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Exhibit 10.1

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

SHIPPINGEASY GROUP, INC.

 

STAMPS.COM INC.,

 

SEG MERGER SUB, INC.

 

and

 

Tim Jugmans,

in its capacity as Representative

 

Dated as of June 16, 2016

 

CONFIDENTIAL TREATMENT REQUESTED BY STAMPS.COM INC.

                                         

***Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that Stamps.com Inc. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.

 


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

ARTICLE I  DEFINED TERMS

2

 

1.1.

Definitions

2

 

 

 

 

ARTICLE II  THE MERGER

19

 

2.1.

Merger

19

 

2.2.

Effective Time; The Closing

19

 

2.3.

Effects of the Merger

20

 

2.4.

Certificate of Incorporation and Bylaws

20

 

2.5.

Directors and Officers

20

 

2.6.

Conversion of Shares

20

 

2.7.

Treatment of Options and Warrants

21

 

2.8.

Dissenters’ Rights

22

 

2.9.

Closing of Transfer Books

22

 

2.10.

Payments

23

 

2.11.

Closing Adjustment Amount

26

 

2.12.

Final Adjustment Amount

27

 

2.13.

Escrow

29

 

2.14.

Representative Holdback

30

 

2.15.

Withholding

30

 

 

 

 

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

30

 

3.1.

Organizational Matters

30

 

3.2.

Capital Structure

31

 

3.3.

Authority and Due Execution

32

 

3.4.

Non-Contravention and Consents

33

 

3.5.

Financial Statements

34

 

3.6.

Litigation

34

 

3.7.

Taxes

35

 

3.8.

Title to, Sufficiency and Condition of Property and Assets

37

 

3.9.

Intellectual Property

38

 

3.10.

Major Customers and Suppliers

40

 

3.11.

Compliance; Permits

41

 

3.12.

Brokers’ and Finders’ Fees

41

 

3.13.

Employment Matters

41

 

3.14.

Employee Benefit Plans

42

 

3.15.

Environmental Matters

44

 

3.16.

Material Contracts

45

 

3.17.

Insurance

46

 

3.18.

Transactions with Related Parties

46

 

3.19.

Privacy and Security

47

 

3.20.

Foreign Corrupt Practices Act

47

 

3.21.

Absence of Changes

48

 

i


TABLE OF CONTENTS

(continued)

Page

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 

 

3.22.

Banking Matters

48

 

3.23.

[***]

48

 

 

 

 

ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

49

 

4.1.

Organizational Matters

49

 

4.2.

Authority and Due Execution

49

 

4.3.

Non-Contravention and Consents

49

 

4.4.

Litigation

50

 

4.5.

Financing

50

 

4.6.

Brokers or Finders

50

 

4.7.

No Prior Merger Sub Operations

51

 

 

 

 

ARTICLE V  COVENANTS OF THE PARTIES

51

 

5.1.

Operation of Business

51

 

5.2.

Confidentiality

53

 

5.3.

Company Benefit Plans

54

 

5.4.

Indemnification Rights

54

 

5.5.

Prohibition of Trading in Parent Common Stock

54

 

5.6.

Exclusivity

55

 

5.7.

Termination of Agreements

55

 

5.8.

Access and Information

55

 

5.9.

Transfer of Stockholders’ Shares

57

 

5.10.

Subsequent Matters

57

 

5.11.

Reasonable Efforts

57

 

5.12.

Disclosure of Certain Matters

58

 

5.13.

Public Disclosure

59

 

5.14.

Company Transaction Costs

59

 

5.15.

Pay Off Letters

59

 

5.16.

Closing Capitalization Schedule

60

 

5.17.

Section 280G Matters

60

 

5.18.

Stockholder Approval

60

 

5.19.

WARN Act

61

 

5.20.

Taxes

61

 

5.21.

Management Incentive Bonuses

63

 

5.22.

Investigation and Agreement by Parent and Merger Sub; No Other Representations or Warranties

63

 

5.23.

Option Grants

64

 

 

 

 

ARTICLE VI  CONDITIONS TO CLOSING

64

 

6.1.

Mutual Conditions to Closing

64

 

6.2.

Additional Conditions to Parent’s Obligations

65

 

ii


TABLE OF CONTENTS

(continued)

Page

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 

 

6.3.

Additional Conditions to the Company’s Obligations

67

 

 

 

 

ARTICLE VII  TERMINATION

68

 

7.1.

Termination

68

 

7.2.

Effect of Termination

69

 

7.3.

Return of Information

69

 

 

 

 

ARTICLE VIII  INDEMNIFICATION

69

 

8.1.

Survival of Representations, Warranties, Covenants and Agreements

69

 

8.2.

Indemnification of the Parent Indemnified Persons by Securityholders

70

 

8.3.

Indemnification of the Securityholder Indemnified Persons

71

 

8.4.

Limitations

72

 

8.5.

Indemnification Procedure

74

 

8.6.

Effect of Investigation

76

 

8.7.

No Recovery

76

 

8.8.

Insurance and Other Third Party Recoveries

76

 

8.9.

Tax Benefit

76

 

8.10.

Nature of Indemnification Payments

77

 

8.11.

Exclusive Remedy

77

 

 

 

 

ARTICLE IX  GENERAL PROVISIONS

77

 

9.1.

Amendment and Modification

77

 

9.2.

Waiver of Compliance

77

 

9.3.

Severability

77

 

9.4.

Expenses and Obligations

78

 

9.5.

Parties in Interest

78

 

9.6.

Notices

78

 

9.7.

Counterparts

79

 

9.8.

Time

79

 

9.9.

Entire Agreement

79

 

9.10.

Attorneys’ Fees

80

 

9.11.

Assignment

80

 

9.12.

Rules of Construction

80

 

9.13.

Governing Law

81

 

9.14.

Waiver of Jury Trial

81

 

9.15.

Consent to Jurisdiction; Venue

82

 

9.16.

Remedies

83

 

9.17.

Certain Matters Regarding Representation of the Company

83

 

9.18.

Privileged Communications

83

 

 

 

 

ARTICLE X  THE REPRESENTATIVE

84

 

10.1.

Authorization of the Representative

84

 

10.2.

Compensation; Exculpation; Indemnity

86

 

iii


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of June 16, 2016, is made by and among ShippingEasy Group, Inc., a Delaware corporation (the “ Company ”), Stamps.com Inc., a Delaware corporation (“ Parent ”), SEG Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“ Merger Sub ”) and Tim Jugmans, in his capacity as the Representative (as hereinafter defined).

 

RECITALS

 

WHEREAS , the boards of directors of the Company, Parent and Merger Sub have deemed it advisable and in the best interests of their respective stockholders to approve this Agreement and to consummate the transactions contemplated by this Agreement on the terms and subject to the conditions provided for herein;

 

WHEREAS , in furtherance thereof it is proposed that Parent acquire the Company by merging Merger Sub with and into the Company, with the Company being the surviving corporation in the merger, in accordance with the General Corporation Law of the State of Delaware, as amended (the “ DGCL ”);

 

WHEREAS , the boards of directors of Parent and Merger Sub have each approved this Agreement, the Merger (as hereinafter defined) and the other transactions contemplated hereby;

 

WHEREAS , the board of directors of the Company has (i)  determined that it is in the best interests of the Company and its Stockholders (as hereinafter defined), and declared it advisable, to enter into this Agreement and the other Transaction Documents (as hereinafter defined) to which the Company is a party, (ii)  approved the execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which the Company is a party and the consummation of the transactions contemplated hereby and thereby, including the Merger, and (iii)  resolved to recommend adoption of this Agreement and approval of the other Transaction Documents to which the Company is a party by the Stockholders;

 

WHEREAS , (i)  promptly following the execution and delivery of this Agreement the Stockholders holding at least a majority of the outstanding Shares (as hereinafter defined) on the date of this Agreement, shall execute and deliver to the Company a written consent pursuant to which such Stockholders adopt this Agreement and approve the Merger and the other transactions contemplated hereby in accordance with the DGCL, a copy of which consent shall be delivered to Parent (the “ Stockholder Approval ”), and, such Stockholders shall also execute and deliver to the Company and Parent Agreements to be Bound (as defined below) executed by such Stockholders and (ii)  not later than one (1) Business Day prior to the Closing, the Securityholders holding Securities (as such foregoing terms are hereinafter defined), outstanding as of the date hereof, that at the Closing will be entitled to receive at least 95% of the Closing Merger Consideration shall execute and deliver to Parent, (A) in each case, as applicable to such Securityholder and the Securities they hold, with respect to their Shares, if any, their respective letter of transmittal (each a “ Letter of Transmittal ”) in the form of Exhibit A-1 to become effective as of the Effective Time (as hereinafter defined), with respect to their Options (as hereinafter defined), if any, an option cancellation agreement (each an “ Option Cancellation Agreement ”) in the form of Exhibit A-2 to become effective as of the Effective Time, and with respect to their Warrants (as hereinafter defined), if any, a warrant cancellation agreement (each a “ Warrant Cancellation Agreement ”) in the form of Exhibit A-3 to become effective as of the Effective Time and (B)  an agreement to be bound by the Specified Provisions (as hereinafter defined) relating to a general release and agreement relating to indemnification and certain other matters (the “ Agreement to be Bound ”) in the form of Exhibit B to be effective as of the date thereof (such actions, as set forth in (ii)(A) and (B), collectively, the “ 95% Condition ”); provided that, if the Closing does not occur (other than solely as a result of the breach of an Agreement to be Bound by a Stockholder), such Letters of Transmittal, Option Cancellation Agreements, Warrant Cancellation Agreements and Agreements to be Bound shall have no force or effect and shall be null and void as of the Termination Date.

 

1


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

WHEREAS , concurrently with the execution and delivery of this Agreement, (1)  each of the Key Executives (as hereinafter defined) has executed and delivered to the Company employment, noncompetition and nonsolicitation agreements in the forms attached hereto as Exhibit D-1 (the “ Employment Agreements ”), (2)  certain Key Board Members (as hereinafter defined) have executed and delivered to the Company noncompetition and nonsolicitation agreements in the form attached hereto as Exhibit D-2 (the “ Noncompetes ”) and (3)  Parent has approved a management incentive plan for the Key Executives and certain other potential participants in the form attached hereto as Exhibit D-3 (the “ MIP ”), all such agreements and plans to become effective at the Effective Time; and

 

WHEREAS , the Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

 

AGREEMENTS

 

NOW, THEREFORE , in consideration of the mutual agreements, covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties agree as follows:

 

ARTICLE I

DEFINED TERMS

 

1.1.           Definitions .  Capitalized terms used in this Agreement but not otherwise defined shall have the following meanings:

 

Action ” means any lawsuit, claim, suit or judicial or legal proceeding, arbitration or similar adjudicatory proceeding or investigation by or before any Governmental Authority.

 

Affiliate ” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person. For the purposes of this definition, “controlling,” “controlled” and “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person whether through the ownership of voting securities, contract or otherwise.

 

2


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Aggregate Merger Consideration ” means an aggregate amount equal to the Closing Merger Consideration plus (a) the Working Capital Escrow Amount, plus (b) the Escrow Amount, plus or minus (c) the Final Adjustment Amount.

 

Aggregate Option Exercise Amount ” means the sum of the amounts that would be payable to the Company by holders of each outstanding Option that is unexercised as of the Effective Time if each such outstanding Option was exercised immediately prior to the Effective Time.

 

Aggregate Warrant Exercise Amount ” means the sum of the amounts that would be payable to the Company by holders of each outstanding Warrant that is unexercised as of the Effective Time if each such outstanding Warrant was exercised immediately prior to the Effective Time.

 

Agreement ” has the meaning set forth in the Preamble.

 

Agreement to be Bound ” has the meaning set forth in the Recitals.

 

Applicable Laws ” means all laws, statutes, rules, regulations, ordinances, judgments, orders, decrees, injunctions and writs of any Governmental Authority applicable to such Person (including, if applicable, such Person’s business, assets or operations).

 

Applicable Percentage ” means (a) with respect to each Stockholder, a percentage equivalent of a fraction, the numerator of which is the number of shares of Common Stock, if any, held by such Stockholder immediately prior to the Effective Time (after giving effect to the net exercise and cancellation at the Effective Time of any Non-Company Warrants to which such Stockholder is a party) and the denominator of which is the Total Share Number; (b) with respect to each Optionholder, a percentage equivalent of a fraction, the numerator of which is equal to the aggregate number of shares of Common Stock issuable for all outstanding Options held by such Optionholder immediately prior to the Effective Time, and the denominator of which is the Total Share Number; and (c) with respect to each Warrantholder, a percentage equivalent of a fraction, the numerator of which is equal to the aggregate number of shares of Preferred Stock issuable for all outstanding Warrants held by such Warrantholder immediately prior to the Effective Time, and the denominator of which is the Total Share Number.

 

Base Purchase Price ” means Fifty Five Million US Dollars ($55,000,000).

 

Business Day ” means each day that is not a Saturday, Sunday or other day on which banking institutions located in Austin, Texas, or Los Angeles, California, are authorized or required by Applicable Law to be closed.

 

Cash ” means all cash and cash equivalents of the Company or any of its Subsidiaries as determined in accordance with GAAP.

 

Certificate ” means a certificate representing any Shares.

 

Certificate of Merger ” has the meaning set forth in Section 2.2 .

