UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to
Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): February 9, 2015
YELP INC.
(Exact name of registrant as
specified in its charter)
Delaware |
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001-35444 |
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20-1854266 |
(State of incorporation) |
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(Commission File No.) |
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(IRS
Employer Identification No.) |
140 New Montgomery
Street, 9th
Floor
San Francisco, CA 94105
(Address of principal executive offices and zip code)
Registrants
telephone number, including area code: (415) 908-3801
Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the filing
obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425) |
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Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐ |
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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☐ |
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
Item 1.01. Entry into a
Material Definitive Agreement.
The information included under Item 2.01 of this Current Report on Form
8-K (the Current Report) is incorporated herein by reference.
Item 2.01. Completion of
Acquisition or Disposition of Assets.
On February 9, 2015, Yelp Inc. (the
Company), Kale Acquisition Corp., a wholly-owned subsidiary of the Company
(Merger Sub I), and Quinoa Acquisition LLC, a wholly-owned subsidiary of the
Company (Merger Sub II), entered into an Agreement and Plan of Merger (the
Merger Agreement) with Eat24Hours.com, Inc. (Eat24), the stockholders of
Eat24 and Nadav Sharon, as Stockholders Agent. Pursuant to the Merger
Agreement, on February 9, 2015, Merger Sub I merged with and into Eat24, with
Eat24 continuing as the surviving corporation (the Interim Surviving
Corporation) and a wholly-owned subsidiary of the Company (the First Step
Merger). Pursuant to the Merger Agreement, the Interim Surviving Corporation
will eventually be merged with and into Merger Sub II, with Merger Sub II
continuing as the surviving entity and a wholly-owned subsidiary of the Company
(the Second Step Merger, and together with the First Step Merger, the
Merger).
The transaction closed upon
consummation of the First Step Merger and the outstanding capital stock of Eat24
was converted into the right to receive an aggregate of approximately $75.0
million in cash, less certain transaction expenses, and 1,402,844 shares of the
Companys Class A Common Stock (the Common Stock). These amounts will be paid
to Eat24 stockholders in accordance with the terms of the Merger Agreement and
will be subject to customary post-closing adjustment based on net working
capital. Of such amounts, approximately $16.5 million in cash and 308,626 shares
of Common Stock will be held in escrow for an 18-month period after the closing
to secure the Companys rights of indemnity under the Merger Agreement.
The foregoing description of the
Merger and the Merger Agreement is qualified in its entirety by reference to the
full text of the Merger Agreement, a copy of which is filed herewith as Exhibit
99.1 hereto and is incorporated herein by reference.
On February 10, 2015, the Company
issued a press release announcing its entry into the Merger Agreement, a copy of
which is filed herewith as Exhibit 99.2 hereto.
Item 3.02. Unregistered
Sales of Equity Securities.
The information included under Item
2.01 of this Current Report is incorporated herein by reference. The issuance of
the Common Stock to the Eat24 stockholders was made in reliance on the private
placement exemption from the registration requirements of the Securities Act of
1933, as amended, provided by Section 4(2) thereof and Rule 506 of Regulation D
promulgated thereunder because it did not involve a public offering. The sale of
the Common Stock was conducted without general solicitation or general
advertising, and each of the Eat24 stockholders represented that he was an
accredited investor as defined in Rule 501 of Regulation D. The Common Stock
to be issued will also contain appropriate restricted stock legends.
Item 9.01. Financial
Statements and Exhibits.
(a) Financial Statements
of the business acquired.
Financial statements of Eat24 will
be filed by amendment to this Current Report not later than 71 calendar days
after the due date of this Current Report.
(b) Pro forma financial
information.
Pro forma financial information will
be filed by amendment to this Current Report not later than 71 calendar days
after the due date of this Current Report.
(d) Exhibits.
Exhibit
Number |
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Description |
99.1 |
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Agreement and Plan of
Merger, dated February 9, 2015, by and among Yelp Inc., Eat24Hours.com,
Inc., Kale Acquisition Corp., Quinoa Acquisition LLC, the Stockholders of
Eat24Hours.com, Inc. and Nadav Sharon, as Stockholders Agent.
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99.2 |
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Press Release, dated
February 10, 2015, entitled Yelp Acquires Leading Online Food Ordering
Service Eat24. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 10, 2015 |
YELP
INC. |
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By: |
/s/ Rob Krolik |
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Rob
Krolik |
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Chief Financial Officer |
INDEX TO EXHIBITS
Exhibit
Number |
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Description |
99.1 |
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Agreement and Plan of
Merger, dated February 9, 2015, by and among Yelp Inc., Eat24Hours.com,
Inc., Kale Acquisition Corp., Quinoa Acquisition LLC, the Stockholders of
Eat24Hours.com, Inc. and Nadav Sharon, as Stockholders Agent.
