UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 5, 2023
Direct Digital Holdings, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-41261 | 87-2306185 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 1177 West Loop South, Suite 1310 Houston, Texas |
77027 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (832) 402-1051
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) |
Name of each exchange on which registered | ||
| Warrants to purchase Class A common stock | DRCTW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”) (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 1.01 | Entry into a Material Definitive Agreement. |
On June 1, 2023, Direct Digital Holdings, Inc. (the “Company”), Direct Digital Holdings, LLC (“DDH LLC”), Huddled Masses LLC (“HM”), Colossus Media, LLC (“Colossus”) and Orange142, LLC (“Orange”) entered into an early opt-in election agreement (the “Early Opt-in Agreement”) with Lafayette Square Loan Servicing, LLC (“Lafayette Square”) and Lafayette Square USA, Inc., which converts the existing LIBOR-based rate under the Term Loan and Security Agreement, dated December 3, 2021 (as amended, the “2021 Credit Facility”) among DDH LLC, as borrower, the Company, HM, Colossus, and Orange, as guarantors, and Lafayette Square, as administrative agent, and the various lenders thereto, to a Term SOFR Rate with a credit spread of 0.15% per annum for interest periods of three months. Additionally, the Early Opt-in Agreement amends clause (i) of the definition of “Benchmark Replacement” in the 2021 Credit Facility to provide for a Term SOFR Rate with credit spread adjustment of 0.10%, 0.15% or 0.25% per annum for interest periods of one month, three months, or six months, respectively.
A copy of the Early Opt-in Agreement is attached hereto as Exhibit 10.1 and is incorporated by reference herein. The foregoing description of the Early Opt-in Agreement is qualified in its entirety by reference to the full text of the Early Opt-in Agreement.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On June 5, 2023, the Company announced that Susan Echard, the Company’s Chief Financial Officer, has separated from the Company, effective immediately. In connection with a transition plan, on June 5, 2023, the Board of Directors (the “Board”) of the Company appointed Diana P. Diaz as interim Chief Financial Officer. In this role, Ms. Diaz will assume the responsibilities of the principal financial officer and principal accounting officer until the Board appoints a permanent replacement.
Ms. Diaz, age 59, joins the Company from Sharps Compliance Corp. (previously Nasdaq listed (SMED) until its acquisition), a leading national healthcare waste management provider to customers in multiple healthcare-related markets, specializing in regulated waste streams including medical, pharmaceutical and hazardous, where she served for a total of 13 years, including as Senior Vice President and Chief Accounting Officer from February 2022 to February 2023 and Vice President and Chief Financial Officer from June 2010 to February 2022. Ms. Diaz’s prior positions include Chief Financial Officer of University General Hospital in Houston, Texas from September 2006 to May 2009, Controller at Memorial Hermann Healthcare System, Texas Medical Center from September 2002 to August 2006 and Controller of the wholesale group at Reliant Energy from July 1998 to May 2002. She started her career at Deloitte & Touche LLP, where she worked from July 1985 to June 1998, ending her tenure at that firm as Audit Senior Manager. Ms. Diaz received her BBA in Accounting from The University of Texas at Austin and her MBA from Rice University’s Jesse H. Jones Graduate School of Management.
There are no family relationships between or among Ms. Diaz and any director, executive officer, or any person nominated or chosen by the Company to become a director or executive officer. There have been no related person transactions (within the meaning of Item 404(a) of Regulation S-K promulgated by the Securities and Exchange Commission) between Ms. Diaz and the Company.