 

3


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Claim ” has the meaning set forth in Section 5.4(a) .

 

Closing ” has the meaning set forth in Section 2.2 .

 

Closing Adjustment Amount ” means an amount (which may be a negative number) equal to (a) Estimated Cash, minus (b) Estimated Debt, plus (c) any Estimated Working Capital Surplus, minus (d) any Estimated Working Capital Deficiency.

 

Closing Balance Sheet ” has the meaning set forth in Section 2.12(a) .

 

Closing Capitalization Schedule ” has the meaning set forth in Section 5.16 .

 

Closing Cash ” has the meaning set forth in Section 2.12(a) .

 

Closing Company Transaction Costs ” has the meaning set forth in Section 2.12(a) .

 

Closing Date ” means the date on which the Closing occurs.

 

Closing Debt ” has the meaning set forth in Section 2.12(a) .

 

Closing Merger Consideration ” means an aggregate amount (not less than zero) equal to (a) the Base Purchase Price, plus (b) the Aggregate Option Exercise Amount, plus (c) the Aggregate Warrant Exercise Amount, plus or minus (d) the Closing Adjustment Amount (which amount will decrease the Closing Merger Consideration if a negative number), minus (e) the Working Capital Escrow Amount; minus (f) the Escrow Amount, minus (g) Paid Company Transaction Costs, minus (h) the Representative Holdback.

 

Closing Working Capital ” has the meaning set forth in Section 2.12(a) .

 

Closing Working Capital Deficiency ” has the meaning set forth in Section 2.12(a) .

 

Closing Working Capital Surplus ” has the meaning set forth in Section 2.12(a) .

 

Code ” means the United States Internal Revenue Code of 1986, as amended.  All references to the Code, Treasury Regulations or other governmental pronouncements shall be deemed to include references to any applicable successor regulations or amending pronouncement.

 

Common Stock ” means the Company’s Common Stock, par value $0.001 per share.

 

Company ” has the meaning set forth in the Preamble.

 

Company Benefit Plans ” has the meaning set forth in Section 3.14(a) .

 

4


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Company Bylaws ” means the Company’s Bylaws, as amended, as in effect prior to the Effective Time.

 

Company Certificate of Incorporation ” means the Company’s Certificate of Incorporation, as amended, as in effect prior to the Effective Time.

 

Company Disclosure Schedule ” means those certain disclosure schedules of even date with this Agreement delivered by the Company to Parent concurrently with the execution and delivery of this Agreement.

 

Company Governing Documents ” has the meaning set forth in Section 3.1(b) .

 

Company Indemnified Parties ” has the meaning set forth in Section 5.4(a) .

 

Company Permits ” has the meaning set forth in Section 3.11(b) .

 

Company Products ” means any product or service marketed or under development for marketing by the Company as of the date hereof, and any discontinued product or service for which the Company still provides support to customers, together with any derivative thereof or modification thereto.

 

Company Stock Plan ” means the Company’s 2012 Stock Plan, as amended from time to time.

 

Company Transaction Costs ” means all fees, costs and expenses incurred by or on behalf of, or paid or to be paid by, the Company, any of its Subsidiaries or the Representative and any officers and directors in connection with the structuring, negotiation or consummation of the transactions contemplated by this Agreement and the other Transaction Documents, including (i) all fees, costs and expenses of any brokers, accountants, financial advisors, attorneys, consultants, auditors and other experts; (ii) any fees and expenses associated with obtaining any Consents, or any waivers, consents or approvals of the Stockholders or other third parties on behalf of the Company or its Subsidiaries; (iii) all brokers’, finders’ or similar fees in connection with the transactions contemplated hereby, including any process run by or on behalf of the Company; (iv) any change of control payments, bonuses, severance, termination or retention obligations or similar amounts payable or due by the Company or any of its Subsidiaries triggered solely by the Merger, (v) with respect to any such amount referred to in clause (iv) and with respect to any other amount that pursuant to this Agreement is to be paid through the Company’s payroll system, the employer portion of any employment and payroll taxes required to be paid by the Company with respect to such amounts other than with respect to any payments, bonuses, severance, termination or amounts due by the Company or any of its Subsidiaries under the MIP and the Employment Agreements); (vi) 50% of the fees and expenses of the Escrow Agent; and (vii) any amounts payable by the Company in connection with the insurance policies to be obtained in accordance with Section 5.4(b) .

 

Confidentiality Agreement ” means the Confidentiality Agreement, dated as of October 9, 2015, by and between the Company and Parent.

 

5


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Consents ” means all authorizations, consents, orders or approvals of, or registrations, declarations or filings with, or expiration of waiting periods imposed by, any Governmental Authority, in each case that are necessary in order to consummate the transactions contemplated by this Agreement and the other Transaction Documents, and all consents and approvals of third parties necessary in order to consummate the transactions contemplated by this Agreement and the other Transaction Documents, including as may be necessary to prevent any conflict with, violation or breach of, or default under, any Material Contract.

 

Consolidated Group ” means any affiliated, combined, consolidated, unitary or similar group with respect to any Taxes, including any affiliated group within the meaning of Section 1504 of the Code electing to file consolidated federal income Tax Returns and any similar group under foreign, state or local Applicable Law.

 

Contract ” means any note, bond, mortgage, indenture, guarantee, license, franchise, permit, agreement, understanding, contract, commitment, letter of intent or other obligation (whether oral or written), and any amendments, supplements or modifications thereto, in each case, other than purchase orders for the purchase or supply of goods, services or raw materials in the ordinary course of business.

 

Current Assets ” means the sum of the Company’s accounts receivable, other receivables, unearned compensation and prepayments, in all cases determined in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures (with consistent classifications, judgments and valuation and estimation methodologies) that were used in the preparation of the Financial Statements.

 

Current Liabilities ” means the sum of the Company’s accounts payable, credit card liabilities, accrued liabilities (which, for the avoidance of doubt, shall include franchise Taxes but shall exclude all income Tax liabilities), salaries payroll liability and other payroll liabilities in all cases determined in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures (with consistent classifications, judgments and valuation and estimation methodologies) that were used in the preparation of the Financial Statements.

 

Debt ” means (a) all indebtedness of the Company and its Subsidiaries for the repayment of borrowed money, whether or not represented by bonds, debentures, notes or similar instruments, all accrued and unpaid interest thereon, and all premiums, penalties, fees and other amounts payable in connection therewith or otherwise included in the Debt Pay-Off Amount, (b) all indebtedness of the Company and its Subsidiaries evidenced by bonds, debentures, notes or similar instruments, including all accrued and unpaid interest thereon, (c) all obligations of the Company and its Subsidiaries with respect to interest-rate hedging, swaps or similar financial arrangements, (d) all capitalized lease obligations of the Company or any of its Subsidiaries, (e) any amounts for the deferred purchase price of goods and services, including any earn-out liabilities associated with past acquisitions, (f) all deposits and monies received in advance (excluding any customer prepaid amounts), (g) all liabilities under any reimbursement obligation relating to a letter of credit, bankers’ acceptance or note purchase facility, (h) all indebtedness or liabilities secured by any security interest on any property or assets of the Company or any of its Subsidiaries, (i) any accrued incentive compensation (excluding accrued employee payables included in Current Liabilities) and (j) all obligations of the type referred to in clauses (a) through (j) of other Persons for the payment of which the Company or any of its Subsidiaries is responsible or liable, as obligor, guarantor, surety or otherwise, including any guarantee of such obligations.

 

6


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Debt Pay-Off Amount ” has the meaning set forth in Section 2.10(a)(i) .

 

“Designated Employees ” has the meaning set forth in Section 5.23 .

 

DGCL ” has the meaning set forth in the Recitals.

 

Dissenting Shares ” has the meaning set forth in Section 2.8(b) .

 

Effective Time ” has the meaning set forth in Section 2.2 .

 

Employee Benefit Plan ” means: (a) any nonqualified deferred compensation or retirement plan or arrangement that is an Employee Pension Benefit Plan; (b) any qualified defined contribution retirement plan or arrangement that is an Employee Pension Benefit Plan; (c) any qualified defined benefit retirement plan or arrangement that is an Employee Pension Benefit Plan; (d) any Employee Welfare Benefit Plan; (e) any fringe benefit plan, policy, or program, agreement or arrangement; (f) any profit sharing, bonus, stock option, stock purchase, equity incentive, consulting, employment, severance, salary continuation, change in control, retention or incentive plan, policy, program, agreement or arrangement; or (g) any plan, policy, program, agreement or arrangement providing benefits related to clubs, vacation, childcare, parenting, employee assistance, tuition reimbursement, sick pay, leave of absence, sabbatical or sick or family leave; in each case whether provided during employment or other service or upon or following retirement or other separation from service.

 

Employee Pension Benefit Plan ” has the meaning set forth in Section 3(2) of ERISA.

 

Employee Welfare Benefit Plan ” has the meaning set forth in Section 3(1) of ERISA.

 

Employment Agreements ” has the meaning set forth in the Recitals.

 

Environmental Claim ” means any claim, demand, suit, order, judgment, proceeding, penalty, citation, or notice of violation, asserted pursuant to any Environmental Law.

 

Environmental Laws ” means all Applicable Laws relating to natural resources, including the ambient air, soil, subsurface soils, surface water or groundwater, or natural resources, or relating to the protection of human health to the extent relating to exposure to Materials of Environmental Concern, pollution or the protection of the environment.

 

Environmental Permits ” means all permits, licenses, registrations, approvals and other authorizations required under applicable Environmental Laws.

 

7


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Equipment ” means all items of equipment, equipment structures, machinery, tools, motor vehicles, fixtures, leasehold improvements, hardware, systems, infrastructure, and other equipment owned, leased, or used in the Company’s or its Subsidiaries’ business, and all other items that would be classified as equipment on the asset side of a balance sheet of the Company prepared in accordance with GAAP.

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

Equipment ” means all items of equipment, equipment structures, machinery, tools, motor vehicles, fixtures, leasehold improvements, hardware, systems, infrastructure, and other equipment owned, leased, or used in the Company’s or its Subsidiaries’ business, and all other items that would be classified as equipment on the asset side of a balance sheet of the Company prepared in accordance with GAAP.

 

Escrow Account ” has the meaning set forth in the Escrow Agreement.

 

Escrow Agent ” means U.S. BANK NATIONAL ASSOCIATION, a national banking association.

 

Escrow Agreement ” means the escrow agreement in substantially the form of Exhibit C entered into on or prior to the Closing by and among Parent, the Representative and the Escrow Agent.

 

Escrow Amount ” has the meaning set forth in Section 2.13(a) .

 

Estimated Cash ” has the meaning set forth in Section 2.11(a) .

 

Estimated Closing Balance Sheet ” has the meaning set forth in Section 2.11(a) .

 

Estimated Company Transaction Costs ” has the meaning set forth in Section 2.11(a) .

 

Estimated Debt ” has the meaning set forth in Section 2.11(a) .

 

Estimated Working Capital Deficiency ” has the meaning set forth in Section 2.11(a) .

 

Estimated Working Capital Surplus ” has the meaning set forth in Section 2.11(a) .

 

Excluded Claims ” means any Parent Indemnification Claim made pursuant to Section 8.2(b)-(f) .

 

Final Adjustment Amount ” means an amount equal to (a) Final Cash minus (b) Final Debt plus (c) any Final Working Capital Surplus, minus (d) any Final Working Capital Deficiency minus (e) the Final Company Transaction Costs.

 

8


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Final Adjustment Deficiency ” has the meaning set forth in Section 2.12(b) .

 

Final Adjustment Surplus ” has the meaning set forth in Section 2.12(b) .

 

Final Balance Sheet ” has the meaning set forth in Section 2.12(b) .

 

Final Cash ” has the meaning set forth in Section 2.12(b) .

 

Final Company Transaction Costs ” has the meaning set forth in Section 2.12(b) .

 

Final Debt ” has the meaning set forth in Section 2.12(b) .

 

Final Working Capital ” has the meaning set forth in Section 2.12(b) .

 

Final Working Capital Deficiency ” has the meaning set forth in Section 2.12(b) .

 

Final Working Capital Surplus ” has the meaning set forth in Section 2.12(b) .

 

Financial Statements ” has the meaning set forth in Section 3.5(a) .

 

Fundamental Representations ” has the meaning set forth in Section 8.1 .

 

GAAP ” means generally accepted accounting principles in the United States, consistently applied by the Company in the preparation of the Financial Statements.

 

Governmental Authority ” means any governmental department, commission, board, bureau, agency, court or other instrumentality, whether foreign or domestic, of any country, nation, republic, federation or similar entity or any state, county, parish or municipality, jurisdiction or other political subdivision thereof.

 

Indemnification Claim ” means a Parent Indemnification Claim or a Securityholder Indemnification Claim, as the case may be.

 

Indemnified Persons ” means the Parent Indemnified Persons or the Securityholder Indemnified Persons, as the case may be.

 

Indemnifying Person ” means Parent and the Surviving Corporation, jointly and severally, in the case of any Securityholder Indemnification Claim, or the Securityholders, acting through the Representative, in the case of any Parent Indemnification Claim.

 

Indemnity Objection Notice ” has the meaning set forth in Section 8.5 .

 

Information Statement ” has the meaning set forth in Section 5.18(a) .

