trigger for such fiscal year) shall be applied in accordance with Section 2.11(d); and
(ii) so long as no Event of Default pursuant to Section 7.01(a), (b), (d) (solely pursuant to a breach of Section 6.12), (h) or (i) then exists, at the option of the Borrower by written notice to the Administrative Agent, the Borrower may reinvest all or any portion of such Net Proceeds to acquire (or replace or rebuild) real property, equipment or other tangible assets (excluding Inventory and Excluded Property) to be used in the business of the Loan Parties (x) within twelve (12) months following receipt of such Net Proceeds or (y) if the Borrower or a Subsidiary enters into a legally binding commitment to reinvest such Net Proceeds within one hundred and eighty (180) days following receipt thereof, within one hundred and eighty (180) days after such initial twelve (12) month-period (the foregoing period being referred to as a “Reinvestment Period”); provided further that if any Net Proceeds are no longer intended to be or cannot be so reinvested at any time after delivery of a notice of reinvestment election, an amount equal to any such Net Proceeds shall be applied to the prepayment of the Obligations as set forth herein within five (5) Business Days after the earlier of (A) the end of the applicable Reinvestment Period and (B) such time that the Borrower reasonably determines that such Net Proceeds are no longer intended to be or cannot be so reinvested.
(d) (i) All voluntary prepayments made pursuant to Section 2.11(a) shall be applied (A) if made with respect to the Term Loans (and in the event Term Loans of more than one Class shall be outstanding at the time, shall be allocated among the Term Loans pro rata based on the aggregate principal amounts of outstanding Term Loans of each such Class), in accordance with Section 2.11(a), (B) if made with respect to the Revolving Loans, to prepay such Loans in accordance with the Lenders’ respective Applicable Percentages without a corresponding reduction in the Revolving Commitments or (C) if made with respect to the Swingline Loans, to prepay such Loans in accordance with Section 2.05 without a corresponding reduction in the Revolving Commitments. (ii) All mandatory prepayments required to be made pursuant to Section 2.11(c) shall be applied, first to prepay the Term Loans (and in the event Term Loans of more than one Class shall be outstanding at the time, shall be allocated among the Term Loans pro rata based on the aggregate principal amounts of outstanding Term Loans of each such Class) and shall be applied to reduce the immediately succeeding four (4) scheduled installments of principal of the Term Loans, with any excess applied pro rata to all remaining scheduled installments of principal of Term Loans and second (but solely in the case of any Prepayment Event described in clause (c) of the definition of the term “Prepayment Event”) to prepay the Revolving Loans and Swingline Loans, ratably, without a corresponding reduction in the Revolving Commitments and third (but solely in the case of any Prepayment Event described in clause (c) of the definition of the term “Prepayment Event”) to cash collateralize outstanding LC Exposure.
(e) The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by fax or through any Electronic System or an Approved Borrower Portal, in each case, if arrangements for doing so have been approved by the Administrative Agent (and, in the case of a prepayment of a Swingline Loan, the Swingline Lender), of any prepayment under this Section: (i) in the case of prepayment of a Term Benchmark Borrowing, not later than 10:00 a.m., New York City time, three (3) U.S. Government Securities Business Days before the date of prepayment, (ii) in the case of an RFR Borrowing, not later than 10:00 a.m., New York City time, five (5) U.S. Government Securities Business Days before the date of prepayment, (iii) in the case of prepayment of an ABR Borrowing (other than a Swingline Loan), not later than 10:00 a.m., New York City time, on the date of prepayment or (iv) in the case of prepayment of a Swingline Loan, not later than 11:00 a.m., New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities or other transactions specified therein, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02 (or, in the case of any RFR Loan, in such amount that would be permitted in the case of an advance of an ABR Revolving Borrowing as provided in Section 2.02), except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing of any Class shall be applied (x) in the case of a Borrowing of Revolving Loans or Swingline Loans, ratably to the Loans included in such prepaid Borrowing and (y) in the case of a Borrowing of Term Loans, in accordance with Section 2.11(e). Prepayments shall be accompanied by (i) accrued interest to the extent required by Section 2.13 and (ii) break funding payments pursuant to Section 2.16.
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SECTION 2.12. Fees.
(a) The Borrower agrees to pay to the Administrative Agent a commitment fee for the account of each Revolving Lender, which shall accrue at the Applicable Rate on the daily amount of the undrawn portion of the Revolving Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which the Lenders’ Revolving Commitments terminate; it being understood that the LC Exposure of a Lender shall be included and the Swingline Exposure of a Lender shall be excluded in the drawn portion of the Revolving Commitment of such Lender for purposes of calculating the commitment fee; provided that, if such Lender continues to have any Revolving Exposure after its Revolving Commitment terminates, then such commitment fee shall continue to accrue on the daily amount of such Lender’s Revolving Exposure from and including the date on which its Revolving Commitment terminates to but excluding the date on which such Lender ceases to have any Revolving Exposure. Commitment fees accrued through and including the last day of March, June, September and December of each year shall be payable in arrears on the fifteenth (15th) day following such last day and on the date on which the Revolving Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any commitment fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day and last day of each period but excluding the date on which the Revolving Commitments terminate).
(b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in each outstanding Letter of Credit, which shall accrue on the daily maximum stated amount then available to be drawn under such Letter of Credit at the same Applicable Rate used to determine the interest rate applicable to Term Benchmark Revolving Loans, during the period from and including the Effective Date to but excluding the later of the date on which such Lender’s Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank for its own account a fronting fee, which shall accrue at 0.125% per annum (or at such other rate or rates per annum separately agreed upon between the Borrower and the Issuing Bank) on the daily maximum stated amount then available to be drawn under each outstanding Letter of Credit, during the period from and including the Effective Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank’s standard fees and commissions with respect to the issuance, amendment, cancellation, negotiation, transfer, presentment or extension of any Letter of Credit and other processing fees, and other standard costs and charges, of the Issuing Bank relating to Letters of Credit as from time to time in effect. Participation fees and fronting fees accrued through and including the last day of each March, June, September and December of each year shall be payable on the fifteenth (15th) day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within ten (10) days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
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(c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid in dollars on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.
SECTION 2.13. Interest.
(a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.
(b) The Loans comprising each Term Benchmark Borrowing shall bear interest at the Term SOFR Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.
(c) Each RFR Loan shall bear interest at a rate per annum equal to Daily Simple SOFR plus the Applicable Rate.
(d) Notwithstanding the foregoing, (i) except as provided in the following clause (d)(ii), during the occurrence and continuance of an Event of Default, the Administrative Agent or the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 9.02 requiring the consent of “each Lender directly affected thereby” for reductions in interest rates), declare that, or (ii) automatically, without any notice or other action from any party hereto, upon the occurrence of an Event of Default with respect to Holdings or the Borrower described in Section 7.01(h) or (i), then, in each case, (A) all Loans shall bear interest at a per annum rate equal to 2.00% plus the rate otherwise applicable to such Loans as provided in the preceding paragraphs of this Section and (B) in the case of any other amount outstanding hereunder, such amount shall accrue at 2.00% per annum plus the rate applicable to such fee or other obligation as provided under the applicable Loan Document.
(e) Accrued interest on each Loan (for ABR Loans , accrued through the last day of the prior calendar month) shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Term Benchmark Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.
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(f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate only at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All interest hereunder on any Loan shall be computed on a daily basis based upon the outstanding principal amount of such Loan as of the applicable date of determination. Any determination of the applicable Alternate Base Rate, Term SOFR Rate or Daily Simple SOFR shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.14. Alternate Rate of Interest.
(a) Subject to clauses (b), (c), (d), (e) and (f) of this Section 2.14, if:
(i) the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) (A) prior to the commencement of any Interest Period for a Term Benchmark Borrowing that adequate and reasonable means do not exist for ascertaining the Term SOFR Rate (including, without limitation, because the Term SOFR Reference Rate is not available or published on a current basis), for such Interest Period or (B) at any time, that adequate and reasonable means do not exist for ascertaining the applicable Daily Simple SOFR for an RFR Loan; or
(ii) the Administrative Agent is advised by the Required Lenders that (A) prior to the commencement of any Interest Period for a Term Benchmark Borrowing, the Term SOFR Rate for the applicable Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or Loan) included in such Borrowing for such Interest Period, or (B) at any time, the applicable Daily Simple SOFR for an RFR Loan will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing;
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders through any Electronic System as provided in Section 9.01 as promptly as practicable thereafter and, until (x) the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist with respect to the relevant Benchmark and (y) the Borrower delivers a new Interest Election Request in accordance with the terms of Section 2.08 or a new Borrowing Request in accordance with the terms of Section 2.03, any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Term Benchmark Borrowing and any Borrowing Request that requests a Term Benchmark Borrowing shall instead be deemed to be an Interest Election Request or a Borrowing Request, as applicable, for (1) an RFR Borrowing so long as Daily Simple SOFR is not also the subject of Section 2.14(a)(i) or (ii) above or (2) an ABR Borrowing if Daily Simple SOFR also is the subject of Section 2.14(a)(i) or (ii) above. Furthermore, if any Term Benchmark Loan or RFR Loan is outstanding on the date of the Borrower’s receipt of the notice from the Administrative Agent referred to in this Section 2.14(a) with respect to a Relevant Rate applicable to such Term Benchmark Loan or RFR Loan, then until (x) the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist with respect to the relevant Benchmark and (y) the Borrower delivers a new Interest Election Request in accordance with the terms of Section 2.08 or a new Borrowing Request in accordance with the terms of Section 2.03, (1) any Term Benchmark Loan shall on the last day of the Interest Period applicable to such Loan, be converted by the Administrative Agent to, and shall constitute, (x) an RFR Borrowing so long as Daily Simple SOFR is not also the subject of Section 2.14(a)(i) or (ii) above or (y) an ABR Loan if Daily Simple SOFR also is the subject of Section 2.14(a)(i) or (ii) above, on such day, and (2) any RFR Loan shall on and from such day be converted by the Administrative Agent to, and shall constitute, an ABR Loan.
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(b) Notwithstanding anything to the contrary herein or in any other Loan Document (and any Swap Agreement shall be deemed not to be a “Loan Document” for purposes of this Section 2.14), if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any setting of the then-current Benchmark, then (x) if a Benchmark Replacement is determined in accordance with clause (1) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark (including any related adjustments) for all purposes hereunder and under any Loan Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a Benchmark Replacement is determined in accordance with clause (2) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders.
(c) Notwithstanding anything to the contrary herein or in any other Loan Document, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(d) The Administrative Agent will promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes, (iv) the removal or reinstatement of any tenor of a Benchmark pursuant to Section 2.14(e) and (v) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 2.14, including any determination with respect to a tenor, rate or adjustment or of the occurrence or nonoccurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.14.
(e) Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including the Term SOFR Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will no longer be representative, then the Administrative Agent may modify the definition of “Interest Period” for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will no longer be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” for all Benchmark settings at or after such time to reinstate such previously removed tenor.
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(f) Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period with respect to any Relevant Rate, in the case of a Term Benchmark Borrowing, the Borrower may revoke any request for a Term Benchmark Borrowing of, conversion to or continuation of Term Benchmark Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to (A) solely with respect to any such request for a Term Benchmark Borrowing, an RFR Borrowing so long as Daily Simple SOFR is not the subject of a Benchmark Transition Event or (B) an ABR Borrowing if Daily Simple SOFR is the subject of a Benchmark Transition Event. During any Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of ABR based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of ABR. Furthermore, if any Term Benchmark Loan or RFR Loan is outstanding on the date of the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period with respect to a Relevant Rate applicable to such Term Benchmark Loan or RFR Loan, then until such time as a Benchmark Replacement is implemented pursuant to this Section 2.14, (1) any Term Benchmark Loan shall on the last day of the Interest Period applicable to such Loan, be converted by the Administrative Agent to, and shall constitute, (x) an RFR Borrowing so long as Daily Simple SOFR is not the subject of a Benchmark Transition Event or (y) an ABR Loan if Daily Simple SOFR is the subject of a Benchmark Transition Event, on such day and (2) any RFR Loan shall on and from such day be converted by the Administrative Agent to, and shall constitute, an ABR Loan.
SECTION 2.15. Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, liquidity or similar requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the applicable interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or any Letter of Credit or participation therein; or
(iii) 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;
and the result of any of the foregoing shall be to increase the cost to such Lender, Issuing Bank or such other Recipient of making, continuing, converting into or maintaining any Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender, the Issuing Bank or such other Recipient of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender, the Issuing Bank or such other Recipient hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender, the Issuing Bank or such other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, the Issuing Bank or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered.
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(b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Commitments of or the Loans made by, or participations in Letters of Credit or Swingline Loans held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy and liquidity), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.
SECTION 2.16. Break Funding Payments.
(a) With respect to Term Benchmark Loans, in the event of (i) the payment of any principal of any Term Benchmark Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default or as a result of any optional or mandatory prepayment of Loans), (ii) the conversion of any Term Benchmark Loan other than on the last day of the Interest Period applicable thereto, (iii) the failure to borrow, convert, continue or prepay any Term Benchmark Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.09(d) and is revoked in accordance therewith), or (iv) the assignment of any Term Benchmark Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19 or 9.02(d), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event.
(b) [Reserved].
(c) A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.
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SECTION 2.17. Taxes.
(a) Withholding of Taxes; Gross-Up; Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document (including, without limitation, the Secured Obligations and Guaranteed Obligations of each Loan Party) shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable withholding agent) requires the deduction or withholding of any Tax from any such payment by a withholding agent, then the applicable withholding agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.17), the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(b) Payment of Other Taxes by Loan Parties. The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.
(c) Evidence of Payment. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 2.17, such Loan Party 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 the return reporting such payment, or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(d) Indemnification by the Loan Parties. The Loan Parties shall jointly and severally indemnify each Recipient, within ten (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) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, 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 any Loan 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.
(e) Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.04(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to such Lender from any other source against any amount due to the Administrative Agent under this paragraph (e).
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(f) Status of Lenders.
(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.17(f)(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 the Borrower is a U.S. Person,
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), an executed copy of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the U.S. is a party (x) with respect to payments of interest under any Loan Document, an executed copy of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(2) in the case of a Foreign Lender claiming that its extension of credit will generate U.S. effectively connected income, an executed copy of IRS Form W-8ECI;
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit B-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) an executed copy of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable; or
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(4) to the extent a Foreign Lender is not the beneficial owner, an executed copy of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate substantially in the form of Exhibit B-2 or Exhibit B-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit B-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 copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
(g) Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.17 (including by the payment of additional amounts pursuant to this Section 2.17), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.17 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph (g) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
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(h) Survival. Each party’s obligations under this Section 2.17 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 obligations under any Loan Document (including the Payment in Full of the Secured Obligations).
(i) Defined Terms. For purposes of this Section 2.17, the term “applicable law” includes FATCA.
SECTION 2.18. Payments Generally; Allocation of Proceeds; Sharing of Set-offs.
(a) Each Loan Party shall make each payment or prepayment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Sections 2.15, 2.16 or 2.17, or otherwise) prior to 2:00 p.m., New York City time, on the date when due or the date fixed for any prepayment hereunder, in immediately available funds, without setoff, recoupment or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its applicable office or offices as described in the Administrative Questionnaire provided by the Administrative Agent to the Borrower from time to time, except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. Unless otherwise provided for herein, if any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.
(b) All payments and any proceeds of Collateral received by the Administrative Agent (i) not constituting either (A) a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied as specified by the Borrower) or (B) a mandatory prepayment (which shall be applied in accordance with Section 2.11) or (ii) after an Event of Default has occurred and is continuing and the Administrative Agent so elects or the Required Lenders so direct, in each case, shall be applied first, to pay any fees, indemnities, or expense reimbursements including amounts then due to the Administrative Agent, the Swingline Lender and the Issuing Bank from the Borrower (other than in connection with Banking Services Obligations or Swap Agreement Obligations), ratably, second, to pay any fees, indemnities, or expense reimbursements then due to the Lenders from the Loan Parties (other than in connection with Banking Services Obligations or Swap Agreement Obligations), ratably, third, to pay interest then due and payable on the Loans, ratably, fourth, to prepay principal on the Loans and unreimbursed LC Disbursements, to pay an amount to the Administrative Agent equal to one hundred five percent (105%) of the aggregate LC Exposure, to be held as cash collateral for such Obligations, and to pay any amounts owing in respect of Swap Agreement Obligations and Banking Services Obligations up to and including the amount most recently provided to the Administrative Agent pursuant to Section 2.22, ratably (with amounts allocated to the Term Loans applied to reduce the subsequent scheduled repayments of the Term Loans to be made pursuant to Section 2.10 in inverse order of maturity) and fifth, to the payment of any other Secured Obligation due to the Administrative Agent or any Lender from the Borrower or any other Loan Party, ratably. Notwithstanding the foregoing, amounts received from any Loan Party shall not be applied to any Excluded Swap Obligation of such Loan Party. Notwithstanding anything to the contrary contained in this Agreement, unless so directed by the Borrower, or unless a Default is in existence, neither the Administrative Agent nor any Lender shall apply any payment which it receives to any Term Benchmark Loan of any Class, except (i) on the expiration date of the Interest Period applicable thereto, or (ii) in the event, and only to the extent, that there are no outstanding ABR Loans of such Class and, in any such event, the Borrower shall pay the break funding payment required in accordance with Section 2.16. The Administrative Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Secured Obligations.
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Notwithstanding the foregoing, Secured Obligations arising under Banking Services Obligations or Swap Agreement Obligations shall be excluded from the application described above and paid in clause fifth if the Administrative Agent has not received written notice thereof, together with such supporting documentation as the Administrative Agent may have reasonably requested from the applicable provider of such Banking Services or Swap Agreements.
(c) At the election of the Administrative Agent, all payments of principal, interest, LC Disbursements, fees, premiums, reimbursable expenses (including, without limitation, all reimbursement for fees, costs and expenses pursuant to Section 9.03), and other sums payable under the Loan Documents, may be paid from the proceeds of Borrowings made hereunder, whether made following a request by the Borrower pursuant to Section 2.03 or 2.05 or a deemed request as provided in this Section or may be deducted from any deposit account of the Borrower maintained with the Administrative Agent. The Borrower hereby irrevocably authorizes (i) the Administrative Agent to make a Revolving Borrowing for the purpose of paying each payment of principal, interest and fees as it becomes due hereunder or any other amount due under the Loan Documents and agrees that all such amounts charged shall constitute Revolving Loans (including Swingline Loans), and that all such Borrowings shall be deemed to have been requested pursuant to Section 2.03 or 2.05, as applicable, and (ii) the Administrative Agent to charge any deposit account of the Borrower maintained with the Administrative Agent for each payment of principal, interest and fees as it becomes due hereunder or any other amount due under the Loan Documents.
(d) If, except as otherwise expressly provided herein, 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 its Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other similarly situated Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by all such Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment or sale of a participation in any of its Loans or participations in LC Disbursements or Swingline Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph 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.
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(e) Unless the Administrative Agent shall have received, prior to any date on which any payment is due to the Administrative Agent for the account of the relevant Lenders or the Issuing Bank pursuant to the terms hereof or any other Loan Document (including any date that is fixed for prepayment by notice from the Borrower to the Administrative Agent pursuant to Section 2.11(e)), notice from the Borrower that the Borrower will not make such payment or prepayment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the relevant Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the relevant Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the NYFRB Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
(f) The Administrative Agent may from time to time provide the Borrower with account statements or invoices with respect to any of the Secured Obligations (the “Statements”). The Administrative Agent is under no duty or obligation to provide Statements, which, if provided, will be solely for the Borrower’s convenience. Statements may contain estimates of the amounts owed during the relevant billing period, whether of principal, interest, fees or other Secured Obligations. If the Borrower pays the full amount indicated on a Statement on or before the due date indicated on such Statement, the Borrower shall not be in default of payment with respect to the billing period indicated on such Statement; provided, that acceptance by the Administrative Agent, on behalf of the Lenders, of any payment that is less than the total amount actually due at that time (including but not limited to any past due amounts) shall not constitute a waiver of the Administrative Agent’s or the Lenders’ right to receive payment in full at another time.
SECTION 2.19. Mitigation Obligations; Replacement of Lenders.
(a) If any Lender requests compensation under Section 2.15, 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 2.17, then 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 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, 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 2.17, or if any Lender becomes a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights (other than its existing rights to payments pursuant to Section 2.15 or 2.17) and obligations under this Agreement and other Loan Documents to an assignee (other than any Ineligible Institution) that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment) (provided that (x) any Affiliated Lender assuming any such interests, rights or obligations shall be required to first comply with Section 9.04(f) and (y) Affiliated Lenders may not hold any Revolving Commitments); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and in circumstances where its consent would be required under Section 9.04, the Issuing Bank and the Swingline Lender), which consent shall not unreasonably be withheld, conditioned or delayed, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, 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) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. Each party hereto agrees that (x) an assignment required pursuant to this paragraph may be effected pursuant to an Assignment and Assumption executed by the Borrower, the Administrative Agent and the assignee (or, to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to which the Administrative Agent and such parties are participants), and (y) the Lender required to make such assignment need not be a party thereto in order for such assignment to be effective and shall be deemed to have consented to and be bound by the terms thereof; provided that, following the effectiveness of any such assignment, the other parties to such assignment agree to execute and deliver such documents necessary to evidence such assignment as reasonably requested by the applicable Lender, provided that any such documents shall be without recourse to or warranty by the parties thereto.
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SECTION 2.20. Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a) fees shall cease to accrue on the Unfunded Revolving Commitment of such Defaulting Lender pursuant to Section 2.12(a);
(b) any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Section 2.18(b) or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 9.08 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, if such Defaulting Lender is a Revolving Lender, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Bank or Swingline Lender hereunder; third, if such Defaulting Lender is a Revolving Lender, to cash collateralize the LC Exposure with respect to such Defaulting Lender in accordance with this Section; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) if such Defaulting Lender is a Revolving Lender, cash collateralize the future LC Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with this Section; sixth, to the payment of any amounts owing to the Lenders of the applicable Class and, if such Defaulting Lender is a Revolving Lender, the Issuing Bank or Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any such Lender, the Issuing Bank or Swingline Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement or under any other Loan Document; seventh, 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 or under any other Loan Document; and eighth, 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 or LC Disbursements in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued 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, and LC Disbursements owed to, all non-Defaulting Lenders of the applicable Class or Classes on a pro rata basis prior to being applied to the payment of any Loans of, or LC Disbursements owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in the Borrower’s obligations corresponding to such Defaulting Lender’s LC Exposure and Swingline Loans are held by the Lenders of the applicable Class or Classes pro rata in accordance with the applicable Commitments without giving effect to clause (d) below. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto;
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(c) such Defaulting Lender shall not have the right to vote on any issue on which voting is required (other than to the extent expressly provided in Section 9.02(b)) and the Revolving Commitment and Revolving Exposure and, if applicable, Term Loan Commitment and Term Loans of such Defaulting Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder or under any other Loan Document; provided that, except as otherwise provided in Section 9.02, this clause (c) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of such Lender or each Lender directly affected thereby;
(d) if such Defaulting Lender is a Revolving Lender and any Swingline Exposure or LC Exposure exists at the time such Revolving Lender becomes a Defaulting Lender then:
(i) all or any part of the Swingline Exposure and LC Exposure of such Defaulting Lender (other than, in the case of a Defaulting Lender that is a Swingline Lender, the portion of such Swingline Exposure referred to in clause (b) of the definition of such term) shall be reallocated among the non-Defaulting Lenders that are Revolving Lenders in accordance with their respective Applicable Percentages but only to the extent that such reallocation does not, as to any such non-Defaulting Lender, cause such non-Defaulting Lender’s Revolving Exposure to exceed its Revolving Commitment;
(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one (1) Business Day following notice by the Administrative Agent (x) first, prepay such Swingline Exposure and (y) second, cash collateralize, for the benefit of the Issuing Bank, the Borrower’s obligations corresponding to such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.06(j) for so long as such LC Exposure is outstanding;
(iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is cash collateralized;
(iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (i) above, then the fees payable to the Lenders pursuant to Sections 2.12(a) and 2.12(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages; and
(v) if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor cash collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of the Issuing Bank or any other Lender hereunder, all letter of credit fees payable under Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until and to the extent that such LC Exposure is reallocated and/or cash collateralized; and
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(e) if such Defaulting Lender is a Revolving Lender, then for so long as such Lender is a Defaulting Lender, the Swingline Lender shall not be required to fund any Swingline Loan and the Issuing Bank shall not be required to issue, amend, renew, extend or increase any Letter of Credit, unless it is satisfied that the related exposure and such Defaulting Lender’s then outstanding LC Exposure will be 100% covered by the Revolving Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 2.20(d), and Swingline Exposure related to any such newly made Swingline Loan or LC Exposure related to any newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.20(d)(i) (and such Defaulting Lender shall not participate therein).
If (i) a Bankruptcy Event or a Bail-In Action with respect to the Parent of any Revolving Lender shall occur following the date hereof and for so long as such event shall continue or (ii) the Swingline Lender or the Issuing Bank has a good faith belief that any Revolving Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, the Swingline Lender shall not be required to fund any Swingline Loan and the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless the Swingline Lender or the Issuing Bank, as the case may be, shall have entered into arrangements with the Borrower or such Lender, satisfactory to the Swingline Lender or the Issuing Bank, as the case may be, to defease any risk to it in respect of such Lender hereunder.
In the event that each of the Administrative Agent, the Borrower and, if the applicable Defaulting Lender is a Revolving Lender, the Swingline Lender and the Issuing Bank agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then, if such Defaulting Lender is a Revolving Lender, the Swingline Exposure and LC Exposure of the Revolving Lenders shall be readjusted to reflect the inclusion of such Lender’s Revolving Commitment and on the date of such readjustment such Lender shall purchase at par such of the Loans of the other Lenders (other than Swingline Loans) as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage.
SECTION 2.21. Returned Payments. If, after receipt of any payment which is applied to the payment of all or any part of the Obligations (including a payment effected through exercise of a right of setoff), the Administrative Agent or any Lender is for any reason compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion), then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Administrative Agent or such Lender. The provisions of this Section 2.21 shall be and remain effective notwithstanding any contrary action which may have been taken by the Administrative Agent or any Lender in reliance upon such payment or application of proceeds. The provisions of this Section 2.21 shall survive the termination of this Agreement.
SECTION 2.22. Banking Services and Swap Agreements. Each Lender or Affiliate thereof providing Banking Services for, or having Swap Agreements with, any Loan Party or any Subsidiary shall deliver to the Administrative Agent, promptly after entering into such Banking Services or Swap Agreements, written notice setting forth the aggregate amount of all Banking Services Obligations and Swap Agreement Obligations of such Loan Party or Subsidiary to such Lender or Affiliate (whether matured or unmatured, absolute or contingent). In furtherance of that requirement, each such Lender or Affiliate thereof shall furnish the Administrative Agent, from time to time after a significant change therein or upon a request therefor, a summary of the amounts due or to become due in respect of such Banking Services Obligations and Swap Agreement Obligations. The most recent information provided to the Administrative Agent shall be used in determining which tier of the waterfall, contained in Section 2.18(b), such Banking Services Obligations and/or Swap Agreement Obligations will be placed. For the avoidance of doubt, so long as Chase or its Affiliate is the Administrative Agent, neither Chase nor any of its Affiliates providing Banking Services for, or having Swap Agreements with, any Loan Party or any Subsidiary of a Loan Party shall be required to provide any notice described in this Section 2.22 in respect of such Banking Services or Swap Agreements.
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ARTICLE III
Representations and Warranties
Each Loan Party represents and warrants to the Lenders that (and where applicable, agrees):
SECTION 3.01. Organization; Powers. Each Loan Party and each Subsidiary is duly organized or formed, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions are within each Loan Party’s corporate or other organizational powers and have been duly authorized by all necessary corporate or other organizational actions and, if required, actions by equity holders. Each Loan Document to which each Loan Party is a party has been duly executed and delivered by such Loan Party and constitutes a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except for filings necessary to perfect Liens created pursuant to the Loan Documents, (b) will not violate any Requirement of Law applicable to any Loan Party or any Subsidiary, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon any Loan Party or any Subsidiary or the assets of any Loan Party or any Subsidiary, or give rise to a right thereunder to require any payment to be made by any Loan Party or any Subsidiary, and (d) will not result in the creation or imposition of, or other requirement to create, any Lien on any asset of any Loan Party or any Subsidiary, except Liens created pursuant to the Loan Documents.
SECTION 3.04. Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the fiscal year ended December 31, 2023, reported on by RSM US LLP, independent public accountants and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended December 31, 2024, certified by its Financial Officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to normal year end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.
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(b) No event, change or condition has occurred that has had, or could reasonably be expected to have, a Material Adverse Effect, since December 31, 2023.
SECTION 3.05. Properties.
(a) As of the date of this Agreement, Schedule 3.05 sets forth the address of each parcel of real property that is owned or leased by any Loan Party. Each of such leases and subleases is valid and enforceable in accordance with its terms and is in full force and effect, and no default by any party to any such lease or sublease exists. Each of the Loan Parties and each Subsidiary has good and indefeasible title to, or valid leasehold interests in, all of its real and personal property, free of all Liens other than those permitted by Section 6.02.
(b) Each Loan Party and each Subsidiary owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property necessary to its business as currently conducted, a correct and complete list of which, as of the date of this Agreement, is set forth on Schedule 3.05, and the use thereof by each Loan Party and each Subsidiary does not infringe in any material respect upon the rights of any other Person, and each Loan Party’s and each Subsidiary’s rights thereto are not subject to any licensing agreement or similar arrangement.
SECTION 3.06. Litigation and Environmental Matters.
(a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of any Loan Party, threatened against or affecting any Loan Party or any Subsidiary (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve any Loan Document or the Transactions.
(b) (i) No Loan Party or any Subsidiary has received notice of any claim with respect to any Environmental Liability or knows of any basis for any Environmental Liability and (ii) and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, no Loan Party or any Subsidiary (A) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law (B) has become subject to any Environmental Liability, (C) has received notice of any claim with respect to any Environmental Liability or (D) knows of any basis for any Environmental Liability.
SECTION 3.07. Compliance with Laws and Agreements; No Default. Except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, each Loan Party and each Subsidiary is in compliance with (i) all Requirements of Law applicable to it or its property and (ii) all indentures, agreements and other instruments binding upon it or its property. No Default has occurred and is continuing.
SECTION 3.08. Investment Company Status. No Loan Party or any Subsidiary is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.
SECTION 3.09. Taxes. Each Loan Party and each Subsidiary has timely filed or caused to be filed all income and other material Tax returns and reports required to have been filed and has paid or caused to be paid all income and other material Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Loan Party or such Subsidiary, as applicable, has set aside on its books adequate reserves and (b) to the extent that the failure to file such returns or to pay Taxes could not reasonably be expected to result in a Material Adverse Effect. No tax liens (other than Liens for Taxes not yet due and payable or for Taxes that are being contested in good faith by appropriate proceedings and for which such Loan Party or such Subsidiary, as applicable, has set aside on its books adequate reserves) have been filed and no claims are being asserted with respect to any such taxes.
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SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87 or subsequent recodification thereof, as applicable) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans.
SECTION 3.11. Disclosure.
(a) The Loan Parties have disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which any Loan Party or any Subsidiary is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party or any Subsidiary to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document (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; provided that, with respect to projected financial information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time delivered and, if such projected financial information was delivered prior to the Effective Date, as of the Effective Date.
(b) As of the Effective Date, to the best knowledge of the Borrower, the information included in the Beneficial Ownership Certification provided on or prior to the Effective Date to any Lender in connection with this Agreement is true and correct in all respects.
SECTION 3.12. Material Agreements.
(a) Attached hereto as Schedule 3.12 is a complete list of all Material Contracts in effect on the Effective Date.