As set forth in her existing employment agreement, the Company expects to pay Ms. Echard severance payments equal to 12 months of her gross base salary, plus certain accrued benefits, conditioned on a general release of the Company against certain claims and continued compliance with the confidentiality, non-solicitation, and non-competition covenants in her existing employment agreement.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) Exhibits |
EXHIBIT INDEX
| Exhibit No. | Description | |
| 10.1 | Early Opt-in Election, dated June 1, 2023, by and among Direct Digital Holdings, Inc., Direct Digital Holdings, LLC, Huddled Masses LLC, Colossus Media, LLC, Orange142, LLC, Lafayette Square Loan Servicing, LLC and Lafayette Square USA, Inc. | |
| 104 | Cover Page Interactive Data File, formatted in Inline Extensible Business Reporting Language (iXBRL). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
June 6, 2023 (Date) |
Direct Digital Holdings, Inc. (Registrant) |
|
/s/ Mark Walker | |
|
Mark Walker Chief Executive Officer |
Exhibit 10.1
Lafayette Square Loan Servicing, LLC
PO Box 25250
PMB 13941
Miami, Florida 33102-5250
June 1, 2023
| Lafayette Square USA, Inc. | |
| PO Box 25250 | |
| PMB 13941 | |
| Miami, Florida 33102-5250 | |
| Attention: Susan Golden | |
| Email: | legal@lafayettesquare.com |
| lsloanops@lafayettesquare.com | |
| Re: | Early Opt-in Election |
Ladies and Gentlemen:
Reference hereby is made to that certain Term Loan and Security Agreement, dated as of December 3, 2021 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and between DIRECT DIGITAL HOLDINGS, LLC, a Texas limited liability company (“Borrower”), DIRECT DIGITAL HOLDINGS, INC., a Delaware corporation (“DDH Holdings”), COLOSSUS MEDIA, LLC, a Delaware limited liability company (“Colossus”), HUDDLED MASSES, LLC, a Delaware liability company (“HM”), ORANGE142, LLC, a Delaware limited liability company (“Orange” and together with DDH Holdings, Colossus, HM, and Orange, the “Guarantors” and each individually a “Guarantor” and together with Borrower, collectively the, “Loan Parties”, and each a “Loan Party”), the financial institutions which are now or which hereafter become a party thereto (collectively, the “Lenders” and each individually, a “Lender”) and Lafayette Square Loan Servicing, LLC (“Lafayette Square”), as agent for Lenders (Lafayette Square, in such capacity, “Agent”). Capitalized terms used herein but not specifically defined herein shall have the meanings ascribed to them in the Loan Agreement.
Pursuant to Section 3.8 of the Loan Agreement, Agent and the Loan Parties have jointly elected to trigger a fallback from USD LIBOR to Term SOFR. So long as Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after notice thereof, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders, effective May 31, 2023 (the “Replacement Date”), Term SOFR will replace the LIBOR for all purposes under the Loan Agreement and the Other Documents in respect of such Benchmark setting without any amendment to, or further action or consent of any other party to, the Loan Agreement or any Other Document. On the Replacement Date, the Benchmark Replacement shall mean the sum of (x) Term SOFR and (y) 0.15% (15 basis points) for an Available Tenor of three-months’ duration. In connection with the implementation and administration of Term SOFR, Agent reserves the right to make Benchmark Replacement Conforming Changes from time to time in accordance with the Loan Agreement.
In addition, the Loan Parties have requested that Agent and Lenders amend certain terms and provisions of the Loan Agreement. In consideration of the foregoing, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree effective as of the date hereof that clause (i) of the definition of “Benchmark Replacement” in Section 3.8(f) of the Loan Agreement is hereby amended and restated as follows:
“(i) the sum of: (x) Term SOFR and (y) 0.10% (10 basis points) for an Available Tenor of one-month’s duration, 0.15% (15 basis points) for an Available Tenor of three-months’ duration, and 0.25% (25 basis points) for an Available Tenor of six-months’ duration,”
Page 2
This letter shall be governed by and construed in accordance with the laws of the State of New York without regard to any conflicts of laws principles.
This letter may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile or electronic transmission (including email transmission of a PDF image) shall be deemed to be an original signature hereto.
Please countersign this letter below to evidence each Lender’s acceptance, acknowledgment and agreement to the foregoing.
[Signature Pages Follow]
| Very Truly Yours, | ||
| Lafayette Square Loan Servicing, LLC, as Agent | ||
| By: | /s/ Damien Dwin | |
| Name: | Damien Dwin | |
| Title: | Chief Executive Officer | |
[Signature Page to Early Opt-In Notice]
| DIRECT DIGITAL HOLDINGS, LLC | ||
| By: | /s/ Keith Smith | |
| Name: | Keith Smith | |
| Title: | President | |
| ORANGE142, LLC | ||
| By: | /s/ Keith Smith | |
| Name: | Keith Smith | |
| Title: | President | |
| HUDDLED MASSES LLC | ||
| By: | /s/ Keith Smith | |
| Name: | Keith Smith | |
| Title: | President | |
| COLOSSUS MEDIA, LLC | ||
| By: | /s/ Keith Smith | |
| Name: | Keith Smith | |
| Title: | President | |
| DIRECT DIGITAL HOLDINGS, INC. | ||
| By: | /s/ Keith Smith | |
| Name: | Keith Smith | |
| Title: | President | |
[Signature Page to Early Opt-In Notice]
Accepted, acknowledged and agreed to
as of the date first above written:
| Lafayette Square USA, Inc., as Lender | ||
| By: | /s/ Damien Dwin | |
| Name: | Damien Dwin | |
| Title: | Chief Executive Officer | |
[Signature Page to Early Opt-In Notice]