 

Insurance Policies ” has the meaning set forth in Section 3.17(a) .

 

9


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Intellectual Property ” means the following U.S. and non-U.S. intellectual property rights, including both statutory and common law rights, as applicable: (a) copyrights, rights in works of authorship (including software), and registrations and applications for registration thereof; (b) trademarks, service marks, trade names, slogans, domain names, logos, trade dress, and other indicia of origin, registrations and applications for registrations thereof and all goodwill associated therewith; (c) patents and patent applications (including all reissues, divisionals, continuations, continuations in part, renewals, reexams and extensions of the foregoing); (d) trade secrets and rights in confidential information, including methods, techniques, procedures, processes and other know-how, whether or not patentable (“ Trade Secrets ”); and (e) all other intellectual property and proprietary rights.

 

IT Systems ” has the meaning set forth in Section 3.9(h) .

 

Key Board Members ” means [***].

 

Key Executives ” means [***].

 

Knowledge ” or the “ Company’s Knowledge ” means with respect to the Company, the actual knowledge, after reasonable inquiry, of the following individuals: [***].

 

Leased Real Property ” means all of the real property leased by the Company or any of its Subsidiaries.

 

Letter of Transmittal ” has the meaning set forth in the Recitals.

 

Liability ” and “ Liabilities ” means any assessments, deficiencies, damages, fines, penalties, losses, Debt, or liability (whether direct or indirect, known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, matured or unmatured, determined or determinable, disputed or undisputed, liquidated or unliquidated, due or to become due, and whether in contract, tort, strict liability or otherwise).

 

Licensed Intellectual Property ” means Intellectual Property that the Company or its Subsidiaries are licensed or otherwise permitted by other Persons to use.

 

Liens ” means liens, pledges, voting agreements, voting trusts, proxy agreements, security interests, mortgages, and other possessory interests, conditional sale or other title retention agreements, assessments, easements, rights of way, covenants, restrictions, rights of first refusal, encroachments, and other burdens, options or encumbrances of any kind (including the filing of or agreement to give any financing statement under the Uniform Commercial Code or comparable law or any jurisdiction in connection with such mortgage, pledge, security interest, encumbrance, lien, or charge).

 

Losses ” means, subject to Sections 8.8 , and 8.9 , any and all assessments, claims, damages, demands, fines, debts, suits, proceedings, judgments, losses, charges, penalties, fees, costs and expenses (including reasonable attorneys’ fees and expenses) sustained, suffered or incurred by any Indemnified Person in connection with, or related to, any matter which is the subject of indemnification under Article VIII ; provided, however, the amount of any Losses in the form of punitive Losses shall not be included in Losses for which an Indemnified Person may seek indemnification under Article VIII , except to the extent paid to a third party.

 

10


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Major Customer ” has the meaning set forth in Section 3.10(a) .

 

Major Supplier ” has the meaning set forth in Section 3.10(b) .

 

Material Adverse Effect ” means any change, circumstance, effect, event or fact that (I) has a material and adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, or (II) prevents or materially delays the ability of the Company or, collectively, the Securityholders, to consummate the Closing; provided, that, in the case of clause (I) , no change, circumstance, effect, event or fact shall be deemed (individually or in the aggregate) to constitute, nor shall any of the foregoing be taken into account in determining whether there has been a Material Adverse Effect, to the extent that such change, circumstance, effect, event or fact results from, arises out of, or relates to (a) a general deterioration in the economy, (b) changes in the economic conditions prevalent in the industry in which the Company and its Subsidiaries operate (including changes in law affecting the industry in which the Company and its Subsidiaries operate); (c) the outbreak or escalation of hostilities involving the United States, the declaration by the United States of a national emergency or war or the occurrence of any other calamity or crisis, including acts of terrorism; (d) any hurricane, tornado, flood, earthquake or other natural disaster; (e) the disclosure of the fact that Parent is the prospective acquirer of the Company where such events, occurrences, facts, conditions or changes primarily involve the actions of parties other than the Company or its employees or Affiliates; (f) the execution of this Agreement, or the announcement, disclosure or pendency of the transactions contemplated by this Agreement or any other Transaction Document where such events, occurrences, facts, conditions or changes primarily involve the actions of parties other than the Company or its employees or Affiliates; (g) the announcement or disclosure of the Company’s intention to review the possibility of selling itself where such events, occurrences, facts, conditions or changes primarily involve the actions of parties other than the Company or its employees or Affiliates; (h) any change in accounting requirements or principles imposed upon the Company, its Subsidiaries or their respective businesses or any change in Applicable Laws, or change in the interpretation thereof by appropriate authorities; (i) actions (other than actions permitted or contemplated by this Agreement) taken by Parent or any of its Affiliates (provided such change, circumstance, effect, event or fact directly relates to such actions); or (j) the taking of any specific action (other than general actions such as operating in the ordinary course of business) required by, or consented to by Parent in accordance with, this Agreement or any other Transaction Document), except in the case of clauses (a) through (h) for such events, occurrences, facts, conditions or changes that have a materially disproportionate effect on the Company and its Subsidiaries relative to other companies in the same industry.

 

Material Contract ” means:

 

(a)          each Contract that requires future expenditures by the Company in excess of [***]   within 12 months of the date hereof or that is reasonably expected to result in payments to the Company within 12 months of the date hereof in excess of [***];

 

(b)          any Contract for the purchase of materials, supplies, goods, services, Equipment or other assets providing for annual payments by the Company or any of its Subsidiaries of [***] or more;

 

11


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(c)          each lease, rental or occupancy agreement, installment and conditional sale agreement, and any other contract or agreement, in each case, affecting the leasing of, or title to or use of, any Leased Real Property;

 

(d)          each joint venture, partnership or any other material contract or agreement involving a sharing of profits, losses, costs or liabilities by the Company or any of its Subsidiaries with any other Person;

 

(e)          each Contract containing covenants that purport to restrict or prohibit the business activity of the Company or any of its Subsidiaries or limit the freedom of the Company or any of its Subsidiaries to engage in any line of business or to compete with any other Person or in any geographic area or during any period of time, excluding, in each case clauses restricting the use or disclosure of confidential information in Contracts entered in the ordinary course of business;

 

(f)           each Contract involving a standstill or similar agreement;

 

(g)          each Contract with any Governmental Authority;

 

(h)          each Contract or agreement with any Related Party;

 

(i)           each Contract relating to Debt with an outstanding principal amount in excess of [***];

 

(j)           each financial advisory or similar type of Contract, and any Contract with an investment or commercial bank that will be binding on the Company or any of its Subsidiaries after the Closing (other than those that contain only binding customary indemnification provisions);

 

(k)          each Contract or series of related Contracts entered into with respect to (i) the acquisition of the assets or properties of any Person or the disposition of assets or properties of the Company or any of its Subsidiaries, in each case, involving consideration in excess of [***], or any merger, consolidation or similar business combination transaction; and (ii) a completed acquisition or disposition by the Company or any of its Subsidiaries of any operating business or the capital stock or other equity interests of any Person pursuant to which the Company or any of its Subsidiaries has continuing obligations as of the date hereof; provided , that the Contracts described in this clause (k) shall not include any Contracts entered into in the ordinary course of business for the sale of goods and services;

 

(l)           each Contract that (i) is an employment, consulting, bonus, profit sharing, incentive compensation, termination or severance Contract, except for any such Contract that is terminable at will by the Company or any of its Subsidiaries without liability in excess of [***] to the Company or any of its Subsidiaries; (ii) is a collective bargaining agreement; or (iii) requires severance payment or payments upon a change of control in excess of [***];

 

12


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(m)         each Contract relating in whole or in part to any license of Intellectual Property to the Company involving consideration in excess of [***] (excluding any “ shrinkwrap ” or similar generally available commercial end-user license to software, in each case that is used without customization) or any license of Intellectual Property from the Company to any third party involving consideration in excess of [***] and which cannot be terminated for convenience on not more than 90 days’ notice;

 

(n)          each Contract with each Person who has made a material contribution to the creation or development of the Owned Intellectual Property relating to the ownership of the Owned Intellectual Property;

 

(o)          each Contract involving any resolution or settlement of any actual or threatened litigation, arbitration, claim or other dispute in the past three years in excess of [***]

 

(p)          any Contracts with any Major Customer or Major Supplier;

 

(q)          any Contracts that contain “most favored nation” pricing provisions, any exclusivity, rights of first refusal, rights of first negotiation or similar obligations or restrictions that are binding on the Company or that would be binding on Parent or any of its Affiliates after the Closing;

 

(r)           any Contract with a carrier or package consolidator; and

 

(s)          each Contract containing “earn-outs” or similar arrangements.

 

Materials of Environmental Concern ” means any pollutants, contaminants, wastes, toxic or hazardous substances, or other substances that are regulated under Environmental Laws, including the federal Comprehensive Environmental Response, Compensation and Liability Act and the federal Resource Conservation and Recovery Act.

 

Merger ” has the meaning set forth in Section 2.1 .

 

Merger Sub ” has the meaning set forth in the Preamble.

 

Mini-Basket ” has the meaning set forth in Section 8.4(a) .

 

Minimum Loss ” has the meaning set forth in Section 8.4(a) .

 

MIP ” has the meaning set forth in the Recitals.

 

Non-Company Warrants ” means each of [***]

 

Noncompete ” has the meaning set forth in the Recitals.

 

Objection Notice ” has the meaning set forth in Section 2.12(b) .

 

Officer’s Certificate ” has the meaning set forth in Section 8.5 .

 

13


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Open Source Software ” means software that is licensed pursuant to an open source, copyleft or community source code license or that is distributed under similar licensing or distribution models (including any library, code or other software that is licensed under any General Public License, Lesser General Public License, MIT License, Apache License, GNU Affero General Public License or similar license arrangement).

 

Option ” means any right or option to purchase Shares issued pursuant to the Company Stock Plan.

 

Option Cancellation Agreement ” has the meaning set forth in the Recitals.

 

Option Grants ” has the meaning set forth in Section 5.23 .

 

Optionholder ” means each holder of an Option.

 

Owned Intellectual Property ” means Intellectual Property owned by the Company or its Subsidiaries.

 

Owned IT Systems ” has the meaning set forth in Section 3.9(h) .

 

Paid Company Transaction Costs ” has the meaning set forth in Section 2.10(a)(iii) .

 

Parent ” has the meaning set forth in the Preamble.

 

Parent Indemnification Claim ” has the meaning set forth in Section 8.2 .

 

Parent Indemnified Persons ” means (a) Parent; (b) the Surviving Corporation and each of its Subsidiaries; (c) with respect to the Persons set forth in clauses (a) and (b), each of their respective Affiliates, assigns and successors in interest; and (d) with respect to the Persons set forth in clauses (a) through (c), each of their respective stockholders, members, partners, directors, officers, employees, agents, attorneys and representatives.

 

Parent Prepared Returns ” has the meaning set forth in Section 5.20(a)(ii) .

 

Pay Off Letter ” or “ Pay Off Letters ” means the letters, and any updates thereto, to be sent by each of the Company’s lenders under Company Debt to Parent prior to the Closing, which letters shall specify the aggregate amount of Debt that will be outstanding as of the Closing Date and wire transfer information for each such lender to be paid at Closing.

 

Permits ” has the meaning set forth in Section 3.11(b) .

 

14


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Permitted Encumbrances ” means (a) statutory Liens for Taxes that are not past due and or that are being contested in good faith by appropriate proceedings; (b) mechanics’, carriers’, workers’, repairers’ and other similar Liens imposed by Applicable Law arising or incurred in the ordinary course of business and consistent with past practices of the Company or any of its Subsidiaries that are not past due or that are being contested in good faith by appropriate proceedings; (c) in the case of leases of vehicles, rolling stock and other Personal Property, encumbrances that do not materially impair the operation of the business at the facility at which such leased equipment or other Personal Property is located; (d) other Liens that were not incurred in connection with the borrowing of money or the advance of credit and that do not materially interfere with the conduct of the business conducted by the Company and its Subsidiaries, taken as a whole; (e) Liens on leases of Leased Real Property arising from the provisions of such leases, including, in relation to Leased Real Property, any agreements or conditions imposed on the issuance of land use permits, zoning, business licenses, use permits or other entitlements of various types issued by any Governmental Authority, necessary or beneficial to the continued use and occupancy of such Leased Real Property or the continuation of the business conducted by the Company or any of its Subsidiaries; (f) zoning regulations and restrictive covenants, easements and other matters of record that do not detract in any material respect from the value of the Leased Real Property and do not materially and adversely affect, impair or interfere with the use of any property affected thereby; (g) public utility easements of record, in customary form, to serve the Leased Real Property; (h) landlords’ Liens in favor of landlords under the leases with respect to the Leased Real Property; (i) mortgages, deeds of trust and other security instruments, and ground leases or underlying leases covering the title, interest or estate of such landlords with respect to the Leased Real Property and to which the leases with respect to the Leased Real Property are subordinate; and (j) Liens set forth on Schedule 1.1(a) .

 

Person ” means an individual, corporation, limited or general partnership, limited liability company, association, joint venture, joint stock company, trust, unincorporated organization, Governmental Authority or any other entity or any group comprised of two or more of the foregoing.

 

Personal Information ” has the meaning set forth in Section 3.19(a) .