(b) Except as set forth in Schedule 3.12, as of the Effective Date: (i) each Loan Party and each Subsidiary has complied in all material respects with all statutory and regulatory requirements, where and as applicable to each of the Material Contracts; (ii) no termination for default, cure notice or show cause notice has been issued and remains unresolved with respect to any Material Contract and, to the best of the Loan Parties’ knowledge, no event, condition or omission has occurred or exists that would constitute grounds for such action; (iii) no past performance evaluation received by any Loan Party or any Subsidiary with respect to any such Material Contract has set forth a default or other failure to perform thereunder or termination or default thereof; (iv) no Material Contract has been terminated for default in the past ten years; and (v) no money due to any Loan Party or any Subsidiary pertaining to any Material Contract has been withheld or set-off as a result of any claim(s) made against any Loan Party or any Subsidiary involving amounts in excess of $100,000, individually or in the aggregate.
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(c) Except as set forth in Schedule 3.12, (i) neither any Loan Party nor any Subsidiary has undergone and is not undergoing, any audit, inspection, survey or examination of records by the Government relating to any Material Contract and involving fraud, deception, dishonesty, willful misconduct, criminal activity or any allegation thereof, (ii) neither any Loan Party nor any Subsidiary has received written notice of, and neither any Loan Party nor any Subsidiary has undergone, any investigation or review relating to any Material Contract and involving fraud, deception, dishonesty, willful misconduct, criminal activity or any allegation thereof, and (iii) no such audit, review, inspection, investigation, survey or examination of records has been threatened in writing.
SECTION 3.13. Solvency.
(a) Immediately after the consummation of the Transactions to occur on the Effective Date, and immediately after the making of each Loan and each issuance of a Letter of Credit hereunder, (i) the fair value of the assets of the Loan Parties on a consolidated basis, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of the Loan Parties on a consolidated basis will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Loan Parties, taken as a whole, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) no Loan Party will have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted after the Effective Date.
(b) No Loan Party intends to, nor will permit any Subsidiary to, and no Loan Party believes that it or any Subsidiary will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.
SECTION 3.14. Insurance. Schedule 3.14 sets forth a description of all insurance maintained by or on behalf of the Loan Parties and their Subsidiaries as of the Effective Date. As of the Effective Date, all premiums in respect of such insurance have been paid. The Loan Parties maintain, and have caused each Subsidiary to maintain, with financially sound and reputable insurance companies, insurance on all their real and personal property in such amounts, subject to such deductibles and self-insurance retentions and covering such properties and risks as are adequate and customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.
SECTION 3.15. Capitalization and Subsidiaries. As of the Effective Date, Schedule 3.15 sets forth (a) a correct and complete list of the name and relationship to the Borrower of each Subsidiary, (b) a true and complete listing of each class of each of Holdings’ and the Borrower’s authorized Equity Interests, of which all of such issued Equity Interests are validly issued, outstanding, fully paid and non-assessable, and owned beneficially and of record by the Persons identified on Schedule 3.15, (c) the type of entity of Holdings, the Borrower and each Subsidiary, (d) whether such Subsidiary is a Loan Party, Material Subsidiary and/or Excluded Subsidiary. The Borrower and its Subsidiaries do not have any equity investments in any other Person other than those specifically disclosed in Schedule 6.04. All of the issued and outstanding Equity Interests owned by any Loan Party have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable. There are no outstanding commitments or other obligations of any Loan Party to issue, and no options, warrants or other rights of any Person to acquire, any shares of any class of capital stock or other equity interests of any Loan Party.
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SECTION 3.16. Security Interest in Collateral. The provisions of this Agreement and the other Loan Documents create legal and valid Liens on all the Collateral in favor of the Administrative Agent, for the benefit of the Secured Parties, and such Liens constitute perfected and continuing Liens on the Collateral, securing the Secured Obligations, enforceable against the applicable Loan Party and all third parties, and having priority over all other Liens on the Collateral except in the case of (a) Permitted Encumbrances, to the extent any such Permitted Encumbrances would have priority over the Liens in favor of the Administrative Agent pursuant to any applicable law and (b) Liens perfected only by possession (including possession of any certificate of title), to the extent the Administrative Agent has not obtained or does not maintain possession of such Collateral.
SECTION 3.17. Employment Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against any Loan Party or any Subsidiary pending or, to the knowledge of any Loan Party, threatened. The hours worked by and payments made to employees of the Loan Parties and their Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, local or foreign law dealing with such matters. All payments due from any Loan Party or any Subsidiary, or for which any claim may be made against any Loan Party or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Loan Party or such Subsidiary.
SECTION 3.18. Margin Regulations. No Loan Party is engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any Borrowing or Letter of Credit hereunder will be used to buy or carry any Margin Stock. Following the application of the proceeds of each Borrowing or drawing under each Letter of Credit, not more than 25% of the value of the assets (either of any Loan Party only or of the Loan Parties and their Subsidiaries on a consolidated basis) will be Margin Stock. Neither the making of any Loan hereunder nor the use of proceeds thereof will violate the provisions of Regulation U or X of the Federal Reserve Board.
SECTION 3.19. Use of Proceeds. The proceeds of the Loans have been used and will be used, whether directly or indirectly as set forth in Section 5.08.
SECTION 3.20. No Burdensome Restrictions. No Loan Party is subject to any Burdensome Restrictions except Burdensome Restrictions permitted under Section 6.10.
SECTION 3.21. Anti-Corruption Laws and Sanctions. Each Loan Party has implemented and maintains in effect policies and procedures designed to ensure compliance by such Loan Party, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions. Each Loan Party, its Subsidiaries and their respective officers and directors, and, to the knowledge of such Loan Party, its employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects and are not knowingly engaged in any activity that could reasonably be expected to result in any Loan Party being designated as a Sanctioned Person. None of (a) any Loan Party, any Subsidiary or any of their respective directors, officers or employees, or (b) to the knowledge of any such Loan Party or Subsidiary, any agent of such Loan Party or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use of proceeds, Transaction or other transaction contemplated by this Agreement or the other Loan Documents will violate Anti-Corruption Laws or applicable Sanctions.
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SECTION 3.22. Affected Financial Institutions. No Loan Party is an Affected Financial Institution.
SECTION 3.23. Plan Assets; Prohibited Transactions. None of the Loan Parties or any of their Subsidiaries is an entity deemed to hold “plan assets” (within the meaning of the Plan Asset Regulations), and neither the execution, delivery nor performance of the transactions contemplated under this Agreement, including the making of any Loan and the issuance of any Letter of Credit hereunder, will give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
SECTION 3.24. Affiliate Transactions. Except as set forth on Schedule 3.24, as of the Effective Date, there are no existing or proposed agreements, arrangements, understandings or transactions between any Loan Party and any of the officers, members, managers, directors, stockholders, parents, holders of other Equity Interests, employees or Affiliates (other than Subsidiaries) of any Loan Party or any members of their respective immediate families, and none of the foregoing Persons are directly or indirectly indebted to or have any direct or indirect ownership, partnership, or voting interest in any Affiliate of any Loan Party or any Person with which any Loan Party has a business relationship or which competes with any Loan Party.
SECTION 3.25. Regulated Insurance Company. None of the Loan Parties or any of their Subsidiaries is an entity which is licensed (or required to be licensed) by any Governmental Authority to engage in the insurance and/or reinsurance business as an insurer or reinsurer.
SECTION 3.26. Outbound Investment Rules. Neither Holdings nor any of its Subsidiaries is a “covered foreign person” as that term is used in the Outbound Investment Rules. Neither Holdings nor any of its Subsidiaries currently engages, or has any present intention to engage in the future, directly or indirectly, in (i) a “covered activity” or a “covered transaction”, as each such term is defined in the Outbound Investment Rules, (ii) any activity or transaction that would constitute a “covered activity” or a “covered transaction”, as each such term is defined in the Outbound Investment Rules, if Holdings or the Borrower were a U.S. Person or (iii) any other activity that would cause the Administrative Agent or any Lender to be in violation of the Outbound Investment Rules or cause the Administrative Agent or any Lender to be legally prohibited by the Outbound Investment Rules from performing under this Agreement.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):
(a) Credit Agreement and Loan Documents. The Administrative Agent (or its counsel) shall have received (i) from each party hereto, a counterpart of this Agreement signed on behalf of such party (which, subject to Section 9.06(b), may include any Electronic Signatures transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page) and (ii) duly executed copies of the Loan Documents and such other legal opinions, certificates, documents, instruments and agreements as the Administrative Agent shall reasonably request in connection with the Transactions and the other Loan Documents, including any promissory notes requested by a Lender pursuant to Section 2.10 payable to the order of each such requesting Lender and a written opinion of the Loan Parties’ counsel, addressed to the Administrative Agent, the Issuing Bank and the Lenders, all in form and substance satisfactory to the Administrative Agent.
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(b) Financial Statements and Projections. The Lenders shall have received (i) audited consolidated financial statements of the Borrower and its Subsidiaries for the 2022 and 2023 fiscal years, (ii) unaudited interim consolidated financial statements of the Borrower and its Subsidiaries for each fiscal quarter ended after the date of the latest applicable financial statements delivered pursuant to clause (i) of this paragraph as to which such financial statements are available, and such financial statements shall not, in the reasonable judgment of the Administrative Agent, reflect any material adverse change in the consolidated financial condition of the Borrower and its Subsidiaries, as reflected in the audited, consolidated financial statements described in clause (i) of this paragraph and (iii) satisfactory Projections through 2030.
(c) Closing Certificates; Certified Certificate of Incorporation; Good Standing Certificates. The Administrative Agent shall have received (i) a certificate of each Loan Party, dated the Effective Date and executed by its Secretary or Assistant Secretary, which shall (A) certify the resolutions of its Board of Directors, members or other governing body authorizing the execution, delivery and performance of the Loan Documents to which it is a party, (B) identify by name and title and bear the signatures of the officers of such Loan Party authorized to sign the Loan Documents to which it is a party and, in the case of Holdings and the Borrower, its Financial Officers, and (C) contain appropriate attachments, including the charter, articles or certificate of organization or incorporation of each Loan Party certified by the relevant authority of the jurisdiction of organization of such Loan Party and a true and correct copy of its bylaws or operating, management or partnership agreement, or other organizational or governing documents, and (ii) a long form good standing certificate for each Loan Party from its jurisdiction of organization or the substantive equivalent available in the jurisdiction of each Loan Party from the appropriate governmental officer in such jurisdiction.
(d) No Default Certificate. The Administrative Agent shall have received a certificate, signed by a Financial Officer of Holdings, dated as of the Effective Date (i) stating that no Default has occurred and is continuing as of such date, (ii) stating that the representations and warranties contained in the Loan Documents are true and correct in all material respects (or, in the case of any representation or warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, in all respects) as of such date, other than any representation or warranty which by its terms is made as of a specified date, which certificate shall state that such representation or warranty is true and correct in all material respects (or, in the case of any representation or warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, in all respects) only as of such specified date, and (iii) certifying as to any other factual matters as may be reasonably requested by the Administrative Agent.
(e) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses required to be reimbursed for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Effective Date. All such amounts will be paid with proceeds of Loans made on the Effective Date and will be reflected in the funding instructions given by the Borrower to the Administrative Agent on or before the Effective Date.
(f) Lien and IP Searches. The Administrative Agent shall have received the results of a recent lien search in the jurisdiction of organization of each Loan Party and each jurisdiction where assets of the Loan Parties are located, and the results of search reports in respect of the intellectual property of the Loan Parties, and such searches shall reveal no Liens on any of the assets of the Loan Parties except for liens permitted by Section 6.02 or discharged on or prior to the Effective Date pursuant to a pay-off letter or other documentation satisfactory to the Administrative Agent.
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(g) [Reserved].
(h) Funding Account. The Administrative Agent shall have received a notice (which notice shall be in the form of a Borrowing Request or such other form or method as approved by the Administrative Agent) setting forth the deposit account of the Borrower (as may be updated from time to time by written notice from the Borrower to the Administrative Agent, the “Funding Account”) to which the Administrative Agent is authorized by the Borrower to transfer the proceeds of any Borrowings requested or authorized pursuant to this Agreement and which, in the case of a Borrowing Request, shall be delivered in accordance with Section 2.03, together with a customary funding indemnification letter to the extent any such Loan will be a Term Benchmark Loan.
(i) Existing Credit Agreement. Except as otherwise provided under Section 1.10, the Administrative Agent shall have received, for the ratable account of each “Lender”, “Issuing Bank” and “Swingline Lender” under and as defined in the Existing Credit Agreement, as the case may be, (i) all accrued and unpaid commitment fees, letter of credit fees, fronting fees and interest owing thereunder immediately prior to the effectiveness of this Agreement, (ii) the principal amount of all unreimbursed “LC Disbursements” outstanding under and as defined in the Existing Credit Agreement, and (iii) the principal amount of all “Swingline Loans” and funded participations in “Swingline Loans” and “Letters of Credit” outstanding under and as defined in the Existing Credit Agreement immediately prior to the effectiveness of this Agreement; provided that any “Revolving Loans” and “Term Loans” outstanding under and as defined in the Existing Credit Agreement immediately prior to the effectiveness of this Agreement shall remain outstanding and be re-evidenced as Revolving Loans or Term Loans, as applicable, outstanding hereunder on the Effective Date to the extent provided under Section 1.10.
(j) Solvency. The Administrative Agent shall have received a solvency certificate signed by a Financial Officer of Holdings dated the Effective Date in form and substance reasonably satisfactory to the Administrative Agent.
(k) Pledged Equity Interests; Stock Powers; Pledged Notes. To the extent not previously delivered to the Administrative Agent pursuant to the Existing Credit Agreement, the Administrative Agent shall have received (i) copies of the certificates representing the Equity Interests pledged pursuant to the Security Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note and other instrument or possessory collateral (if any) pledged to the Administrative Agent pursuant to the Security Agreement, endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof or accompanied by allonges or other acknowledgements signed in blank, as applicable.
(l) Filings, Registrations and Recordings. Each document (including any Uniform Commercial Code financing statements and federal intellectual property filings) required by the Collateral Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 6.02), shall be in proper form for filing, registration or recordation.
(m) Insurance. Subject to Section 5.14, the Administrative Agent shall have received evidence of insurance coverage in form, scope, and substance reasonably satisfactory to the Administrative Agent and otherwise in compliance with the terms of Section 5.10 of this Agreement and the Security Agreement.
(n) Due Diligence. The Administrative Agent and its counsel shall have completed all legal due diligence, the results of which shall be satisfactory to Administrative Agent in its sole discretion.
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(o) USA PATRIOT Act, Etc. At least five (5) days prior to the Effective Date, (i) the Administrative Agent and Lenders shall have received (x) all documentation and other information regarding the Loan Parties requested in connection with applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act, to the extent requested in writing of the Borrower at least ten (10) days prior to the Effective Date and (y) a properly completed and signed IRS Form W-8 or W-9, as applicable, for each Loan Party and (ii) to the extent the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, any Lender that has requested, in a written notice to the Borrower at least ten (10) days prior to the Effective Date, a Beneficial Ownership Certification in relation to the Borrower shall have received such Beneficial Ownership Certification (provided that, upon the execution and delivery by such Lender of its signature page to this Agreement, the condition set forth in this clause (ii) shall be deemed to be satisfied).
(p) Investment Policy. The Administrative Agent shall have received a copy of Borrower’s investment policy.
(q) Other Documents. The Administrative Agent shall have received such other documents as the Administrative Agent, the Issuing Bank, any Lender or their respective counsel may have reasonably requested (including, without limitation, a properly completed letter of credit application (whether standalone or pursuant to a master agreement, as applicable) if the issuance of a Letter of Credit will be required on the Effective Date, together with an executed copy of the Issuing Bank’s master agreement for the issuance of commercial Letters of Credit).
Without limiting the generality of the provisions of Section 9.02, for purposes of determining compliance with the conditions specified in this Section 4.01 on the Effective Date, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Effective Date specifying its objection thereto. The Administrative Agent shall notify the Loan Parties, the Lenders and the Issuing Bank of the Effective Date, and such notice shall be conclusive and binding.
SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend or extend any Letter of Credit, is subject to the satisfaction of the following conditions:
(a) The representations and warranties of the Loan Parties set forth in the Loan Documents shall be true and correct in all material respects (or, in the case of any representation or warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, in all respects) with the same effect as though made on and as of the date of such Borrowing or the date of issuance, amendment or extension of such Letter of Credit, as applicable (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects (or, in the case of any representation or warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, in all respects) only as of such specified date).
(b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment or extension of such Letter of Credit, as applicable, no Default or Event of Default shall have occurred and be continuing.
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Each Borrowing and each issuance, amendment or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section; provided that, in the case of any Incremental Term Loan the proceeds of which are, substantially concurrently with the receipt thereof, solely to be used by the Borrower or any Subsidiary to finance, in whole or in part, a Limited Condition Transaction, then (1) the foregoing clause (b) shall be limited to no Event of Default pursuant to Section 7.01(a), (b), (h), (i) or (m) having occurred, being continuing or resulting therefrom, (2) the Borrower shall only be required to satisfy the requirements of the above clause (a) as of the LCT Test Date for such Limited Condition Transaction, (3) the representations and warranties so given in respect of the funding of such Loan or Borrowing shall be limited to the Specified Representations and (4) the Borrower shall only be required to satisfy the requirements of the above clause (c) at such time as provided under Section 1.05(b).
Notwithstanding the failure to satisfy the conditions precedent set forth in paragraphs (a) or (b) of this Section, unless otherwise directed by the Required Lenders, the Administrative Agent may, but shall have no obligation to, continue to make Loans and an Issuing Bank may, but shall have no obligation to, issue, amend or extend, or cause to be issued, amended or extended, any Letter of Credit for the ratable account and risk of Lenders from time to time if the Administrative Agent believes that making such Loans or issuing, amending or extending, or causing the issuance, amendment or extension of, any such Letter of Credit is in the best interests of the Lenders.
ARTICLE V
Affirmative Covenants
Until the Payment in Full of the Secured Obligations, each Loan Party covenants and agrees, jointly and severally with all of the other Loan Parties, with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. Holdings and the Borrower will furnish to the Administrative Agent and each Lender:
(a) within one hundred and forty-five (145) days after the end of each fiscal year of Holdings (which time period may be extended by an additional thirty (30) days by the Administrative Agent in its sole discretion) (commencing with the fiscal year ending December 31, 2024) (or, to the extent applicable, if earlier, by the date that the Annual Report on Form 10-K of the Relevant Public Company for such fiscal year would be required to be filed under the rules and regulations of the SEC, giving effect to any automatic extension available thereunder for the filing of such form), its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by RSM US LLP or another firm of independent public accountants of recognized national standing (without a “going concern” or like qualification, commentary or exception, and without any qualification or exception as to the scope of such audit (other than qualifications resulting directly from the upcoming Revolving Credit Maturity Date or Term Loan Maturity Date)) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; provided that any portion of any such period occurring prior to the Effective Date shall not include Holdings; provided further that, to the extent Holdings is not the Relevant Public Company, the filing of the Relevant Public Company’s Form 10-K with the SEC shall satisfy the requirements set forth in this clause (a) so long as (x) such filing is publicly available on the Electronic Data Gathering, Analysis and Retrieval system (EDGAR) of the SEC and contains such audited consolidated financial statements required under this clause (a) (it being understood and agreed that any requirements of this clause (a) not included in such publicly available filing shall be separately delivered to the Administrative Agent and each Lender as otherwise provided above), (y) such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such Relevant Public Company on the one hand, and the information relating to Holdings and its consolidated Subsidiaries on a standalone basis, on the other hand and (z) such materials shall be reported on by an independent registered public accounting firm of recognized national standing, with an unmodified report by such independent registered public accountants without an emphasis of matter paragraph related to going concern as defined by Statement on Accounting Standards AU-C Section 570 “The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern” (or any similar statement under any amended or successor rule as may be adopted by the Auditing Standards Board from time to time) (other than qualifications resulting directly from the upcoming Revolving Credit Maturity Date or Term Loan Maturity Date) (it being understood that there shall be no obligation to audit any such consolidating information), and, for the avoidance of doubt, without modification as to the scope of audit;
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(b) within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of Holdings (commencing with the fiscal year ending March 31, 2025) (or, to the extent applicable, if earlier, by the date that the Quarterly Report on Form 10-Q of the Relevant Public Company for such fiscal quarter would be required to be filed under the rules and regulations of the SEC, giving effect to any automatic extension available thereunder for the filing of such form), its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a Financial Officer of Holdings as presenting fairly in all material respects the financial condition and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; provided that any portion of any such period occurring prior to the Effective Date shall not include Holdings; provided further that, to the extent Holdings is not the Relevant Public Company, the filing of the Relevant Public Company’s Form 10-Q with the SEC shall satisfy the requirements set forth in this clause (b) so long as (x) such filing is publicly available on the Electronic Data Gathering, Analysis and Retrieval system (EDGAR) of the SEC and contains such unaudited consolidated financial statements required under this clause (b) (it being understood and agreed that any requirements of this clause (b) not included in such publicly available filing shall be separately delivered to the Administrative Agent and each Lender as otherwise provided above) and (y) such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such Relevant Public Company on the one hand, and the information relating to Holdings and its consolidated Subsidiaries on a standalone basis, on the other hand;
(c) concurrently with any delivery of financial statements under clause (a) or (b) above (commencing with the fiscal quarter ending June 30, 2024) (collectively or individually, as the context requires, the “Financial Statements”), a Compliance Certificate (i) prior to the consummation of a Qualified IPO, certifying the Financial Statements delivered under clause (a) or (b) above, as applicable, as presenting fairly in all material respects the financial condition and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, and in the case of the Financial Statements delivered under clause (b) subject to normal year-end audit adjustments and the absence of footnotes, (ii) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (iii) setting forth reasonably detailed calculations demonstrating compliance with Section 6.12 (to the extent required hereunder for such period) and (iv) prior to a Qualified IPO, stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the Financial Statements accompanying such certificate;
(d) concurrently with any delivery of Financial Statements under clause (a) above, a management discussion and analysis report, in reasonable detail, signed by the chief financial officer of Holdings, describing the financial condition and results of operation of the Loan Parties and their Subsidiaries for the fiscal year of Holdings then ended;
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(e) prior to a Qualified IPO, as soon as available, but in any event no later than sixty (60) days after the end of each fiscal year of Holdings, a copy of the budget of Holdings for each month of the upcoming fiscal year (the “Annual Budget”) in form and substance reasonably satisfactory to the Administrative Agent;
(f) promptly following any request therefor, (x) such other information regarding the operations, changes in ownership of Equity Interests, business affairs and financial condition of any Loan Party or any Subsidiary (including, for the avoidance of doubt, any Excluded Subsidiary), or compliance with the terms of this Agreement, as the Administrative Agent or any Lender (through the Administrative Agent) may reasonably request and (y) information and documentation reasonably requested by the Administrative Agent or any Lender for purposes of compliance with applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act and the Beneficial Ownership Regulation;
(g) at any time after a Qualified IPO, promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Relevant Public Company, any Loan Party or any Subsidiary with the SEC, or any Governmental Authority succeeding to any or all of the functions of the SEC, or with any national securities exchange, or distributed by the Relevant Public Company or the Borrower to its shareholders generally, as the case may be; and
(h) promptly after any request therefor by the Administrative Agent or any Lender, copies of (i) any documents described in Section 101(k)(1) of ERISA that any Loan Party or any ERISA Affiliate may request with respect to any Multiemployer Plan and (ii) any notices described in Section 101(l)(1) of ERISA that any Loan Party or any ERISA Affiliate may request with respect to any Multiemployer Plan; provided that if any Loan Party or any ERISA Affiliate has not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, applicable Loan Party or the applicable ERISA Affiliate shall promptly make a request for such documents and notices from such administrator or sponsor and shall provide copies of such documents and notices promptly after receipt thereof.
Documents required to be delivered pursuant to clauses (a), (b), (d), (g) or (h) of this Section 5.01 (to the extent any such documents are included in materials otherwise filed with the SEC, as applicable) may be delivered electronically and shall be deemed to have been so delivered on the date (i) on which such materials are publicly available as posted on the Electronic Data Gathering, Analysis and Retrieval system (EDGAR) or (ii) on which such documents are posted on behalf of Holdings on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether made available by the Administrative Agent); provided that (A) upon written request by the Administrative Agent (or any Lender through the Administrative Agent) to Holdings, Holdings shall deliver paper copies of such documents to the Administrative Agent or such Lender until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (B) Holdings shall notify the Administrative Agent and each Lender (by facsimile or through Electronic System) of the posting of any such documents and provide to the Administrative Agent through Electronic System electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by any Loan Party with any such request by a Lender for delivery, and each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such document to it and maintaining its copies of such documents.
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SECTION 5.02. Notices of Material Events. The Loan Parties will furnish to the Administrative Agent and each Lender prompt (but in any event within any time period that may be specified below) written notice of the following:
(a) the occurrence of any Default or Event of Default;
(b) receipt of any notice of any investigation by a Governmental Authority or any Proceeding commenced or threatened against any Loan Party or any Subsidiary that (i) seeks damages in excess of $2,000,000, (ii) seeks injunctive relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its assets, (iv) alleges criminal misconduct by any Loan Party or any Subsidiary, (v) alleges the violation of, or seeks to impose remedies under, any Environmental Law or related Requirement of Law, or seeks to impose Environmental Liability, (vi) asserts liability on the part of any Loan Party or any Subsidiary in excess of $2,000,000 in respect of any tax, fee, assessment, or other governmental charge, or (vii) involves any product recall;
(c) any material change in accounting or financial reporting practices by Holdings or any of its Subsidiaries;
(d) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of Holdings and its Subsidiaries in an aggregate amount exceeding $2,000,000;
(e) within two (2) Business Days after the occurrence thereof, any Loan Party entering into a Swap Agreement or an amendment to a Swap Agreement, together with copies of all agreements evidencing such Swap Agreement or amendment;
(f) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect; and
(g) any change in the information provided in the Beneficial Ownership Certification delivered to such Lender that would result in a change to the list of beneficial owners identified in such certification.
Each notice delivered under this Section (i) shall be in writing, (ii) shall contain a heading or a reference line that reads “Notice under Section 5.02 of Neptune Flood Incorporated Amended and Restated Credit Agreement dated April 10, 2025” and (iii) shall be accompanied by a statement of a Financial Officer or other executive officer of Holdings setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. Each Loan Party will, and will cause each Subsidiary to, (a) do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, qualifications, licenses, permits, privileges, franchises, governmental authorizations, intellectual property rights, licenses and permits material to the conduct of its business, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted and (b) carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted; provided that nothing in this Section 5.03 shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03.
SECTION 5.04. Payment of Obligations. Each Loan Party will, and will cause each Subsidiary to, pay or discharge all Material Indebtedness and all other material liabilities and obligations, including Taxes, before the same shall become delinquent or in default, in each case, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) such Loan Party or Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect; provided, however, that each Loan Party will, and will cause each Subsidiary to, remit withholding taxes and other payroll taxes to appropriate Governmental Authorities as and when claimed to be due, notwithstanding the foregoing exceptions.
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SECTION 5.05. Maintenance of Properties. Each Loan Party will, and will cause each Subsidiary to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.
SECTION 5.06. Books and Records; Inspection Rights. Each Loan Party will, and will cause each Subsidiary to, (a) keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities and (b) permit any representatives designated by the Administrative Agent or any Lender (including employees of the Administrative Agent, any Lender or any consultants, accountants, lawyers, agents and appraisers retained by the Administrative Agent), upon reasonable prior notice, to visit and inspect its properties, conduct at the Loan Party’s premises field examinations of the Loan Party’s assets, liabilities, books and records, including examining and making extracts from its books and records, environmental assessment reports and Phase I or Phase II studies, and to discuss its affairs, finances and condition with its officers and independent accountants (and hereby authorizes the Administrative Agent and each Lender to contact its independent accountants directly) and to provide contact information for each bank where each Loan Party has a depository and/or securities account and each such Loan Party hereby authorizes the Administrative Agent and each Lender to contact the bank(s) in order to request bank statements and/or balances, all at such reasonable times and as often as reasonably requested. The Loan Parties acknowledge that the Administrative Agent, after exercising its rights of inspection, may prepare and distribute to the Lenders certain reports pertaining to the Loan Parties’ assets for internal use by the Administrative Agent and the Lenders.
SECTION 5.07. Compliance with Laws and Material Contractual Obligations. Each Loan Party will, and will cause each Subsidiary to, (i) comply with its organizational documents, (ii) comply with each other Requirement of Law applicable to it or its property (including without limitation Environmental Laws) and (iii) perform its obligations under agreements to which it is a party, except, in the case of the foregoing clauses (ii) and (iii), to the extent that any such failure to so comply or perform could not reasonably be expected result in a Material Adverse Effect. Each Loan Party will maintain in effect and enforce policies and procedures designed to ensure compliance by such Loan Party, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
SECTION 5.08. Use of Proceeds.
(a) The proceeds of the Loans and the Letters of Credit will be used only to (i) refinance existing indebtedness, (ii) finance the Closing Date Dividend and (iii) finance the working capital needs and general corporate purposes of Holdings and its Subsidiaries in the ordinary course of business (including, without limitation, Permitted Acquisitions). The proceeds of Incremental Term Loans shall be used in such manner as agreed between the Borrower and the applicable Lenders providing such Incremental Term Loans so long as such use of proceeds is not otherwise prohibited by the terms of this Agreement. No part of the proceeds of any Loan and no Letter of Credit will be used, whether directly or indirectly, for any purpose that entails a violation of any of the regulations of the Federal Reserve Board, including Regulations T, U and X.
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(b) The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that each Loan Party and its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, except to the extent permitted for a Person required to comply with Sanctions, or (iii) in any manner that would result in the violation of any Sanctions applicable to any party hereto.
SECTION 5.09. Accuracy of Information. The Loan Parties will ensure that any information, including financial statements or other documents, furnished to the Administrative Agent or the Lenders in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder contains no 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, and the furnishing of such information shall be deemed to be a representation and warranty by the Borrower on the date thereof as to the matters specified in this Section 5.09; provided that, with respect to the Projections and the Annual Budget, the Loan Parties will cause the Projections and the Annual Budget to be prepared in good faith based upon assumptions believed to be reasonable at the time.
SECTION 5.10. Insurance. Each Loan Party will, and will cause each Subsidiary to, (a) maintain with financially sound and reputable carriers having a financial strength rating of at least A- by A.M. Best Company (i) insurance in such amounts (with no greater risk retention) and against such risks (including loss or damage by fire and loss in transit; theft, burglary, pilferage, larceny, embezzlement, and other criminal activities; business interruption; and general liability) and such other hazards, as is customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations and (ii) all insurance required pursuant to the Collateral Documents and (b) comply with the applicable Flood Insurance Requirements; provided that the Borrower may, in its sole discretion, self-insure for errors and omissions insurance, so long as such self-insurance is in such amounts and against such risks as is customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations. The Borrower will furnish to the Lenders, upon request of the Administrative Agent, but no less frequently than annually, information in reasonable detail as to the insurance so maintained.
SECTION 5.11. Casualty and Condemnation. The Borrower (a) will furnish to the Administrative Agent and the Lenders prompt written notice of any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any material portion of the Collateral or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of this Agreement and the Collateral Documents.
SECTION 5.12. Depository Banks. Holdings and each Subsidiary will establish and maintain the Administrative Agent as its (a) principal depository bank, including for the maintenance of operating, administrative, cash management, collection activity, and other deposit accounts for the conduct of its business and (b) principal provider of other bank products.
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SECTION 5.13. Subsidiary Guarantors; Additional Collateral; Further Assurances.
(a) As promptly as possible but in any event within forty-five (45) days (or such later date as may be agreed upon by the Administrative Agent) after (A) any Person becomes an Intermediate Holdco or a Subsidiary (other than an Excluded Subsidiary), (B) any Subsidiary ceases to be an Excluded Subsidiary or (C) any Subsidiary is designated by the Borrower as a Discretionary Guarantor in accordance with the definition of “Discretionary Guarantor”, then, in each case, the Borrower shall (i) provide the Administrative Agent with written notice thereof setting forth information in reasonable detail describing the material assets of such Person and (ii) cause each such Intermediate Holdco or Subsidiary to execute and deliver to the Administrative Agent a Joinder Agreement and a joinder to the Security Agreement (in the form contemplated thereby) pursuant to which such Intermediate Holdco or Subsidiary, as applicable, agrees to be bound by the terms and provisions thereof, which shall be accompanied by appropriate organizational resolutions, other organizational documentation and, if reasonably requested by the Administrative Agent, legal opinions in form and substance reasonably satisfactory to the Administrative Agent and its counsel. In connection therewith, the Administrative Agent shall have received all documentation and other information regarding such newly formed or acquired Subsidiaries or such Intermediate Holdco as may be required to comply with the applicable “know your customer” rules and regulations, including the USA Patriot Act. Each such Person delivering a Joinder Agreement (x) shall automatically become a Subsidiary Guarantor hereunder and thereupon shall have all of the rights, benefits, duties, and obligations in such capacity under the Loan Documents and (y) will grant Liens to the Administrative Agent, for the benefit of the Administrative Agent and the other Secured Parties, in any property of such Loan Party which constitutes Collateral.