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99.2 |
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Press Release, dated
February 10, 2015, entitled Yelp Acquires Leading Online Food Ordering
Service Eat24. |
AGREEMENT AND PLAN OF
MERGER
among:
Yelp
Inc.,
a Delaware corporation;
Kale Acquisition
Corp.,
a Delaware corporation;
Quinoa
Acquisition
LLC,
a Delaware limited liability
company;
Eat24hours.Com,
Inc.,
a Delaware corporation;
Nadav Sharon, Haim Erez,
Moran Hacmon, Chen Shashar, Asaf Sharon and
Amir
Eisenstein,
each an
individual;
and
Nadav
Sharon,
as the Stockholders Agent.
___________________________
Dated as of February 9,
2015
___________________________
Table of Contents
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Page |
1. |
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DESCRIPTION OF
TRANSACTION |
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2 |
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1.1 |
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The
Integrated Merger |
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2 |
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1.2 |
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Closing; Effective Time |
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2 |
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1.3 |
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Certificate of Incorporation and Bylaws; Directors and
Officers |
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5 |
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1.4 |
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Conversion of Shares |
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6 |
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1.5 |
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Exchange of Certificates |
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8 |
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1.6 |
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Further Action |
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9 |
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1.7 |
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Reorganization Status |
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9 |
2. |
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REPRESENTATIONS AND WARRANTIES OF
THE COMPANY |
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10 |
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2.1 |
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Due
Organization; Subsidiaries; Etc. |
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10 |
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2.2 |
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Charter Documents; Records |
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11 |
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2.3 |
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Capitalization |
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11 |
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2.4 |
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Financial Statements and Related Information |
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12 |
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2.5 |
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Liabilities |
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13 |
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2.6 |
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Absence of Changes |
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13 |
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2.7 |
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Title to Assets |
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15 |
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2.8 |
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Bank
Accounts |
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15 |
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2.9 |
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Equipment; Real Property |
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16 |
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2.10 |
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Intellectual Property |
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16 |
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2.11 |
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Contracts |
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20 |
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2.12 |
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Compliance with Legal Requirements |
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23 |
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2.13 |
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Governmental Authorizations; No Subsidies |
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2.14 |
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Tax
Matters |
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24 |
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2.15 |
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Employee and Labor Matters; Benefit Plans |
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26 |
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2.16 |
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Environmental Matters |
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30 |
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2.17 |
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Insurance |
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30 |
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2.18 |
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Related Party Transactions |
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30 |
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2.19 |
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Legal Proceedings; Orders |
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30 |
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2.20 |
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Authority; Binding Nature of Agreement; Inapplicability of
Anti-takeover |
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Statutes |
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2.21 |
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Non-Contravention; Consents |
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2.22 |
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Vote
Required |
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2.23 |
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Brokers |
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-i-
Table of
Contents
(continued)
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Page |
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2.24 |
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Full
Disclosure |
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32 |
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2.25 |
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No
Existing Discussions |
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3. |
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REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB |
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33 |
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3.1 |
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Due
Organization |
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33 |
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3.2 |
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Non-Contravention; Consents |
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3.3 |
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Authority; Binding Nature of Agreement |
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34 |
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3.4 |
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Legal Proceedings |
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34 |
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3.5 |
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Valid Issuance |
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3.6 |
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Brokers |
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3.7 |