 

Personal Property ” means all of the machinery, Equipment, tools, motor vehicles, furniture, furnishings, leasehold improvements, office equipment, inventory, supplies and other tangible personal property owned or leased by the Company or its Subsidiaries and used or held for use in their business or operations as of the Closing Date.

 

[***] ” has the meaning set forth in Section 3.23 .

 

Post-Closing Owed Amounts ” has the meaning set forth in Section 2.10(b) .

 

Pre-Closing Period ” means any Tax period ending on or before the Closing Date.

 

Preferred Stock ” means the Company’s Preferred Stock, par value $0.001 per share, including the Company’s Series Seed Preferred Stock, Series Seed-2 Preferred Stock and Series A Preferred Stock.

 

Privacy Laws ” has the meaning set forth in Section 3.19(a) .

 

Privileged Communications ” has the meaning set forth in Section 9.18 .

 

15


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Pro Rata Share ” means, with respect to each Securityholder, a percentage equivalent of a fraction (a) the numerator of which is the portion of Aggregate Merger Consideration payable to such Securityholder pursuant to the transactions contemplated by this Agreement and (b) the denominator of which is the Aggregate Merger Consideration payable to all Securityholders pursuant to the transactions contemplated by this Agreement.

 

Referee ” has the meaning set forth in Section 2.12(b) .

 

Registered IP ” has the meaning set forth in Section 3.9(a) .

 

Related Party ” means, with respect to any specified Person:  (i) any Affiliate of such specified Person; (ii) any Person who serves as a director, executive officer, partner, member or in a similar capacity of such specified Person; (iii) any immediate family member of such Person or of a Person described in clause (ii); or (iv) any other Person who holds, individually or together with any Affiliate of such other Person and any member(s) of such Person’s immediate family, more than 5% of the outstanding voting equity or ownership interests of such specified Person.

 

Representative ” means Tim Jugmans, and any successor representative appointed to act on their behalf.

 

Representative Holdback ” has the meaning set forth in Section 2.14 .

 

Representative Losses ” has the meaning set forth in Section 10.2(c) .

 

Representative Prepared Returns ” has the meaning set forth in Section 5.20(a)(i) .

 

Restricted Transactions ” has the meaning set forth in Section 5.6(a) .

 

Section 280G Payments ” has the meaning set forth in Section 5.17 .

 

Securities ” means, collectively, the Shares, Options and Warrants.

 

Securityholder ” means, collectively, the Stockholders, the Optionholders and the Warrantholders.

 

Securityholder Indemnification Claim ” has the meaning set forth in Section 8.3 .

 

Securityholder Indemnified Persons ” means (a) the Securityholders; (b) each of the Securityholder’s respective Affiliates, assigns and successors in interest; and (c) with respect to the Persons set forth in clauses (a) and (b), each of their respective Securityholders, members, partners, directors, officers, employees, agents, attorneys and representatives.

 

16


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Securityholder Taxes ” means the following: (a) any and all Taxes imposed on the Company or any Subsidiary of the Company for any Pre-Closing Period and for the portion of any Straddle Period ending on the Closing Date (determined in accordance with Section 5.19(b) ; (b) any Transfer Taxes for which the Representative is liable pursuant to Section 5.19(f) ; (c) all liability for Taxes of any member (other than the Company or any of its Subsidiaries) of a Consolidated Group of which the Company or any of its Subsidiaries (including any predecessor entities) is or was a member prior to the Closing Date; (d) all Taxes of any Person (other than the Company or any of its Subsidiaries) imposed on the Company or any of its Subsidiaries as a transferee or successor, by Contract, pursuant to any Applicable Laws or otherwise, which Taxes relate to events or transactions occurring prior to the Closing Date; and (e) any Losses asserted against, incurred, sustained or suffered by the Parent or its Affiliates (including the Surviving Corporation after the Closing) as a result of, arising out of or otherwise relating to a breach of any representation or warranty in Section 3.7 ; provided , that no such Tax will constitute a Securityholder Tax to the extent the amount of such Tax (i) was included as a Current Liability in the determination of Final Working Capital or (ii) results from any action outside the ordinary course of business taken by, or at the direction of, Parent on the Closing Date and after the Closing.

 

Seller Group ” has the meaning set forth in Section 9.17 .

 

Shares ” means the shares of Common Stock and Preferred Stock outstanding immediately prior to the Effective Time.

 

Specified Provisions ” means Section 2.12Section 2.13 , Section 2.14 , Section 5.2 , Section 5.5 , Section 5.6 , Section 5.7 , Section 5.9 , Section 5.10 , Section 5.11 , Section 5.13 , Article VIII , Section 9.13 , Section 9.14 , Section 9.15 and Article X hereto.

 

Stockholder Approval ” has the meaning set forth in the Recitals.

 

Stockholder Notice ” has the meaning set forth in Section 5.18(b) .

 

Stockholders ” means the holders of Shares.

 

Straddle Period ” means any Tax period beginning on or before the Closing Date and ending after the Closing Date.

 

Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, another Person in which such first Person owns, directly or indirectly, an amount of the voting securities, other voting ownership or voting partnership interests which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of such Person).

 

Surviving Corporation ” has the meaning set forth in Section 2.1 .

 

Tax ” or “ Taxes ” means federal, state, local or foreign taxes of any kind, including, but not limited to, net income, gross income, minimum, alternative minimum, margin, gross receipts, commercial activity, net worth, corporate, capital, excise, property, ad valorem, sales, use, transfer, turnover, value added, license, withholding, payroll, employment, unemployment, social security, workers’ compensation, estimated, severance, escheat, abandoned property, stamp, intangible, environmental, windfall profits, custom, duty and franchise taxes imposed by any Governmental Authority together with any interest, penalties, addition to tax or additional amounts imposed thereon.

 

17


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Tax Benefit ” has the meaning set forth in Section 8.10 .

 

Tax Proceeding ” has the meaning set forth in Section 3.7(b) .

 

Tax Returns ” means any return, report, statement, information return or other document (including any schedule or attachment thereto and amendment thereof) filed or required to be filed with any Governmental Authority in connection with the determination, assessment, collection or administration of any Taxes or the administration of any laws, regulations or administrative requirements relating to any Taxes.

 

Termination Date ” has the meaning set forth in Section 7.1 .

 

Third Party Claim ” has the meaning set forth in Section 8.5(b) .

 

Total Share Number ” means the sum of (i) the total number of shares of Common Stock issued and outstanding immediately prior to the Effective Time, plus (ii) the total number of shares of Preferred Stock issued and outstanding immediately prior to the Effective Time, plus (iii) the aggregate number of shares of Common Stock issuable for all outstanding vested Options immediately prior to the Effective Time, plus (iv) the aggregate number of shares of Preferred Stock issuable for all outstanding Warrants immediately prior to the Effective Time.

 

Trade Secrets ” has the meaning set forth in the definition of Intellectual Property in this Article I .

 

Transaction Documents ” means, collectively, this Agreement and each other agreement, document, certificate and instrument required to be executed in accordance herewith.

 

Transfer Taxes ” has the meaning set forth in Section 5.20(e) .

 

Treasury Regulations ” means the final and temporary regulations promulgated under the Code.

 

WARN Act ” means the Worker Adjustment and Retraining Notification Act of 1988, as amended, and any similar state or local law addressing mass layoffs or employment losses.

 

Warrant ” has the meaning set forth in Section 3.2(b) .

 

Warrant Cancellation Agreement ” has the meaning set forth in the Recitals.

 

Warrantholder ” means each holder of a Warrant.

 

“Websites ” means all Internet websites, including content, text, graphics, images, audio, video, data, databases, Software and related digital media included on or used in the operation of and maintenance thereof, and all ASP, HTML, DHTML, SHTML, and XML files, cgi and other scripts, subscriber data, archives, and server and traffic logs.

 

18


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Working Capital ” means Current Assets minus Current Liabilities, calculated in accordance with the sample calculations set forth in Schedule 1.1(b) .

 

Working Capital Deficiency ” means the amount by which the Working Capital Target exceeds the Working Capital.

 

Working Capital Escrow Amount ” means [***].

 

Working Capital Surplus ” means the amount by which Working Capital exceeds the Working Capital Target.

 

Working Capital Target ” means [***].

 

Written Consent ” has the meaning set forth in Section 5.18(a) .

 

ARTICLE II

THE MERGER

 

2.1.           Merger .  Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into the Company (the “ Merger ”) in accordance with the terms of, and subject to the conditions set forth in, this Agreement and the DGCL.  Following the Merger, the Company shall continue as the surviving corporation in the Merger (sometimes hereinafter referred to as the “ Surviving Corporation ”) and the separate corporate existence of Merger Sub shall cease.

 

2.2.           Effective Time; The Closing .  Upon the terms and subject to the conditions set forth in this Agreement, as soon as practicable on the Closing Date, the Company, Parent and Merger Sub shall cause a Certificate of Merger meeting the requirements of Section 251 of the DGCL (the “ Certificate of Merger ”) to be properly executed and filed with the Secretary of State of the State of Delaware in accordance with the terms and conditions of the DGCL on the Closing Date.  The Merger shall become effective at the time of filing of the Certificate of Merger with the Secretary of State of the State of Delaware (or such later time as agreed by the Company and Parent and set forth in the Certification of Merger) in accordance with the DGCL (the “ Effective Time ”).  Subject to the terms and conditions of this Agreement, the closing of the Merger (the “ Closing ”) shall take place at 9:00 a.m., Los Angeles time, no later than five (5) Business Days after the last of the conditions to Closing set forth in Article VI have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), at the offices of Manatt, Phelps & Phillips, LLP, 11355 West Olympic, Blvd., Suite 10000, Los Angeles, CA, 90064, or at such other time or on such other date or at such other place as the Company and Parent may mutually agree upon in writing; provided, however, that the Closing shall not occur on the dates June 17, 2016 through June 30, 2016 without the prior written consent of the Parent and the Company.

 

19


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

2.3.           Effects of the Merger .  At and after the Effective Time, the Merger shall have the effects set forth in this Agreement and in the relevant provisions of the DGCL.  Without limiting the generality of the foregoing and subject thereto, at the Effective Time, the separate existence of Merger Sub will cease and the Company shall continue as the Surviving Corporation, and, without other transfer, all the property, rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations and duties of the Company and Merger Sub shall become the debts, liabilities, obligations and duties of the Surviving Corporation as if the Surviving Corporation had itself incurred them.

 

2.4.           Certificate of Incorporation and Bylaws .

 

(a)           At the Effective Time, and without any further action on the part of the Company or Merger Sub, the Company Certificate of Incorporation shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by Applicable Law, subject to the terms of this Agreement, including, for the avoidance of doubt, Section 5.4 .

 

(b)           At the Effective Time, and without further action on the part of the Company or Merger Sub, the Company Bylaws shall be amended and restated in their entirety such that the bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by Applicable Law, subject to the terms of this Agreement, including, for the avoidance of doubt, Section 5.4 .

 

2.5.           Directors and Officers .  From and after the Effective Time, (a) the directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation, and (b) the officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, in each case until the earlier of their death, resignation or removal or until their respective successors are duly elected or appointed and qualified.

 

2.6.           Conversion of Shares .  At the Effective Time, by virtue of the Merger and without any action on the part of any party, any Person or any holder of any securities of any Person:

 

(a)           Each Share issued and outstanding immediately prior to the Effective Time (excluding any Shares described in Section 2.6(b)) (i) shall be converted automatically into the right to receive the portion of the consideration set forth in this Agreement attributable to such Share in cash, without interest, and subject to deduction for any required withholding Tax, and (ii) shall otherwise cease to be outstanding, shall automatically be canceled, extinguished and cease to exist; provided , that Dissenting Shares shall not be so converted or represent the right to receive the foregoing consideration, but the holders of such Dissenting Shares shall only be entitled to such rights as are set forth in Section 2.8 and the applicable provisions of the DGCL.  For the avoidance of doubt, each Share of Preferred Stock is entitled to and shall receive, in accordance with the terms of the Company Certificate of Incorporation, the same price per share in the Merger as the Shares of Common Stock in lieu of receiving any liquidation preference to which such Shares may otherwise be entitled therein.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(b)           Each Share held by Parent or Merger Sub or held by the Company as treasury shares or by any Subsidiary of Parent, Merger Sub or the Company immediately prior to the Effective Time shall automatically be canceled without any conversion thereof, and no payment, consideration or distribution shall be made with respect thereto.

 

(c)           Each share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and shall represent one validly issued, fully paid and non-assessable share of common stock, par value $0.001   per share, of the Surviving Corporation.

 

2.7.           Treatment of Options and Warrants .

 

(a)           Prior to the Effective Time, the Company’s board of directors shall take all actions necessary, including amending the Company Stock Plan and applicable stock option agreements, as necessary, and obtaining any necessary consents, to cause (i) all vested Options to be cancelled and converted into the right by each Optionholder holding outstanding vested Options immediately prior to the Effective Time to receive (without interest), as soon as reasonably practicable on or after the Closing Date but no later than five (5) Business Days following the Closing Date, the consideration applicable to such Optionholder’s vested Options as set forth in Section 2.7(b) and (ii) all unvested Options to be cancelled.  As soon as reasonably practicable on or after the Closing Date, but no later than two (2) Business Days following the Closing Date, Parent shall cause the Surviving Corporation to provide written notice of the foregoing to each Optionholder.