(b) Each Loan Party will cause, and will cause each other Loan Party to cause, all of its owned property (other than Excluded Property) to be subject at all times to first priority, perfected Liens in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Secured Obligations in accordance with the terms and conditions of the Collateral Documents, subject in any case to Liens permitted by Section 6.02 to the extent any such Permitted Encumbrances would have priority over the Liens in favor of the Administrative Agent pursuant to any applicable law. Without limiting the generality of the foregoing, each Loan Party will cause (x) 100% of the issued and outstanding Equity Interests of the Borrower and (y) 100% of the issued and outstanding Equity Interests held by each Loan Party in each of its direct Subsidiaries (including, for the avoidance of doubt, 100% of the issued and outstanding Equity Interests of each Intermediate Holdco, but excluding any Equity Interests that constitute Excluded Property), in each case, to be subject at all times to a first priority, perfected Lien in favor of the Administrative Agent for the benefit of the Administrative Agent and the other Secured Parties to secure the Secured Obligations in accordance with the terms and conditions of the Collateral Documents or other pledge or security documents as the Administrative Agent shall reasonably request. Notwithstanding the foregoing, no such pledge agreement in respect of the Equity Interests of a Foreign Subsidiary shall be required to the extent the Administrative Agent or its counsel determines that such pledge would not provide material credit support for the benefit of the Secured Parties pursuant to legally valid, binding and enforceable pledge agreements.
(c) Without limiting the foregoing, each Loan Party will, and will cause each Subsidiary to, execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents, agreements and instruments, and will take or cause to be taken such further actions (including the filing and recording of financing statements, fixture filings, and other documents and such other actions or deliveries of the type required by Section 4.01, as applicable), which may be required by any Requirement of Law or which the Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents and to ensure perfection and priority of the Liens created or intended to be created by the Collateral Documents, all in form and substance reasonably satisfactory to the Administrative Agent and all at the expense of the Loan Parties.
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(d) [Reserved].
(e) Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, the Administrative Agent may (but shall not be obligated to) determine in its sole and reasonable discretion that the cost to the Loan Parties of granting and perfecting any Lien is disproportionate to the benefit to be realized by the Administrative Agent, the Lenders and the other Secured Parties by perfecting a Lien in a given asset or group of assets included in the Collateral and, in each such case, the Administrative Agent shall be permitted to, without the consent of the Lenders or Required Lenders, waive any requirement of perfection of any such Lien required under the Loan Documents.
SECTION 5.14. Post-Closing Requirements. Not later than the dates set forth in Schedule 5.14 (or such later dates as the Administrative Agent shall agree in its sole discretion) or as otherwise required thereunder, the Loan Parties shall take the actions set forth on Schedule 5.14.
ARTICLE VI
Negative Covenants
Until the Payment in Full of the Secured Obligations, each Loan Party covenants and agrees, jointly and severally with all of the other Loan Parties, with the Lenders that:
SECTION 6.01. Indebtedness. No Loan Party will, nor will it permit any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness, except:
(a) the Secured Obligations;
(b) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and any Refinance Indebtedness in respect thereof;
(c) Indebtedness (i) of any Loan Party to another Loan Party, (ii) of any Loan Party to any Subsidiary and (iii) of any Subsidiary to any Loan Party or any other Subsidiary, provided that (i) Indebtedness of any Subsidiary that is not a Loan Party to the Borrower or any other Loan Party shall be subject to Section 6.04 and (ii) Indebtedness of any Loan Party to any Subsidiary that is not a Loan Party shall be subordinated to the Secured Obligations on terms reasonably satisfactory to the Administrative Agent;
(d) Guarantees by any Loan Party of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of any Loan Party or any other Subsidiary, provided that (i) the Indebtedness so Guaranteed is permitted by this Section 6.01, (ii) Guarantees by the Borrower or any other Loan Party of Indebtedness of any Subsidiary that is not a Loan Party shall be subject to Section 6.04 and (iii) Guarantees permitted under this clause (d) shall be subordinated to the Secured Obligations on the same terms as the Indebtedness so Guaranteed is subordinated to the Secured Obligations;
(e) Indebtedness incurred to finance the acquisition, construction or improvement of any fixed or capital assets (whether or not constituting purchase money Indebtedness), including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness in accordance with clause (f) below; provided that (i) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this clause (e), together with any Refinance Indebtedness in respect thereof permitted by clause (f) below, shall not exceed $5,000,000 at any time outstanding;
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(f) Indebtedness which represents extensions, renewals, refinancing or replacements (such Indebtedness being so extended, renewed, refinanced or replaced being referred to herein as the “Refinance Indebtedness”) of any of the Indebtedness described in clauses (b), (e), (i) and (p) hereof (such Indebtedness being referred to herein as the “Original Indebtedness”); provided that (i) such Refinance Indebtedness does not increase the principal amount or interest rate of the Original Indebtedness (except by an amount equal to the sum of (A) any undrawn commitments under the financing documents for the Original Indebtedness, plus (B) the amount of all accrued and unpaid interest on such Original Indebtedness, plus (C) the amount of any premiums (including tender premiums), make-whole amounts, fees or penalties payable with respect to such Original Indebtedness, (D) the amount of all accrued and unpaid fees (including any exit consent fees) on such Original Indebtedness, plus (E) the amount of all fees (including arrangement, commitment, structuring, underwriting, ticking, amendment, closing and other similar fees), commissions, costs, expenses and other amounts associated with such Refinance Indebtedness), (ii) any Liens securing such Refinance Indebtedness are not extended to any additional property of any Loan Party or any Subsidiary, (iii) no Loan Party or any Subsidiary that is not originally obligated with respect to repayment of such Original Indebtedness is required to become obligated with respect to such Refinance Indebtedness, (iv) the maturity date of such Refinance Indebtedness does not occur prior to the maturity date for such Original Indebtedness, and such Refinance Indebtedness does not result in a shortening of the average weighted maturity of such Original Indebtedness, (v) the terms of such Refinance Indebtedness are not less favorable to the obligor thereunder, taken as a whole, than the original terms of such Original Indebtedness and (vi) if such Original Indebtedness was subordinated in right of payment to the Obligations or any of the other Secured Obligations, then the terms and conditions of such Refinance Indebtedness must include subordination terms and conditions that are at least as favorable to the Administrative Agent and the Lenders as those that were applicable to such Original Indebtedness;
(g) Indebtedness owed to any Person providing workers’ compensation, health, disability or other employee benefits or property, errors and omissions, casualty or liability insurance, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business;
(h) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business;
(i) Subordinated Indebtedness in an aggregate principal amount, together with any Refinance Indebtedness in respect thereof permitted by clause (f) above, not exceeding the greater of (x) $8,000,000 and (y) 10% of Applicable EBITDA at any time outstanding;
(j) Indebtedness in the form of Swap Agreements permitted by Section 6.07;
(k) Indebtedness which may be deemed to exist in connection with agreements providing for customary indemnification, purchase price adjustments and similar obligations (but excluding earnouts, seller notes and similar obligations) in connection with the acquisition or disposition of assets in accordance with the requirements of this Agreement, so long as any such obligations are those of the Person making the respective acquisition or sale, and are not guaranteed by any other Person except as permitted by Section 6.01(d);
(l) Indebtedness representing deferred compensation, deferred compensation plans or other similar arrangements to employees of the Borrower (or any direct or indirect parent of the Borrower) and their Subsidiaries, in each case, incurred in the ordinary course of business;
(m) Indebtedness representing any taxes, assessments or governmental charges to the extent (i) the validity or amount thereof is being contested in good faith by appropriate proceedings, (ii) such Loan Party or Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (iii) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect;
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(n) all premiums (if any), interest (including post petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (m) above, in each case, other than any such premium, interest, fee, expense, charge or other obligation that increases the principal amount of any Indebtedness or other obligation incurred in reliance on any of clauses (a) through (m) above;
(o) contingent obligations in respect of leases (other than Capital Lease Obligations) that do not constitute Indebtedness, in each case entered into in the ordinary course of business;
(p) Indebtedness of any Person that becomes a Subsidiary after the date hereof; provided that (i) such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary, (ii) the aggregate principal amount of Indebtedness permitted by this clause (p), together with any Refinance Indebtedness in respect thereof permitted by clause (f) above, shall not exceed the greater of (x) $8,000,000 and (y) 10% of Applicable EBITDA at any time outstanding and (iii) such Indebtedness shall not be Guaranteed by, or secured by assets of, any Loan Party;
(q) to the extent constituting Indebtedness, any earn-out, seller note or similar deferred payment obligation arising in connection with a Permitted Acquisition, in each case, so long as the payment there is subordinated to the Secured Obligation pursuant to a subordination agreement reasonably satisfactory to the Administrative Agent (it being agreed that the applicable obligor shall be permitted to make regularly scheduled payments of such obligations so long as no Event of Default has occurred and is continuing at the time of and immediately after giving effect to such payments); and
(r) other unsecured Indebtedness in an aggregate outstanding principal amount not exceeding at any time the greater of (x) $12,000,000 and (y) 15% of Applicable EBITDA.
SECTION 6.02. Liens. No Loan Party will, nor will it permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including Accounts) or rights in respect of any thereof, except:
(a) Liens created pursuant to any Loan Document;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of Holdings, the Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not apply to any other property or asset of Holdings, the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(d) Liens on fixed or capital assets acquired, constructed or improved by Holdings, the Borrower or any Subsidiary; provided that (i) such Liens secure Indebtedness permitted by Section 6.01(e), (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such Liens shall not apply to any other property or assets of Holdings, the Borrower or any Subsidiary;
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(e) any Lien existing on any property or asset prior to the acquisition thereof by Holdings, the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Loan Party after the date hereof prior to the time such Person becomes a Loan Party; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Loan Party, as the case may be, (ii) such Lien shall not apply to any other property or assets of any Loan Party or Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Loan Party, as the case may be, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(f) Liens of a collecting bank arising in the ordinary course of business under Section 4-210 of the UCC in effect in the relevant jurisdiction covering only the items being collected upon;
(g) Liens arising out of Sale and Leaseback Transactions permitted by Section 6.06;
(h) (i) licenses, sublicenses, leases or subleases granted to other Persons that, in the reasonable good faith judgment of Holdings, are not materially interfering with, or are not material to, the conduct of the business of Holdings or any of its Subsidiaries and (y) any interest or title of a lessor, sublessor or licensor under any lease or license agreement permitted by this Agreement to which any Loan Party or any of its Subsidiaries is a party, in each case, other than any exclusive license or sub-license of intellectual property;
(i) Liens arising from precautionary UCC financing statement filings regarding operating leases entered into in the ordinary course of business;
(j) statutory and common law landlords’ liens under leases to which Holdings or any of its Subsidiaries is a party in the ordinary course of business;
(k) Liens on property or assets acquired pursuant to a Permitted Acquisition, or on property or assets of a Subsidiary in existence at the time such Subsidiary is acquired pursuant to a Permitted Acquisition, provided that (i) any Indebtedness that is secured by such Liens is permitted under Section 6.01(p) and (ii) such Liens are not incurred in connection with or in contemplation or anticipation of, such Permitted Acquisition and do not attach to any asset of Holdings or any of its Subsidiaries;
(l) Liens arising out of any conditional sale, title retention, consignment or other similar arrangements for the sale of goods entered into by Holdings or any of its Subsidiaries in the ordinary course of business to the extent such Liens do not attach to any assets other than the goods subject to such arrangements;
(m) ground leases in respect of real property on which facilities owned or leased by Holdings or any of its Subsidiaries are located;
(n) (i) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto and (ii) Liens arising out of deposits of cash and Cash Equivalents, security deductibles, self-insurance, co-payment, co-insurance, retentions and similar obligations (including Liens on cash and Cash Equivalents securing such obligations) to providers of insurance in the ordinary course of business;
(o) Liens granted by a Subsidiary that is not a Loan Party in favor of the Borrower or another Loan Party in respect of Indebtedness owed by such Subsidiary; and
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(p) Liens not otherwise permitted under this Section 6.02 securing Indebtedness and other obligations in an aggregate outstanding amount not to exceed at any time the greater of (x) $12,000,000 and (y) 15% of Applicable EBITDA.
SECTION 6.03. Fundamental Changes; Activities of Holdings.
(a) No Loan Party will, nor will it permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or otherwise Dispose of all or substantially all of its assets, or all or substantially all of the Equity Interests of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing:
(i) the Borrower or any Subsidiary may merge or consolidate with and into, or be dissolved or liquidated into, the Borrower or any Subsidiary, so long as (A) in the case of any such merger, consolidation, dissolution or liquidation involving the Borrower, the Borrower is the surviving or continuing entity of any such merger, consolidation, dissolution or liquidation, (B) subject to the immediately preceding clause (A), if such transaction involves a Subsidiary which is a Loan Guarantor, a Loan Guarantor shall be the surviving or continuing entity of any such merger, consolidation, dissolution or liquidation, and (C) any security interests granted to the Administrative Agent for the benefit of the Secured Parties pursuant to the Collateral Documents in the assets of such Subsidiary shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such merger, consolidation, dissolution or liquidation) and all actions required to maintain said perfected status have been taken; provided that any such merger or consolidation involving a Person that is not a wholly-owned Subsidiary immediately prior to such merger or consolidation shall not be permitted unless also permitted by Section 6.04;
(ii) any Foreign Subsidiary may be merged, consolidated or amalgamated with and into, or be dissolved or liquidated into, or transfer any of its assets to, any Subsidiary, so long as any security interests granted to the Administrative Agent for the benefit of the Secured Parties pursuant to the Collateral Documents in the Equity Interests and other assets of such Foreign Subsidiary shall remain in full force and effect and perfected and enforceable (to at least the same extent as in effect immediately prior to such merger, consolidation, amalgamation, dissolution, liquidation or transfer) and all actions required to maintain said perfected status have been taken;
(iii) Permitted Acquisitions may be consummated in accordance with the requirements of this Agreement;
(iv) the sale or issuance of (A) Equity Interests by the Borrower to Holdings or by any Subsidiary to the Borrower or any other Loan Party, (B) Qualified Stock of any Subsidiary that is not a Loan Party to its direct parent or (C) Equity Interests by Holdings that do not result in a Change in Control; provided, that, for the avoidance of doubt, any Disqualified Stock so issued shall be subject to Section 6.01; and
(v) any Subsidiary that is not a Loan Party may liquidate or dissolve if Holdings determines in good faith that such liquidation or dissolution is in the best interests of Holdings and is not materially disadvantageous to the Lenders (as reasonably determined by the Administrative Agent); provided that any such merger or consolidation involving a Person that is not a wholly-owned Subsidiary immediately prior to such merger or consolidation shall not be permitted unless also permitted by Section 6.04.
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(b) No Loan Party will, nor will it permit any Subsidiary to, engage in any business other than businesses of the type conducted by Holdings and its Subsidiaries on the date hereof and businesses reasonably related thereto.
(c) No Loan Party will, nor will it permit any Subsidiary to, change its fiscal year or any fiscal quarter from the basis in effect on the Effective Date.
(d) No Loan Party will change the accounting basis upon which its financial statements are prepared.
(e) No Loan Party will change the tax filing elections it has made under the Code.
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. No Loan Party will, nor will it permit any Subsidiary to, form any subsidiary after the Effective Date, or purchase, hold or acquire (including pursuant to any merger or consolidation with any Person that was not a Loan Party and a wholly-owned Subsidiary prior to such merger or consolidation) any Equity Interests, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any Person or any assets of any other Person constituting a business unit (whether through purchase of assets, merger or otherwise), except:
(a) Permitted Investments;
(b) investments in existence on the date hereof and described in Schedule 6.04;
(c) (i) any Loan Party may make intercompany loans and advances to any other Loan Party, (ii) any Subsidiary which is not a Loan Party may make intercompany loans and advances to any Loan Party or to any Subsidiary which is not a Loan Party and (iii) any Loan Party may make intercompany loans and advances to any Subsidiary which is not a Loan Party (such intercompany loans and advances referred to in the immediately preceding clauses (i), (ii) and (iii), collectively, the “Intercompany Loans”); provided that (A) at no time shall the aggregate outstanding principal amount of all Intercompany Loans made pursuant to Section 6.04(c)(iii), when added to the aggregate outstanding amount of all contributions and acquisitions of Equity Interests made pursuant to Section 6.04(d)(ii) and the aggregate amount of all Intercompany Loans capitalized or forgiven during the term of this Agreement pursuant to Section 6.04(d)(ii) and the aggregate outstanding amount of all Guarantees permitted under the proviso to Section 6.04(e), exceed an amount equal to the greater of (x) $4,000,000 and (y) 5% of Applicable EBITDA (determined without regard to any write-downs or write-offs of such loans and advances), net of any returns on any such investment in the form of a cash principal repayment, cash distribution, cash dividend or cash redemption, as applicable, (B) no Intercompany Loan may be made pursuant to Section 6.04(c)(iii) above at any time that a Default or Event of Default has occurred and is continuing or would result therefrom, (C) each Intercompany Loan shall be unsecured and evidenced by an Intercompany Note, (D) each such Intercompany Note owned or held by a Loan Party shall be pledged to the Administrative Agent pursuant to the relevant Collateral Document and (E) any Intercompany Loans made to any such Loan Party or any such Subsidiary that is not a Loan Party pursuant to this Section 6.04(c) shall cease to be permitted by this Section 6.04(c) if such Person ceases to constitute (x) a Loan Party or (y) a Subsidiary, as the case may be;
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(d) (i) any Loan Party may make capital contributions to, or acquire Equity Interests of, any other Loan Party and may capitalize or forgive any Intercompany Loans owed to it by any other Loan Party, (ii) any Loan Party may make capital contributions to, or acquire Equity Interests of, any Subsidiary that is not a Loan Party and may capitalize or forgive any Intercompany Loans owed to it by any Subsidiary that is not a Loan Party and (iii) any Subsidiary which is not a Loan Party may make capital contributions to, or acquire Equity Interests of, any Loan Party or any other Subsidiary which is not a Loan Party and may capitalize or forgive any Intercompany Loans owed to it by any Loan Party or any other Subsidiary which is not a Loan Party; provided that (A) at no time shall the aggregate outstanding amount of all contributions and acquisitions of Equity Interests made pursuant to Section 6.04(d)(ii), when added to the aggregate amount of all Intercompany Loans capitalized or forgiven during the term of this Agreement pursuant to Section 6.04(d)(ii) and the aggregate outstanding principal amount of all Intercompany Loans made pursuant to Section 6.04(c)(iii) and the aggregate outstanding amount of all Guarantees permitted under the proviso to Section 6.04(e), exceed an amount equal to the greater of (x) $4,000,000 and (y) 5% of Applicable EBITDA (determined without regard to any write-downs or write-offs of such loans and advances), net of any returns on any such investment in the form of a cash principal repayment, cash distribution, cash dividend or cash redemption, as applicable, (B) no contribution or acquisition of Equity Interests or capitalization or forgiveness of Intercompany Loans may be made pursuant to Section 6.04(d)(ii) at any time that a Default or Event of Default has occurred and is continuing or would result therefrom, (C) in the case of any contribution pursuant to Section 6.04(d)(ii), other than cash or Cash Equivalents invested in a Subsidiary that is not a Loan Party, any security interest granted to the Administrative Agent for the benefit of the Secured Parties pursuant to the Collateral Documents in any assets so contributed shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such contribution) and all actions required to maintain said perfected status have been taken, and (D) any investment made in or to any such Loan Party or any such Subsidiary that is not a Loan Party pursuant to this Section 6.04(d) shall cease to be permitted by this Section 6.04(d) if such Person ceases to constitute (x) a Loan Party or (y) a Subsidiary, as the case may be;
(e) Guarantees constituting Indebtedness permitted by Section 6.01, provided that the aggregate outstanding principal amount of Indebtedness of Subsidiaries that are not Loan Parties that is Guaranteed by any Loan Party (together with the aggregate outstanding principal amount of all Intercompany Loans made pursuant to Section 6.04(c)(iii) and the aggregate outstanding amount of all contributions and acquisitions of Equity Interests made pursuant to Section 6.04(d)(ii) and the aggregate amount of all Intercompany Loans capitalized or forgiven during the term of this Agreement pursuant to Section 6.04(d)(ii)) shall not exceed at any time the greater of (x) $4,000,000 and (y) 5% of Applicable EBITDA (in each case determined without regard to any write-downs or write-offs);
(f) loans or advances made by a Loan Party or any Subsidiary to its officers and employees on an arms-length basis in the ordinary course of business consistent with past practices for travel and entertainment expenses, relocation costs and similar purposes up to a maximum of the greater of (x) $1,500,000 or (y) 2% of Applicable EBITDA in the aggregate at any one time outstanding;
(g) Holdings and its Subsidiaries may acquire and hold obligations of their officers and employees in connection with such officers’ and employees’ acquisition of shares of Holdings’ or the Borrower’s Qualified Stock (so long as no cash is actually advanced by Holdings or any of its Subsidiaries in connection with the acquisition of such obligations);
(h) Holdings and its Subsidiaries may acquire, and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;
(i) Holdings and its Subsidiaries may acquire and hold accounts receivables owing to any of them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms of Holdings or such Subsidiary or acquired in connection with a Permitted Acquisition (and not created in contemplation thereof);
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(j) Holdings or any Subsidiary may enter into Interest Rate Protection Agreements and similar agreements to the extent permitted by Section 6.07;
(k) Holdings and its Subsidiaries may make advances in the form of a prepayment of expenses or lease, utility and other similar deposits to vendors, suppliers and trade creditors, so long as such expenses were incurred in the ordinary course of business;
(l) (i) reasonable earnest money deposits made in connection with the acquisitions of property and assets not prohibited hereunder and (ii) deposits made in the ordinary course of business securing contractual obligations to the extent constituting a Lien permitted hereunder;
(m) advances of payroll payments to employees of Holdings and its Subsidiaries in the ordinary course of business up to a maximum of $1,000,000 in the aggregate at any one time outstanding;
(n) Cash Equivalents acquired in connection with the satisfaction or enforcement of Indebtedness or claims due or owing or as security for any such Indebtedness or claim, in each case, so long as the same are pledged to the Administrative Agent to secure the Secured Obligations in accordance with the Collateral Documents;
(o) contingent obligations of Holdings or any of its Subsidiaries in respect of leases (other than Capitalized Lease Obligations) entered into in the ordinary course of business;
(p) notes payable, or stock or other securities issued by Account Debtors to a Loan Party or any Subsidiary pursuant to negotiated agreements with respect to settlement of such Account Debtor’s Accounts in the ordinary course of business, consistent with past practices;
(q) investments in the form of Swap Agreements permitted by Section 6.07;
(r) investments of any Person existing at the time such Person becomes a Subsidiary or consolidates or merges with any Subsidiary (including in connection with a Permitted Acquisition), so long as such investments were not made in contemplation of such Person becoming a Subsidiary or of such merger;
(s) investments received in connection with the Disposition of assets permitted by Section 6.05;
(t) investments constituting deposits described in clauses (c) and (d) of the definition of the term “Permitted Encumbrances”;
(u) Permitted Acquisitions;
(v) investments (made directly or indirectly through one or more Subsidiaries) in Reinsurance Vehicles in an aggregate outstanding amount not to exceed at any time the greater of (x) $12,000,000 and (y) 15% of Applicable EBITDA;
(w) other investments, loans, advances and Guarantees so long as at the time of making each such investment, loan, advance or Guarantee and immediately after giving effect (including giving effect on a pro forma basis) thereto, (A) no Default or Event of Default then exists or would result therefrom, (B) Holdings is in compliance with the financial covenants set forth in Section 6.12 and (C) the Total Net Leverage Ratio is not greater than 3.00 to 1.00; and
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(x) so long as at the time of making such investment, loan, advance or Guarantee and immediately after giving effect (including giving effect on a pro forma basis) thereto no Event of Default pursuant to Section 7.01(a), (b), (h) or (i) then exists or would result therefrom, other investments, loans, advances and Guarantees in an aggregate outstanding amount not to exceed at any time the greater of (x) $37,000,000 and (y) 50% of Applicable EBITDA (in each case determined without regard to any writedowns or write-offs).
SECTION 6.05. Asset Sales. No Loan Party will, nor will it permit any Subsidiary to, Dispose of any asset, including any Equity Interest owned by it, nor will Holdings permit the Borrower to issue any additional Equity Interest in the Borrower (other than to Holdings in compliance with Section 6.04), nor will any Loan Party permit any Subsidiary of the Borrower to issue any additional Equity Interest in such Subsidiary (other than to the Borrower or another Subsidiary in compliance with Section 6.04), except:
(a) Dispositions of (i) Inventory in the ordinary course of business and (ii) used, obsolete, worn out or surplus equipment or property in the ordinary course of business; provided that the aggregate fair market value of all assets Disposed in reliance on this subclause (a)(ii) shall not exceed during any fiscal year of Holdings, the greater of (x) $4,000,000 and (y) 5% of Applicable EBITDA;
(b) Dispositions of assets to Holdings or any Subsidiary; provided that (i) any such Dispositions involving a Subsidiary that is not a Loan Party shall be made in compliance with Section 6.09 and (ii) the aggregate fair market value of all assets Disposed by Loan Parties to Subsidiaries that are not Loan Parties during the term of this Agreement shall not exceed $2,500,000;
(c) Dispositions of Accounts (excluding Dispositions in a factoring arrangement) in connection with the compromise, settlement or collection thereof;
(d) Dispositions of cash, Permitted Investments and other investments permitted by clauses (r) and (t) of Section 6.04;
(e) each of Holdings and its Subsidiaries may lease (as lessee) or license (as licensee) real or personal property (other than intellectual property on an exclusive basis) in the ordinary course of business (so long as any such lease or license does not create a Capitalized Lease Obligation except to the extent permitted by Section 6.01(e));
(f) each of Holdings and its Subsidiaries may sell or discount, in each case without recourse and in the ordinary course of business, accounts receivable or notes receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof and not as part of any financing transaction;
(g) Holdings and its Subsidiaries may liquidate or otherwise dispose of Cash Equivalents in the ordinary course of business, in each case for cash at fair market value and in a transaction not otherwise prohibited by the other terms of this Agreement;
(h) so long as at the time of such Disposition and immediately after giving effect (including giving effect on a pro forma basis) thereto no Event of Default then exists or would result therefrom, each of Holdings and its Subsidiaries may grant licenses, sublicenses, leases or subleases (other than exclusive licenses or sublicenses of intellectual property) in the ordinary course of business to other Persons that, in the reasonable good faith judgment of Holdings, do not materially interfere with or are not material to, the conduct of the business of Holdings or any of its Subsidiaries;
(i) Sale and Leaseback Transactions permitted by Section 6.06;
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(j) Dispositions resulting from any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of Holdings or any Subsidiary;
(k) transactions permitted by Section 6.03(a);
(l) so long as at the time of making such Disposition and immediately after giving effect (including giving effect on a pro forma basis) thereto no Default or Event of Default then exists or would result therefrom, other Dispositions of assets (other than Equity Interests in a Subsidiary unless all Equity Interests in such Subsidiary are sold) that are not permitted by any other clause of this Section made for fair value and for at least 75% cash consideration; provided that the aggregate fair market value of all assets Disposed of in reliance upon this paragraph (l) during any fiscal year of Holdings, shall not exceed the greater of (x) $4,000,000 and (y) 5% of Applicable EBITDA; and
(m) ceding of insurance or reinsurance in the ordinary course of business.
Notwithstanding the foregoing, no Loan Party or any Subsidiary shall consummate any transaction that results in the Disposition (whether by way of any Restricted Payment, investment, Lien, sale, conveyance, transfer or other Disposition, and whether in a single transaction or a series of transactions) of intellectual property that is material to the business of Holdings and its Subsidiaries to any Affiliate of Holdings that is not a Loan Party; provided that Holdings and its Subsidiaries may grant non-exclusive licenses of any intellectual property to any Subsidiary that is not a Loan Party in the ordinary course of business so long as Holdings or such Subsidiary retains the beneficial ownership and the same rights to use such intellectual property as held prior to such license.
SECTION 6.06. Sale and Leaseback Transactions. No Loan Party will, nor will it permit any Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred (a “Sale and Leaseback Transaction”), except for any such sale of any fixed or capital assets by Holdings or any Subsidiary that is made for cash consideration in an amount not less than the fair value of such fixed or capital asset and is consummated within 90 days after Holdings or such Subsidiary acquires or completes the construction of such fixed or capital asset.
SECTION 6.07. Swap Agreements. No Loan Party will, nor will it permit any Subsidiary to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which Holdings, the Borrower or any Subsidiary has actual exposure (other than those in respect of Equity Interests of Holdings, the Borrower or any Subsidiary), and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from floating to fixed rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of Holdings, the Borrower or any Subsidiary.
SECTION 6.08. Restricted Payments; Certain Payments of Junior Indebtedness.
(a) No Loan Party will, nor will it permit any Subsidiary to, declare or make, or agree to declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except:
(i) Holdings, the Borrower and any Subsidiary may declare and pay dividends with respect to its Qualified Stock payable solely in additional shares of its Qualified Stock, and, with respect to its Disqualified Stock, payable solely in additional shares of such Disqualified Stock (to the extent permitted under Section 6.01) or in shares of its Qualified Stock;
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(ii) Subsidiaries may declare and pay dividends or distributions ratably with respect to their Qualified Stock;
(iii) the declaration and payment of Restricted Payments by Holdings (or, after a Qualified IPO, the Relevant Public Company) in amounts required for Holdings (or such Relevant Public Company) to redeem, repurchase or otherwise acquire for value (and that are actually used to redeem, repurchase or otherwise acquire for value) outstanding Qualified Stock of Holdings (or, after a Qualified IPO, such Relevant Public Company) (or options or warrants to purchase Qualified Stock of Holdings or such Relevant Public Company), held by current or former officers, directors, managers, members of management or employees of Holdings, the Borrower or any of its Subsidiaries; provided that (A) the aggregate amount of all Restricted Payments made in reliance on this Section 6.08(a)(iii) during any fiscal year of Holdings shall not exceed the greater of (x) $2,000,000 and (y) 2.5% of Applicable EBITDA, (B) the aggregate amount of all Restricted Payments made in reliance on this Section 6.08(a)(iii) during the term of this Agreement shall not exceed the greater of (x) $8,000,000 and (y) 10.0% of Applicable EBITDA and (C) at the time of making each such Restricted Payment and immediately after giving effect (including giving effect on a pro forma basis) thereto, no Default or Event of Default then exists or would result therefrom;
(iv) so long as at the time of making each such Restricted Payment and immediately after giving effect (including giving effect on a pro forma basis) thereto, no Default or Event of Default then exists or would result therefrom, Restricted Payments by Holdings (or, after a Qualified IPO, such Relevant Public Company) that are used by Holdings or such other Relevant Public Company to make Restricted Payments in an aggregate amount during the term of this Agreement not to exceed (when taken together with the aggregate amount of payments of Junior Indebtedness made pursuant to Section 6.08(b)(v) during the term of this Agreement) the greater of (x) $8,000,000 and (y) 10% of Applicable EBITDA;
(v) other Restricted Payments, so long as at the time of making each such Restricted Payment and immediately after giving effect (including giving effect on a pro forma basis) thereto, (A) no Default or Event of Default then exists or would result therefrom, (B) Holdings is in compliance with the financial covenants set forth in Section 6.12 and (C) the Total Net Leverage Ratio is not greater than 3.00 to 1.00;
(vi) the Closing Date Dividend;
(vii) after a Qualified IPO, Restricted Payments by the Relevant Public Company in an aggregate amount not to exceed in any fiscal year the greater of (x) 6.00% of the net proceeds received by (or contributed to) the Relevant Public Company from such Qualified IPO and (y) 6.00% of the market capitalization of the Relevant Public Company or; and
(viii) after a Qualified IPO, Restricted Payments made within 60 days of declaration thereof if, at the time of the declaration thereof, such Restricted Payment would have been permitted under another clause or clauses of this Section 6.08(a) at the time of such declaration thereof (it being understood that such Restricted Payment shall be deemed to have been made in reliance on such clause or clauses).
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(b) No Loan Party will, nor will it permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Junior Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Junior Indebtedness, except:
(i) payment of regularly scheduled interest and principal payments as and when due in respect of any Junior Indebtedness permitted under Section 6.01, other than payments in respect of Junior Indebtedness prohibited by the subordination provisions thereof (so long as such subordination provisions are reasonably acceptable to the Administrative Agent at the time of incurrence or assumption of such Junior Indebtedness);
(ii) payment of Indebtedness evidenced by the Intercompany Note that is not prohibited by the subordination provisions therein;
(iii) refinancings of Junior Indebtedness to the extent permitted by Section 6.01;
(iv) payment of secured Junior Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Junior Indebtedness to the extent such sale or transfer is permitted by the terms of Section 6.05;
(v) so long as at the time of making each such payment and immediately after giving effect (including giving effect on a pro forma basis) thereto, no Default or Event of Default then exists or would result therefrom, other payments of Junior Indebtedness in an aggregate amount during the term of this Agreement not to exceed (when taken together with the aggregate amount of Restricted Payments made pursuant to Section 6.08(a)(iv) during the term of this Agreement) the greater of (x) $8,000,000 and (y) 10% of Applicable EBITDA; and
(vi) other payments of Junior Indebtedness, so long as at the time of making each such payment and immediately after giving effect (including giving effect on a pro forma basis) thereto, (A) no Default or Event of Default then exists or would result therefrom, (B) Holdings is in compliance with the financial covenants set forth in Section 6.12 and (C) the Total Net Leverage Ratio is not greater than 3.00 to 1.00.
SECTION 6.09. Transactions with Affiliates. No Loan Party will, nor will it permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, with an aggregate value for all such transactions during any fiscal year of Holdings in excess of the greater of (x) $2,500,000 and (y) 3% of Applicable EBITDA, except (a) transactions that (i) are in the ordinary course of business and (ii) are at prices and on terms and conditions not less favorable to such Loan Party or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among the Loan Parties not involving any other Affiliate, (c) any investment permitted by Sections 6.04(c), 6.04(d) or 6.04(v), (d) any Indebtedness permitted under Section 6.01(c), (e) any Restricted Payment permitted by Section 6.08, (f) loans or advances to employees permitted under Section 6.04(f), (g) the payment of reasonable fees to directors of Holdings, the Borrower or any Subsidiary who are not employees of Holdings, the Borrower or any Subsidiary, and compensation and employee benefit arrangements paid to, and indemnities provided for the benefit of, directors, officers or employees of Holdings, the Borrower or its Subsidiaries in the ordinary course of business, and (h) any issuances of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans approved by Holdings’ board of directors, (i) Specified Equity Contributions and (j) as set forth on Schedule 3.24.
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SECTION 6.10. Restrictive Agreements. No Loan Party will, nor will it permit any Subsidiary to, directly or indirectly enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of such Loan Party or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any Equity Interests or to make or repay loans or advances to Holdings, the Borrower or any other Subsidiary or to Guarantee Indebtedness of Holdings, the Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by any applicable law or by any Loan Document, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.10 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of assets or a Subsidiary pending such sale, provided such restrictions and conditions apply only to such assets or the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) [reserved], (v) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (vi) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof. No Loan Party shall, nor shall it permit any Subsidiary to, sell, transfer, assign, mortgage, pledge, lease, grant a security interest in or otherwise encumber (other than Permitted Encumbrances and Liens permitted pursuant to Section 6.02(e)) any real property owned by any Loan Party or Subsidiary to an unaffiliated third party without the prior written consent of the Required Lenders.
SECTION 6.11. Amendment of Material Documents. No Loan Party will, nor will it permit any Subsidiary to, amend or modify, or waive any of its rights under, (a) any agreement relating to any Subordinated Indebtedness or (b) its charter, articles or certificate of organization or incorporation and bylaws or operating, management or partnership agreement, or other organizational or governing documents, in each case, to the extent any such amendment, modification or waiver would be adverse to the Lenders (as reasonably determined by the Administrative Agent).
SECTION 6.12. Financial Covenants.
(a) Total Net Leverage Ratio. Holdings will not permit the Total Net Leverage Ratio, on the last day of any fiscal quarter of Holdings ending on or after March 31, 2025 (any such day, a “Testing Date”), to be greater than (i) 5.00 to 1.00 on each Testing Date occurring on or before September 30, 2025, (ii) 4.50 to 1.00 on each Testing Date occurring on or after December 31, 2025 but prior to September 30, 2026 and (iii) 4.00 to 1.00 on each Testing Date occurring on or after September 30, 2026.
(b) Interest Coverage Ratio. Holdings will not permit the Interest Coverage Ratio, for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter of Holdings ending on or after March 31, 2025, to be less than 2.00 to 1.00.
SECTION 6.13. Outbound Investment Rules. Holdings will not, and will not permit any of its Subsidiaries to, (a) be or become a “covered foreign person”, as that term is defined in the Outbound Investment Rules or (b) engage, directly or indirectly, in (i) a “covered activity” or a “covered transaction”, as each such term is defined in the Outbound Investment Rules, (ii) any activity or transaction that would constitute a “covered activity” or a “covered transaction”, as each such term is defined in the Outbound Investment Rules, if Holdings or the Borrower were a U.S. Person or (iii) any other activity that would cause the Administrative Agent or any Lender to be in violation of the Outbound Investment Rules or cause the Administrative Agent or any Lender to be legally prohibited by the Outbound Investment Rules from performing under this Agreement.
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ARTICLE VII
Events of Default
SECTION 7.01. Any of the following events shall constitute an “Event of Default”:
(a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in Section 7.01(a)) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) Business Days;
(c) any representation or warranty made or deemed made by or on behalf of any Loan Party or any Subsidiary in, or in connection with, this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been materially incorrect when made or deemed made;
(d) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(a), 5.03 (with respect to a Loan Party’s existence), 5.08, 5.13 or 5.14, or in Article VI or in Article X; provided that any Event of Default under Section 6.12 is subject to cure as provided in Section 7.03;
(e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 7.01(a), (b) or (d)) or any other Loan Document, and such failure shall continue unremedied for a period of (i) ten (10) days after the earlier of any Loan Party’s knowledge of such breach or notice thereof from the Administrative Agent (which notice will be given at the request of any Lender) if such breach relates to terms or provisions of Section 5.01, 5.02 (other than Section 5.02(a)) and 5.03 (other than with respect to a Loan Party’s existence) of this Agreement or (ii) thirty (30) days after the earlier of any Loan Party’s knowledge of such breach or notice thereof from the Administrative Agent (which notice will be given at the request of any Lender) if such breach relates to terms or provisions of any other Section of this Agreement or any other Loan Document;
(f) any Loan Party or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness to the extent such sale or transfer is permitted by the terms of Section 6.05;
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of any Loan Party or any Subsidiary or its debts, or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator, liquidator, rehabilitator or similar official for any Loan Party or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered;
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(i) any Loan Party or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 7.01(h), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for such Loan Party or Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;
(j) any Loan Party or any Subsidiary shall become unable, admit in writing its inability, or publicly declare its intention not to, or fail generally, to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate amount in excess of $5,000,000 shall be rendered against any Loan Party, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of sixty (60) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of any Loan Party or any Subsidiary to enforce any such judgment or any Loan Party or any Subsidiary shall fail within sixty (60) days to discharge one or more non-monetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgments or orders, in any such case, are not stayed on appeal or otherwise being appropriately contested in good faith by proper proceedings diligently pursued;
(l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;
(m) a Change in Control shall occur;
(n) the occurrence of any “default”, as defined in any Loan Document (other than this Agreement), or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided;
(o) other than pursuant to Section 10.08, the Loan Guaranty shall fail to remain in full force or effect, any action shall be taken by any Loan Guarantor to discontinue or to assert the invalidity or unenforceability of the Loan Guaranty or any Loan Guarantor shall deny that it has any further liability under the Loan Guaranty, or shall give notice to such effect;
(p) except as permitted by the terms of any Collateral Document, (i) any Collateral Document shall for any reason fail to create a valid security interest in any Collateral purported to be covered thereby, or (ii) any Lien securing any Secured Obligation shall cease to be a perfected, first priority Lien;
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(q) any Collateral Document shall fail to remain in full force or effect (other than pursuant to the terms hereof or thereof) or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Collateral Document;
(r) any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Loan Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction that evidences its assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms); or
(s) prior to the consummation of a Qualified IPO, Trevor Burgess shall cease to be an employee of the Borrower or its Subsidiaries (including, without limitation, as a result of death, disability or incapacity) with responsibility substantially consistent with (or greater than) his responsibility with regard to the Borrower on the Effective Date and is not replaced within 270 days of such occurrence with a replacement reasonably acceptable to the Administrative Agent (it being agreed that the four (4) individuals identified to the Administrative Agent in writing prior to the Effective Date are acceptable to the Administrative Agent); provided that the foregoing shall not constitute an Event of Default to the extent Trevor Burgess is a member of the board of directors of the Borrower.
SECTION 7.02. Remedies.
(a) If any Event of Default shall occur, then, and in every such event (other than an event with respect to Holdings or the Borrower described in Section 7.01(h) or (i)), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Revolving Commitments, whereupon the Revolving Commitments shall terminate immediately, (ii) declare the Loans then outstanding to be due and payable in whole (or in part, but ratably as among the Loans at the time outstanding, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other Secured Obligations (including, for the avoidance of doubt, any break funding payment) accrued hereunder and under the other Loan Documents, shall become due and payable immediately, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Loan Parties, (iii) require cash collateral for the LC Exposure in accordance with Section 2.06(j) hereof and (iv) exercise all other rights and remedies of the Secured Parties under the Loan Documents and applicable law; and in the case of any event with respect to Holdings or the Borrower described in Section 7.01(h) or (i), the Revolving Commitments shall automatically terminate and the principal of the Loans then outstanding and cash collateral for the LC Exposure, together with accrued interest thereon and all fees and other Secured Obligations (including, for the avoidance of doubt, any break funding payment) accrued hereunder and under the other Loan Documents, shall automatically become due and payable, and the obligation of the Borrower to cash collateralize the LC Exposure as provided in clause (iii) above shall automatically become effective, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Loan Parties. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, and at the request of the Required Lenders shall, increase the rate of interest applicable to the Loans and other Obligations as set forth in this Agreement and exercise any rights and remedies provided to the Administrative Agent under the Loan Documents or at law or equity, including all remedies provided under the UCC.
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(b) In addition to any other rights and remedies granted to the Administrative Agent and the Lenders in the Loan Documents, the Administrative Agent on behalf of the Secured Parties may exercise all rights and remedies of a secured party under the UCC or any other applicable law. Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Loan Party or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived by each Loan Party on behalf of itself and its Subsidiaries), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, or consent to the use by any Loan Party of any cash collateral arising in respect of the Collateral on such terms as the Administrative Agent deems reasonable, and/or may forthwith sell, lease, assign give an option or options to purchase or otherwise dispose of and deliver, or acquire by credit bid on behalf of the Lenders, the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Administrative Agent or any Lender or elsewhere, upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery, all without assumption of any credit risk. The Administrative Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Loan Party, which right or equity is hereby waived and released by each Loan Party on behalf of itself and its Subsidiaries. Each Loan Party further agrees on behalf of itself and its Subsidiaries, at the Administrative Agent’s request, to assemble the Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at the premises of the Borrower, another Loan Party or elsewhere. The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this Section 7.02, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any other way relating to the Collateral or the rights of the Administrative Agent and the Lenders hereunder, including reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the obligations of the Loan Parties under the Loan Documents, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including Section 9-615(a)(3) of the UCC, need the Administrative Agent account for the surplus, if any, to any Loan Party. To the extent permitted by applicable law, each Loan Party on behalf of itself and its Subsidiaries waives all Liabilities it may acquire against the Administrative Agent or any Lender arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.
SECTION 7.03. Equity Cure.
(a) Notwithstanding anything to the contrary contained in Section 7.01 or 7.02, for purposes of determining whether any Default or Event of Default under the covenants set forth in Section 6.12 has occurred with respect to any fiscal quarter at any time after the end of such fiscal quarter until the expiration of the fifteenth (15th) Business Day after the date on which financial statements are required to be delivered pursuant to Section 5.01(a) or (b), as applicable, with respect to such fiscal quarter (with respect to the applicable fiscal quarter, the “Cure Expiration Date”), the Permitted Holders may make a cash Specified Equity Contribution, directly or indirectly, to the Borrower, and the Borrower may apply the amount of the net cash proceeds thereof to increase Consolidated EBITDA with respect to such fiscal quarter for purposes of any four-quarter period that contains such fiscal quarter (with respect to any fiscal quarter, the “Cure Right”); provided that (i) such net cash proceeds are actually received by the Borrower as cash common equity or any other Qualified Stock (including through capital contribution of such net cash proceeds to the Borrower) no later than the Cure Expiration Date for the applicable fiscal quarter and (ii) the Borrower shall have provided notice to the Administrative Agent on the date such amounts are actually received by the Borrower in connection with a Cure Right and designated as a “Specified Equity Contribution” and are Not Otherwise Applied (it being understood that to the extent such notice is provided in advance of delivery of a Compliance Certificate for the applicable fiscal quarter, the amount of such net cash proceeds that is designated as the Specified Equity Contribution may be lower than specified in such notice to the extent that the amount necessary to cure any Event of Default under the covenants set forth in Section 6.12 is less than the full amount of such originally designated amount).
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(b) The right to make a Specified Equity Contribution is subject to the following conditions: (i) no more than two Specified Equity Contributions may be made in any period of four consecutive fiscal quarters and Specified Equity Contributions may not be made in successive fiscal quarters, (ii) no more than five Specified Equity Contributions will be made in the aggregate during the term of this Agreement, (iii) the net cash proceeds of any Specified Equity Contribution shall be no more than the amount required to cause Holdings to be in pro forma compliance with Section 6.12 for the applicable fiscal quarter, (iv) there shall be no pro forma reduction in Indebtedness (including by way of “netting”) with the proceeds of any Specified Equity Contribution for determining compliance with Section 6.12 for the fiscal quarter in respect of which the Cure Right is being exercised, (v) all Specified Equity Contributions shall only be included in Consolidated EBITDA for purposes of determining compliance with Section 6.12 and for no other reason (for the avoidance of doubt, all Specified Equity Contributions shall be disregarded for purposes of determining pricing, financial covenant or financial ratio based conditions (including the determination of compliance with the financial covenants set forth in Section 6.12 on a pro forma basis in connection with the utilization of any basket or exception or the taking of any action), baskets with respect to covenants contained in the Loan Documents and all other purposes), and (v) following delivery to the Administrative Agent of any written notice from the Borrower indicating an intent to make a Specified Equity Contribution with respect to any fiscal quarter, until the Specified Equity Contribution is made for such fiscal quarter, no Loans shall be required to be made under this Agreement and no Letters of Credit shall be required to be issued, amended or extended.
(c) Notwithstanding anything to the contrary contained in Section 7.01 or 7.02, (i) upon receipt of the proceeds of a Specified Equity Contribution by the Borrower in respect of any fiscal quarter and prior to the Cure Expiration Date therefor, the covenants set forth in Section 6.12 for such fiscal quarter shall be deemed satisfied and complied with as of the end of such fiscal quarter with the same effect as though there had been no failure to comply with Section 6.12 for such fiscal quarter and any Default related to any failure to comply with Section 6.12 as of the end of such fiscal quarter (and any other Default arising solely as a result thereof) shall be deemed not to have occurred for any purpose under the Loan Documents and (ii) following delivery to the Administrative Agent of any notice indicating an intent to make a Specified Equity Contribution for any fiscal quarter, unless the Administrative Agent has received a written notice from the Borrower of its intent not to make a Specified Equity Contribution and exercise its rights under this Section 7.03 prior to the Cure Expiration Date for such fiscal quarter, neither the Administrative Agent nor any Lender shall exercise any rights or remedies under Section 7.02 (or under any other provisions of the Loan Documents) available during the continuance of any Event of Default based solely on the basis of any actual or purported failure to comply with Section 6.12 until such failure is not cured with the proceeds of a Specified Equity Contribution on or prior to the Cure Expiration Date for such fiscal quarter.
ARTICLE VIII
The Administrative Agent
SECTION 8.01. Authorization and Action.
(a) Each Lender, on behalf of itself and any of its Affiliates that are Secured Parties and each Issuing Bank hereby irrevocably appoints the entity named as Administrative Agent in the heading of this Agreement and its successors and assigns to serve as the administrative agent and collateral agent under the Loan Documents and each Lender and each Issuing Bank authorizes the Administrative Agent to take such actions as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent under such agreements and to exercise such powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than within the United States, each Lender and each Issuing Bank hereby grants to the Administrative Agent any required powers of attorney to execute and enforce any Collateral Document governed by the laws of such jurisdiction on such Lender’s or such Issuing Bank’s behalf. Without limiting the foregoing, each Lender and each Issuing Bank hereby authorizes the Administrative Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which the Administrative Agent is a party, and to exercise all rights, powers and remedies that the Administrative Agent may have under such Loan Documents.
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(b) As to any matters not expressly provided for herein and in the other Loan Documents (including enforcement or collection), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the written instructions of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, pursuant to the terms in the Loan Documents), and, unless and until revoked in writing, such instructions shall be binding upon each Lender and each Issuing Bank; provided, however, that the Administrative Agent shall not be required to take any action that (i) the Administrative Agent in good faith believes exposes it to liability unless the Administrative Agent receives an indemnification and is exculpated in a manner satisfactory to it from the Lenders and the Issuing Banks with respect to such action or (ii) is contrary to this Agreement or any other Loan Document or applicable law, including any action that may be in violation of the automatic stay under any applicable law relating to bankruptcy, insolvency or reorganization or relief of debtors or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any applicable law relating to bankruptcy, insolvency or reorganization or relief of debtors; provided, further, that the Administrative Agent may seek clarification or direction from the Required Lenders prior to the exercise of any such instructed action and may refrain from acting until such clarification or direction has been provided. Except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower, any other Loan Party, any Subsidiary or any Affiliate of any of the foregoing that is communicated to or obtained by the Person serving as Administrative Agent or any of its Affiliates in any capacity. Nothing in this Agreement shall require the Administrative Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(c) In performing its functions and duties hereunder and under the other Loan Documents, the Administrative Agent is acting solely on behalf of the Lenders and the Issuing Banks (except in limited circumstances expressly provided for herein relating to the maintenance of the Register), and its duties are entirely mechanical and administrative in nature. The motivations of each Arranger and the Administrative Agent are commercial in nature and not to invest in the general performance or operations of the Borrower. Without limiting the generality of the foregoing:
(i) the Administrative Agent does not assume and shall not be deemed to have assumed any obligation or duty or any other relationship as the agent, fiduciary or trustee of or for any Lender, Issuing Bank, any other Secured Party or holder of any other Secured Obligation other than as expressly set forth herein and in the other Loan Documents, regardless of whether a Default or an Event of Default has occurred and is continuing (and it is understood and agreed that the use of the term “agent” (or any similar term) herein or in any other Loan Document with reference to the Administrative Agent is not intended to connote any fiduciary duty or other implied (or express) obligations arising under agency doctrine of any applicable law, and that such term is used as a matter of market custom and is intended to create or reflect only an administrative relationship between contracting parties); additionally, each Lender agrees that it will not assert any claim against the Administrative Agent based on an alleged breach of fiduciary duty by the Administrative Agent in connection with this Agreement and the transactions contemplated hereby;
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(ii) where the Administrative Agent is required or deemed to act as a trustee in respect of any Collateral over which a security interest has been created pursuant to a Loan Document expressed to be governed by the laws of any country, or is required or deemed to hold any Collateral “on trust” pursuant to the foregoing, the obligations and liabilities of the Administrative Agent to the Secured Parties in its capacity as trustee shall be excluded to the fullest extent permitted by applicable law; and
(iii) nothing in this Agreement or any Loan Document shall require the Administrative Agent to account to any Lender for any sum or the profit element of any sum received by the Administrative Agent for its own account.
(d) The Administrative Agent may perform any 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 of their respective duties and exercise their respective rights and powers 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 pursuant to this Agreement. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agent except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agent.
(e) No Arranger shall have obligations or duties whatsoever in such capacity under this Agreement or any other Loan Document and shall incur no liability hereunder or thereunder in such capacity, but all such persons shall have the benefit of the indemnities provided for hereunder.
(f) In case of the pendency of any proceeding with respect to any Loan Party under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, the Administrative Agent (irrespective of whether the principal of any Loan or any reimbursement obligation in respect of any LC Disbursement shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, LC Disbursements and all other Secured 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, the Issuing Banks and the Administrative Agent (including any claim under Sections 2.12, 2.13, 2.15, 2.17 and 9.03) allowed in such judicial proceeding; and
(ii) 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 proceeding is hereby authorized by each Lender, each Issuing Bank and each other Secured Party 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, the Issuing Banks or the other Secured Parties, to pay to the Administrative Agent any amount due to it, in its capacity as the Administrative Agent, under the Loan Documents (including under Section 9.03). 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 or Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Secured Obligations or the rights of any Lender or Issuing Bank or to authorize the Administrative Agent to vote in respect of the claim of any Lender or Issuing Bank in any such proceeding.
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(g) The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Banks, and, except solely to the extent of the Borrower’s rights to consent pursuant to and subject to the conditions set forth in this Article, none of Holdings or any of its Subsidiaries, or any of their respective Affiliates, shall have any rights as a third party beneficiary under any such provisions. Each Secured Party, whether or not a party hereto, will be deemed, by its acceptance of the benefits of the Collateral and of the Guarantees of the Secured Obligations provided under the Loan Documents, to have agreed to the provisions of this Article.
SECTION 8.02. Administrative Agent’s Reliance, Limitation of Liability, Indemnification, Etc.
(a) Neither the Administrative Agent nor any of its Related Parties shall be (i) liable for any action taken or omitted to be taken by such party, the Administrative Agent or any of its Related Parties under or in connection with this Agreement or the other Loan Documents (x) with the consent of 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 to be necessary, under the circumstances as provided in the Loan Documents) or (y) in the absence of its own gross negligence or willful misconduct (such absence to be presumed unless otherwise determined by a court of competent jurisdiction by a final and nonappealable judgment) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document (including, for the avoidance of doubt, in connection with the Administrative Agent’s reliance on any Electronic Signature transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page) or for any failure of any Loan Party to perform its obligations hereunder or thereunder.
(b) The Administrative Agent shall be deemed not to have knowledge of any (x) notice of any of the events or circumstances set forth or described in Section 5.02 unless and until written notice thereof stating that it is a “notice under Section 5.02” in respect of this Agreement and identifying the specific clause under said Section is given to the Administrative Agent by the Borrower, or (y) notice of any Default or Event of Default unless and until written notice thereof (stating that it is a “notice of Default” or a “notice of an Event of Default”) is given to the Administrative Agent by the Borrower, a Lender or an Issuing Bank. Further, 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 any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document or the occurrence of any Default or Event of Default, (iv) the sufficiency, validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items (which on their face purport to be such items) expressly required to be delivered to the Administrative Agent or satisfaction of any condition that expressly refers to the matters described therein being acceptable or satisfactory to the Administrative Agent, (vi) the creation, perfection or priority of Liens on the Collateral or (vii) compliance by Affiliated Lenders with the terms hereof relating to Affiliated Lenders. Notwithstanding anything herein to the contrary, the Administrative Agent shall not be liable for, or be responsible for any Liability, cost or expense suffered by the Borrower, any other Loan Party, any Subsidiary, any Lender or the Issuing Bank as a result of, any determination of any Credit Exposure, any of the component amounts thereof or any portion thereof attributable to each Lender or the Issuing Bank.
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(c) Without limiting the foregoing, the Administrative Agent (i) may treat the payee of any promissory note as its holder until such promissory note has been assigned in accordance with Section 9.04, (ii) may rely on the Register to the extent set forth in Section 9.04(b), (iii) may consult with legal counsel (including counsel to the Borrower), independent public accountants and other experts selected by it, and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (iv) makes no warranty or representation to any Lender or Issuing Bank and shall not be responsible to any Lender or Issuing Bank for any statements, warranties or representations made by or on behalf of any Loan Party in connection with this Agreement or any other Loan Document, (v) in determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, may presume that such condition is satisfactory to such Lender or Issuing Bank unless the Administrative Agent shall have received notice to the contrary from such Lender or Issuing Bank sufficiently in advance of the making of such Loan or the issuance of such Letter of Credit and (vi) shall be entitled to rely on, and shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon, any notice, consent, certificate or other instrument or writing (which writing may be a fax, any electronic message, Internet or intranet website posting or other distribution) or any statement made to it orally or by telephone and believed by it to be genuine and signed or sent or otherwise authenticated by the proper party or parties (whether or not such Person in fact meets the requirements set forth in the Loan Documents for being the maker thereof).
SECTION 8.03. Posting of Communications.
(a) The Borrower agrees that the Administrative Agent may, but shall not be obligated to, make any Communications available to the Lenders and the Issuing Banks by posting the Communications on IntraLinks™, DebtDomain, SyndTrak, ClearPar or any other electronic system chosen by the Administrative Agent to be its electronic transmission system (the “Approved Electronic Platform”).
(b) Although the Approved Electronic Platform and its primary web portal are secured with generally-applicable security procedures and policies implemented or modified by the Administrative Agent from time to time (including, as of the Effective Date, a user ID/password authorization system) and the Approved Electronic Platform is secured through a per-deal authorization method whereby each user may access the Approved Electronic Platform only on a deal-by-deal basis, each of the Lenders, each of the Issuing Banks and the Borrower acknowledges and agrees that the distribution of material through an electronic medium is not necessarily secure, that the Administrative Agent is not responsible for approving or vetting the administrators, representatives or contacts of any Lender that are added to the Approved Electronic Platform, and that there may be confidentiality and other risks associated with such distribution. Each of the Lenders, each of the Issuing Banks and the Borrower hereby approves distribution of the Communications through the Approved Electronic Platform and understands and assumes the risks of such distribution.
(c) THE APPROVED ELECTRONIC PLATFORM AND THE COMMUNICATIONS ARE PROVIDED “AS IS” AND “AS AVAILABLE”. THE APPLICABLE PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE APPROVED ELECTRONIC PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE APPROVED ELECTRONIC PLATFORM AND THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE APPLICABLE PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE APPROVED ELECTRONIC PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT, ANY ARRANGER OR ANY OF THEIR RESPECTIVE RELATED PARTIES (COLLECTIVELY, “APPLICABLE PARTIES”) HAVE ANY LIABILITY TO ANY LOAN PARTY, ANY LENDER, ANY ISSUING BANK OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTY’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET OR THROUGH AN ELECTRONIC SYSTEM OR THE APPROVED ELECTRONIC PLATFORM.
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“Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed by the Administrative Agent, any Lender or any Issuing Bank by means of electronic communications pursuant to this Section, including through an Approved Electronic Platform.
(d) Each Lender and each Issuing Bank agrees that notice to it (as provided in the next sentence) specifying that Communications have been posted to the Approved Electronic Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender and Issuing Bank agrees (i) to notify the Administrative Agent in writing (which could be in the form of electronic communication) from time to time of such Lender’s or Issuing Bank’s (as applicable) email address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such email address.
(e) Each of the Lenders, each of the Issuing Banks and the Borrower agrees that the Administrative Agent may, but (except as may be required by applicable law) shall not be obligated to, store the Communications on the Approved Electronic Platform in accordance with the Administrative Agent’s generally applicable document retention procedures and policies.
(f) Nothing herein shall prejudice the right of the Administrative Agent, any Lender or any Issuing Bank to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.
SECTION 8.04. The Administrative Agent Individually. With respect to its Commitment, Loans (including Swingline Loans) and Letters of Credit, the Person serving as the Administrative Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender or Issuing Bank, as the case may be. The terms “Issuing Banks”, “Lenders”, “Required Lenders” and any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity as a Lender, Issuing Bank or as one of the Required Lenders, as applicable. The Person serving as the Administrative Agent 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 banking, trust or other business with, any Loan Party, any Subsidiary or any Affiliate of any of the foregoing as if such Person was not acting as the Administrative Agent and without any duty to account therefor to the Lenders or the Issuing Banks.
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SECTION 8.05. Successor Administrative Agent.
(a) The Administrative Agent may resign at any time by giving 30 days’ prior written notice thereof to the Lenders, the Issuing Banks and the Borrower, whether or not a successor Administrative Agent has been appointed. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within thirty (30) days after the retiring Administrative Agent’s giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Banks, appoint a successor Administrative Agent, which shall be a bank with an office in New York, New York or an Affiliate of any such bank. In either case, such appointment shall be subject to the prior written approval of the Borrower (which approval may not be unreasonably withheld, conditioned or delayed and shall not be required while an Event of Default has occurred and is continuing). Upon the acceptance of any appointment as Administrative Agent by a successor Administrative Agent, such successor Administrative Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Administrative Agent. Upon the acceptance of appointment as Administrative Agent by a successor Administrative Agent, the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. Prior to any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the retiring Administrative Agent shall take such action as may be reasonably necessary to assign to the successor Administrative Agent its rights as Administrative Agent under the Loan Documents.
(b) Notwithstanding paragraph (a) of this Section, in the event no successor Administrative Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its intent to resign, the retiring Administrative Agent may give notice of the effectiveness of its resignation to the Lenders, the Issuing Banks and the Borrower, whereupon, on the date of effectiveness of such resignation stated in such notice, (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents; provided that, solely for purposes of maintaining any security interest granted to the Administrative Agent under any Collateral Document for the benefit of the Secured Parties, the retiring Administrative Agent shall continue to be vested with such security interest as collateral agent for the benefit of the Secured Parties, and continue to be entitled to the rights set forth in such Collateral Document and Loan Document, and, in the case of any Collateral in the possession of the Administrative Agent, shall continue to hold such Collateral, in each case until such time as a successor Administrative Agent is appointed and accepts such appointment in accordance with this Section (it being understood and agreed that the retiring Administrative Agent shall have no duty or obligation to take any further action under any Collateral Document, including any action required to maintain the perfection of any such security interest), and (ii) the Required Lenders shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent; provided further that (A) all payments required to be made hereunder or under any other Loan Document to the Administrative Agent for the account of any Person other than the Administrative Agent shall be made directly to such Person and (B) all notices and other communications required or contemplated to be given or made to the Administrative Agent shall directly be given or made to each Lender and each Issuing Bank. Following the effectiveness of the Administrative Agent’s resignation from its capacity as such, the provisions of this Article, Section 2.17(d) and Section 9.03, as well as any exculpatory, reimbursement and indemnification provisions set forth in any other Loan Document, shall continue in effect for the benefit of such retiring Administrative Agent, its subagents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent and in respect of the matters referred to in the first proviso to the first sentence of this Section 8.05(b).
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SECTION 8.06. Acknowledgments of Lenders and Issuing Banks.