 

(b)           At the Effective Time, each vested Option that is issued and outstanding as of immediately prior to the Effective Time shall be cancelled, and in consideration of such cancellation, the Surviving Corporation shall pay in accordance with Section 2.10(a)(vi) to each such Optionholder an amount in cash equal to (I) the excess of (i) such Optionholder’s Applicable Percentage of the Closing Merger Consideration over (ii) the aggregate exercise price for all outstanding vested Options held by such Optionholder and (II) any amounts, if any, that may become payable in respect of such vested Option in the future pursuant to Section 2.12 and/or Section 2.13 .  The amounts described in this Section 2.7(b) shall be deemed to have been paid in full satisfaction of all rights pertaining to such Options.  At the Effective Time, each vested Option with an exercise price greater than the portion of Closing Merger Consideration that would otherwise be payable for such Option if such Option was exercised immediately prior to the Effective Time shall be cancelled without consideration payable therefor and shall be of no further force and effect.

 

(c)           At least five (5) Business Days prior to the Effective Time, the Company’s board of directors shall give written notice of this Agreement and the transactions contemplated hereby to each Warrantholder. At the Effective Time, each Warrant that is outstanding immediately prior to the Effective Time will be cancelled and extinguished and be converted into the right to receive (without interest), as soon as reasonably practicable on or after the Closing Date but no later than two (2) Business Days following the Closing Date, the consideration applicable to such Warrantholder’s Warrants as set forth in Section 2.10(a)(vii) .

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

2.8.           Dissenters’ Rights .

 

(a)           Promptly following receipt of the Stockholder Approval, the Company shall provide each record holder of Shares who shall not have voted in favor of the Merger or consented thereto in writing, with notice of such holder’s appraisal rights pursuant to Section 262 of the DGCL.  The Company shall give Parent (i) prompt notice of any demands for appraisal pursuant to Section 262 of the DGCL received by the Company from any Stockholders, withdrawals of such demands and any other demand, notice or instrument delivered to the Company pursuant to the DGCL that relates to such demand and (ii) the opportunity to participate in all negotiations and proceedings with respect to such demands.  The Company or, after the Closing, the Representative, shall not, except with the prior written consent of Parent, which shall not be unreasonably withheld, make any payment with respect to, or settle or offer to settle, such demands.  No later than ten (10) days following the date on which the Effective Time occurs, Parent and the Surviving Corporation shall provide notice of the Effective Time to each Stockholder who has neither voted in favor of the Merger nor consented thereto in writing and has not withdrawn or lost the right to the appraisal pursuant to Section 262 of the DGCL.

 

(b)           Notwithstanding any provision of this Agreement to the contrary, no Shares issued and outstanding immediately prior to the Effective Time that are held by holders who have neither voted in favor of the Merger nor consented thereto in writing and who are entitled to demand, and properly demand the right, if any, for appraisal of such Shares in accordance with the provisions of Section 262 of the DGCL and have not withdrawn or lost such right to appraisal (collectively, the “ Dissenting Shares ”) shall be converted into or represent a right to receive any portion of the Aggregate Merger Consideration for such Shares, and the holder of such Dissenting Shares shall only be entitled to such appraisal rights as are granted by the DGCL.  If a holder of Shares who demands appraisal of such Shares under the DGCL shall thereafter effectively withdraw or lose (through failure to perfect or otherwise) the right to appraisal with respect to such Shares, then, as of the occurrence of such withdrawal or loss, each such Share shall be deemed to have been converted into and represent only the right to receive, in accordance with Sections 2.6 and 2.10 , the portion of the Aggregate Merger Consideration for such Shares hereunder, without interest, and such Share shall no longer be deemed a Dissenting Share hereunder.

 

2.9.           Closing of Transfer Books .  From and after the Effective Time, the stock transfer books of the Company shall be closed and no transfer of Shares shall thereafter be made.  From and after the Effective Time, the holders of Certificates evidencing ownership of Shares immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for in this Agreement or by Applicable Law.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

2.10.        Payments .

 

(a)            Closing Payments .  At the Closing, Parent shall pay or cause to be paid (by an exchange agent reasonably acceptable to the Company, if Parent so elects at Parent’s sole cost and expenses), or shall deposit or cause to be deposited, as the case may be, the following amounts by wire transfer of immediately available funds pursuant to wire transfer instructions confirmed by the applicable payment recipient in writing, or other applicable payment methods as may be authorized by any particular Securityholder pursuant to a Letter of Transmittal, Option Cancellation Agreement and/or Warrant Cancellation Agreement, as applicable, as follows:

 

(i)           to each lender (if any) under Company Debt, to an account designated by such lender in writing, the amount of Debt specified in such lender’s Pay Off Letter (collectively, the sum of such Debt amounts for all such payees being hereinafter referred to as the “ Debt Pay-Off Amount ”);

 

(ii)          the Escrow Amount plus the Working Capital Escrow Amount with the Escrow Agent;

 

(iii)          all Company Transaction Costs that remain outstanding as of the Closing Date to such account or accounts as are designated by the Company in accordance with Section 5.14 (collectively, the sum of such payments for all payees of Company Transaction Costs being hereinafter referred to as the “ Paid Company Transaction Costs ”);

 

(iv)         such account as is designated by the Representative in writing, the Representative Holdback;

 

(v)          to each Stockholder that delivers a completed and duly executed Letter of Transmittal and all applicable Certificates for cancellation (or an affidavit of loss and indemnity agreement as contemplated by the Letter of Transmittal and who complies with the requirement of such affidavit of loss and indemnity agreement) to Parent or its exchange agent on or prior to the Closing Date, an amount equal to the Stockholder’s Applicable Percentage of the Closing Merger Consideration.  Notwithstanding anything to the contrary in this Agreement, with respect to any payments due to a Stockholder as a result of the net exercise and cancellation at the Effective Time of any Non-Company Warrants held (but not issued) by such Stockholder, such amounts (including, without limitation, any amounts which are payable by the Representative or the Escrow Agent hereunder) shall be remitted to and processed by the Surviving Corporation or its agent, and paid to such Stockholder in the amounts and at the times set forth in this Agreement, net of all required withholdings as set forth in Section 2.15 .  The Surviving Corporation or its agent shall pay, or cause to be paid, to such Stockholder any amounts received from the Representative or the Escrow Agent pursuant to the preceding sentence as soon as practicable and not later than five (5) Business Days following receipt of such amounts.

 

(vi)         through the Company’s payroll system (or, at the option of Parent for any particular Optionholder, through Parent’s exchange agent) to each Optionholder that delivers a completed and duly executed Option Cancellation Agreement, an amount equal to (I) the excess of (x) such Optionholder’s Applicable Percentage of the Closing Merger Consideration over (y) the aggregate exercise price for all outstanding vested Options held by such Optionholder and (II) the amounts, if any, that may become payable in respect of such Options in the future pursuant to Section 2.12 and/or Section 2.13 .  Notwithstanding anything to the contrary in this Agreement, with respect to any payments which become due in respect of Options from and after the Closing, such amounts (including, without limitation, any amounts which are payable by the Representative or the Escrow Agent hereunder) shall be remitted to and processed by the Surviving Corporation or its payroll agent, and paid to the respective Optionholders in the amounts and at the times set forth in this Agreement, net of all required withholdings as set forth in Section 2.15 .  The Surviving Corporation or its payroll agent shall pay, or cause to be paid, to Optionholders any amounts received from the Representative or the Escrow Agent pursuant to the preceding sentence as soon as practicable and not later than five (5) Business Days following receipt of such amounts.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(vii)        to each Warrantholder that delivers a completed and duly executed Warrant Cancellation Agreement an amount equal to (I) the excess of (x) such Warrantholder’s Applicable Percentage of the Closing Merger Consideration over (y) the aggregate exercise price for all outstanding Warrants held by such Warrantholder and (II) the amounts, if any, that may become payable in respect of such Warrants in the future pursuant to Section 2.12 and/or Section 2.13 . Notwithstanding anything to the contrary in this Agreement, with respect to any payments which become due in respect of Warrants from and after the Closing, such amounts (including, without limitation, any amounts which are payable by the Representative or the Escrow Agent hereunder) shall be remitted to and processed by the Surviving Corporation or its agent, and paid to the respective Warrantholders in the amounts and at the times set forth in this Agreement, net of all required withholdings as set forth in Section 2.15 .  The Surviving Corporation or its agent shall pay, or cause to be paid, to Warrantholders any amounts received from the Representative or the Escrow Agent pursuant to the preceding sentence as soon as practicable and not later than five (5) Business Days following receipt of such amounts.

 

(b)            Post-Closing Payments .  From and after the Closing, (i) Parent or its exchange agent shall promptly (and in any event within five (5) Business Days after receipt) pay or cause to be paid to (x) each Stockholder that delivers a completed and duly executed Letter of Transmittal and all applicable Certificates for cancellation (or an affidavit of loss and indemnity agreement as contemplated by the Letter of Transmittal) and an Agreement to be Bound, (y) each Optionholder that delivers a completed and duly executed Option Cancellation Agreement and an Agreement to be Bound, and (z) each Warrantholder that delivers a completed and duly executed Warrant Cancellation Agreement and an Agreement to be Bound, to Parent at any time after the Closing Date, with respect to all Securities held by such Securityholder, the amount (without interest) that would have been payable to such Securityholder pursuant to Section 2.10(a)(v) , 2.10(a)(vi) or 2.10(a)(vii) , if such Securityholder had delivered such documents on or prior to the Closing Date (the aggregate amount of such payments, the “ Post-Closing Owed Amounts ”), and (ii) Parent or its exchange agent shall hold the Post-Closing Owed Amounts in a segregated account to be used solely for purposes of this Section 2.10(b) .  Any other payments (including distributions by the Escrow Agent and payments of any Final Adjustment Surplus) to be made to the Securityholders following the Closing shall be made by the Parent, the Surviving Corporation or the Escrow Agent, as applicable.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(c)           Unexchanged Shares .  Any portion of the Aggregate Merger Consideration that remains unclaimed by the Securityholders twelve (12) months after the Effective Time shall be returned to Parent, upon demand at the discretion of Parent, and any Securityholder who has not exchanged Certificates or delivered Option Cancellation Agreements or Warrant Cancellation Agreements for the Aggregate Merger Consideration in accordance with this Section 2.10 prior to that time shall thereafter look only to Parent for payment of the Aggregate Merger Consideration; provided , that any such portion of the Aggregate Merger Consideration payable from the Escrow Funds shall be held and distributed to the Persons entitled thereto in accordance with the terms of this Agreement and the Escrow Agreement, at the respective times and subject to the contingencies specified herein and therein and any portion of any amounts payable under Section 2.13 to which the Securityholders may become entitled shall become payable at the times and subject to the contingencies specified herein. Notwithstanding the foregoing, Parent shall not be liable to any holder of Certificates, Options or Warrants for any amounts paid to a public official pursuant to applicable abandoned property, escheat or similar Applicable Laws. Any amounts remaining unclaimed by Securityholders two (2) years after the Effective Time (or such earlier date, immediately prior to such time when the amounts would otherwise escheat to or become property of any Governmental Authority) shall become, to the extent permitted by Applicable Law, the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.

 

(d)           Dissenting Share Payments .  Parent shall make available any amounts to be paid to a Stockholder that is attributable to a Dissenting Share to pay the fair value of such Dissenting Share for which appraisal rights are perfected pursuant to Section 262 of the DGCL.  With respect to any amounts that are attributable to a Dissenting Share, such amounts shall be withheld by Parent for distribution to the holder thereof in accordance with Sections 2.6 only upon the withdrawal or loss of the right to appraisal pursuant to Section 262 of the DGCL and the delivery of a completed and duly executed Letter of Transmittal and all applicable Certificates for cancellation (or an affidavit of lost Certificate as contemplated by the Letter of Transmittal) to Parent, with respect to all Shares held by such Stockholder.  Any portion of the Aggregate Merger Consideration made available to any exchange agent in respect of any Dissenting Shares shall be returned to Parent, upon demand.

 

(e)            Lost Certificates .  If any Certificate shall have been lost, stolen or destroyed, upon the delivery of an affidavit of loss and indemnity agreement by the holder thereof, the Surviving Corporation shall pay or cause to be paid in exchange for such lost, stolen or destroyed Certificate the relevant portion of the Aggregate Merger Consideration payable in respect thereof pursuant to Section 2.10(b) .