(a) Each Lender represents and warrants that (i) the Loan Documents set forth the terms of a commercial lending facility, (ii) in participating as a Lender, it is engaged in making, acquiring or holding commercial loans and in providing other facilities set forth herein as may be applicable to such Lender or Issuing Bank, in each case, in the ordinary course of business, and not for the purpose of investing in the general performance or operations of the Borrower, or for the purpose of purchasing, acquiring or holding any other type of financial instrument such as a security (and each Lender agrees not to assert a claim in contravention of the foregoing, such as a claim under federal or state securities laws), (iii) it has, independently and without reliance upon the Administrative Agent, any Arranger or any other Lender, or any of the Related Parties of any of the foregoing, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement as a Lender, and to make, acquire or hold Loans hereunder and (iv) it is sophisticated with respect to decisions to make, acquire and/or hold commercial loans and to provide other facilities set forth herein, as may be applicable to such Lender, and either it, or the Person exercising discretion in making its decision to make, acquire and/or hold such commercial loans or to provide such other facilities, is experienced in making, acquiring or holding such commercial loans or providing such other facilities. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, any Arranger or any other Lender, or any of the Related Parties of any of the foregoing, and based on such documents and information (which may contain material, non-public information within the meaning of the United States securities laws concerning the Borrower and its Affiliates) 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.
(b) Each Lender, by delivering its signature page to this Agreement on the Effective Date, or delivering its signature page to an Assignment and Assumption or any other Loan Document pursuant to which it shall become a Lender hereunder, shall be deemed to have acknowledged receipt of, and consented to and approved, each Loan Document and each other document required to be delivered to, or be approved by or satisfactory to, the Administrative Agent or the Lenders on the Effective Date or the effective date of any such Assignment and Assumption or any other Loan Document pursuant to which it shall have become a Lender hereunder.
(c) (i) Each Lender hereby agrees that (x) if the Administrative Agent notifies such Lender that the Administrative Agent has determined in its sole discretion that any funds received by such Lender from the Administrative Agent or any of its Affiliates (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, a “Payment”) were erroneously transmitted to such Lender (whether or not known to such Lender), and demands the return of such Payment (or a portion thereof), such Lender shall promptly, but in no event later than one Business Day thereafter (or such later date as the Administrative Agent, in its sole discretion, may specify in writing), return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon (except to the extent waived in writing by the Administrative Agent) in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent at the greater of the NYFRB Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect, and (y) to the extent permitted by applicable law, such Lender shall not assert, and hereby waives, as to the Administrative Agent, 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 Payments received, including without limitation any defense based on “discharge for value” or any similar doctrine. A notice of the Administrative Agent to any Lender under this Section 8.06(c) shall be conclusive, absent manifest error.
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(ii) Each Lender hereby further agrees that if it receives a Payment from the Administrative Agent or any of its Affiliates (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) with respect to such Payment (a “Payment Notice”) or (y) that was not preceded or accompanied by a Payment Notice, it shall be on notice, in each such case, that an error has been made with respect to such Payment. Each Lender agrees that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may have been sent in error, such Lender shall promptly notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in no event later than one (1) Business Day thereafter (or such later date as the Administrative Agent, in its sole discretion, may specify in writing), return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon (except to the extent waived in writing by the Administrative Agent) in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent at the greater of the NYFRB Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
(iii) The Borrower and each other Loan Party hereby agrees that (x) in the event an erroneous Payment (or portion thereof) are not recovered from any Lender that has received such Payment (or portion thereof) for any reason, the Administrative Agent shall be subrogated to all the rights of such Lender with respect to such amount and (y) an erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Loan Party.
(iv) Each party’s obligations under this Section 8.06(c) shall survive the resignation or replacement of the Administrative Agent or any transfer of rights or obligations by, or the replacement of, a Lender, the termination of the Commitments or the repayment, satisfaction or discharge of all Obligations under any Loan Document.
(d) Each Lender hereby agrees that (i) it has requested a copy of each report prepared by or on behalf of the Administrative Agent; (ii) the Administrative Agent (A) makes no representation or warranty, express or implied, as to the completeness or accuracy of any report or any of the information contained therein or any inaccuracy or omission contained in or relating to a report and (B) shall not be liable for any information contained in any report; (iii) the reports are not comprehensive audits or examinations, and that any Person performing any field examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties’ books and records, as well as on representations of the Loan Parties’ personnel and that the Administrative Agent undertakes no obligation to update, correct or supplement the reports; (iv) it will keep all reports confidential and strictly for its internal use, not share the report with any Loan Party or any other Person except as otherwise permitted pursuant to this Agreement; and (v) without limiting the generality of any other indemnification provision contained in this Agreement, (A) it will hold the Administrative Agent and any such other Person preparing a report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any report in connection with any extension of credit that the indemnifying Lender has made or may make to the Borrower, or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, a Loan or Loans; and (B) it will pay and protect, and indemnify, defend, and hold the Administrative Agent and any such other Person preparing a report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including reasonable attorneys’ fees) incurred by the Administrative Agent or any such other Person as the direct or indirect result of any third parties who might obtain all or part of any report through the indemnifying Lender.
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SECTION 8.07. Collateral Matters.
(a) Except with respect to the exercise of setoff rights in accordance with Section 9.08 or with respect to a Secured Party’s right to file a proof of claim in an insolvency proceeding, no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce any Guarantee of the Secured Obligations, it being understood and agreed that all powers, rights and remedies under the Loan Documents may be exercised solely by the Administrative Agent on behalf of the Secured Parties in accordance with the terms thereof. In its capacity, the Administrative Agent is a “representative” of the Secured Parties within the meaning of the term “secured party” as defined in the UCC. In the event that any Collateral is hereafter pledged by any Person as collateral security for the Secured Obligations, the Administrative Agent is hereby authorized, and hereby granted a power of attorney, to execute and deliver on behalf of the Secured Parties any Loan Documents necessary or appropriate to grant and perfect a Lien on such Collateral in favor of the Administrative Agent on behalf of the Secured Parties.
(b) In furtherance of the foregoing and not in limitation thereof, no arrangements in respect of Banking Services the obligations under which constitute Secured Obligations and no Swap Agreement the obligations under which constitute Secured Obligations, will create (or be deemed to create) in favor of any Secured Party that is a party thereto any rights in connection with the management or release of any Collateral or of the obligations of any Loan Party under any Loan Document. By accepting the benefits of the Collateral, each Secured Party that is a party to any such arrangement in respect of Banking Services or Swap Agreement, as applicable, shall be deemed to have appointed the Administrative Agent to serve as administrative agent and collateral agent under the Loan Documents and agreed to be bound by the Loan Documents as a Secured Party thereunder, subject to the limitations set forth in this paragraph.
SECTION 8.08. Credit Bidding. The Secured Parties hereby irrevocably authorize the Administrative Agent, at the direction of the Required Lenders, to credit bid all or any portion of the Secured Obligations (including by accepting some or all of the Collateral in satisfaction of some or all of the Secured Obligations pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code, including under Sections 363, 1123 or 1129 of the Bankruptcy Code, or any similar laws in any other jurisdictions to which a Loan Party is subject, or (b) at any other sale, foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) the Administrative Agent (whether by judicial action or otherwise) in accordance with any applicable law. In connection with any such credit bid and purchase, the Secured Obligations owed to the Secured Parties shall be entitled to be, and shall be, credit bid by the Administrative Agent at the direction of the Required Lenders on a ratable basis (with Secured Obligations with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that shall vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) for the asset or assets so purchased (or for the equity interests or debt instruments of the acquisition vehicle or vehicles that are issued in connection with such purchase). In connection with any such bid (i) the Administrative Agent shall be authorized to form one or more acquisition vehicles and to assign any successful credit bid to such acquisition vehicle or vehicles (ii) each of the Secured Parties’ ratable interests in the Secured Obligations which were credit bid shall be deemed without any further action under this Agreement to be assigned to such vehicle or vehicles for the purpose of closing such sale, (iii) the Administrative Agent shall be authorized to adopt documents providing for the governance of the acquisition vehicle or vehicles (provided that any actions by the Administrative Agent with respect to such acquisition vehicle or vehicles, including any Disposition of the assets or equity interests thereof, shall be governed, directly or indirectly, by, and the governing documents shall provide for, control by the vote of the Required Lenders or their permitted assignees under the terms of this Agreement or the governing documents of the applicable acquisition vehicle or vehicles, as the case may be, irrespective of the termination of this Agreement and without giving effect to the limitations on actions by the Required Lenders contained in Section 9.02 of this Agreement), (iv) the Administrative Agent on behalf of such acquisition vehicle or vehicles shall be authorized to issue to each of the Secured Parties, ratably on account of the relevant Secured Obligations which were credit bid, interests, whether as equity, partnership interests, limited partnership interests or membership interests, in any such acquisition vehicle and/or debt instruments issued by such acquisition vehicle, all without the need for any Secured Party or acquisition vehicle to take any further action, and (v) to the extent that Secured Obligations that are assigned to an acquisition vehicle are not used to acquire Collateral for any reason (as a result of another bid being higher or better, because the amount of Secured Obligations assigned to the acquisition vehicle exceeds the amount of Secured Obligations credit bid by the acquisition vehicle or otherwise), such Secured Obligations shall automatically be reassigned to the Secured Parties pro rata with their original interest in such Secured Obligations and the equity interests and/or debt instruments issued by any acquisition vehicle on account of such Secured Obligations shall automatically be cancelled, without the need for any Secured Party or any acquisition vehicle to take any further action. Notwithstanding that the ratable portion of the Secured Obligations of each Secured Party are deemed assigned to the acquisition vehicle or vehicles as set forth in clause (ii) above, each Secured Party shall execute such documents and provide such information regarding the Secured Party (and/or any designee of the Secured Party which will receive interests in or debt instruments issued by such acquisition vehicle) as the Administrative Agent may reasonably request in connection with the formation of any acquisition vehicle, the formulation or submission of any credit bid or the consummation of the transactions contemplated by such credit bid.
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SECTION 8.09. Certain ERISA Matters.
(a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that at least one of the following is and will be true:
(i) such Lender is not using “plan assets” (within the meaning of the Plan Asset Regulations) of one or more Benefit Plans in connection with the Loans, the Letters of Credit, the Commitments or this Agreement,
(ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement,
(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement, or
(iv) such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.
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(b) In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that none of the Administrative Agent or any Arranger or any of their respective Affiliates is a fiduciary with respect to the assets of such Lender in connection with the Loans, the Letters of Credit, the Commitments or this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related to hereto or thereto).
(c) The Administrative Agent and each Arranger hereby informs the Lenders that each such Person is not undertaking to provide investment advice or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Letters of Credit, the Commitments, this Agreement and any other Loan Documents, (ii) may recognize a gain if it extended the Loans, the Letters of Credit or the Commitments for an amount less than the amount being paid for an interest in the Loans, the Letters of Credit or the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
SECTION 8.10. Flood Laws. Chase has adopted internal policies and procedures that address requirements placed on federally regulated lenders under the Flood Laws. Chase, as administrative agent or collateral agent on a syndicated facility, will post on the applicable electronic platform (or otherwise distribute to each Lender in the syndicate) documents that it receives in connection with the Flood Laws. However, Chase reminds each Lender and Participant in the facility that, pursuant to the Flood Laws, each federally regulated Lender (whether acting as a Lender or Participant in the facility) is responsible for assuring its own compliance with the flood insurance requirements.
SECTION 8.11. Borrower Communications.
(a) The Administrative Agent, the Lenders and the Issuing Bank agree that the Borrower may, but shall not be obligated to, make any Borrower Communications to the Administrative Agent through an electronic platform chosen by the Administrative Agent to be its electronic transmission system (the “Approved Borrower Portal”).
(b) Although the Approved Borrower Portal and its primary web portal are secured with generally-applicable security procedures and policies implemented or modified by the Administrative Agent from time to time (including, as of the Effective Date, a user ID/password authorization system), each of the Lenders, the Issuing Bank and the Borrower acknowledges and agrees that the distribution of material through an electronic medium is not necessarily secure, that the Administrative Agent is not responsible for approving or vetting the administrators, representatives or contacts of the Borrower that are added to the Approved Borrower Portal, and that there may be confidentiality and other risks associated with such distribution. Each of the Lenders, the Issuing Bank and the Borrower hereby approves distribution of Borrower Communications through the Approved Borrower Portal and understands and assumes the risks of such distribution.
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(c) THE APPROVED BORROWER PORTAL IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE APPLICABLE PARTIES DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER COMMUNICATIONS, OR THE ADEQUACY OF THE APPROVED BORROWER PORTAL AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE APPROVED BORROWER PORTAL AND THE BORROWER COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE APPLICABLE PARTIES IN CONNECTION WITH THE BORROWER COMMUNICATIONS OR THE APPROVED BORROWER PORTAL. IN NO EVENT SHALL ANY APPLICABLE PARTY HAVE ANY LIABILITY TO ANY LOAN PARTY, ANY LENDER, THE ISSUING BANK OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S TRANSMISSION OF BORROWER COMMUNICATIONS THROUGH THE INTERNET OR THE APPROVED BORROWER PORTAL.
(d) Each of the Lenders, the Issuing Bank and the Borrower agrees that the Administrative Agent may, but (except as may be required by applicable law) shall not be obligated to, store the Borrower Communications on the Approved Borrower Portal in accordance with the Administrative Agent’s generally applicable document retention procedures and policies.
(e) Nothing herein shall prejudice the right of the Borrower to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices.
(a) Except in the case of notices and other communications expressly permitted to be given by fax or Electronic Systems or the Approved Borrower Portal (and subject in each case to paragraph (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 fax or Electronic Systems, as follows:
| (i) | if to any Loan Party, to it in care of the Borrower at: |
Neptune Flood Incorporated
400 6th Street South
St. Petersburg, FL 33701
Attention: Trevor Burgess, President & CEO
Telephone: [PERSONAL INFORMATION REDACTED]
Email: [PERSONAL INFORMATION REDACTED]
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(ii) if from any Loan Party to the Administrative Agent or Chase in its capacity as the Issuing Bank or the Swingline Lender, (A) to the address or addresses separately provided to the Borrower and (B) and, in the case of a notification in respect of the DQ List, JPMDQ_Contact@jpmorgan.com;
(iii) if from any Lender to the Administrative Agent or Chase in its capacity as the Issuing Bank or the Swingline Lender, at the address separately provided to the Lenders by the Administrative Agent from time to time;
(iv) if to any other Lender or Issuing Bank, to it at its address, email, fax number or email set forth in its Administrative Questionnaire.
All such notices and other communications (i) sent by hand or overnight courier service, or mailed by certified or registered mail shall be deemed to have been given when received, (ii) sent by fax shall be deemed to have been given when sent, provided that if not given during normal business hours for the recipient, such notice or communication shall be deemed to have been given at the opening of business on the next Business Day of the recipient, or (iii) delivered through any Electronic Systems or Approved Electronic Platforms or Approved Borrower Portals, as applicable, to the extent provided in paragraph (b) below shall be effective as provided in such paragraph (b).
(b) Notices and other communications to any Loan Party, the Administrative Agent, the Issuing Bank or any Lender hereunder may be delivered or furnished by using Electronic Systems or Approved Electronic Platforms or Approved Borrower Portals, as applicable, in each case, pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II or no Default certificates and to Compliance Certificates delivered pursuant to Section 5.01(c) unless otherwise agreed by the Administrative Agent and the applicable Lender. Each of the Administrative Agent and the Borrower (on behalf of the Loan Parties) may, in its discretion, agree to accept notices and other communications to it hereunder by using Electronic Systems or Approved Electronic Platforms or Approved Borrower Portal, as applicable, and in each case 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 proscribes, all such notices and other communications (i) 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 the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if not given during the normal business hours of the recipient, such notice or communication shall be deemed to have been given at the opening of business on the next Business Day for the recipient, and (ii) posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email 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 of the recipient.
(c) Any party hereto may change its address, facsimile number or e-mail address for notices and other communications hereunder by notice to the other parties hereto.
SECTION 9.02. Waivers; Amendments.
(a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under any other Loan Document are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.
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(b) Except as provided in Section 2.09 (as in effect on the date hereof) with respect to any Incremental Facility Amendment or modification of the Commitment Schedule, and subject to Sections 2.14(b) and (c) and Sections 9.02(c) and (e) (each as in effect on the date hereof), neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (i) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or (ii) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto, with the consent of the Required Lenders; provided that no such waiver, amendment, modification, consent or other agreement shall (A) increase, extend or re-instate the Commitment of any Lender without the written consent of such Lender (including any such Lender that is a Defaulting Lender), (B) reduce or forgive the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce or forgive any interest or fees payable hereunder or under any other Loan Document or extend the timing of payments of such fees, interest or other amounts, in each case, without the written consent of each Lender (including any such Lender that is a Defaulting Lender) directly affected thereby (except that any amendment or modification of the financial covenants in this Agreement (or defined terms used in the financial covenants in this Agreement) shall not constitute a reduction in the rate of interest or fees for purposes of this clause (B)), (C) postpone any scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any date for the payment of any interest, fees or other Secured Obligations payable hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, in each case, without the written consent of each Lender (including any such Lender that is a Defaulting Lender) directly affected thereby (other than, in each case, any prepayment required to be made pursuant to Section 2.11(c)), (D) amend, modify or change (or consent to any departure from) any pro rata sharing, pro rata reduction, pro rata increase or pro rata offer provisions in this Agreement, including Section 2.09(d) or Section 2.18(b) or (d), in each case, in a manner that would alter the ratable requirements of such provisions, in each case, without the written consent of each Lender (other than any Defaulting Lender), (E) amend, modify or change any of the provisions of this Section or the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or thereunder or make any determination or grant any consent hereunder or thereunder, in each case, without the written consent of each Lender (other than any Defaulting Lender) (it being understood that, solely with the consent of the parties prescribed by Section 2.09 to be parties to an Incremental Facility Amendment, Incremental Term Loans and additional Revolving Commitments may be included in the determination of Required Lenders on substantially the same basis as the initial Commitments and Loans are included on the Effective Date), (F) (x) release Holdings or the Borrower from its obligations under the Loan Documents or (y) release any Loan Guarantor from its obligation under its Loan Guaranty (except as otherwise permitted herein or in the other Loan Documents as in effect on the date hereof), in each case, without the written consent of each Lender (other than any Defaulting Lender), (G) except as provided in clause (c) of this Section (as in effect on the date hereof) or in any Collateral Document as in effect on the date of effectiveness thereof, release all or substantially all of the Collateral without the written consent of each Lender (other than any Defaulting Lender), (H) change Section 2.20, without the consent of each Lender (other than any Defaulting Lender), (I) amend or waive any of the conditions set forth in Section 4.02 without the requisite number (or percentage in interest) of each affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time or (J) (x) subordinate, or have the effect of subordinating (whether by contract, structurally or otherwise), the right of payment of all or any portion of the Secured Obligations to any other Indebtedness or other obligations or liabilities or (y) subordinate, or have the effect of subordinating (whether by contract, structurally or otherwise), the Liens securing (or purporting to secure) all or any portion of the Secured Obligations to Liens securing (or purporting to secure) any other Indebtedness or other obligation or liabilities, in each case, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Swingline Lender or the Issuing Bank hereunder without the prior written consent of the Administrative Agent, the Swingline Lender or the Issuing Bank, as the case may be (it being understood that any amendment to Section 2.20 shall require the consent of the Administrative Agent, the Swingline Lender and the Issuing Bank); provided further that no such agreement shall amend or modify the provisions of Section 2.06 or any Letter of Credit Agreement or any letter of credit application and any bilateral agreement between the Borrower and the Issuing Bank regarding the Issuing Bank’s Issuing Bank Sublimit or the respective rights and obligations between the Borrower and the Issuing Bank in connection with the issuance of Letters of Credit without the prior written consent of the Administrative Agent and the Issuing Bank, respectively. The Administrative Agent may also amend the Commitment Schedule to reflect assignments entered into pursuant to Section 9.04. Any amendment, waiver or other modification of this Agreement or any other Loan Document that by its terms affects the rights or duties under this Agreement of the Lenders of one or more Classes (but not the Lenders of any other Class), may be effected by an agreement or agreements in writing entered into by the Borrower and the requisite number or percentage in interest of each affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time.
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(c) The Secured Parties hereby irrevocably authorize the Administrative Agent (or its designee), at its option and in its sole discretion (or at the direction of the Required Lenders), to release any Liens granted to the Administrative Agent by the Loan Parties on any Collateral (i) upon the Payment in Full of the Secured Obligations, and the cash collateralization of all Unliquidated Obligations in a manner satisfactory to each affected Lender, (ii) constituting property being Disposed of if the Loan Party Disposing of such property certifies to the Administrative Agent that the Disposition is made in compliance with the terms of this Agreement (and the Administrative Agent may rely conclusively on any such certificate, without further inquiry), and to the extent that the property being Disposed of constitutes 100% of the Equity Interests of a Subsidiary, the Administrative Agent is authorized to release the Loan Guaranty provided by such Subsidiary, (iii) constituting property leased to a Loan Party under a lease which has expired or been terminated in a transaction permitted under this Agreement, or (iv) as required to effect any Disposition of such Collateral in connection with any exercise of remedies of the Administrative Agent (or at the direction of the Required Lenders) pursuant to Section 7.02. Except as provided in the preceding sentence, the Administrative Agent will not release any Liens on Collateral without the prior written authorization of the Required Lenders or, to the extent required by Section 9.02(b), all of the Lenders. Any such release shall not in any manner discharge, affect, or impair the Secured Obligations or any Liens (other than those expressly being released) upon (or obligations of the Loan Parties in respect of) all interests retained by the Loan Parties, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral. Any execution and delivery by the Administrative Agent of documents in connection with any such release shall be without recourse to or warranty by the Administrative Agent. In addition, each of the Secured Parties, on behalf of itself and any of its Affiliates that are Secured Parties, irrevocably authorizes the Administrative Agent (or its designee), at its option and in its discretion, (x) to subordinate any Lien on any assets granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 6.02(b) or 6.02(d) (each as in effect on the date hereof), or (y) in the event that the Borrower shall have advised the Administrative Agent that, notwithstanding the use by the Borrower of commercially reasonable efforts to obtain the consent of such holder (but without the requirement to pay any sums to obtain such consent) to permit the Administrative Agent to retain its liens (on a subordinated basis as contemplated by clause (x) above), the holder of such other Indebtedness requires, as a condition to the extension of such credit, that the Liens on such assets granted to or held by the Administrative Agent under any Loan Document be released, to release the Administrative Agent’s Liens on such assets. The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders or any other Secured Party for any failure to monitor or maintain any portion of the Collateral.
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(d) If, in connection with any proposed amendment, restatement, supplement, modification, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but has not been obtained being referred to herein as a “Non-Consenting Lender”), then the Borrower may elect to replace a Non-Consenting Lender as a Lender party to this Agreement, provided that, concurrently with such replacement, (i) another bank or other entity (other than any Ineligible Institution) which is reasonably satisfactory to the Borrower, the Administrative Agent and, to the extent involving the assignment or transfer of any Revolving Commitment, the Swingline Lender and the Issuing Bank shall agree, as of such date, to purchase for cash the Loans and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of clause (b) of Section 9.04 (provided that (A) any Affiliated Lender assuming any such interests, rights or obligations shall be required to first comply with Section 9.04(f) and (B) Affiliated Lenders may not hold any Revolving Commitments), (ii) such replacement Lender agrees to the applicable proposed amendment, restatement, supplement, modification, waiver or consent and (iii) the Borrower shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (1) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Sections 2.15 and 2.17, and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 2.16 had the Loans of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender. Each party hereto agrees that (a) an assignment required pursuant to this paragraph may be effected pursuant to an Assignment and Assumption executed by the Borrower, the Administrative Agent and the assignee (or, to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to which the Administrative Agent and such parties are participants), and (b) the Lender required to make such assignment need not be a party thereto in order for such assignment to be effective and shall be deemed to have consented to and be bound by the terms thereof; provided that, following the effectiveness of any such assignment, the other parties to such assignment agree to execute and deliver such documents necessary to evidence such assignment as reasonably requested by the applicable Lender, provided that any such documents shall be without recourse to or warranty by the parties thereto.
(e) Notwithstanding anything to the contrary herein the Administrative Agent may, with the consent of the Borrower only, amend, modify or supplement this Agreement or any of the other Loan Documents to cure any ambiguity, omission, mistake, defect or inconsistency.
SECTION 9.03. Expenses; Limitation of Liability; Indemnity; Etc.
(a) Expenses. The Loan Parties, jointly and severally, shall pay all (i) reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable out-of-pocket fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication and distribution (including, without limitation, via the internet or through an Electronic System or Approved Electronic Platform) of the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers of the provisions of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the out-of-pocket fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement, collection or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
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(b) Limitation of Liability. To the extent permitted by applicable law (i) neither the Borrower nor any other Loan Party shall assert, and the Borrower and each other Loan Party hereby waives, any claim against the Administrative Agent, any Arranger, the Issuing Bank and any Lender, and any Related Party of any of the foregoing Persons (each such Person being called a “Lender-Related Person”) for any Liabilities arising from the use by others of information or other materials (including, without limitation, any personal data) obtained through telecommunications, electronic or other information transmission systems (including the Internet, any Approved Electronic Platform and any Approved Borrower Portal), except to the extent they are found by a final, non-appealable judgment of a court of competent jurisdiction to result from the willful misconduct or gross negligence of such Lender-Related Person and (ii) no party hereto shall assert, and each such party hereby waives, any Liabilities against any other party hereto, 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 or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof; provided that, nothing in this Section 9.03(b) shall relieve the Borrower or any other Loan Party of any obligation it may have to indemnify an Indemnitee, as provided in Section 9.03(c), against any special, indirect, consequential or punitive damages asserted against such Indemnitee by a third party.
(c) Indemnity. The Loan Parties, jointly and severally, shall indemnify the Administrative Agent, each Arranger, the Issuing Bank and 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 Liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of the Loan Documents or any agreement or instrument contemplated thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by a Loan Party or a Subsidiary, or any Environmental Liability related in any way to a Loan Party or a Subsidiary, (iv) the failure of a Loan Party to deliver to the Administrative Agent the required receipts or other required documentary evidence with respect to a payment made by such Loan Party for Taxes pursuant to Section 2.17, or (v) any actual or prospective Proceeding relating to any of the foregoing, whether or not such Proceeding is brought by any Loan Party or their respective equity holders, Affiliates, creditors or any other third Person and whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such Liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee. This Section 9.03(c) shall not apply with respect to Taxes other than any Taxes that represent losses, claims or damages arising from any non-Tax claim.
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(d) Lender Reimbursement. Each Lender severally agrees to pay any amount required to be paid by any Loan Party under paragraphs (a), (b) or (c) of this Section 9.03 to the Administrative Agent and each Revolving Lender severally agrees to pay to the Swingline Lender and the Issuing Bank, and each Related Party of any of the foregoing Persons (each, an “Agent-Related Person”) (to the extent not reimbursed by the Loan Parties and without limiting the obligation of any Loan Party to do so), ratably according to their respective Applicable Percentage in effect on the date on which such payment is sought under this Section (or, if such payment is sought after the Payment in Full of the Secured Obligations, ratably in accordance with such Applicable Percentage immediately prior to such date), and agrees to indemnify and hold each Agent-Related Person harmless from and against any and all Liabilities and related expenses, including the fees, charges and disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent-Related Person in any way relating to or arising out of the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent-Related Person under or in connection with any of the foregoing; provided that the unreimbursed expense or Liability or related expense, as the case may be, was incurred by or asserted against such Agent-Related Person in its capacity as such; provided, further, that no Lender shall be liable for the payment of any portion of such Liabilities, costs, expenses or disbursements that are found by a final and non-appealable decision of a court of competent jurisdiction to have resulted primarily from such Agent-Related Person’s gross negligence or willful misconduct. The agreements in this Section shall survive the termination of this Agreement and Payment in Full of the Secured Obligations.
(e) Payments. All amounts due under this Section 9.03 shall be payable promptly after written demand therefor.
SECTION 9.04. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Loan Party without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
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(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more Persons (other than an Ineligible Institution) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments, participations in Letters of Credit and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld, conditioned or delayed) of:
(A) the Borrower, provided that, (x) the Borrower shall be deemed to have consented to an assignment of all or a portion of the Term Loans and Term Loan Commitments unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof and (y) the Borrower shall be deemed to have consented to an assignment of all or a portion of the Revolving Loans and Revolving Commitments unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof, and provided further that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee that is not an Ineligible Institution;
(B) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Term Loan or Term Loan Commitment to a Lender, an Affiliate of a Lender or an Approved Fund;
(C) the Issuing Bank; provided that no consent of the Issuing Bank shall be required (x) if (I) an Event of Default has occurred with respect to the Borrower under Section 7.01(h) or (i) and (II) the Issuing Bank has no outstanding Letters of Credit at that time or (y) for an assignment of all or any portion of a Term Loan or Term Loan Commitment; and
(D) the Swingline Lender; provided that no consent of the Swingline Lender shall be required (x) if (I) an Event of Default has occurred with respect to the Borrower under Section 7.01(h) or (i) and (II) the Swingline Lender has no outstanding Swingline Loans at that time or (y) for an assignment of all or any portion of a Term Loan or Term Loan Commitment.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the “trade date” under the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (in the case of a Revolving Commitment or Revolving Loans) or $1,000,000 (in the case of a Term Loan Commitment or Term Loans), in each case, aggregated across Affiliates and Approved Funds, unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;
(B) 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; provided that this clause shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans;
(C) the parties to each assignment shall execute and deliver to the Administrative Agent (x) an Assignment and Assumption or (y) to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants, together with a processing and recordation fee of $3,500; and
(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower, the other Loan Parties and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable laws, including federal and state securities laws.
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For the purposes of this Section 9.04(b), the terms “Approved Fund” and “Ineligible Institution” have the following meanings:
“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Ineligible Institution” means a (a) natural person, (b) Defaulting Lender or its Parent, (c) holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof; provided that, with respect to clause (c), such holding company, investment vehicle or trust shall not constitute an Ineligible Institution if it (x) has not been established for the primary purpose of acquiring any Loans or Commitments, (y) is managed by a professional advisor, who is not such natural person or a relative thereof, having significant experience in the business of making or purchasing commercial loans, and (z) has assets greater than $25,000,000 and a significant part of its activities consist of making or purchasing commercial loans and similar extensions of credit in the ordinary course of its business, (d) a Loan Party or a Subsidiary or other Affiliate of a Loan Party (other than an Affiliated Lender in compliance with Section 9.04(f)) or (e) any Disqualified Institution.
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.
(iv) The Administrative Agent, acting for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices in the United States of America 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 amount (and stated interest) of the Loans and LC Disbursements 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, the Issuing Bank and the Lenders shall 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. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(v) Upon its receipt of (x) a duly completed Assignment and Assumption executed by an assigning Lender and an assignee or (y) to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register; provided that if either the assigning Lender or the assignee shall have failed to make any payment required to be made by it pursuant to Section 2.05, 2.06(d) or (e), 2.07(b), 2.18(d) or 9.03(d), the Administrative Agent shall have no obligation to accept such Assignment and Assumption and record the information therein in the Register unless and until such payment shall have been made in full, together with all accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
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(c) Any Lender may, without the consent of, or notice to, the Borrower, the Administrative Agent, the Swingline Lender or the Issuing Bank, sell participations to one or more banks or other entities (a “Participant”) other than an Ineligible Institution in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitments and 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, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 (subject to the requirements and limitations therein, including the requirements under Sections 2.17(f) and (g) (it being understood that the documentation required under Section 2.17(f) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Sections 2.18 and 2.19 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Section 2.15 or 2.17 with respect to any participation than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.
Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(d) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement or any other Loan Document (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) and proposed Section 1.163-5(b) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
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(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(e) Disqualified Institutions.
(i) No assignment or participation shall be made to any Person that was a Disqualified Institution as of the date (the “Trade Date”) on which the assigning Lender entered into a binding agreement to sell and assign or grant a participation in all or a portion of its rights and obligations under this Agreement to such Person (unless the Borrower has consented to such assignment or participation in writing in its sole and absolute discretion, in which case such Person will not be considered a Disqualified Institution for the purpose of such assignment or participation). For the avoidance of doubt, with respect to any assignee or Participant that becomes a Disqualified Institution after the applicable Trade Date (including as a result of the delivery of a written supplement to the list of “Disqualified Institutions” referred to in, the definition of “Disqualified Institution”), (x) such assignee or Participant shall not retroactively be disqualified from becoming a Lender or Participant and (y) the execution by the Borrower of an Assignment and Assumption with respect to such assignee will not by itself result in such assignee no longer being considered a Disqualified Institution. Any assignment or participation in violation of this clause (e)(i) shall not be void, but the other provisions of this clause (e) shall apply.
(ii) If any assignment or participation is made to any Disqualified Institution without the Borrower’s prior written consent in violation of clause (i) above, or if any Person becomes a Disqualified Institution after the applicable Trade Date, the Borrower may, at its sole expense and effort, upon notice to the applicable Disqualified Institution and the Administrative Agent, require such Disqualified Institution to assign, without recourse (in accordance with and subject to the restrictions contained in this Section 9.04), all of its interest, rights and obligations under this Agreement to one or more Persons (other than an Ineligible Institution) at the lesser of (x) the principal amount thereof and (y) the amount that such Disqualified Institution paid to acquire such interests, rights and obligations, in each case, plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to it hereunder.
(iii) Notwithstanding anything to the contrary contained in this Agreement, Disqualified Institutions to whom an assignment or participation is made in violation of clause (i) above (A) will not have the right to (x) receive information, reports or other materials provided to Lenders by the Borrower, the Administrative Agent or any other Lender, (y) attend or participate in meetings attended by the Lenders and the Administrative Agent, or (z) access any electronic site established for the Lenders or confidential communications from counsel to or financial advisors of the Administrative Agent or the Lenders and (B) (x) for purposes of any consent to any amendment, waiver or modification of, or any action under, and for the purpose of any direction to the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) under this Agreement or any other Loan Document, each Disqualified Institution will be deemed to have consented in the same proportion as the Lenders that are not Disqualified Institutions consented to such matter and (y) for purposes of voting on any plan of reorganization, each Disqualified Institution party hereto hereby agrees (1) not to vote on such plan of reorganization, (2) if such Disqualified Institution does vote on such plan of reorganization notwithstanding the restriction in the foregoing clause (1), such vote will be deemed not to be in good faith and shall be “designated” pursuant to Section 1126(e) of the Bankruptcy Code (or any similar provision in any other applicable laws), and such vote shall not be counted in determining whether the applicable class has accepted or rejected such plan of reorganization in accordance with Section 1126(c) of the Bankruptcy Code (or any similar provision in any other applicable laws) and (3) not to contest any request by any party for a determination by the Bankruptcy Court (or other applicable court of competent jurisdiction) effectuating the foregoing clause (2).
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(iv) The Administrative Agent shall have the right, and the Borrower hereby expressly authorizes the Administrative Agent, to (A) post the list of Disqualified Institutions provided by the Borrower and any updates thereto from time to time (collectively, the “DQ List”) on an Approved Electronic Platform, including that portion of such Approved Electronic Platform that is designated for “public side” Lenders and/or (B) provide the DQ List to each Lender or potential Lender requesting the same.
(v) The Administrative Agent and the Lenders shall not be responsible or have any liability for, or have any duty to ascertain, inquire into, monitor or enforce, compliance with the provisions hereof relating to Disqualified Institutions. Without limiting the generality of the foregoing, neither the Administrative Agent nor any Lender shall (x) be obligated to ascertain, monitor or inquire as to whether any other Lender or Participant or prospective Lender or Participant is a Disqualified Institution or (y) have any liability with respect to or arising out of any assignment or participation of Loans, or disclosure of confidential information, by any other Person to any Disqualified Institution.
(f) Affiliated Lenders.
(i) Any Term Lender may, at any time, assign all or a portion of its rights and obligations solely with respect to Term Loans under this Agreement to a Person who is or will become, after such assignment, an Affiliated Lender or a Debt Fund Affiliate, subject to the following limitations:
(A) Affiliated Lenders will not receive information provided solely to Lenders by the Administrative Agent or any Lender and will not be permitted to attend or participate in meetings attended solely by the Lenders and the Administrative Agent, other than the right to receive notices of prepayments and other administrative notices in respect of its Term Loans required to be delivered to Lenders pursuant to Article II;
(B) each Affiliated Lender shall either (I) make a representation to the selling Lender that it does not possess material non-public information with respect to the Borrower and its Subsidiaries or the securities of any of them that has not been disclosed to the Lenders generally (other than Lenders who elect not to receive such information) or (II) disclose that it cannot make such representation, in which case, the applicable assigning Lender shall be deemed to expressly re-make the acknowledgement set forth in the second succeeding paragraph in connection with such assignment;
(C) after giving effect to such assignment, the aggregate principal amount of Term Loans held by Affiliated Lenders shall not exceed 25% of the principal amount of all Term Loans at such time outstanding, in each case, after giving effect to any substantially simultaneous cancellation thereof (such percentage, the “Affiliated Lender Cap”); provided that each of the parties hereto agrees and acknowledges that the Administrative Agent shall not be liable for any Liabilities, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever incurred or suffered by any Person in connection with any compliance or noncompliance with this clause (C) or any purported assignment exceeding the Affiliated Lender Cap;
(D) as a condition to each assignment pursuant to this clause (f), the Administrative Agent shall have been provided a written notice in connection with each assignment to an Affiliated Lender or a Person that upon effectiveness of such assignment would constitute an Affiliated Lender, and (without limitation of the provisions of clause (C) above) shall be under no obligation to record such assignment in the Register, as applicable until three (3) Business Days after receipt of such notice; and
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(E) proceeds of Loans may not be used to finance such purchase.
(ii) Notwithstanding anything to the contrary contained herein, any Affiliated Lender or Debt Fund Affiliate that has purchased Term Loans pursuant to this clause (f) may, in its sole discretion but subject to the consent of the Borrower, contribute, directly or indirectly, the principal amount of such Term Loans, plus all accrued and unpaid interest thereon, to the Borrower (through any direct or indirect parent thereof) for the purpose of immediately cancelling and extinguishing such Term Loans and such contribution may be in exchange for Qualified Stock of the Borrower (or any direct or indirect parent thereof) otherwise permitted by the terms of this Agreement to be issued at such time and which would not result in a Change of Control. Upon the date of such contribution, assignment or transfer, (x) the aggregate outstanding principal amount of Term Loans shall reflect such cancellation and extinguishing of the Term Loans then held by the Borrower and (y) the Borrower shall promptly provide notice to the Administrative Agent of such contribution of such Term Loans, and the Administrative Agent, upon receipt of such notice, shall reflect the cancellation and extinguishing of the applicable Term Loans in the Register.
(iii) Each Lender participating in any assignment to Affiliated Lenders acknowledges and agrees that in connection with such assignment, (1) the Affiliated Lenders then may have, and later may come into possession of material non-public information, (2) such Lender has independently and, without reliance on the Affiliated Lenders or any of their Subsidiaries, the Borrower or any of its Subsidiaries, the Administrative Agent or any other Agent-Related Persons, made its own analysis and determination to participate in such assignment notwithstanding such Lender’s lack of knowledge of the material non-public information, (3) none of the Affiliated Lenders or any of their Subsidiaries, the Borrower or any of its Subsidiaries shall be required to make any representation that it is not in possession of material non-public information, (4) none of the Affiliated Lenders or its Affiliates, the Borrower or any of its Subsidiaries or Affiliates, the Administrative Agent or any other Agent-Related Persons shall have any liability to such Lender, and such Lender hereby waives and releases, to the extent permitted by law, any claims such Lender may have against any Affiliated Lender or Affiliate thereof, the Borrower or any of its Subsidiaries or Affiliates, the Administrative Agent and any other Agent-Related Persons, under applicable laws or otherwise, with respect to the nondisclosure of the material non-public information and (5) that the material non-public information may not be available to the Administrative Agent or the other Lenders. Each Affiliated Lender and each Debt Fund Affiliate agrees to notify the Administrative Agent promptly (and in any event within ten (10) Business Days) if it acquires any Person who is also a Lender, and each Lender agrees to notify the Administrative Agent promptly (and in any event within ten (10) Business Days) if it becomes an Affiliated Lender or a Debt Fund Affiliate.
(iv) Notwithstanding anything in Section 9.02 or the definition of “Required Lenders” to the contrary:
(A) for purposes of determining whether the Required Lenders have (I) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom, or subject to Section 9.04(f)(v), any plan of reorganization pursuant to the Bankruptcy Code, (II) otherwise acted on any matter related to any Loan Document, or (III) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, no Affiliated Lender shall have any right to consent (or not consent), otherwise act or direct or require the Administrative Agent or any Lender to take (or refrain from taking) any such action and all Term Loans held by such Affiliated Lenders shall be deemed to have been voted in the same proportion as the allocation of voting by Term Lenders that are not Affiliated Lenders for all purposes of calculating whether the Required Lenders have taken any actions;
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(B) Debt Fund Affiliates may not in the aggregate account for more than 49.9% of the amounts set forth in the calculation of Required Lenders;
(C) notwithstanding the above, Affiliated Lenders and Debt Fund Affiliates shall have the right to vote on any amendment, modification, waiver, consent or other action described in the first proviso to Section 9.02(b) or otherwise requiring the written consent of each Lender or of each Lender directly affected thereby; and
(D) notwithstanding the above, no amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom may (x) directly affect any Affiliated Lender or Debt Fund Affiliate in its capacity as a Term Lender in a manner that is disproportionate to the effect on any Term Lender of the same Class or (y) deprive such Affiliated Lender or Debt Fund Affiliate of its Applicable Percentage of any payments to which it is entitled, in each case subject to the prior consent of such Affiliated Lender and/or Debt Fund Affiliate, as applicable.
(v) Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, but subject to Sections 9.04(f)(iv)(A), (C) and (D) above, each Affiliated Lender hereby agrees that, if a proceeding under the Bankruptcy Code or similar law in any jurisdiction shall be commenced by or against the Borrower or any other Loan Party at a time when such Lender is an Affiliated Lender, such Affiliated Lender irrevocably authorizes and empowers the Administrative Agent to vote on behalf of such Affiliated Lender with respect to the Term Loans held by such Affiliated Lender in any manner in the Administrative Agent’s sole discretion, unless the Administrative Agent instructs such Affiliated Lender to vote, in which case such Affiliated Lender shall vote with respect to the Term Loans held by it as the Administrative Agent directs; provided that such Affiliated Lender shall be entitled to vote in accordance with its sole discretion (and not in accordance with the direction of the Administrative Agent) in connection with any plan of reorganization to the extent any such plan of reorganization proposes to treat any Obligations held by such Affiliated Lender in a manner that is less favorable in any material respect to such Affiliated Lender than the proposed treatment of similar Obligations held by Lenders that are not Affiliated Lenders. The Lenders and each Affiliated Lender agree and acknowledge that the provisions set forth in this Section 9.04(f) and the related provisions set forth in each Assignment and Assumption entered into by an Affiliated Lender constitute a “subordination agreement” as such term is contemplated by, and utilized in, Section 510(a) of the Bankruptcy Code, and, as such, would be enforceable for all purposes in any case where the Borrower or any Subsidiary has filed for protection under any law relating to bankruptcy, insolvency or reorganization or relief of debtors applicable to the Borrower or such Subsidiary, as applicable. Each Affiliated Lender hereby irrevocably appoints the Administrative Agent (such appointment being coupled with an interest) as such Affiliated Lender’s attorney-in-fact, with full authority in the place and stead of such Affiliated Lender and in the name of such Affiliated Lender (solely in respect of Term Loans and participations therein and not in respect of any other claim or status such Affiliated Lender may otherwise have), from time to time in the Administrative Agent’s discretion to take any action and to execute any instrument that the Administrative Agent may deem reasonably necessary to carry out the provisions of this Section 9.04(f).
SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect until Payment in Full of the Secured Obligations. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any other Loan Document or any provision hereof or thereof.
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SECTION 9.06. Counterparts; Integration; Effectiveness; Electronic Execution.
(a) This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to (i) fees payable to the Administrative Agent and (ii) increases or reductions of the Issuing Bank Sublimit of the Issuing Bank 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 which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
(b) Delivery of an executed counterpart of a signature page of (x) this Agreement, (y) any other Loan Document and/or (z) any document, amendment, approval, consent, information, notice (including, for the avoidance of doubt, any notice delivered pursuant to Section 9.01), certificate, request, statement, disclosure or authorization related to this Agreement, any other Loan Document and/or the transactions contemplated hereby and/or thereby (each an “Ancillary Document”) that is an Electronic Signature transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement, such other Loan Document or such Ancillary Document, as applicable. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Agreement, any other Loan Document and/or any Ancillary Document shall be deemed to include Electronic Signatures, deliveries or the keeping of records in any electronic form (including deliveries by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page), each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be; provided that nothing herein shall require the Administrative Agent to accept Electronic Signatures in any form or format without its prior written consent and pursuant to procedures approved by it; provided, further, without limiting the foregoing, (i) to the extent the Administrative Agent has agreed to accept any Electronic Signature, the Administrative Agent and each of the Lenders shall be entitled to rely on such Electronic Signature purportedly given by or on behalf of the Borrower or any other Loan Party without further verification thereof and without any obligation to review the appearance or form of any such Electronic Signature and (ii) upon the request of the Administrative Agent or any Lender, any Electronic Signature shall be promptly followed by a manually executed counterpart. Without limiting the generality of the foregoing, the Borrower and each Loan Party hereby (A) agrees that, for all purposes, including without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among the Administrative Agent, the Lenders, the Borrower and the Loan Parties, Electronic Signatures transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page and/or any electronic images of this Agreement, any other Loan Document and/or any Ancillary Document shall have the same legal effect, validity and enforceability as any paper original, (B) the Administrative Agent and each of the Lenders may, at its option, create one or more copies of this Agreement, any other Loan Document and/or any Ancillary Document in the form of an imaged electronic record in any format, which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document (and all such electronic records shall be considered an original for all purposes and shall have the same legal effect, validity and enforceability as a paper record), (C) waives any argument, defense or right to contest the legal effect, validity or enforceability of this Agreement, any other Loan Document and/or any Ancillary Document based solely on the lack of paper original copies of this Agreement, such other Loan Document and/or such Ancillary Document, respectively, including with respect to any signature pages thereto and (D) waives any claim against any Lender-Related Person for any Liabilities arising solely from the Administrative Agent’s and/or any Lender’s reliance on or use of Electronic Signatures and/or transmissions by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page, including any Liabilities arising as a result of the failure of the Borrower and/or any Loan Party to use any available security measures in connection with the execution, delivery or transmission of any Electronic Signature.
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SECTION 9.07. Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender, the Issuing Bank, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final and in whatever currency denominated) at any time held, and other obligations at any time owing, by such Lender, the Issuing Bank or any such Affiliate, to or for the credit or the account of any Loan Party against any and all of the Secured Obligations now or hereafter existing and owing to such Lender or the Issuing Bank or their respective Affiliates, irrespective of whether or not such Lender, the Issuing Bank or such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Loan Parties may be contingent or unmatured or are owed to a branch office or Affiliate of such Lender or the Issuing Bank different from the branch office or Affiliate 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 2.20 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, the Issuing Banks, and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Secured Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The applicable Lender, the Issuing Bank or such Affiliate shall notify the Borrower and the Administrative Agent of such setoff or application; provided that the failure to give or any delay in giving such notice shall not affect the validity of such setoff or application under this Section. The rights of each Lender, the Issuing Bank and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the Issuing Bank or their respective Affiliates may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.
(a) The Loan Documents (other than those containing a contrary express choice of law provision) shall be governed by and construed in accordance with the law of the State of New York.
(b) Each of the Lenders and the Administrative Agent hereby irrevocably and unconditionally agrees that, notwithstanding the governing law provisions of any applicable Loan Document, any claims brought against the Administrative Agent or any of its Related Parties relating to this Agreement, any other Loan Document, the Collateral or the consummation or administration of the transactions contemplated hereby or thereby shall be construed in accordance with and governed by the law of the State of New York.
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(c) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court for the Southern District of New York sitting in the Borough of Manhattan (or if such court lacks subject matter jurisdiction, the Supreme Court of the State of New York sitting in the Borough of Manhattan), and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Documents, the transactions relating hereto or thereto, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may (and any such claims, cross-claims or third party claims brought against the Administrative Agent or any of its Related Parties may only) be heard and determined in such Federal (to the extent permitted by law) or New York State 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 any other Loan Document shall (i) affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction, (ii) waive any statutory, regulatory, common law, or other rule, doctrine, legal restriction, provision or the like providing for the treatment of bank branches, bank agencies, or other bank offices as if they were separate juridical entities for certain purposes, including UCC Sections 4-106, 4-A-105(1)(b), and 5-116(b), UCP 600 Article 3 and ISP98 Rule 2.02, and URDG 758 Article 3(a), or (iii) affect which courts have or do not have personal jurisdiction over the issuing bank or beneficiary of any Letter of Credit or any advising bank, nominated bank or assignee of proceeds thereunder or proper venue with respect to any litigation arising out of or relating to such Letter of Credit with, or affecting the rights of, any Person not a party to this Agreement, whether or not such Letter of Credit contains its own jurisdiction submission clause.
(d) Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (c) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(e) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
SECTION 9.10. 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, 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 OR OTHER AGENT (INCLUDING ANY ATTORNEY) OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
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SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Bank 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 their respective directors, officers, employees and agents, including accountants, legal counsel and other advisors (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 Governmental Authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by any applicable law or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, 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 (x) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement (it being understood that the DQ List may be disclosed to any assignee or Participant, or prospective assignee or Participant, in reliance on this clause (f)) or (y) any direct, indirect, actual or prospective counterparty (or its advisors) to any insurance, swap, derivative or other transaction under which payments are to be made by reference to the Loan Parties and their obligations, this Agreement or payments hereunder, (g) to holders of any Equity Interests in any Loan Party, (h) on a confidential basis to (1) any rating agency in connection with rating Holdings or its Subsidiaries or the credit facilities provided for herein, (2) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the credit facilities provided for herein or (3) any financing source, insurer or reinsurer, (i) with the consent of the Borrower, (j) to any Person providing a Guarantee of all or any portion of the Secured Obligations, or (k) 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, the Issuing Bank or any Lender on a non-confidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a non-confidential basis prior to disclosure by the Borrower and other than information pertaining to this Agreement provided by arrangers to data service providers, including league table providers, that serve the lending industry; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
For the avoidance of doubt, nothing in this Section 9.12 shall prohibit any Person from voluntarily disclosing or providing any Information within the scope of this confidentiality provision to any governmental, regulatory or self-regulatory organization (any such entity, a “Regulatory Authority”) to the extent that any such prohibition on disclosure set forth in this Section 9.12 shall be prohibited by the laws or regulations applicable to such Regulatory Authority.
EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN SECTION 9.12 FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NONPUBLIC INFORMATION CONCERNING THE BORROWER, THE OTHER LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NONPUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
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ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER, THE OTHER LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
SECTION 9.13. Several Obligations; Nonreliance; Violation of Law. The respective obligations of the Lenders hereunder are several and not joint and the failure of any Lender to make any Loan or perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Federal Reserve Board) for the repayment of the Borrowings provided for herein. Anything contained in this Agreement to the contrary notwithstanding, neither the Issuing Bank nor any Lender shall be obligated to extend credit to the Borrower in violation of any Requirement of Law.
SECTION 9.14. USA PATRIOT Act. Each Lender that is subject to the requirements of the USA PATRIOT Act hereby notifies each Loan Party that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the USA PATRIOT Act.
SECTION 9.15. Disclosure. Each Loan Party, each Lender and the Issuing Bank hereby acknowledges and agrees that the Administrative Agent and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with, any of the Loan Parties and their respective Affiliates.
SECTION 9.16. Appointment for Perfection. Each Lender hereby appoints each other Lender as its agent for the purpose of perfecting Liens, for the benefit of the Administrative Agent and the Secured Parties, in assets which, in accordance with Article 9 of the UCC or any other applicable law can be perfected only by possession or control. Should any Lender (other than the Administrative Agent) obtain possession or control of any such Collateral, such Lender shall notify the Administrative Agent thereof, and, promptly upon the Administrative Agent’s request therefor shall deliver such Collateral to the Administrative Agent or otherwise deal with such Collateral in accordance with the Administrative Agent’s instructions.
SECTION 9.17. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the NYFRB Rate to the date of repayment, shall have been received by such Lender.
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SECTION 9.18. No Fiduciary Duty, etc. (a) Each Loan Party acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that no Credit Party will have any obligations except those obligations expressly set forth herein and in the other Loan Documents and each Credit Party is acting solely in the capacity of an arm’s length contractual counterparty to the Loan Parties with respect to the Loan Documents and the transactions contemplated therein and not as a financial advisor or a fiduciary to, or an agent of, any Loan Party or any other person. Each Loan Party agrees that it will not assert any claim against any Credit Party based on an alleged breach of fiduciary duty by such Credit Party in connection with this Agreement and the transactions contemplated by the Loan Documents. Additionally, each Loan Party acknowledges and agrees that no Credit Party is advising the Loan Parties as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction. Each Loan Party shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated by the Loan Documents, and the Credit Parties shall have no responsibility or liability to any Loan Party with respect thereto.
(b) Each Loan Party further acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that each Credit Party, together with its Affiliates, in addition to providing or participating in commercial lending facilities such as that provided hereunder, is a full service securities or banking firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, any Credit Party may provide investment banking and other financial services to, and/or acquire, hold or sell, for its own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of, any Loan Party or its Affiliates and other companies with which any Loan Party may have commercial or other relationships. With respect to any securities and/or financial instruments so held by any Credit Party or any of its customers, all rights in respect of such securities and financial instruments, including any voting rights, will be exercised by the holder of the rights, in its sole discretion.
(c) In addition, each Loan Party acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that each Credit Party and its affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which a Loan Party or its Subsidiaries may have conflicting interests regarding the transactions described herein and otherwise. No Credit Party will use confidential information obtained from Holdings or the Borrower by virtue of the transactions contemplated by the Loan Documents or its other relationships with Holdings or its Subsidiaries in connection with the performance by such Credit Party of services for other companies, and no Credit Party will furnish any such information to other companies. Each Loan Party also acknowledges that no Credit Party has any obligation to use in connection with the transactions contemplated by the Loan Documents, or to furnish to any Loan Party, confidential information obtained from other companies.
SECTION 9.19. Marketing Consent. The Borrower hereby authorizes the Arranger and its affiliates (collectively, the “Arranger Parties”), at their respective sole expense, and without any prior approval by the Borrower, to include the Borrower’s name and logo in advertising, marketing, tombstones, case studies and training materials, and to give such other publicity to this Agreement as the Arranger Parties may from time to time determine in their sole discretion. The foregoing authorization shall remain in effect unless the Borrower notifies each Arranger in writing that such authorization is revoked.
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SECTION 9.20. Acknowledgment and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
SECTION 9.21. Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Swap Agreements or any other agreement or instrument that is a QFC (such support “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
SECTION 9.22. Release under Existing Credit Agreement. Each of the Lenders (including in its capacities (or in any of its Affiliates’ capacities) as potentially providing Banking Services for, or potentially having Swap Agreements with, any Loan Party or Subsidiary thereof) irrevocably authorizes the Administrative Agent to release each of the Pledgors (together, the “Released Pledgors”) under the Existing Credit Agreement and the Shareholder Pledge Agreement and the parties hereto agree that concurrent with the effectiveness of this Agreement, the Shareholder Pledge Agreement shall be terminated in its entirety and shall be of no further effect. In connection with the foregoing, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the Released Pledgors such documents as the Borrower may reasonably request to evidence the release of such items of Collateral from the assignment and security interest granted under the Shareholder Pledge Agreement or to release the Loan Documents (as defined in the Existing Credit Agreement) set forth on Schedule 9.22, in each case in accordance with the terms of the Loan Documents and this Section 9.22. Any execution and delivery of documents pursuant to this Section shall be without recourse to or warranty by the Administrative Agent.
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ARTICLE X
Loan Guaranty
SECTION 10.01. Guaranty. Each Loan Guarantor hereby agrees that it is jointly and severally liable for, and, as a primary obligor and not merely as surety, absolutely, unconditionally and irrevocably guarantees to the Secured Parties, the prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of the Guaranteed Obligations of such Loan Guarantor. Each Loan Guarantor further agrees that the Guaranteed Obligations may be extended or renewed in whole or in part without notice to or further assent from it, and that it remains bound upon its guarantee notwithstanding any such extension or renewal. All terms of this Loan Guaranty apply to and may be enforced by or on behalf of any domestic or foreign branch or Affiliate of any Lender that extended any portion of the Guaranteed Obligations.
SECTION 10.02. Guaranty of Payment. This Loan Guaranty is a guaranty of payment and not of collection. Each Loan Guarantor waives any right to require the Administrative Agent, the Issuing Bank or any Lender to sue the Borrower, any Loan Guarantor, any other guarantor of, or any other Person obligated for all or any part of the Guaranteed Obligations (each, an “Obligated Party”), or otherwise to enforce its payment against any collateral securing all or any part of the Guaranteed Obligations.
SECTION 10.03. No Discharge or Diminishment of Loan Guaranty.
(a) Except as otherwise provided for herein, the obligations of each Loan Guarantor hereunder are unconditional and absolute and not subject to any reduction, limitation, impairment or termination for any reason (other than the Payment in Full of the Secured Obligations), including: (i) any claim of waiver, release, extension, renewal, settlement, surrender, alteration, or compromise of any of the Guaranteed Obligations, by operation of law or otherwise; (ii) any change in the existence, structure or ownership of the Borrower or any other Obligated Party liable for any of the Guaranteed Obligations; (iii) any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Obligated Party, or their assets or any resulting release or discharge of any obligation of any Obligated Party; or (iv) the existence of any claim, setoff or other rights which any Loan Guarantor may have at any time against any Obligated Party, the Administrative Agent, the Issuing Bank, any Lender, or any other Person, whether in connection herewith or in any unrelated transactions.
(b) The obligations of each Loan Guarantor hereunder are not subject to any defense or setoff, counterclaim, recoupment, or termination whatsoever by reason of the invalidity, illegality, or unenforceability of any of the Guaranteed Obligations or otherwise, or any provision of applicable law or regulation purporting to prohibit payment by any Obligated Party, of the Guaranteed Obligations or any part thereof.
145
(c) Further, the obligations of any Loan Guarantor hereunder are not discharged or impaired or otherwise affected by: (i) the failure of the Administrative Agent, the Issuing Bank or any Lender to assert any claim or demand or to enforce any remedy with respect to all or any part of the Guaranteed Obligations; (ii) any waiver or modification of or supplement to any provision of any agreement relating to the Guaranteed Obligations; (iii) any release, non-perfection, or invalidity of any indirect or direct security for the obligations of the Borrower for all or any part of the Guaranteed Obligations or any obligations of any other Obligated Party liable for any of the Guaranteed Obligations; (iv) any action or failure to act by the Administrative Agent, the Issuing Bank or any Lender with respect to any collateral securing any part of the Guaranteed Obligations; or (v) any default, failure or delay, willful or otherwise, in the payment or performance of any of the Guaranteed Obligations, or any other circumstance, act, omission or delay that might in any manner or to any extent vary the risk of such Loan Guarantor or that would otherwise operate as a discharge of any Loan Guarantor as a matter of law or equity (other than the Payment in Full of the Secured Obligations).
SECTION 10.04. Defenses Waived. To the fullest extent permitted by applicable law, each Loan Guarantor hereby waives any defense based on or arising out of any defense of the Borrower or any Loan Guarantor or the unenforceability of all or any part of the Guaranteed Obligations from any cause, or the cessation from any cause of the liability of the Borrower, any Loan Guarantor or any other Obligated Party, other than the Payment in Full of the Secured Obligations. Without limiting the generality of the foregoing, each Loan Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any Obligated Party, or any other Person. Each Loan Guarantor confirms that it is not a surety under any state law and shall not raise any such law as a defense to its obligations hereunder. The Administrative Agent may, at its election, foreclose on any Collateral held by it by one or more judicial or nonjudicial sales, accept an assignment of any such Collateral in lieu of foreclosure or otherwise act or fail to act with respect to any collateral securing all or a part of the Guaranteed Obligations, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with any Obligated Party or exercise any other right or remedy available to it against any Obligated Party, without affecting or impairing in any way the liability of such Loan Guarantor under this Loan Guaranty, except to the extent of the Payment in Full of the Secured Obligations. To the fullest extent permitted by applicable law, each Loan Guarantor waives any defense arising out of any such election even though that election may operate, pursuant to applicable law, to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Loan Guarantor against any Obligated Party or any security.
SECTION 10.05. Rights of Subrogation. No Loan Guarantor will assert any right, claim or cause of action, including, without limitation, a claim of subrogation, contribution or indemnification that it has against any Obligated Party, or any collateral, until the Loan Parties and the Loan Guarantors have fully performed all their obligations to the Administrative Agent, the Issuing Bank and the Lenders.
SECTION 10.06. Reinstatement; Stay of Acceleration. If at any time any payment of any portion of the Guaranteed Obligations (including a payment effected through exercise of a right of setoff) is rescinded, or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise (including pursuant to any settlement entered into by a Secured Party in its discretion), each Loan Guarantor’s obligations under this Loan Guaranty with respect to that payment shall be reinstated at such time as though the payment had not been made and whether or not the Administrative Agent, the Issuing Bank and the Lenders are in possession of this Loan Guaranty. If acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of any agreement relating to the Guaranteed Obligations shall nonetheless be payable by the Loan Guarantors forthwith on demand by the Administrative Agent.
146
SECTION 10.07. Information. Each Loan Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that each Loan Guarantor assumes and incurs under this Loan Guaranty, and agrees that none of the Administrative Agent, the Issuing Bank or any Lender shall have any duty to advise any Loan Guarantor of information known to it regarding those circumstances or risks.
SECTION 10.08. Release of Loan Guarantors.
(a) A Subsidiary Guarantor shall automatically be released from its obligations under the Loan Guaranty upon the consummation of any transaction permitted by this Agreement as a result of which such Subsidiary Guarantor ceases to be a Subsidiary; provided that, if so required by this Agreement, the Required Lenders shall have consented to such transaction and the terms of such consent shall not have provided otherwise. Further, the Administrative Agent may (and is hereby irrevocably authorized by each Lender to), upon the request of the Borrower, release any Subsidiary Guarantor from its obligations under the Loan Documents if such Subsidiary Guarantor constitutes an Excluded Subsidiary; provided that no such release shall occur if such Subsidiary Guarantor continues (after giving effect to the consummation of such transaction or designation) to be a guarantor or provide any credit support in respect of any Material Indebtedness, Disqualified Stock or Subordinated Indebtedness of Holdings, the Borrower or any Subsidiary.
(b) Upon Payment in Full of the Secured Obligations, the Loan Guaranty and all obligations (other than those expressly stated to survive such termination) of each Loan Guarantor thereunder shall automatically terminate, all without delivery of any instrument or performance of any act by any Person.
(c) In connection with any termination or release pursuant to this Section, the Administrative Agent shall (and is hereby irrevocably authorized by each Lender to) execute and deliver to any Loan Party, at such Loan Party’s expense, all documents that such Loan Party shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section shall be without recourse to or warranty by the Administrative Agent.
SECTION 10.09. Taxes. Each payment of the Guaranteed Obligations will be made by each Loan Guarantor without withholding for any Taxes, unless such withholding is required by law. If any Loan Guarantor determines, in its sole discretion exercised in good faith, that it is so required to withhold Taxes, then such Loan Guarantor may so withhold and shall timely pay the full amount of withheld Taxes to the relevant Governmental Authority in accordance with applicable law. If such Taxes are Indemnified Taxes, then the amount payable by such Loan Guarantor shall be increased as necessary so that, net of such withholding (including such withholding applicable to additional amounts payable under this Section), the Administrative Agent, Lender or Issuing Bank (as the case may be) receives the amount it would have received had no such withholding been made.
SECTION 10.10. Maximum Liability. Notwithstanding any other provision of this Loan Guaranty, the amount guaranteed by each Loan Guarantor hereunder shall be limited to the extent, if any, required so that its obligations hereunder shall not be subject to avoidance under Section 548 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act, Uniform Voidable Transactions Act or similar statute or common law. In determining the limitations, if any, on the amount of any Loan Guarantor’s obligations hereunder pursuant to the preceding sentence, it is the intention of the parties hereto that any rights of subrogation, indemnification or contribution which such Loan Guarantor may have under this Loan Guaranty, any other agreement or applicable law shall be taken into account.