 

(f)            Transferees .  If any portion of the Agreement Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition to such payment that (i) such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer, and (ii) the Person requesting such payment shall pay to any exchange agent any transfer or other Tax required as a result of such payment to a Person other than the registered holder of such Certificate or establish to the reasonable satisfaction of the exchange agent that such Tax has been paid or is not payable.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

2.11.        Closing Adjustment Amount .

 

(a)           No later than two (2) Business Days before the Closing Date, the Company shall deliver or cause to be delivered to Parent an estimated balance sheet of the Company and its Subsidiaries prepared as of 11:59 p.m. on the last Business Day prior to the Closing Date (except as otherwise contemplated by this Agreement) (the “ Estimated Closing Balance Sheet ”), which sets forth a good faith estimate of the following: (i) the amount of Cash (“ Estimated Cash ”), (ii) the amount of Debt outstanding (the “ Estimated Debt ”), (iii) the amount of Working Capital Surplus or Working Capital Deficiency (“ Estimated Working Capital Surplus ” or “ Estimated Working Capital Deficiency ,” respectively), and (iv) the amount of Company Transaction Costs that the Company proposes will be Paid Company Transaction Costs and any other Company Transaction Costs that, without limiting the effect of Section 2.10(a)(iii) , would otherwise be unpaid after giving effect to the Closing (the “ Estimated Company Transaction Costs ”) in each case, as of such time and date.  The Estimated Closing Balance Sheet shall be prepared by the Company in accordance with this Agreement and GAAP in a manner consistent with, and using the same principles, policies, methods and practices used in, the preparation of the Financial Statements; provided , that in the event of a conflict between GAAP and the preparation of the Financial Statements, GAAP shall prevail.

 

(b)           Contemporaneously with the delivery of the Estimated Closing Balance Sheet, the Company shall deliver to the Parent the Closing Capitalization Schedule in accordance with Section 5.16 .  The parties understand and agree that each Securityholder’s Applicable Percentage and Pro Rata Share has been calculated based upon the accuracy of the representations and warranties set forth in Section 3.2 and that, in the event the number of outstanding Shares or the number of outstanding Options, Warrants or other stock equivalents is greater or less than the amounts specifically set forth in Section 3.2 (including as a result of (i) any inaccuracy in the representations and warranties set forth in Section 3.2 or any inaccuracy in Company Disclosure Schedule 3.2 or the Closing Capitalization Schedule, (ii) the issuance or expiration after the date of this Agreement of options, warrants or other rights to purchase Shares, or (iii) any stock split, reverse stock split, stock dividend, including any dividend or distribution of securities convertible into stock or any stock equivalent of the Company, recapitalization, reclassification or other like change occurring after the date of this Agreement) each Securityholder’s Applicable Percentage and Pro Rata Share shall be appropriately adjusted.  Notwithstanding anything to the contrary in this Agreement, in no event shall the sum of the payments due and payable pursuant to this Article II exceed the Base Purchase Price, except to the extent the Aggregate Merger Consideration (disregarding for this purpose the Aggregate Option Exercise amount and the Aggregate Warrant Exercise Amount) exceeds the Base Purchase Price.  In no event will Parent or Merger Sub have any obligation or liability to any party hereto or any other Person in the event the sum of the payments due and payable pursuant to this Article II exceed the Base Purchase Price, except to the extent the Aggregate Merger Consideration (disregarding for this purpose the Aggregate Option Exercise amount and the Aggregate Warrant Exercise Amount) exceeds the Base Purchase Price.  In calculating the Applicable Percentage of Merger Consideration payable under this Article II , Parent shall be entitled to rely conclusively on the representations and warranties contained in Section 3.2 regarding the capital structure of the Company and the Closing Capitalization Schedule and in the event of any inconsistency between such representations and warranties and the Closing Capitalization Schedule, on the Closing Capitalization Schedule.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

2.12.        Final Adjustment Amount .

 

(a)           No later than ninety (90) days after the Closing Date, Parent shall cause the Surviving Corporation to prepare and deliver to the Representative a consolidated balance sheet of the Company and its Subsidiaries prepared as of 11:59 p.m. on the last Business Day prior to the Closing Date (except as otherwise contemplated by this Agreement) (the “ Closing Balance Sheet ”), which shall set forth the following:  (i) the amount of Cash (“ Closing Cash ”), (ii) the amount of Debt (“ Closing Debt ”), (iii) the components of Working Capital to enable Parent and the Representative (on behalf of the Securityholders) to calculate the amount of Working Capital (“ Closing Working Capital ”) and the amount of Working Capital Surplus or Working Capital Deficiency (“ Closing Working Capital Surplus ” or “ Closing Working Capital Deficiency ,” as the case may be), and (iv) the Company Transaction Costs that were not Paid Company Transaction Costs (the “ Closing Company Transaction Costs ”) in each case, as of such time and date.  The Closing Balance Sheet shall be prepared in accordance with this Agreement and GAAP in a manner consistent with, and using the same principles, policies, methods and practices used in, the preparation of the Financial Statements; provided that in the event of a conflict between GAAP and the preparation of the Financial Statement, GAAP shall prevail.  Following the delivery of the Closing Balance Sheet to the Representative, Parent and the Surviving Corporation shall afford the Representative and its representatives the opportunity to examine the Closing Balance Sheet, and such supporting schedules, analyses and other underlying records or documentation as are reasonably necessary and appropriate.  Parent and the Surviving Corporation shall reasonably cooperate with the Representative and its representatives in such examination, including providing answers to questions asked by the Representative and its representatives, and Parent and the Surviving Corporation shall promptly make available to the Representative and its representatives any records that are reasonably requested by the Representative and its representatives.

 

(b)           If within 30 days following delivery of the Closing Balance Sheet to the Representative, the Representative has not delivered to Parent written notice (the “ Objection Notice ”) of its objections to the Closing Balance Sheet (such Objection Notice must contain a statement describing in reasonable detail the basis of such objections), then the Closing Balance Sheet, Closing Cash, Closing Debt, Closing Working Capital, Closing Working Capital Surplus or Closing Working Capital Deficiency, as applicable, and Closing Company Transaction Costs as set forth in or derived from such Closing Balance Sheet shall be deemed final and conclusive and shall be the “ Final Balance Sheet ,” “ Final Cash ,” “ Final Debt ,” “ Final Working Capital ”, “ Final Working Capital Surplus ” or “ Final Working Capital Deficiency ,” and “ Final Company Transaction Costs ” respectively.  If the Representative delivers the Objection Notice within such 30-day period, then Parent and the Representative shall endeavor in good faith to resolve the objections, for a period not to exceed 15 days from the date of delivery of the Objection Notice.  If at the end of the 15-day period there are any objections that remain in dispute, then the remaining objections in dispute shall be submitted for resolution to an accounting firm to be selected jointly by the Representative and Parent within the following five days or, if the Representative and Parent are unable to mutually agree within such five-day period, such accounting firm shall be a mutually agreed upon, nationally recognized accounting firm (such jointly selected accounting firm, the “ Referee ”).  The Referee shall determine any unresolved items of the Final Balance Sheet, Final Cash, Final Debt, Final Working Capital and Final Working Capital Surplus or Final Working Capital Deficiency within 30 days after the objections that remain in dispute are submitted to it.  If any objections are submitted to the Referee for resolution, (i) each party shall furnish to the Referee such workpapers and other documents and information relating to such objections as the Referee may request and are available to that party or its Subsidiaries (or its independent public accountants) and will be afforded the opportunity to present to the Referee any material relating to the determination of the matters in dispute and to discuss such determination with the Referee; (ii) to the extent that a value has been assigned to any objection that remains in dispute, the Referee shall not assign a value to such objection that is greater than the greatest value for such objection claimed by either party or less than the smallest value for such objection claimed by either party; (iii) the determination by the Referee of Final Cash, Final Debt, Final Working Capital, Final Working Capital Surplus or Final Working Capital Deficiency and Final Company Transaction Costs, as set forth in a written notice delivered to both parties and the Escrow Agent by the Referee, shall be made in accordance with this Agreement and shall be binding and conclusive on the parties and shall constitute an arbitral award that is final, binding and unappealable and upon which a judgment may be entered by a court having jurisdiction thereof; and (iv) the fees and expenses of the Referee shall be paid by the Parent and the Securityholders in inverse proportion as they may prevail on the merits (with the amount payable by the Securityholders to be paid out of any remaining amounts in the Working Capital Escrow or the Representative Holdback).

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(c)          To the extent that the Final Adjustment Amount minus the Closing Adjustment Amount is a positive number, such excess (the “ Final Adjustment Surplus ”) shall be paid by Parent via wire transfer of immediately available funds within five days of the determination of the Final Adjustment Amount to the Securityholders in accordance with their Applicable Percentages.  To the extent that the Final Adjustment Amount minus the Closing Adjustment Amount is a negative number, the absolute value of such deficiency (the “ Final Adjustment Deficiency ”) shall be distributed to Parent from the Working Capital Escrow Amount; provided , however , that if the Surviving Corporation fails to deliver to the Representative the Closing Balance Sheet no later than 90 days after the Closing Date, then any Final Adjustment Deficiency shall be deemed to be zero and no amounts shall be distributed to Parent from the Working Capital Escrow Account pursuant to this Section 2.12(c) .  In the event the Working Capital Escrow Amount is insufficient to pay the entire Final Adjustment Deficiency, Parent may, in its discretion, deliver a written notice to the Escrow Agent and the Representative specifying the amount of such deficiency, and the Escrow Agent shall pay such amount out of the Working Capital Escrow Account and, thereafter, at the sole option of Parent, from the Escrow Amount, to Parent in accordance with the terms of the Escrow Agreement.  No failure on the part of Parent to deliver a notice as specified in the immediately preceding sentence shall relieve the Securityholders of the obligation to pay the amount of the Final Adjustment Deficiency to Parent.  In the event the amount of funds in the Working Capital Escrow Amount exceeds the Final Adjustment Deficiency, then the Escrow Agent, after paying the Final Adjustment Deficiency to Parent as provided herein, shall promptly (but in any event, within five (5) Business Days) pay any remaining amounts in the Working Capital Escrow Amount to the Securityholders in accordance with their respective Applicable Percentages.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

2.13.        Escrow .

 

(a)            Escrow Amount .  On or prior to the Closing, (i) the Representative, Parent and the Escrow Agent shall enter into the Escrow Agreement, and (ii) an amount equal to [***] (the “ Escrow Amount ”) shall be deposited in escrow at Closing pursuant to Section 2.10(a)(ii) and shall be held in escrow pursuant to the terms of this Agreement and the Escrow Agreement.  On the first anniversary of the Closing Date, the parties shall cause the Escrow Agent, pursuant to the Escrow Agreement, to promptly (but in any event, within five (5) Business Days after the first anniversary of the Closing) release and deliver to the Securityholders (in accordance with Section 2.10(a)) an amount equal to [***] (the “ First Period Escrow Amount ”) less the amount of pending or disputed indemnification claims of Parent Indemnified Persons in compliance with the requirements of Article VIII and the aggregate amount of any releases from the Escrow Account, if any, for claims prior to such first anniversary date.  The amount of the First Period Escrow Amount subject to such pending or disputed indemnification claims of Parent Indemnified Persons made before the first anniversary of the Closing Date shall remain in the Escrow Fund until such time such portion of the First Period Escrow Amount is no longer subject to pending or disputed indemnification claims of Parent Indemnified Persons, at which time the parties shall cause the Escrow Agent, pursuant to the Escrow Agreement, to promptly (but in any event, within five (5) Business Days) release and deliver to the Securityholders (in accordance with Section 2.10(a)) such amount. On midnight, Pacific Time on the date that is the eighteen month anniversary of the Closing Date (for example, if the Closing Date was June 15, 2016, then the date would be December 15 th , 2017) (the “ Escrow Termination Date ”) the parties shall cause the Escrow Agent, pursuant to the Escrow Agreement, to promptly (but in any event, within five (5) Business Days) release and deliver to the Stockholders the remaining amounts held in the Escrow Fund less the amount subject to pending or disputed indemnification claims of Parent Indemnified Persons , and where such claims are in compliance with the requirements of Article VIII .  On the Escrow Termination Date, the Escrow Fund will terminate except with respect to any amount that is reasonably necessary (based on the facts and circumstances existing at the time) to satisfy any unsatisfied (including pending) claims for Losses specified in any Officer’s Certificate delivered by Parent Indemnified Persons to the Escrow Agent and the Representative on or prior to the Escrow Termination Date, and in accordance with the provisions of Article VIII .  As soon as all such claims have been resolved, the Escrow Agent shall immediately deliver to the Securityholders (in accordance with Section 2.10(a)) the remaining portion of the Escrow Amount, if any, not required to satisfy such claims pursuant to the Escrow Agreement. Deliveries from the Escrow Fund to the Stockholders pursuant to this Agreement and the Escrow Agreement shall be made in proportion to the Securityholders’ respective Applicable Percentage of the remaining Escrow Amount as set forth in Exhibit C , and in the Escrow Agreement, with each amount rounded to the nearest whole cent ($0.01).

 

(b)            Working Capital Escrow .  On or prior to the Closing, pursuant to the Escrow Agreement, an amount equal to the Working Capital Escrow Amount shall be deposited in an escrow (separate from the Escrow Amount) at Closing pursuant to Section 2.10(a)(ii) and shall be held in escrow pursuant to the terms of Section 2.12 hereof and the Escrow Agreement.  The Working Capital Escrow Amount shall be used, held and disbursed solely pursuant to Section 2.12 and shall not be used for any other purpose.

 

(c)            Instructions to Escrow Agent .

 

(i)           The Representative and Parent covenant and agree to jointly instruct the Escrow Agent in writing promptly (within five (5) Business Days) after the determination of the Final Adjustment Amount to make any disbursements required by Section 2.12(c) .

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(ii)          Subject to Section 8.4(c) , the Representative covenants and agrees that at any time a Parent Indemnified Person is indemnified for Parent Indemnification Claims under Article VIII , including if requested by Parent, the Representative shall promptly execute and deliver to the Escrow Agent joint written instructions with Parent to release to the Parent Indemnified Person such portion of the Escrow Amount as is necessary to satisfy the Securityholders’ indemnification obligations for Parent Indemnification Claims under Article VIII .