147
SECTION 10.11. Contribution.
(a) To the extent that any Loan Guarantor shall make a payment under this Loan Guaranty (a “Guarantor Payment”) which, taking into account all other Guarantor Payments then previously or concurrently made by any other Loan Guarantor, exceeds the amount which otherwise would have been paid by or attributable to such Loan Guarantor if each Loan Guarantor had paid the aggregate Guaranteed Obligations satisfied by such Guarantor Payment in the same proportion as such Loan Guarantor’s “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Loan Guarantors as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Guarantor Payment, the Payment in Full of the Secured Obligations and the termination of this Agreement, such Loan Guarantor shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Loan Guarantor for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.
(b) As of any date of determination, the “Allocable Amount” of any Loan Guarantor shall be equal to the excess of the fair saleable value of the property of such Loan Guarantor over the total liabilities of such Loan Guarantor (including the maximum amount reasonably expected to become due in respect of contingent liabilities, calculated, without duplication, assuming each other Loan Guarantor that is also liable for such contingent liability pays its ratable share thereof), giving effect to all payments made by other Loan Guarantors as of such date in a manner to maximize the amount of such contributions.
(c) This Section 10.11 is intended only to define the relative rights of the Loan Guarantors, and nothing set forth in this Section 10.11 is intended to or shall impair the obligations of the Loan Guarantors, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Loan Guaranty.
(d) The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Loan Guarantor or Loan Guarantors to which such contribution and indemnification is owing.
(e) The rights of the indemnifying Loan Guarantors against other Loan Guarantors under this Section 10.11 shall be exercisable upon the Payment in Full of the Secured Obligations and the termination of this Agreement.
SECTION 10.12. Liability Cumulative. The liability of each Loan Party as a Loan Guarantor under this Article X is in addition to and shall be cumulative with all liabilities of each Loan Party to the Administrative Agent, the Issuing Bank and the Lenders under this Agreement and the other Loan Documents to which such Loan Party is a party or in respect of any obligations or liabilities of the other Loan Parties, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.
SECTION 10.13. Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations under this Guarantee in respect of a Swap Obligation (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 10.13 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 10.13 or otherwise under this Loan Guaranty voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). Except as otherwise provided herein, the obligations of each Qualified ECP Guarantor under this Section 10.13 shall remain in full force and effect until the termination of all Swap Obligations. Each Qualified ECP Guarantor intends that this Section 10.13 constitute, and this Section 10.13 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
[Signature Page Follows]
148
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective authorized officers as of the day and year first above written.
| NEPTUNE FLOOD INCORPORATED, | ||
| as the Borrower | ||
| By: | /s/ Trevor Burgess | |
| Name: | Trevor Burgess | |
| Title: | Chief Executive Officer | |
| NEPTUNE INSURANCE HOLDINGS INC., | ||
| as Holdings | ||
| By: | /s/ Trevor Burgess | |
| Name: | Trevor Burgess | |
| Title: | Chief Executive Officer | |
Signature Page to Amended and Restated Credit Agreement
Neptune Flood Incorporated
| JPMORGAN CHASE BANK, N.A., individually as a Lender, and as Administrative Agent, Swingline Lender and Issuing Bank | ||
| By: | /s/ Jenna Chum | |
| Name: | Jenna M. Chum | |
| Title: | Authorized Officer | |
Signature Page to Amended and Restated Credit Agreement
Neptune Flood Incorporated
| CAPITAL ONE, NATIONAL ASSOCIATION, | ||
| as a Lender | ||
| By: | /s/ Jerry Huang | |
| Name: | Jerry Huang | |
| Title: | Duly Authorized Signatory | |
Signature Page to Amended and Restated Credit Agreement
Neptune Flood Incorporated
| VALLEY NATIONAL BANCORP, | ||
| as a Lender | ||
| By: | /s/ Ryan Sloan | |
| Name: | Ryan Sloan | |
| Title: | First Vice President | |
Signature Page to Amended and Restated Credit Agreement
Neptune Flood Incorporated
| BANK OF AMERICA, N.A., | ||
| as a Lender | ||
| By: | /s/ Cameron Cardozo | |
| Name: | Cameron Cardozo | |
| Title: | Senior Vice President | |
Signature Page to Amended and Restated Credit Agreement
Neptune Flood Incorporated
| SOUTHSTATE BANK, N.A., | ||
| as a Lender | ||
| By: | /s/ Michael R. Butler | |
| Name: | Michael R. Butler | |
| Title: | Senior Vice President | |
Signature Page to Amended and Restated Credit Agreement
Neptune Flood Incorporated
| BMO BANK N.A., | ||
| as a Lender | ||
| By: | /s/ Lauren Harte | |
| Name: | Lauren Harte | |
| Title: | Vice President | |
Signature Page to Amended and Restated Credit Agreement
Neptune Flood Incorporated
CLIMATE FIRST BANK,as a Lender | ||
| By: | /s/ Matthew Miller | |
| Name: | Matthew Miller | |
| Title: | Sr. VP | |
Signature Page to Amended and Restated Credit Agreement
Neptune Flood Incorporated
COMMITMENT SCHEDULE
[***]
Commitment Schedule
Schedule 3.05
Properties etc.
[***]
Schedule 3.12
Material Contracts
[***]
Schedule 3.14
Insurance
[***]
Schedule 3.15
Capitalization and Subsidiaries
[***]
Schedule 3.24
Affiliate Transactions
[***]
Schedule 5.14
Post-Closing Requirements
[***]
Schedule 6.01
Existing Indebtedness
[***]
Schedule 6.02
Existing Liens
[***]
Schedule 6.04
Existing Investments
[***]
Schedule 6.10
Existing Restrictions
[***]
Schedule 9.22
Released Pledgor Documents
[***]
EXHIBIT A
ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit and guarantees and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and other rights of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
| 1. | Assignor: | ______________________________ |
| 2. | Assignee: | ______________________________ [and is an Affiliate/Approved Fund of [identify Lender]1] |
| 3. | Borrower: | Neptune Flood Incorporated, a Delaware corporation |
| 4. | Administrative Agent: | JPMorgan Chase Bank, N.A., as the administrative agent under the Credit Agreement |
| 5. | Credit Agreement: | The Amended and Restated Credit Agreement dated as of April 10, 2025 among Holdings, the Borrower, the other Loan Parties party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent |
| 1 | Select as applicable. |
A-1
| 6. | Assigned Interest: |
Facility Assigned2 | Aggregate Amount of Commitment/Loans for all Lenders | Amount of Commitment/Loans Assigned | Percentage Assigned of Commitment/Loans3 | |||||||||
| $ | $ | % | ||||||||||
| $ | $ | % | ||||||||||
| $ | $ | % | ||||||||||
Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower, the Loan Parties and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including federal and state securities laws.
The terms set forth in this Assignment and Assumption are hereby agreed to:
| ASSIGNOR | ||
| [NAME OF ASSIGNOR] | ||
| By: | ||
| Name: | ||
| Title: | ||
| ASSIGNEE | ||
| [NAME OF ASSIGNEE] | ||
| By: | ||
| Name: | ||
| Title: | ||
| 2 | Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g., “Revolving Commitment”, “Term Loan Commitment”, etc.). |
| 3 | Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. |
A-2
| [Consented to and]4 Accepted: | ||
| JPMORGAN CHASE BANK, N.A., as | ||
| Administrative Agent, Issuing Bank and Swingline Lender | ||
| By: | ||
| Name: | ||
| Title: | ||
| [Consented to:]5 | ||
| NEPTUNE FLOOD INCORPORATED, | ||
| as the Borrower | ||
| By: | ||
| Name: | ||
| Title: | ||
| 4 | To be added only if the consent of the Administrative Agent, Issuing Bank and/or Swingline Lender, as applicable, is required by the terms of the Credit Agreement. |
| 5 | To be added only if the consent of the Borrower is required by the terms of the Credit Agreement. |
A-3
ANNEX 1 to
ASSIGNMENT AND ASSUMPTION
STANDARD TERMS
AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of Holdings, the Borrower, any Subsidiary or Affiliate or any other Person obligated in respect of any Loan Document, (iv) any requirements under applicable law for the Assignee to become a lender under the Credit Agreement or any other Loan Document or to charge interest at the rate set forth therein from time to time or (v) the performance or observance by Holdings, the Borrower, any Subsidiary or Affiliate, or any other Person of any of their respective obligations under any Loan Document.
1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement and under applicable law that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of this type, (v) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Sections 5.01(a) and 5.01(b) thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent, any Arranger, the Assignor or any other Lender or their respective Related Parties, and (vi) attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, any Arranger, the Assignor or any other Lender or their respective Related Parties, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender. Without limiting the foregoing, the Assignee represents and warrants, and agrees to, each of the matters set forth in Section 8.06 of the Credit Agreement, including that the Loan Documents set out the terms of a commercial lending facility.
2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Acceptance and adoption of the terms of this Assignment and Assumption by the Assignee and the Assignor by Electronic Signature (as defined in the Credit Agreement) or delivery of an executed counterpart of a signature page of this Assignment and Assumption by any Approved Electronic Platform (as defined in the Credit Agreement) shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.
Annex 1-1
EXHIBIT B-1
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Amended and Restated Credit Agreement dated as of April 10, 2025 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Neptune Insurance Holdings Inc., a Delaware corporation, as Holdings, Neptune Flood Incorporated, a Delaware corporation, as Borrower, the other Loan Parties party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and each lender from time to time party thereto.
Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any promissory note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate prior to the first payment to be made to the undersigned, and in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF LENDER]
| By: | ||
| Name: | ||
| Title: | ||
| Date: ________ __, 20[ ] | ||
B-1-1
EXHIBIT B-2
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Amended and Restated Credit Agreement dated as of April 10, 2025 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Neptune Insurance Holdings Inc., a Delaware corporation, as Holdings, Neptune Flood Incorporated, a Delaware corporation, as Borrower, the other Loan Parties party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and each lender from time to time party thereto.
Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate prior to the first payment to be made to the undersigned, and in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT]
| By: | ||
| Name: | ||
| Title: | ||
| Date: ________ __, 20[ ] | ||
B-2-1
EXHIBIT B-3
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Amended and Restated Credit Agreement dated as of April 10, 2025 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Neptune Insurance Holdings Inc., a Delaware corporation, as Holdings, Neptune Flood Incorporated, a Delaware corporation, as Borrower, the other Loan Parties party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and each lender from time to time party thereto.
Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or (ii) an IRS Form W-8IMY accompanied by a withholding statement together with an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate prior to the first payment to be made to the undersigned, and in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT]
| By: | ||
| Name: | ||
| Title: | ||
| Date: ________ __, 20[ ] | ||
B-3-1
EXHIBIT B-4
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Amended and Restated Credit Agreement dated as of April 10, 2025 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Neptune Insurance Holdings Inc., a Delaware corporation, as Holdings, Neptune Flood Incorporated, a Delaware corporation, as Borrower, the other Loan Parties party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and each lender from time to time party thereto.
Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any promissory note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any promissory note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or (ii) an IRS Form W-8IMY accompanied by a withholding statement together with an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate prior to the first payment to be made to the undersigned, and in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF LENDER]
| By: | ||
| Name: | ||
| Title: | ||
| Date: ________ __, 20[ ] | ||
B-4-1
EXHIBIT C
COMPLIANCE CERTIFICATE
| To: | The Lenders party to the Credit Agreement described below |
This Compliance Certificate (this “Certificate”), for the period ended [____], is furnished pursuant to that certain Amended and Restated Credit Agreement dated as of April 10, 2025 (as amended, modified, renewed or extended from time to time, the “Agreement”) among Neptune Insurance Holdings Inc., a Delaware corporation (“Holdings”), Neptune Flood Incorporated, a Delaware corporation (the “Borrower”), the other Loan Parties party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders and as the Issuing Bank and Swingline Lender. Unless otherwise defined herein, capitalized terms used in this Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
| 1. | I am the [____] of Holdings and I am authorized to deliver this Certificate on behalf of Holdings and its Subsidiaries; |
| 2. | I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the compliance of Holdings and its Subsidiaries with the Agreement during the accounting period covered by the attached financial statements (the “Relevant Period”); |
| 3. | The attached financial statements of Holdings and, as applicable, its Subsidiaries and/or Affiliates for the Relevant Period: (a) have been prepared on an accounting basis (the “Accounting Method”) consistent with the requirements of the Agreement and, except as may have been otherwise expressly agreed to in the Agreement, present fairly in all material respects the financial condition and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, and (b) to the extent that the attached are not annual fiscal year end statements of Holdings, are subject to normal year-end audit adjustments and the absence of footnotes; |
| 4. | The examinations described in paragraph 2 did not disclose and I have no knowledge of, except as set forth below, (a) the existence of any condition or event which constitutes a Default or an Event of Default under the Agreement or any other Loan Document during or at the end of the Relevant Period or as of the date of this Certificate or (b) any change in the Accounting Method or in the application thereof that has occurred since the date of the annual financial statements delivered to the Administrative Agent in connection with the closing of the Agreement or subsequently delivered as required in the Agreement; |
| 5. | I hereby certify that, except as set forth below, no Loan Party has changed (i) its name, (ii) its chief executive office, (iii) its principal place of business, (iv) the type of entity it is or (v) its state of incorporation or organization without having given the Administrative Agent the notice required by the Security Agreement; |
| 6. | The representations and warranties of the Loan Parties set forth in the Loan Documents are true and correct as of the date hereof, except to the extent that any such representation or warranty specifically refers to an earlier date, in which case it is true and correct only as of such earlier date; |
C-1
| 7. | Schedule I attached hereto sets forth financial data and computations evidencing Holdings’ compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct; |
| 8. | Schedule II hereto sets forth the computations necessary to determine the Applicable Rate commencing on the Business Day this Certificate is delivered; |
| 9. | Attached hereto are updated versions of Exhibit[s] [___] to the Security Agreement setting forth the information required to be set forth in those Exhibit[s] as of the date of this Compliance Certificate. |
Described below are the exceptions, if any, referred to in paragraph 4 hereof by listing, in detail, the (i) nature of the condition or event, the period during which it has existed and the action which Holdings or the Borrower has taken, is taking, or proposes to take with respect to each such condition or event or (ii) change in the Accounting Method or the application thereof and the effect of such change on the attached financial statements:
The foregoing certifications, together with the computations set forth in Schedule I and Schedule II hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this day of , .
| By: | |||
| Name: | |||
| Title: | |||
C-2
Schedule I to Compliance Certificate
Compliance as
of [____] with
Provisions of Section 6.12 of the Agreement
The computations set forth in this Schedule I are designed to facilitate the calculation of financial covenants and certain other provisions in the Agreement relating to the information set forth in consolidated financial statements of Holdings delivered with this Certificate. The computations set forth in this Schedule I have been made in accordance with GAAP. The use of abbreviated terminology and/or descriptions in the computations below are not in any way intended to override or eliminate the more detailed descriptions for such computations set forth in the relevant provisions of the Agreement, all of which shall be deemed to control. In addition, the failure to identify any specific provisions or terms of the Agreement in this Schedule I does not in any way affect their applicability during the periods covered by such financial statements or otherwise, which shall in all cases be governed by the Agreement.
| I. Consolidated EBITDA for the most recently ended 4 fiscal quarters | ||||
| With reference to any period: | ||||
| (a) Consolidated Net Income for such period | $ | |||
| plus, without duplication and (other than clause (a)(vii) and clause (a)(ix) below) to the extent deducted (but not excluded) in determining Consolidated Net Income, | ||||
| (i) Consolidated Interest Expense for such period | + $ | |||
| (ii) income and foreign withholding tax expense for such period net of tax refunds | + $ | |||
| (xv) all amounts attributable to depreciation and amortization expense for such period including goodwill or asset impairment charges, write-downs, write-offs or write-ups (other than impairment charges and write-downs related to inventory and receivables) | + $ | |||
| () any reasonable and customary non-recurring fees, expenses or charges (other than depreciation or amortization expense as described in the preceding clause (a)(iii)) actually incurred and paid in cash during such period in connection with any of the following: (A) any Permitted Acquisition or any other investment permitted hereunder; provided that the aggregate of all amounts added back to Consolidated EBITDA pursuant to this clause (a)(iv)(A) during any period of four consecutive fiscal quarters of Holdings for Permitted Acquisitions or any other investment permitted hereunder that are not consummated shall not exceed $1,000,000; (B) any permitted sale or other Disposition of assets (whether or not consummated); and (C) any permitted issuance, incurrence or assumption of Indebtedness or issuance of Equity Interests (whether or not consummated); provided that the aggregate of all amounts added back to Consolidated EBITDA pursuant to this clause (a)(iv)(C) during any period of four consecutive fiscal quarters of Holdings shall not exceed $500,000 | + $ | |||
| (iii) any non-recurring cash fees, cash charges and other cash expenses made or incurred during such period in connection with any of the following: (A) the Transactions to occur on the Effective Date that are paid or otherwise accounted for within 180 days of the Effective Date in an aggregate amount not to exceed $2,500,000; and (B) amendments, waivers or other modifications in respect of the Loan Documents (whether or not consummated) in an aggregate amount not to exceed $500,000 during any period of four consecutive fiscal quarters of Holdings | +$ | |||
| (iv) any unusual or non-recurring charges or expenses for such period (including (A) non-recurring expenses relating to severance liabilities, and (B) restructuring, transition and startup costs, fees, charges, reserves, accruals or expenses (including those relating to (1) business optimization and other restructuring and integration, set-up, recertification and integration, (2) retention and retirement, (3) systems and information technology procurement, establishment and optimization, including any non-recurring costs and expenses associated with information technology systems (hardware and software) build out and integration and license consent fees, (4) rebranding and new product startup costs, (5) contract termination, (6) the start-up, closure, relocation or reconfiguration or consolidation of facilities and future lease commitments, non-recurring costs related to entry into new markets, (7) recruiting, relocation, signing bonuses and salary for interim employees, severance payments and modifications to pension and post-retirement employee benefit plans, (8) consulting fees and expenses, (9) interim salary and bonus and (10) settlement costs, transaction costs and other comparable charges and expenses), but, in each case, excluding any non-cash charge in respect of an item that was included in Consolidated Net Income in a prior period; provided that the aggregate of all amounts added back to Consolidated EBITDA pursuant to this clause (a)(vi) during any period of four consecutive fiscal quarters of Holdings, when taken together with the aggregate of all amounts added to Consolidated EBITDA pursuant to clause (a)(vii) below during such period, shall not exceed 25% of Consolidated EBITDA for such period (calculated before giving effect to such additions) | +$ |
| (vii) the amount of “run rate” cost savings, operating expense reductions, and expenses and cost synergies related to any Permitted Acquisition or other investment permitted hereunder and consummated after the Effective Date (without duplication of any amounts added back pursuant to clause (a)(v) above), in each case, projected by Holdings in good faith to be realized within twelve (12) months after such transaction is consummated as a result of specified actions taken in connection therewith (which “run rate” cost savings, operating expense reductions and expenses and cost synergies shall be calculated on a pro forma basis as though such “run rate” cost savings, restructuring charges and expenses, operating expense reductions and expenses and cost synergies had been realized on the first day of the period for which Consolidated EBITDA is being determined), net of the amount of actual benefits realized during such period from such actions; provided that (x) such “run rate” cost savings, restructuring charges and expenses, operating expense reductions and expenses and cost synergies are reasonably expected and factually supportable (in the good faith determination of Holdings) and (y) to the extent the aggregate of all amounts added to Consolidated EBITDA pursuant to this clause (a)(vii) during any period of four consecutive fiscal quarters of Holdings exceeds 5% of Consolidated EBITDA for such period (calculated before giving effect to such additions), Holdings shall have delivered to the Administrative Agent a certificate signed by a Financial Officer of Holdings certifying as to the satisfaction of the conditions and requirements set forth in this clause (a)(vii), together with all supporting documentation and calculations with respect thereto as may be requested by the Administrative Agent; provided further that (A) the aggregate of all amounts added to Consolidated EBITDA pursuant to this clause (a)(vii) during any period of four consecutive fiscal quarters of Holdings shall not exceed 20% of Consolidated EBITDA for such period (calculated before giving effect to such additions), and (B) the aggregate of all amounts added to Consolidated EBITDA pursuant to this clause (a)(vii) during any period of four consecutive fiscal quarters of Holdings, when taken together with the aggregate of all amounts added back to Consolidated EBITDA pursuant to clause (a)(vi) above during such period, shall not exceed 25% of Consolidated EBITDA for such period (calculated before giving effect to such additions and add-backs) | +$ |
| (viii) any non-cash losses or charges (less any non-cash gains) | +$ | |||
| (ix) all other add-backs or adjustments for such period which are set forth in any quality of earnings report with respect to Holdings delivered to the Administrative Agent after the Effective Date that is requested by Holdings and acceptable to the Administrative Agent in its reasonable discretion (including as to the identity of the provider of such quality of earnings report); provided that the aggregate of all such adjustments and amounts added back to Consolidated EBITDA pursuant to this clause (a)(ix) during any period of four consecutive fiscal quarters of Holdings shall not exceed 5% of Consolidated EBITDA for such period (calculated before giving effect to such adjustments and add-backs) | +$ | |||
| (x) any one-time charges of up to 5% of Consolidated EBITDA for any period of four consecutive fiscal quarters of Holdings (calculated before giving effect to such additions and add-backs) which are approved in writing by the Required Lenders, in their reasonable discretion | +$ | |||
| (xi) any charges related to insurance or derivatives purchased by Holdings or any of its Subsidiaries for the purpose of managing catastrophic loss risk in the ordinary course of business; provided that the aggregate of all amounts added back to Consolidated EBITDA pursuant to this clause (a)(xi) during any period of four consecutive fiscal quarters of Holdings shall not exceed $500,000 | +$ | |||
| (xii) Public Company Costs paid in cash during such period | +$ | |||
| (xiii) all non-cash expenses realized or incurred in connection with or resulting from equity or equity-linked compensation plans, employee benefit plans or agreements or post-employment benefit plans or agreements, or grants or sales of stock, stock appreciation, awards under any successor plans of Holdings or its Subsidiaries’ option or equity plans or similar rights, stock options, restricted stock, preferred stock, stock appreciation or other similar rights | +$ | |||
| A. | Sum of I.(a)(i) through I.(a)(xii) | $ | ||
| minus | ||||
(b) without duplication and to the extent included (and not deducted in the case of clause (b)(iv) below) in Consolidated Net Income for such period, the sum of |
| (i) any unusual or non-recurring gains or income and any non-cash gains or items of income for such period | $ | |||
| (ii) all cash payments made during such period on account of non-cash charges that were accruals or reserves added to Consolidated Net Income pursuant to any of clauses (a)(iv) and (a)(viii) above in a prior period, | +$ | |||
| (iii) refunds of Taxes based on income or profits or capital, plus franchise taxes, plus foreign withholding taxes and foreign unreimbursed value added taxes and tariffs, of Holdings and its Subsidiaries for such period (including, in each case, of any penalties and interest related to such taxes or arising from tax examinations), in each case, to the extent not netted in calculating Consolidated Net Income or from the amount included in clause (a)(ii) above, and | +$ | |||
| (iv) capitalized software costs | +$ | |||
| B. | Sum of I.(b)(i) through I.(b)(iv) | $ | ||
| C. |
Consolidated EBITDA (the sum of I.A. minus I.B.) |
=$ | ||
| II. Maximum Total Net Leverage Ratio (Section 6.12(a)) | ||||
| (a) Consolidated Total Funded Indebtedness | $ | |||
| (b) Unrestricted Cash as of such date in an aggregate amount not to exceed 50% of Applicable EBITDA | –$ | |||
| A. | Consolidated Total Funded Indebtedness net of Unrestricted Cash | $ | ||
| B. | Consolidated EBITDA (from I.C.) | $ | ||
| C, | Total Net Leverage Ratio (ratio of II.A. to II.B.) | ___ to 1.00 | ||
| Maximum Total Net Leverage Ratio permitted under Section 6.12(a) | [___] to 1.00 | |||
| In compliance? | Yes/No (select one) | |||
| III. Interest Coverage Ratio (Section 6.12(b))
|
||||
| A. | Consolidated EBITDA (from I.C.) | $ | ||
| B. | cash Consolidated Interest Expense | $ | ||
| C. | Interest Coverage Ratio (ratio of III.A to III.B) | ___ to 1.00 | ||
| Minimum Interest Coverage Ratio required under Section 6.12(b) | [__] to 1.00 | |||
| In compliance? | Yes/No (select one) | |||
Schedule II to Compliance Certificate
Holdings’ Applicable Rate Calculation
EXHIBIT D
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (this “Agreement”), dated as of [____], is entered into between [_______], a [______] (the “New Subsidiary”) and JPMORGAN CHASE BANK, N.A., in its capacity as administrative agent (the “Administrative Agent”) under that certain Amended and Restated Credit Agreement dated as of April 10, 2025 (as the same may be amended, modified, extended or restated from time to time, the “Credit Agreement”) among NEPTUNE INSURANCE HOLDINGS INC., a Delaware corporation (“Holdings”), NEPTUNE FLOOD INCORPORATED, a Delaware corporation (the “Borrower”), the other Loan Parties party thereto, the Lenders party thereto and the Administrative Agent for the Lenders. All capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement.
The New Subsidiary and the Administrative Agent, for the benefit of the Secured Parties, hereby agree as follows:
1. The New Subsidiary hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the New Subsidiary will be deemed to be a Loan Party under the Credit Agreement and a “Loan Guarantor” for all purposes of the Credit Agreement and shall have all of the obligations of a Loan Party and a Loan Guarantor thereunder as if it had executed the Credit Agreement. The New Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Credit Agreement, including without limitation (a) all of the representations and warranties of the Loan Parties set forth in Article III of the Credit Agreement, (b) all of the covenants set forth in Articles V and VI of the Credit Agreement and (c) all of the guaranty obligations set forth in Article X of the Credit Agreement. Without limiting the generality of the foregoing terms of this paragraph 1, the New Subsidiary, subject to the limitations set forth in Section 10.10 and 10.13 of the Credit Agreement, hereby guarantees, jointly and severally with the other Loan Guarantors, to the Administrative Agent and the Lenders, as provided in Article X of the Credit Agreement, the prompt payment and performance of the Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof and agrees that if any of the Guaranteed Obligations are not paid or performed in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise), the New Subsidiary will, jointly and severally together with the other Loan Guarantors, promptly pay and perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal.
2. If required, the New Subsidiary is, simultaneously with the execution of this Agreement, executing and delivering such Collateral Documents (and such other documents and instruments) as requested by the Administrative Agent in accordance with the Credit Agreement.
3. The address of the New Subsidiary for purposes of Section 9.01 of the Credit Agreement is as follows:
______________________________________
______________________________________
______________________________________
D-1
4. The New Subsidiary hereby waives acceptance by the Administrative Agent and the Lenders of the guaranty by the New Subsidiary upon the execution of this Agreement by the New Subsidiary.
5. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one and the same instrument.
6. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the New Subsidiary has caused this Agreement to be duly executed by its authorized officer, and the Administrative Agent, for the benefit of the Secured Parties, has caused the same to be accepted by its authorized officer, as of the day and year first above written.
| [NEW SUBSIDIARY] | ||
| By: | ||
| Name: | ||
| Title: | ||
| Acknowledged and accepted: | ||
| JPMORGAN CHASE BANK, N.A., as Administrative Agent | ||
| By: | ||
| Name: | ||
| Title: | ||
D-2
EXHIBIT E
INTERCOMPANY NOTE
[___________], 20[__]
Each of the parties hereto (in such capacity, each, an “Issuer”) which has now or may in the future incur Indebtedness to any other party hereto (in such capacity, each, a “Holder”), in lawful money of the United States of America or such other lawful currency as may be agreed by such Issuer and Holder, hereby promises to pay at such location as the applicable Holder shall from time to time designate, any and all amounts owing from time to time on and after the date hereof by each such Issuer to each such Holder in consideration for the loans, advances or other extensions of credit (an “Intercompany Loan”) extended by such Holder to such Issuer. Such Intercompany Loans will bear interest. The amount, the interest rate (if any) and any additional terms, including, but not limited to, the maturity date, of each Intercompany Loan shall be documented in the books and records of each Holder or in a duly executed and binding agreement among the parties thereto (an “Intercompany Loan Agreement”).
Each Issuer agrees, and each Holder agrees, (i) that the payment of all obligations owing in respect of such Intercompany Loans incurred by an Issuer that is also a Loan Party is subordinated in the right of payment to prior Payment in Full of the Secured Obligations by the Credit Parties (as such terms are defined in that certain Amended and Restated Credit Agreement (as amended, restated, amended and restated, modified and/or supplemented from time to time, the “Credit Agreement”; all capitalized terms used herein but are otherwise undefined shall have the meanings assigned to them in the Credit Agreement) dated April 10, 2025, by and among Neptune Insurance Holdings Inc., a Delaware corporation (“Holdings”), Neptune Flood Incorporated, a Delaware corporation (the “Borrower”), the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) (the date on which such Payment in Full of the Secured Obligations occurs, the “Termination Date”), (ii) that the subordination is for the benefit of and enforceable by the Administrative Agent on behalf of the holders of such Obligations, (iii)(x) unless an Event of Default has occurred and is continuing, the Issuer may make regularly scheduled payments of principal and interest due the Holder under this Intercompany Note (this “Note”) and (y) at any time when an Event of Default has occurred and is continuing, any and all payments with respect to the applicable Intercompany Loans received by a Holder shall be held for the benefit of the Secured Parties and be paid over to the Administrative Agent on behalf of the Secured Parties, without affecting or impairing in any manner the liability of such Holder under this Note, and (iv) at no time shall any Holder take any Enforcement Actions against any Issuer.
“Enforcement Action” shall mean (a) except as expressly permitted by this Note, to take from or for the account of an Issuer or any other person, by set-off or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by an Issuer with respect to the obligations evidenced by this Note, (b) to initiate or participate with others in any suit, action or proceeding against an Issuer or any other person to (i) sue for or enforce payment of the whole or any part of the obligations evidenced by this Note, (ii) commence or join with other persons to commence a bankruptcy or other insolvency proceeding of an Issuer, or (iii) commence judicial enforcement of any of the rights and remedies under this Note or applicable law with respect to the obligations evidenced by this Note, (c) to accelerate the obligations evidenced by this Note, (d) to take any action to enforce any rights or remedies with respect to the obligations evidenced by this Note, (e) to exercise any put option or to cause an Issuer to honor any redemption or mandatory prepayment obligation under this Note, or (f) to take any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce this Note or to foreclose upon, take possession of or sell any property or assets of an Issuer or any other person.
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Without limiting the generality of the foregoing, each Holder hereby agrees with the Secured Parties that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Note (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until the Termination Date; provided, that if any amount shall be paid to such Holder on account of such subrogation rights at any time prior to the Termination Date, such amount shall be held for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent, on behalf of the Secured Parties, to be credited and applied to the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents or, if the Loan Documents do not provide for the application of such amount, to be held by the Secured Parties as collateral security for any Obligations thereafter existing.
Upon the commencement of any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency, receivership or liquidation or similar proceeding of any jurisdiction (an “Insolvency Proceeding”) relating to any Issuer, all amounts owed by such Issuer to each Holder shall become immediately due and payable without presentment, demand, protest or notice of any kind whatsoever in connection with this Note. Following the Termination Date, any Holder may make demand for all or any part of the amounts owing to such Holder under this Note, by any Issuer, without the consent or permission of such Issuer; provided that, prior to the Termination Date, any Holder may file a claim with respect to this Intercompany Note in an Insolvency Proceeding of the Issuer and, if such Holder has not filed such claim at least ten (10) Business Days prior to the date therefore, the Administrative Agent is hereby authorized in the name of the Holder as attorney-in-fact of the Holder to file such claim. Any payment or distribution of any assets of the Issuer in an Insolvency Proceeding on account of this Note shall be made to the Administrative Agent, on behalf of the Secured Parties, until the Termination Date.