 

2.14.         Representative Holdback .  The amount of [***] (the “ Representative Holdback ”) shall be paid at Closing pursuant to Section 2.10(a)(iv) to an account maintained for the benefit of the Securityholders, and shall be held, used and disbursed by or at the direction of the Representative in accordance with Article X .

 

2.15.         Withholding .  Notwithstanding any other provision of this Agreement, Parent and Surviving Corporation and its Subsidiaries shall be entitled to deduct and withhold, or cause to be deducted and withheld, from any amounts payable or otherwise deliverable pursuant to this Agreement or in connection with the re-allocation of Shares under Non-Company Warrants such amounts as are required to be withheld with respect to the making of such payment under any provision of U.S. federal, state, local, or other Tax Law, and to request any necessary Tax forms, including Form W-9 or the appropriate series of Form W-8, as applicable, or any similar information for the purpose of determining whether such withholding is required.  In such event, Parent shall notify the Representative of its intention to deduct or withhold and the Parties shall cooperate in good faith to minimize to the extent permissible under Applicable Law the amount of any such deduction or withholding, including by providing any certificates or forms that are reasonably requested to establish an exemption from (or reduction in) any deduction or withholding; provided that nothing in this sentence shall require Parent to incur any expense or take any tax position with which it in good faith disagrees.  To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth on the Company Disclosure Schedule, the Company represents and warrants to Parent and Merger Sub as follows:

 

3.1.           Organizational Matters .

 

(a)            Organization, Standing and Power to Conduct Business .  The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware; has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted; and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except for any such failures that would not, individually or in the aggregate, reasonably be expected to be material to the Company or any of its Subsidiaries.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(b)           Charter Documents .  True and correct copies of the Company Certificate of Incorporation and the Company Bylaws and the respective certificates of incorporation, bylaws, limited liability company agreements or other comparable organizational documents of the Subsidiaries of the Company, as amended and as in effect on the date of this Agreement and immediately prior to the Closing (the “ Company Governing Documents ”), have been furnished or made available to Parent or its representatives.  Neither the Company nor any of its Subsidiaries is in violation of, or in default under, any of the provisions of its respective Company Governing Documents, including any failure to comply and satisfy any anti-dilution rights of securities having such rights.

 

(c)            SubsidiariesCompany Disclosure Schedule 3.1(c) sets forth a complete list of each Subsidiary of the Company and the jurisdiction of incorporation of each Subsidiary.  Each Subsidiary of the Company is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization; has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted; and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except for any such failures that would not, individually or in the aggregate, reasonably be expected to be material to the Company or any of its Subsidiaries.  The Company directly or indirectly owns 100% of the capital stock or other equity interests or ownership interests of each of its Subsidiaries free and clear of all Liens other than Permitted Encumbrances.  There are no outstanding securities of the Company’s Subsidiaries convertible into or exchangeable or exercisable for capital stock or other equity interests or ownership interests in the Company or any of the Company’s Subsidiaries, or options, warrants or other rights to acquire capital stock or other equity interests or ownership interests in the Company or any of its Subsidiaries.

 

3.2.          Capital Structure .

 

(a)            Company Disclosure Schedule 3.2(a)(i) sets forth a complete and accurate list of all record and beneficial owners of the issued and outstanding capital stock of the Company.  As of the date of this Agreement, the authorized capital stock of the Company consists of [***].  All Shares are duly authorized, validly issued, fully paid and nonassessable.  Company Disclosure Schedule 3.2(a)(ii) sets forth, for each Subsidiary of the Company, a complete and accurate list of its authorized capital stock or other equity or ownership interests and the record and beneficial holders of its outstanding capital stock or other equity or ownership interests.

 

(b)            Company Disclosure Schedule 3.2(b) sets forth a complete and accurate list of each Option, including the name of the holder of such Option, date of grant, expiration date, exercise price, number of Shares subject thereto and the vesting schedule thereof.  All Options were issued under the Company Stock Plan.  The Company has furnished to the Parent true and complete copies of the Company Stock Plan and true and complete copies of all stock option agreements evidencing Options.  The Company has outstanding warrants (each, a “ Warrant ”; for the avoidance of doubt, “Warrant” shall not include any Non-Company Warrant) for the purchase of an aggregate of [***] shares of Series Seed Preferred Stock.  Company Disclosure Schedule 3.2(b)(ii)   sets forth the names of all Persons holding each such Warrant, together with the number of Warrants thus held, the number of Shares under the Warrant, and the relevant exercise price(s), vesting date(s) and number of Warrants vesting on each such date, and expiration date(s) thereof, as applicable. All such Options and Warrants have been offered, issued and delivered by the Company in all material respects in compliance with all Applicable Laws and in compliance with all pre-emptive or similar rights.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(c)           Except as set forth above, as of the date of this Agreement and as of the Closing Date, there are not outstanding (i) any shares of capital stock or other voting securities of the Company; (ii) any securities of the Company convertible into, or exchangeable or exercisable for, shares of capital stock or other voting securities of the Company; nor (iii) any options, warrants, calls, rights, commitments, shareholder agreements, voting agreements or other agreements to which the Company is a party or by which it is bound, in any case obligating the Company to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, shares of capital stock or other voting securities of the Company, or obligating the Company to grant, extend or enter into any such option, warrant, call, right, commitment or agreement.  Each outstanding Share or other equity or ownership interest of the Company and each of its Subsidiaries is duly authorized, validly issued, fully paid and nonassessable.  There are no phantom stock interests, stock appreciation rights or similar contractual entitlements to the profits of the Company or any of its Subsidiaries outstanding.  All of the aforesaid shares or other equity or ownership interests have been offered, sold and delivered by the Company or a Subsidiary in material compliance with all applicable federal and state securities laws and in compliance with all pre-emptive or similar rights.

 

(d)          Except as set forth in the Company Governing Documents or Company Disclosure Schedule 3.2(d) , there are no voting trusts, proxies, or other agreements or understandings with respect to the voting of Shares, nor are there any agreements to which the Company is a party relating to the registration, sale or transfer (including agreements relating to rights of first refusal, co sale rights or “drag along” rights) of any of any Shares, Options or Warrants.

 

(e)           The Closing Capitalization Schedule will, when delivered, be correct.

 

3.3.           Authority and Due Execution .  The Company has the requisite corporate power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated herein and therein.  Upon the receipt of the Stockholder Approval, as contemplated herein, the execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated herein or therein will have been duly authorized by all necessary corporate action on the part of the Company.  The Stockholder Approval is the only vote or consent of the holders of any class or series of the Company’s capital stock required to adopt this Agreement and approve the Transaction Documents, approve the Merger and consummate the Merger and the other transactions contemplated hereby.  This Agreement and each of the other Transaction Documents to which the Company is or will be a party has been, or upon execution and delivery thereof will be, duly and validly executed and delivered by the Company and, assuming that this Agreement and the other Transaction Documents to which the Company is a party constitute the valid and binding agreement of the other parties hereto and thereto (subject to the exceptions in (a) and (b) immediately below), constitute, or upon execution and delivery will constitute, the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms and conditions, except that the enforcement hereof and thereof may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).  The board of directors of the Company, via unanimous written consent, duly and unanimously adopted resolutions (i) determining that the terms of this Agreement, the Merger and the other transactions contemplated hereby are fair to, and in the best interests of, the Stockholders, (ii) approving and declaring advisable this Agreement and the transactions contemplated hereby, including the Merger, (iii) directing that this Agreement be submitted to the Stockholders for adoption and (iv) resolving to recommend that the Stockholders vote in favor of the adoption of this Agreement and the approval of the transactions contemplated hereby, including the Merger, which resolutions have not been subsequently rescinded, modified or withdrawn in any way.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

3.4.           Non-Contravention and Consents .

 

(a)            Non-Contravention .  The execution and delivery of this Agreement and each other Transaction Document does not, and the performance of this Agreement and each other Transaction Document will not:  (i) conflict with or violate the Company Certificate of Incorporation or Company Bylaws, or the respective certificate of incorporation, bylaws, limited liability company agreement or other similar organizational documents of its Subsidiaries; (ii) conflict with or violate any Applicable Law; (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a breach or default) under, require any consent of any Person pursuant to, or give to others any rights of termination, acceleration or cancellation of, or loss of benefits under any Material Contract; (iv) give others any right of termination, amendment, modification, acceleration or cancellation of, or allow the imposition of fees or penalties; (v) materially impair the rights of the Company or alter materially the rights or obligations of any third party under; or (vi) result in the creation of a Lien on any of the properties or assets of the Company pursuant to, any Material Contract; except, with respect to each of clauses (iii) through (iv) above, such matters which (x) are set forth on Company Disclosure Schedule 3.4 or (y) would not be material to the Company or its Subsidiaries.

 

(b)            Contractual Consents .  Except as set forth in Company Disclosure Schedule 3.4(b) , no Consent under any Material Contract is required to be obtained in connection with the execution, delivery or performance of this Agreement or any other Transaction Document by the Company or the consummation of the transactions contemplated hereby or thereby.

 

(c)            Governmental Consents .  No Consent of any Governmental Authority is required to be obtained or made by the Company in connection with the execution, delivery and performance of this Agreement or any other Transaction Document or the consummation of the transactions contemplated hereby or thereby, except for (i) the filing of a Certificate of Merger with the Secretary of State of Delaware and (ii) such other Consents, the failure of which to be obtained or made would not be material to the Company or any of its Subsidiaries.

 

33


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(d)           State Takeover Laws .  No “fair price,” “interested shareholder,” “business combination” or similar provision of any state takeover law is, or at the Effective Time will be, applicable to the transactions contemplated by this Agreement or the Transaction Documents.

 

3.5.           Financial Statements .

 

(a)            Financial Statements .  Attached hereto in Company Disclosure Schedule 3.5(a) are true, correct and complete copies of (i) the audited consolidated financial statements (consisting of a balance sheet, statement of income and statement of cash flows) of the Company and its Subsidiaries for the years ended December 31, 2014 and December 31, 2015   and (ii) the Company’s unaudited consolidated financial statements (consisting of a monthly balance sheets, statements of income and statement of cash flows) of the Company and its Subsidiaries for each month of the five-month period ended May 31, 2016 (collectively, the “ Financial Statements ”).  The Financial Statements were prepared in accordance with GAAP consistently applied and in accordance with historic past practices throughout the periods involved and fairly present in all material respects the consolidated financial position, results of operations and cash flows of the Company as of the dates and for the periods indicated therein, in accordance with GAAP (except that the unaudited Financial Statements do not contain all notes required by GAAP to the extent disclosed on Schedule 3.5(a) and are subject to normal year-end adjustments which are not, individually or in the aggregate, material).

 

(b)            Absence of Liabilities .  The Company and its Subsidiaries have no liability, contingent or otherwise, or obligation whether or not of the nature required to be disclosed in a balance sheet prepared in accordance with GAAP, except for (i) liabilities to the extent included as liabilities or shown as a reserve in the Financial Statements, (ii) liabilities incurred in the ordinary course of business and consistent with past practices of the Company since the date of the most recent Financial Statements; or (iii) liabilities for fees and expenses incurred in connection with the transactions contemplated by this Agreement and the other Transaction Documents to the extent they are Paid Company Transaction Costs.

 

3.6.           Litigation .  Except as set forth on Company Disclosure Schedule 3.6(a) , there is no action, suit, judicial or administrative proceeding, grievance or arbitration pending or, to the Company’s Knowledge, threatened against (i) the Company or any of its Subsidiaries, (ii) any material property or material asset of the Company, (iii) any officer or director of the Company arising out of the fact that such Person is an officer or director of the Company or (iv) the transactions contemplated by this Agreement.  There are no outstanding orders, writs, injunctions or decrees or, to the Company’s Knowledge, reviews or investigations relating to the Company or any of its Subsidiaries pending or, to the Company’s Knowledge, threatened by or before any arbitrator or any Governmental Authority.  There is no action, suit, judicial or administrative proceeding, grievance or arbitration that the Company or any of its Subsidiaries intends to initiate, commence or file.  Company Disclosure Schedule 3.6(b) also sets forth a complete and correct list and description of all material actions, suits, judicial or administrative proceeding, grievance or arbitration filing made, filed or otherwise initiated in connection with the Company that have been resolved since January 1, 2012, and the resolution thereof.

 

34


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

3.7.           Taxes .

 

(a)           All Taxes imposed on the Company and its Subsidiaries have been fully paid, whether or not shown on Tax Returns.  The Company and its Subsidiaries have duly complied with all material withholding Tax and Tax deposit requirements imposed on them.  All Tax Returns required to be filed by or with respect to the Company and its Subsidiaries have been duly and timely filed with the appropriate Governmental Authority (other than Tax Returns for which timely extensions have been filed, granted and have not expired) and all such Tax Returns are correct and complete in all material respects.  True, correct and complete copies of all filed federal Tax Returns for the Company and its Subsidiaries with respect to taxable years commencing on or after January 1, 2011 have been delivered or made available to representatives of Parent.

 

(b)           No claim has been made by any taxing authority in any jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that it is or may be subject to Tax by that jurisdiction.  There is no audit, litigation or other proceeding with respect to Taxes (each, a “ Tax Proceeding ”) pending against the Company or any of its Subsidiaries, and no assessment, deficiency or adjustment for Taxes has been asserted by any Governmental Authority against the Company or any of its Subsidiaries that has not been finally resolved and satisfied.

 

(c)           There is not in force any waiver or agreement for any extension of time for the assessment or payment of any material Tax of or with respect to the Company or any of its Subsidiaries.  Neither the Company nor any of its Subsidiaries is a party to or bound by any closing agreement, offer in compromise or any other agreement with any taxing authority.

 

(d)           Neither the Company nor any of its Subsidiaries is, or ever has been, a member of a Consolidated Group (other than a group which includes only the Company and its Subsidiaries).  Neither the Company nor any of its Subsidiaries has any liability for the Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign Applicable Laws).

 

(e)           There are no Liens (other than statutory Liens for Taxes that are not yet due and payable) with respect to any asset of the Company or any Subsidiary that arose in connection with any failure (or alleged failure) to pay any Tax.

 

(f)            Each of the Company and its Subsidiaries has at all times used the accrual method of accounting for income Tax purposes.

 

(g)            Company Disclosure Schedule 3.7(g) sets forth all foreign jurisdictions in which the Company and its Subsidiaries are subject to Tax, are engaged in business or have a permanent establishment.  Neither the Company nor any of its Subsidiaries has entered into a gain recognition agreement pursuant to Treas. Reg. § 1.367(a) 8.  Neither the Company nor any of its Subsidiaries has transferred an intangible the transfer of which would be subject to the rules of Section 367(d) of the Code.

 

35


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(h)           Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period beginning after the Closing Date as a result of (i) an adjustment under Section 481(a) of the Code (or any corresponding or similar provision of state, local or foreign Tax Applicable Laws) by reason of a change in method of accounting, or otherwise, prior to the Closing Date for a Pre-Closing Period, (ii) the installment method of accounting, the completed contract method of accounting, or the cash method of accounting with respect to a transaction that occurred prior to the Closing Date, (iii) an election made pursuant to Section 108(i) of the Code (or any corresponding or similar provision of state, local or foreign Applicable Laws) prior to the Closing Date, (iv) any inclusion under Section 956 of the Code for the taxable year of the Company or any of its Subsidiaries with respect to any loan, debt or other investment or transaction entered into before the Closing Date, or (v) any “closing agreement” as described in section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Applicable Laws) executed prior to the Closing Date.

 

(i)            Neither the Company nor any of its Subsidiaries has engaged in a transaction that constitutes a “reportable transaction” as defined in Treasury Regulation Section 1.6011-4(b).

 

(j)            Neither the Company nor any of its Subsidiaries is a party to a Tax sharing, indemnity, allocation or similar agreement.  No power of attorney granted by or with respect to the Company or any Subsidiary relating to Taxes is currently in force.

 

(k)           Neither the Company or any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement.

 

(l)            None of the Company’s non-U.S. Subsidiaries has recognized any amount of Subpart F income as defined in Section 952 of the Code during a taxable year of such Subsidiary that includes but does not end on the Closing Date.

 

(m)          All information in the possession of the Company and its Subsidiaries relating to the Company’s and/or its Subsidiaries’ compliance with transfer pricing Laws during the past three years has been delivered or made available to representatives of the Parent.

 

(n)           Since December 31, 2015, neither the Company nor any of its Subsidiaries have made, changed or rescinded any Tax election, amended any Tax Return or taken any position on any Tax Return, taken any action, omitted to take any action or entered into any other transaction that would have the effect of increasing the Tax liability or reducing any Tax assets in respect of any Tax period following the Closing.

 

(o)           Notwithstanding any other representations and warranties in this Agreement, the representations and warranties in this Section 3.7 and Section 3.14 are the only representations and warranties in this Agreement with respect to the Tax matters of the Company and its Subsidiaries and the Company makes no representation or warranty with respect to the existence, availability, amount, usability or limitations (or lack thereof) of any net operating loss, net operating loss carryforward, capital loss, capital loss carryforward, basis amount or other Tax attribute (whether federal, state, local or foreign) of the Company or any Subsidiary after the Closing Date.

 

36


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

3.8.           Title to, Sufficiency and Condition of Property and Assets .

 

(a)           The Company and its Subsidiaries have good, valid and marketable title to, or valid leasehold interests in, all of the material Personal Property used or held for use in its business, including any Personal Property reflected in the Financial Statements.

 

(b)           The Personal Property has been maintained in all respects with generally accepted industry practice, is in good operating condition and repair (subject to ordinary wear and tear) and is available for immediate use in the business and operation of the Company and its Subsidiaries as presently conducted.  The Personal Property constitutes all of the assets necessary for the Company and its Subsidiaries to carry on their respective businesses as currently conducted.  None of the Personal Property is subject to any Liens, other than Permitted Encumbrances.

 

(c)           Set forth on Company Disclosure Schedule 3.8(c) is a correct and complete list of the street address of each parcel of Leased Real Property and the identity of the lessor, lessee and current occupant (if different from the lessee) of each such parcel of Leased Real Property.  Each Leased Real Property is a valid and binding obligation of the Company or one of its Subsidiaries and (subject to any of such leases being terminated in the ordinary course of business and consistent with past practices of the Company or its Subsidiaries and in accordance with the terms thereof) is in full force and effect.  Neither the Company nor any of its Subsidiaries is in default under any lease set forth on Company Disclosure Schedule 3.8(c) .  The Company has furnished or made available to Parent complete and correct copies of all leases and documents relating thereto, including any amendments thereto and any assignments thereof.  Each lease, sublease or similar agreement is true, accurate and complete, has not been modified, altered, terminated or revoked, is in full force and effect, and no default, breach, violation or non-compliance exists with respect thereto, and no event has occurred and no condition or state of facts which would constitute such default, breach, violation or noncompliance.  To the Company’s Knowledge, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default under any Leased Real Property lease or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder.

 

(d)           The Company does not own, and has never owned, any real property.

 

37


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

3.9.           Intellectual Property .

 

(a)           Set forth on Company Disclosure Schedule 3.9(a) is a list of all registered or government-issued Owned Intellectual Property, including any applications for registration or issuance thereof (“ Registered IP ”) and all material unregistered copyrights and trademarks.  All registrations, maintenance and renewal fees finally due before the Closing Date and required to maintain the Company’s ownership of the Registered IP have been paid to the relevant Governmental Authority.  In the last twelve (12) months, no Registered IP has been abandoned (except in the ordinary course of business), canceled or adjudicated invalid, or is subject to any outstanding order, judgment, stipulation or decree restricting its use or adversely affecting or reflecting the Company’s or its Subsidiaries’ rights thereto.  Neither the Company nor its Subsidiaries have taken any action that would materially impair or otherwise materially adversely affect the Company’s or its Subsidiaries’ rights in Registered IP.  The Company solely owns free and clear of any Liens (other than Permitted Encumbrances) all Owned Intellectual Property used in the operations of the business of the Company and its Subsidiaries as currently conducted, including all Intellectual Property set forth on Company Disclosure Schedule 3.9(a) .

 

(b)           The Company either (i) solely owns or (ii) has the license or right to use all Intellectual Property used in the operations of the business of the Company and its Subsidiaries as currently conducted.  Except as would not be material to the Company and its Subsidiaries, no third party is in default of any obligation under any license agreement granting such third party a right to use the Owned Intellectual Property.  The Intellectual Property set forth on Company Disclosure Schedule 3.9(a) is valid, subsisting and enforceable.  The completion of the transactions contemplated by this Agreement will not alter or impair the ownership or right of the Company or its Subsidiaries to use any of the Owned Intellectual Property or Licensed Intellectual Property.  The Owned Intellectual Property and Licensed Intellectual Property constitute all Intellectual Property necessary to operate the business of the Company and its Subsidiaries as currently conducted. The Company has not received a written notice from any third Person pursuant to which such third Person claims to own any Company Intellectual Property .

 

(c)           To the Company’s Knowledge, the business of the Company, as currently conducted, has not infringed and does not infringe or misappropriate the Intellectual Property of any third party.  No third party has asserted against the Company a claim or allegation (including invitations to license) in writing that the Company is infringing, has infringed or misappropriated any Intellectual Property of such third party. To the Company’s Knowledge, no third party has infringed, misappropriated or is infringing or misappropriating any of the Intellectual Property owned by the Company.  There are no pending or, to the Company’s Knowledge, threatened (i) interferences, reexaminations, oppositions, or cancellation proceedings involving any Owned Intellectual Property or (ii) proceedings contesting the validity, ownership or right to use, sell, license, distribute, or dispose of the Owned Intellectual Property.

 

(d)           The Company has taken reasonable measures to protect the confidentiality of the Trade Secrets used in the operations of the business of the Company and its Subsidiaries as currently conducted, including but not limited to entering into Contracts with all current employees that have conceived, invented, reduced to practice, authored or otherwise created Trade Secrets that are material to the operations of the business of the Company and its Subsidiaries as currently conducted.  All Intellectual Property developed by or for the Company and its Subsidiaries was conceived, invented, reduced to practice, authored or otherwise created solely by either employees of the Company or its Subsidiaries acting within the scope of their employment, or independent contractors of the Company or its Subsidiaries pursuant to agreements containing an assignment of Intellectual Property to the Company or its Subsidiaries.

 

38


Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(e)           Except as disclosed in Company Disclosure Schedule 3.9(e) (showing in each case the governing license), the software in the Owned Intellectual Property, including the Company’s platform and portal marketed under the “Shipping Easy” brand, do not contain and are not distributed with any Open Source Software, and no Open Source Software has been incorporated into any software in the Owned Intellectual Property used by the Company or its Subsidiaries that would in any way obligate the Company or its Subsidiaries to:  (i) disclose to any third party the source code for any such Owned Intellectual Property; (ii) permit any third party the right to make derivative works based upon any such Owned Intellectual Property; or (iii) permit any third party to redistribute any such Owned Intellectual Property at no or minimal charge.

 

(f)           The software in the Owned Intellectual Property (i) is not subject to any legal or contractual restriction that would prevent the Company Products from being licensed, sublicensed, marketed, modified or otherwise used or sold by the Company without restriction, and without any payment or other obligation to any other Person, and the consummation of the transactions contemplated by this Agreement will not alter any of the rights described in this subsection (i) , (ii) conforms in all material respects to all published feature lists provided by the Company to customers of such Company Products and all warranties or other contractual commitments made by the Company in connection therewith, and (iii) is distributed to customers pursuant to the terms of agreements that provide that the Company retains title to the Company Intellectual Property incorporated into the Company Products.

 

(g)           No Owned Intellectual Property is subject to any agreement with any Person pursuant to which the Company or its Subsidiaries has, or could be required to deposit into escrow, the source code of such Owned Intellectual Property or pursuant to which access to such source code is or would be granted to a Person.  To the Company’s Knowledge, there has been no unauthorized disclosure of any of such source code.

 

(h)           The Company or its Subsidiaries, as the case may be, owns or has rights to access and use all electronic data processing, production systems and servers supporting customer transactions, information, record keeping, communications, telecommunications, account management, inventory management and other computer systems used in connection with the business of the Company and its Subsidiaries as currently conducted (the “ IT Systems ”).  The Company and its Subsidiaries have taken reasonable steps in accordance with industry standards to (i) secure the IT Systems owned by the Company or its Subsidiaries (“ Owned IT Systems ”) from unauthorized access or use by any Person, and to (ii) facilitate the continued, uninterrupted and error-free operation of the Owned IT Systems.  No capital expenditures are necessary with respect to the Owned IT Systems other than capital expenditures in the ordinary course of business that are consistent with the past practice of the Company and its Subsidiaries.

 

(i)            There has not been any material malfunction with respect to any of the Owned IT Systems since January 1, 2014, that has not been remedied or replaced in all material respects.

 

(j)            No Owned Intellectual Property has been developed by the Company under or in connection with any Contract with a Governmental Authority.

 

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Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

(k)           The Company has required and obtained, and uses reasonable efforts to enforce, each current and former employee and individual independent contractor of the Company who is involved in the development of Intellectual Property that is included in a Company Product to execute one or more agreements with provisions relating to the protection of the Company’s confidential information and the sole ownership by the Company of all Intellectual Property developed within the scope of the individual’s employment or independent contractor relationship with the Company. The Company has obtained sole ownership of all works of authorship and inventions developed with the funding or facilities or other resources of the Company made by its Employees or individual independent contractors within the scope of the individual’s employment or independent contractor relationship with the Company.

 

(l)            Notwithstanding any other representation and warranties in this Agreement, the representations and warranties in this Section 3.9 are the only representations and warranties in this Agreement with respect to the Intellectual Property of the Company.

 

3.10.        Major Customers and Suppliers .

 

(a)            Company Disclosure Schedule 3.10(a) contains a list of the top twenty customers of the Company, based on the amount of revenue attributable to such customers during the 12-month period ended March 31, 2016 (each, a “ Major Customer ”).  The Company is not engaged in any dispute with any Major Customer and, to the Company’s Knowledge, no Major Customer has:  (i) threatened to cancel or otherwise terminate, or intends to cancel or otherwise terminate, any relationships with the Company or its Subsidiari


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