All payments under this Note shall be made without setoff, counterclaim or deduction of any kind. Any amount owing by any Issuer to a Holder shall not be reduced in any way by any outstanding obligations of such Holder to such Issuer, whether such obligations are monetary or otherwise.
This Note may be pledged and delivered by any of the Holders incorporated in the United States to one or more financial institutions to secure extensions of credit to any of the Holders or any of their respective affiliates and the Issuers and the Holder hereby acknowledge and agree that such financial institutions may exercise all rights with respect to this Note as may be provided to them in connection with such extension of credit. Each Holder that is a Loan Party will pledge its interests herein to the Secured Parties pursuant to the terms of the Security Agreement, and each Issuer consents to such pledge.
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Each Holder is hereby authorized by each Issuer to record all amounts owing by such Issuer to such Holder, all of which shall be evidenced by this Note, and all repayments thereof, in its books and records in accordance with its usual practice, such books and records constituting prima facie evidence of the accuracy of the information contained therein; provided, however, that the failure of a Holder to record such information shall not affect any Issuer’s obligations hereunder.
Each Issuer hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. No delay on the part of any Holder in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy preclude any other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Note shall in any event be effective against any party hereto unless the same shall be in writing and signed and delivered by such party. Until the Termination Date, and notwithstanding anything to the contrary contained in this Note, no Holder shall, without the prior written consent of the Administrative Agent, agree to any amendment, modification or supplement to this Note in any manner adverse to the Administrative Agent or Secured Parties. The Administrative Agent and each other Secured Party shall be a third-party beneficiary of the subordination
terms of this Note and no such terms may be amended, modified or supplemented without the prior written consent of the Administrative Agent.
This Note shall be construed as a separate promissory note with respect to each loan, advance and other extension of credit constituting Indebtedness owed by an Issuer and may be amended, modified, supplemented, waived or released by the respective Issuer and Holder with respect to each such loan, advance and other extension of credit constituting Indebtedness without the approval of any other party hereto and without affecting the obligations of any other party hereto hereunder.
Each party hereto hereby authorizes any other party hereto to amend this Note by supplementing Schedule I to specifically identify any Intercompany Loan made after the date hereof. The rights and obligations of the Holders and Issuers hereunder shall remain in full force and effect notwithstanding the addition of any Intercompany Loan on Schedule I hereto. Additional subsidiaries of Holdings and the Borrower may become signatories of this Note after the date hereof, whereupon they shall be deemed to be parties hereto as Issuers or Holders, as the case may be, as if they had been original signatories of this Note, and, to the extent such subsidiary is a Loan Party, may pledge this Note pursuant to the Collateral Documents, as applicable, referred to above and/or such other pledge or security agreement as may become applicable hereto.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY PRINCIPLES OF CONFLICTS OF LAW OR OTHER RULE OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE LAWS OF THE STATE OF NEW YORK.
[Signature Pages Follow]
E-3
IN WITNESS WHEREOF, the parties hereto have caused this Note to be duly executed by their authorized officers as of the day and year first above written.
ISSUERS:
| ||
NEPTUNE INSURANCE HOLDINGS INC., as an Issuer | ||
| By: | ||
| Name: | ||
| Title: | ||
NEPTUNE FLOOD INCORPORATED, as an Issuer | ||
| By: | ||
| Name: | ||
| Title: | ||
| NEPTUNE INSURANCE AGENCY NY LLC, as an Issuer | ||
| By: | ||
| Name: | ||
| Title: | ||
E-4
| HOLDERS: | ||
| NEPTUNE INSURANCE HOLDINGS INC., as a Holder | ||
| By: | ||
| Name: | ||
| Title: | ||
| NEPTUNE FLOOD INCORPORATED, as a Holder | ||
| By: | ||
| Name: | ||
| Title: | ||
| NEPTUNE INSURANCE AGENCY NY LLC, as a Holder | ||
| By: | ||
| Name: | ||
| Title: | ||
E-5
SCHEDULE I
Holder | Issuer | Currency of Intercompany Loan | Principal Amount of Intercompany Loan | Date of Intercompany Loan | Maturity Date | |||||||||||||||||
E-6
Exhibit 10.9
FORM OF
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this “Agreement”) is made and entered into as of [__], 2025, by and between Neptune Insurance Holdings Inc., a Delaware corporation (the “Company”), Trevor Burgess (“Founder”) and each of the undersigned entities affiliated with Founder (each, a “Founder Entity” and collectively, the “Founder Entities”).
WHEREAS, the Company’s board of directors (the “Board”) has determined that it is in the best interests of the Company and its stockholders to implement a dual class common stock structure in connection with the Company’s initial public offering of its capital stock (the “IPO”) to, among other things, enable the Company to execute its long-term vision;
WHEREAS, in connection with the IPO, the Board and the stockholders of the Company have approved and adopted that certain Second Amended and Restated Certificate of Incorporation of the Company (the “Amended and Restated Certificate of Incorporation”), which, among other things, provides (i) for two classes of common stock of the Company, Class A Common Stock, par value $0.00001 per share (“Class A Common Stock”), entitling holders to one (1) vote for each share thereof held, and a newly-created Class B Common Stock, par value $0.00001 per share (“Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock), entitling holders to ten (10) votes per share thereof held, and (ii) that each share of the Company’s common stock, par value $0.00001 per share (the “Pre-IPO Common Stock”), issued and outstanding or held as treasury stock immediately prior to the effectiveness of the filing of the Amended and Restated Certificate of Incorporation (the “Effective Time”), will, automatically and without further action by any stockholder, be reclassified as, and become, one (1) share of Class A Common Stock;
WHEREAS, at the Effective Time, all shares of Pre-IPO Common Stock beneficially owned by Founder and held by any Founder Entities as of immediately prior to the Effective Time will be reclassified as shares of Class A Common Stock pursuant to the Amended and Restated Certificate of Incorporation;
WHEREAS, the Board has determined that exchanging such shares of Class A Common Stock to be beneficially owned by Founder and held by any of the Founder Entities upon the Effective Time for shares of Class B Common Stock, effective immediately following the Effective Time, as part of the implementation of the dual class common stock structure is advisable and in the best interest of the Company and all of its stockholders, including its stockholders other than Founder and the Founder Entities; and
WHEREAS, the parties hereto intend that no gain or loss shall be recognized in the Exchange (as defined below) pursuant to Sections 368(a)(1)(E) and/or 1036 of the Internal Revenue Code of 1986, as amended (the “Code”), and this Agreement shall constitute a plan of reorganization within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, representations and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereto agree as follows:
Article I.
EXCHANGE AND ISSUANCE OF CLASS B COMMON STOCK
1.1 Exchange of Class A Common Stock.
(a) Subject to the terms and conditions of this Agreement, immediately following the Effective Time, each Founder Entity shall be deemed to have automatically transferred to the Company the shares of Class A Common Stock held by such Founder Entity upon the Effective Time as set forth on Exhibit A hereto (the “Class A Shares”) and the Company shall issue to each Founder Entity shares of Class B Common Stock (the “Class B Shares”), at an exchange ratio of one (1) Class A Share for one (1) Class B Share (the “Exchange”).
(b) Concurrently herewith, each Founder Entity is delivering to the Company such instruments of transfer or other documentation as may be reasonably required to evidence that the shares of Class A Common Stock held by such Founder Entity have been duly transferred to the Company to be held in escrow until the Effective Time and such documents are automatically released without further action by the Company or such Founder Entity at the Effective Time.
1.2 Effective Time of the Exchange.
(a) The Exchange shall occur and be deemed effective without any further action by the Company, Founder or any Founder Entity immediately following the Effective Time and prior to the consummation of the sale of the shares of the Company’s Class A Common Stock in the IPO.
(b) Upon the effectiveness of the Exchange, the Company shall deliver (or cause its transfer agent to deliver) to Founder and each Founder Entity such documentation as may be reasonably required to evidence that the Class B Shares have been duly issued and delivered to such Founder Entity.
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Article II.
REPRESENTATIONS AND WARRANTIES OF FOUNDER
Founder and each Founder Entity hereby represent and warrant to the Company, with respect to the transactions contemplated hereby, as follows:
2.1 Ownership; Authority. Effective as of the Effective Time, Founder will be the beneficial owner, and such Founder Entity will be the legal owner, of the Class A Shares exchanged hereunder as set forth on Exhibit A hereto, free and clear of all liens, encumbrances and restrictions (except for restrictions on transfer arising under applicable securities laws or as set forth or contemplated by this Agreement, the Amended and Restated Certificate of Incorporation or any other agreements to which Founder or such Founder Entity, on the one hand, and the Company, on the other hand, are a party). Founder and such Founder Entity have the full right, power and authority to enter into this Agreement and, assuming the waiver or inapplicability of any and all rights of first refusal or co-sale by the Company and the Company’s stockholders that are applicable to the transactions contemplated hereby, to transfer, convey and exchange the Class A Shares in accordance with this Agreement. Assuming the due authorization, execution and delivery by the Company, this Agreement constitutes a valid and binding agreement of Founder and such Founder Entity, enforceable against Founder and such Founder Entity in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity). Upon consummation of the Exchange contemplated hereby, the Company will acquire from such Founder Entity good and marketable title to the Class A Shares held by such Founder Entity, free and clear of any and all liens, encumbrances and restrictions (except for restrictions on transfer arising under applicable securities laws or as set forth or contemplated by this Agreement, the Amended and Restated Certificate of Incorporation or any other agreements to which Founder or such Founder Entity, on the one hand, and the Company, on the other hand, are a party, and subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).
2.2 Governmental Authorization. The execution, delivery and performance by Founder and such Founder Entity of this Agreement and the consummation of the transactions contemplated hereby require no action by or in respect of, or filing with, any governmental authority on the part of Founder or such Founder Entity (excluding, for the avoidance of doubt (a) the filing by the Company of the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware and (b) compliance by the Company with any applicable requirements of any applicable state or federal securities laws). For purposes of this Agreement, “governmental authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.
2.3 Noncontravention. The execution, delivery and performance by Founder and such Founder Entity of this Agreement and the consummation of the transactions contemplated hereby do not and will not (a) violate any governing document, including any trust agreement, applicable to Founder or such Founder Entity, (b) subject to compliance with Section 2.2, violate any applicable law, (c) assuming the waiver or inapplicability of any and all rights of first refusal or co-sale held by the Company or the Company’s stockholders that are applicable to the transactions contemplated hereby, require any consent or other action under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any obligation of Founder or such Founder Entity or to the loss of any benefit to which Founder or such Founder Entity is entitled under any provision of any agreement or other instrument binding upon Founder or such Founder Entity or (d) result in the creation or imposition of any lien on such Founder Entity’s Class B Shares, other than restrictions on transfer arising under applicable securities laws or as set forth or contemplated by this Agreement, the Amended and Restated Certificate of Incorporation or any other agreements to which Founder or such Founder Entity, on the one hand, and the Company, on the other hand, are a party.
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2.4 Restricted Securities; Rule 144. Each of Founder and such Founder Entity understands that the Class B Shares are characterized as “restricted securities” under the Securities Act of 1933, as amended (“Securities Act”), because such shares are being acquired from the Company in a transaction not involving a public offering and in exchange for shares acquired from the Company in a transaction not involving a public offering, and that under the Securities Act and the rules and regulations promulgated thereunder the Class B Shares may be resold without registration under the Securities Act only in certain limited circumstances, and subject to the restrictions under the Amended and Restated Certificate of Incorporation. Each of Founder and such Founder Entity understands and hereby acknowledges that the Class B Shares must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is otherwise available. Founder and such Founder Entity are aware of the provisions of Rule 144 promulgated under the Securities Act, which permit limited resales of shares purchased in a transaction not involving a public offering, subject to the satisfaction of certain conditions.
2.5 Legends. It is understood that any certificate or book entry position representing the Class B Shares and any securities issued in respect thereof or exchange therefor, shall bear legends in substantially the following form (in addition to any legend required under applicable state securities laws or agreements to which Founder or such Founder Entity are a party):
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.”
Article III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Founder and each of the Founder Entities, with respect to the transactions contemplated hereby, as follows:
3.1 Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.
3.2 Corporate Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby, including the issuance and delivery of the Class B Shares in accordance with the Amended and Restated Certificate of Incorporation, are within the corporate powers of the Company and have been duly authorized by all necessary corporate action on the part of the Company and the Company’s stockholders, subject to compliance with Section 3.3. Any and all rights of first refusal or co-sale held by the Company or the Company’s stockholders that are applicable to the transactions contemplated hereby have been waived. Assuming the due authorization, execution and delivery by Founder and the Founder Entities, this Agreement constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).
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3.3 Governmental Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby require no action by or in respect of, or filing with, any governmental authority other than compliance by the Company with any applicable requirements of any applicable state or federal securities laws.
3.4 Noncontravention. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not, assuming compliance with the matters referred to in Section 3.3, (a) violate the Amended and Restated Certificate of Incorporation or the Second Amended and Restated Bylaws of the Company (the “Amended and Restated Bylaws”), (b) violate any applicable law, (c) require any consent or other action by any person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Company or to the loss of any benefit to which the Company is entitled under any provision of any agreement or other instrument binding upon the Company or (d) result in the creation or imposition of any lien on the Class B Shares other than as set forth or contemplated by this Agreement or the Amended and Restated Certificate of Incorporation.
Article IV.
COVENANTS
4.1 Market Stand-Off Agreement. Founder and each Founder Entity have entered into a lock-up agreement with the underwriters of the IPO with respect to the sale, disposition or transfer of his/its securities of the Company and Founder and each Founder Entity agree not to revoke such lock-up agreement. Founder and each Founder Entity also agree that any other lock-up or market stand-off agreements applicable to the shares of Common Stock of the Company held by him/it will continue to apply to the Class B Shares in accordance with the terms of such agreements.
4.2 Waiver of Right of First Refusal. The Company hereby waives any preexisting rights of first refusal applicable to the transactions contemplated hereby.
4.3 Certain Expenses. The Company shall be responsible for any and all filing fees and related costs and expenses that may be incurred in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with the consummation of the transactions contemplated by this Agreement.
Article V.
GENERAL PROVISIONS
5.1 Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of Delaware as applied to agreements entered into among Delaware residents to be performed entirely within Delaware, without regard to principles of conflicts of law.
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5.2 Successors and Assigns. No party hereto may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other party. Subject to the immediately preceding sentence, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
5.3 Entire Agreement; Amendment. Other than the rights, restrictions and preferences provided for the Class B Common Stock pursuant to the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, this Agreement, including the exhibit attached hereto, constitutes the full and entire understanding and agreement between the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any term hereof may be amended or, waived other than by a written instrument signed by Founder, the Founder Entities and the Company.
5.4 Counterparts. This Agreement may be executed in counterparts (including by facsimile, electronic or .pdf transmission), each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
5.5 Tax Consequences. The parties hereto intend that no gain or loss shall be recognized in the Exchange pursuant to Sections 368(a)(1)(E) and/or 1036 of the Code. The parties hereto adopt this Agreement as a plan of reorganization within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a). Notwithstanding the foregoing, Founder and each Founder Entity have reviewed with his/its own tax advisors the federal, state, local and foreign tax consequences of the Exchange, investment in the Class B Shares and the transactions contemplated by this Agreement. Founder and each Founder Entity are relying solely on such advisors and not on any statements or representations of the Company or any of its agents in connection with the transactions contemplated hereby, except for the representations and warranties of the Company expressly set forth in Article III.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of the date first above written.
| NEPTUNE INSURANCE HOLDINGS INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| TREVOR BURGESS | ||
| By: | ||
| [FOUNDER ENTITIES] | ||
| By: | ||
| Name: | ||
| Title: | ||
[Signature Page to Exchange Agreement]
Exhibit A
Class A Shares to be Exchanged
Number: [ ]
Record Holder: [ ]
A-1
Exhibit 10.10
FORM OF
EQUITY EXCHANGE RIGHT AGREEMENT
THIS EQUITY EXCHANGE RIGHT AGREEMENT (this “Agreement”) is made and entered into as of [___], 2025, by and between Neptune Insurance Holdings Inc., a Delaware corporation (the “Company”), and Trevor Burgess (“Founder”).
WHEREAS, the Company’s board of directors (the “Board”) has determined that it is in the best interests of the Company and its stockholders to implement a dual class common stock structure in connection with the Company’s initial public offering of its capital stock (the “IPO”) to, among other things, enable the Company to execute its long-term vision;
WHEREAS, in connection with the IPO, the Board and the stockholders of the Company have approved and adopted that certain Second Amended and Restated Certificate of Incorporation of the Company (the “Amended and Restated Certificate of Incorporation”), which, among other things, provides (i) for two classes of common stock of the Company, Class A Common Stock, par value $0.00001 per share (“Class A Common Stock”), entitling holders to one (1) vote for each share thereof held, and a newly-created Class B Common Stock, par value $0.00001 per share (“Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”), entitling holders to ten (10) votes per share thereof held, and (ii) that each share of the Company’s common stock, par value $0.00001 per share (the “Pre-IPO Common Stock”), issued and outstanding or held as treasury stock immediately prior to the effectiveness of the filing of the Amended and Restated Certificate of Incorporation (the “Effective Time”), will, automatically and without further action by any stockholder, be reclassified as, and become, one (1) share of Class A Common Stock;
WHEREAS, at the Effective Time, Founder will hold (i) awards of non-qualified stock options that are exercisable for shares of Class A Common Stock (the “Founder Options”) and (ii) effective upon the filing of the Company’s Registration Statement on Form S-8 as promptly as practicable after the time the Company’s Registration Statement on Form S-1 relating to the IPO is declared effective by the Securities and Exchange Commission, restricted stock units covering shares of Class A Common Stock (the “Founder RSUs”), in each case as set forth in Exhibit A (the Founder Options and Founder RSUs, each, a “Founder Equity Award” and collectively, the “Founder Equity Awards”), and each Founder Equity Award has been granted under the Company’s Amended and Restated 2025 Stock Plan, as amended, or the Company’s 2025 Equity Incentive Plan, as applicable, and the respective award agreement memorializing such Founder Equity Award (collectively, the “Equity Documents”); and
WHEREAS, as part of the implementation of the dual class common stock structure, the Board has determined that it is advisable and in the best interest of the Company and all of its stockholders, including its stockholders other than Founder and Founder’s affiliates, to provide Founder with the right to require the Company to exchange shares of Class A Common Stock that Founder acquires upon the exercise, vesting, and/or settlement of his Founder Equity Awards for shares of Class B Common Stock on a one share-for-one share basis, subject to the terms and conditions set forth in this Agreement; and
WHEREAS, the parties hereto intend that no gain or loss shall be recognized in any Exchange pursuant to Sections 368(a)(1)(E) and/or 1036 of the Internal Revenue Code of 1986, as amended (the “Code”), and this Agreement shall constitute a plan of reorganization within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, representations and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereto agree as follows:
Article I.
PUT RIGHT AND EXCHANGE AND ISSUANCE OF
CLASS B COMMON STOCK
1.1 Grant of Put Right. Effective immediately following the Effective Time, and subject to the terms and provisions of this Agreement (including Section 1.2(a) below), the Company hereby irrevocably grants to Founder the right (the “Put Right”) to require the Company to exchange any shares of Class A Common Stock that Founder acquires following the Effective Time as a result of the exercise, vesting, and/or settlement of his Founder Equity Awards (each, a “Put Eligible Share”) for shares of Class B Common Stock at an exchange ratio of one (1) share of Class A Common Stock for one (1) share of Class B Common Stock, net of any applicable withholding taxes; provided, however, if the Company becomes aware of any obligation to deduct or withhold any taxes as a result of, or with respect to, such exchange, the Company shall notify Founder of such obligation at least five (5) business days before the completion of such exchange and shall cooperate with Founder to reduce or eliminate any such deduction or withholding to the extent permitted by applicable law (the “Exchange”).
1.2 Exercise of Put Right.
(a) The Put Right with respect to any Put Eligible Share will be exercisable by Founder by submitting a completed and fully-executed notice in the form attached hereto as Exhibit B (the “Put Right Notice”) to the Company on or prior to the Expiration Date (as defined in Section 1.5 below) with respect to such Put Eligible Share. The Put Right will be deemed to have been exercised immediately prior to 5:00 p.m. Eastern Time on the date of timely delivery of a Put Right Notice with respect to such Put Eligible Share.
(b) Failure to deliver a Put Right Notice prior to 5:00 p.m. Eastern Time on the applicable Expiration Date for any Put Eligible Share will constitute an irrevocable waiver of the Put Right with respect to such Put Eligible Share.
(c) A Put Right cannot be exercised by Founder with respect to any Put Eligible Share more than once. Further, Founder will have no Put Right pursuant to this Agreement with respect to any share of Class A Common Stock that is acquired by Founder following the Effective Time other than as a result of the exercise, vesting, and/or settlement of a Founder Equity Award.
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1.3 Exchange of Shares. Within ten (10) calendar days after the Company’s receipt of a properly executed Put Right Notice, the Company will complete the Exchange for the specified number of Put Eligible Shares indicated in such Put Right Notice (“Exercised Shares”) by issuing, out of funds legally available therefor, a number of shares of Class B Common Stock to Founder equal to such specified number, subject to the completion of any actions reasonably necessary to be taken by Founder in order for the Company to complete such Exchange, including delivering to the Company of such instruments of transfer or other documentation as may be reasonably required to evidence that the Exercised Shares have been duly transferred to the Company. In addition, the Company and Founder may mutually agree in writing to effect any Exchange through procedures and timing requirements other than those set forth in this Section 1.3. Upon the effectiveness of such Exchange, the Company will deliver (or cause its transfer agent to deliver) to Founder such documentation as may be reasonably required to evidence that the shares of Class B Common Stock have been duly issued and delivered to Founder in exchange for the Exercised Shares.
1.4 Rights to Shares of Class A Common Stock Following Exchange. Upon the Exchange, Founder will no longer have any rights as a holder of the Exercised Shares that are the subject of the Exchange (other than the right to receive the shares of Class B Common Stock in accordance with this Agreement). Such Exercised Shares will be deemed to have been redeemed by the Company in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor, if any, have been delivered to the Company. The Founder hereby agrees to execute such instruments and other documentation as may be reasonably necessary to cause such Exercised Shares to be cancelled or transferred to the Company, including, if applicable, on the books of the Company’s transfer agent.
1.5 Termination of Put Right. The Put Right will terminate on the following date(s) (each, an “Expiration Date”):
(a) With respect to any shares of Class A Common Stock subject to a Founder Equity Award that have not become Put Eligible Shares, the Expiration Date will be the date such shares or Founder Equity Award, as applicable, are forfeited pursuant to the applicable Equity Documents; and
(b) With respect to any Put Eligible Shares, the Expiration Date will be the earliest of the date:
(i) on which Founder sells, transfers, or otherwise disposes of such Put Eligible Shares; and
(ii) the Final Conversion Date (as defined in the Amended and Restated Certificate of Incorporation).
Article II.
REPRESENTATIONS AND WARRANTIES OF FOUNDER
Founder hereby represents and warrants to the Company, with respect to the transactions contemplated hereby, as follows:
2.1 Ownership; Authority. Founder has the full right, power and authority to enter into this Agreement. Assuming the due authorization, execution and delivery by the Company, this Agreement constitutes a valid and binding agreement of Founder, enforceable against Founder in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity). Upon consummation of an Exchange contemplated hereby, the Company will acquire from Founder good and marketable title to the Exercised Shares subject to such Exchange, free and clear of any and all liens, encumbrances and restrictions (except for restrictions on transfer arising under applicable securities laws or as set forth or contemplated by this Agreement, the Amended and Restated Certificate of Incorporation or any other agreements to which Founder and the Company are a party, and subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).
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2.2 Governmental Authorization. The execution, delivery and performance by Founder of this Agreement and the consummation of the transactions contemplated hereby require no action by or in respect of, or filing with, any governmental authority on the part of Founder (excluding, for the avoidance of doubt (a) the filing by the Company of the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware and (b) compliance by the Company with any applicable requirements of any applicable state or federal securities laws). For purposes of this Agreement, “governmental authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.
2.3 Noncontravention. The execution, delivery and performance by Founder of this Agreement and the consummation of the transactions contemplated hereby do not and will not (a) violate any governing document, including any trust agreement, applicable to Founder, (b) subject to compliance with Section 2.2, violate any applicable law, (c) assuming the waiver or inapplicability of any and all rights of first refusal or co-sale held by the Company or the Company’s stockholders that are applicable to the transactions contemplated hereby, require any consent or other action under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any obligation of Founder or to the loss of any benefit to which Founder is entitled under any provision of any agreement or other instrument binding upon Founder or (d) result in the creation or imposition of any lien on any Founder Equity Awards or the shares of Class A Common Stock underlying such awards, other than restrictions on transfer arising under applicable securities laws or as set forth or contemplated by this Agreement, the Amended and Restated Certificate of Incorporation or any other agreements to which Founder and the Company are a party.
Article III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Founder, with respect to the transactions contemplated hereby, as follows:
3.1 Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.
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3.2 Corporate Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby, including the issuance and delivery of the shares of Class B Common Stock in connection with each Exchange hereunder (including the conversion thereof into Class A Common Stock upon the terms specified in the Amended and Restated Certificate of Incorporation) in accordance with the Amended and Restated Certificate of Incorporation, are within the corporate powers of the Company and have been duly authorized by all necessary corporate action on the part of the Company and the Company’s stockholders, subject to compliance with Section 3.3. Any and all rights of first refusal or co-sale held by the Company or the Company’s stockholders that are applicable to the transactions contemplated hereby have been waived. Assuming the due authorization, execution and delivery by Founder, this Agreement constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).
3.3 Governmental Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby require no action by or in respect of, or filing with, any governmental authority other than compliance by the Company with any applicable requirements of any applicable state or federal securities laws.
3.4 Noncontravention. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not, assuming compliance with the matters referred to in Section 3.3, (a) violate the Amended and Restated Certificate of Incorporation or the Second Amended and Restated Bylaws of the Company (the “Amended and Restated Bylaws”), (b) violate any applicable law, (c) require any consent or other action by any person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Company or to the loss of any benefit to which the Company is entitled under any provision of any agreement or other instrument binding upon the Company or (d) result in the creation or imposition of any lien on the shares of Class B Common Stock other than as set forth or contemplated by this Agreement or the Amended and Restated Certificate of Incorporation.
Article IV.
COVENANTS
4.1 Market Stand-Off Agreement. Founder has entered into a lock-up agreement with the underwriters of the IPO with respect to the sale, disposition or transfer of his securities of the Company and Founder agrees not to revoke such lock-up agreement. Founder also agrees that any other lock-up or market stand-off agreements applicable to the shares of Common Stock of the Company held by Founder will continue to apply to the shares of the Class B Common Stock in accordance with the terms of such agreements.
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Article V.
GENERAL PROVISIONS
5.1 Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of Delaware as applied to agreements entered into among Delaware residents to be performed entirely within Delaware, without regard to principles of conflicts of law.
5.2 Successors and Assigns. No party hereto may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other party. Subject to the immediately preceding sentence, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
5.3 Entire Agreement; Amendment. Other than the rights, restrictions and preferences provided for under the Equity Documents with respect to Founder Equity Awards and the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws with respect to the shares of Class B Common Stock, this Agreement, including the exhibits attached hereto, constitutes the full and entire understanding and agreement between the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any term hereof may be amended or waived other than by a written instrument signed by Founder and the Company.
5.4 Counterparts. This Agreement may be executed in counterparts (including by facsimile, electronic or .pdf transmission), each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
5.5 No Guarantee of Continued Service. Founder acknowledges and agrees that neither the execution of this Agreement nor the existence of the Put Right granted hereunder constitutes an express or implied promise of continuous employment or service with the Company for any period, or at all, and that neither the execution of this Agreement nor the existence of the Put Right granted hereunder will interfere in any way with Founder’s right or the right of the Company to terminate Founder’s employment or service at any time, with or without cause.
5.6 Tax Consequences. The parties hereto intend that no gain or loss shall be recognized in any Exchange pursuant to Sections 368(a)(1)(E) and/or 1036 of the Code. The parties hereto adopt this Agreement as a plan of reorganization within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a). Notwithstanding the foregoing, the Company and Founder each have reviewed with its/his own tax advisors the federal, state, local and foreign tax consequences of the Put Right and the Exchange, Founder Equity Awards and the potential acquisition of shares of Class A Common Stock thereunder, the potential exchange of such shares for shares of Class B Common Stock, and the transactions contemplated by this Agreement. Each party hereto is relying solely on such advisors and not on any statements or representations of the Company or any of its agents, or Founder or any of his agents, as applicable, in connection with the transactions contemplated hereby, except for the representations and warranties of the Company and Founder expressly set forth in Articles II and III.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of the date first above written.
| NEPTUNE INSURANCE HOLDINGS INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| TREVOR BURGESS | ||
| By: | ||
[Signature Page to Equity Exchange Right Agreement]
EXHIBIT A
[To come]
A-1
EXHIBIT B
Put Right Notice (the “Notice”)
(To be signed only upon exercise of a Put Right)
To: Neptune Insurance Holdings Inc.
Attn: General Counsel
The undersigned (“Founder”), hereby irrevocably elects to exercise his right under the Put Right pursuant to the Equity Exchange Right Agreement dated as of [_____], 2025 (the “Agreement”), by and between Neptune Insurance Holdings Inc. (the “Company”) and Founder, to require the Company to exchange Put Eligible Shares (the “Exercised Shares”) for a number of shares of Class B Common Stock of equivalent value as determined on the date of the Exchange, subject to the terms of this Notice and the Agreement. Capitalized terms not otherwise defined in the Notice will have the meaning ascribed to them in the Agreement.
By executing this Notice, Founder hereby represents and warrants to the Company as follows:
1. Acknowledgements. Founder acknowledges and affirms that the representations and warranties set forth in Article II of the Agreement as of the date of this Notice are true and correct, and agrees to the covenants set forth in Article IV of the Agreement.
2. Legends. It is understood that any certificate or book entry position representing the shares of Class B Common Stock and any securities issued in respect thereof or exchange therefor, will bear legends in substantially the following form (in addition to any legend required under applicable state securities laws or agreements to which Founder is a party):
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.”
3. Restricted Securities; Rule 144. Except as otherwise permitted by applicable law, Founder understands that any shares of Class B Common Stock issued to Founder in an Exchange will be characterized as “restricted securities” under the Act because such shares are being acquired from the Company in a transaction not involving a public offering and in exchange for shares acquired from the Company in a transaction not involving a public offering, and that under the Securities Act and the rules and regulations promulgated thereunder the shares of Class B Common Stock may be resold without registration under the Act only in certain limited circumstances, and subject to the restrictions under the Amended and Restated Certificate of Incorporation. Founder understands and hereby acknowledges that the shares of Class B Common Stock must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is otherwise available. Founder is aware of the provisions of Rule 144 promulgated under the Act, which permit limited resales of shares purchased in a transaction not involving a public offering, subject to the satisfaction of certain conditions.
4. Tax Matters. Founder has reviewed with his own tax advisors the federal, state, local and foreign tax consequences of the Put Right and the Exchange, Founder Equity Awards and the potential acquisition of shares of Class A Common Stock thereunder, the potential exchange of such shares for shares of Class B Common Stock, and the transactions contemplated by this Agreement. Founder is relying solely on such advisors and not on any statements or representations of the Company or any of its agents in connection with the transactions contemplated hereby, except for the representations and warranties of the Company expressly set forth in Article III of the Agreement.
| Dated: | |
| TREVOR BURGESS | |
| Address: |
B-1
Exhibit 16.1
September 2, 2025
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Commissioners:
We have read Neptune Flood Incorporated’s statements included in its Form S-1 filed on September 2, 2025, and we agree with such statements concerning our firm.
/s/ RSM US LLP
Exhibit 21.1
Subsidiaries of the Registrant
| 1. | Neptune Flood Incorporated |
| 2. | Neptune Insurance Agency NY LLC |
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-1 of Neptune Insurance Holdings Inc. of our report dated July 2, 2025, except for the effects of the corporate restructuring described in Note 1 to the consolidated financial statements, as to which the date is August 8, 2025 relating to the financial statements of Neptune Insurance Holdings Inc., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
September 2, 2025