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Sufficient Funds |
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4. |
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INDEMNIFICATION, ETC. |
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4.1 |
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Survival of Representations, Etc. |
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4.2 |
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Indemnification |
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4.3 |
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Other Limitations |
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4.4 |
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No
Contribution |
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4.5 |
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Defense of Third Party Claims |
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38 |
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4.6 |
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Tax
Matters |
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5. |
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MISCELLANEOUS PROVISIONS |
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5.1 |
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Stockholders Agent |
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5.2 |
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Further Assurances |
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5.3 |
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Tax
Matters |
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5.4 |
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Fees
and Expenses |
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5.5 |
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Attorneys Fees |
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5.6 |
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Notices |
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43 |
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5.7 |
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Headings |
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44 |
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5.8 |
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Counterparts and Exchanges by Electronic Transmission or
Facsimile |
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5.9 |
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Governing Law; Dispute Resolution |
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5.10 |
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Successors and Assigns |
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5.11 |
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Remedies Cumulative; Specific Performance |
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5.12 |
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Waiver |
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5.13 |
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Waiver of Jury Trial |
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5.14 |
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Amendments |
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45 |
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5.15 |
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Severability |
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5.16 |
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Parties in Interest |
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46 |
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5.17 |
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Entire Agreement |
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46 |
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5.18 |
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Disclosure Schedule |
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46 |
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5.19 |
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Construction |
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46 |
-ii-
AGREEMENT AND PLAN OF
MERGER
This Agreement And Plan of Merger
(the Agreement) is
made and entered into as of February 9, 2015, by and among: Yelp
Inc., a Delaware corporation (Parent); Kale Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Parent
(Merger Sub I); Quinoa Acquisition LLC, a Delaware limited
liability company and a wholly-owned subsidiary of Parent (Merger Sub II, and
with Merger Sub I, the Merger Subs); Eat24hours.Com, Inc., a
Delaware corporation (the Company); Nadav Sharon, Haim Erez, Moran
Hacmon, Chen Shashar, Asaf Sharon And Amir Eisenstein, each an
individual (collectively, the Major Stockholders) and Nadav
Sharon, as the Stockholders Agent (as defined in Section 5.1). Certain
other capitalized terms used in this Agreement are defined in Section 1.4(b) and
Exhibit A.
Recitals
A. Parent, Merger Sub I and the Company intend to
effect a merger of Merger Sub I into the Company (the First Step Merger) in accordance with this Agreement and the
Delaware General Corporation Law (the DGCL) and, to the extent
applicable, the California General Corporation Law (the CGCL). Upon consummation of the First Step Merger, Merger Sub I will cease
to exist, and the Company will become a wholly-owned subsidiary of Parent.
B. As soon as practicable following the First Step
Merger, Parent intends to cause the Company to merge with and into Merger Sub II
(the Second Step
Merger and, taken together with
the First Step Merger, the Integrated Merger or the
Merger). Upon consummation of the Second Step Merger,
the Company will cease to exist, and Merger Sub II will survive as wholly-owned
subsidiary of Parent. The Integrated Merger is intended to constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the Code). Parent and the Company intend that the
First Step Merger and the Second Step Merger will constitute integrated steps in
a single plan of reorganization within the meaning of Treas. Reg. §§1.368-2(g)
and 1.368-3, which plan of reorganization the parties adopt by executing this
Agreement.
C. Pursuant to the First Step Merger, among other
things, and subject to the terms and conditions of this Agreement, all of the
issued and outstanding capital stock of the Company shall be converted into the
right to receive the consideration set forth herein.
D. A portion of the consideration payable in
connection with the First Step Merger shall be placed in escrow as security for
the indemnification obligations set forth in this Agreement.
E. Concurrently with the execution of this Agreement,
Parent and certain employees of the Company are executing offer letters, and
related documentation and agreements, in form and substance mutually agreed to
by the parties thereto and delivering their respective countersignatures thereto
(the Offer
Letters).
F. Concurrently with the execution of this Agreement,
each of the Major Stockholders is executing and delivering to Parent a
Non-Competition and Non-Solicitation Agreement in favor of Parent in form and
substance mutually agreed to by the parties thereto (the Non-Competition Agreements).
G. The respective boards of directors of Parent,
Merger Sub I, Merger Sub II and the Company have approved this Agreement and the
Integrated Merger.
1
Agreement
The parties to this
Agreement agree as follows:
1. Description Of Transaction
1.1 The
Integrated Merger.
(a) At the
Effective Time (as defined in Section 1.2 hereof) and subject to and upon the
terms and conditions of this Agreement and the applicable provisions of the DGCL
and the CGCL, Merger Sub I shall be merged with and into the Company, the
separate corporate existence of Merger Sub I shall cease, and the Company shall
continue as the surviving corporation and as a wholly-owned subsidiary of
Parent. The surviving corporation after the First Step Merger is hereinafter
referred to as the Interim
Surviving Corporation.
(b) As soon as
practicable after the Effective Time, and subject to and upon the terms and
conditions of this Agreement and the applicable provisions of DGCL, the CGCL and
the Delaware Limited Liability Company Act (the LLC Act), the Interim Surviving Corporation shall be merged with and into
Merger Sub II, the separate corporate existence of the Interim Surviving
Corporation shall cease, and Merger Sub II shall continue as the surviving
entity and as a wholly-owned subsidiary of Parent. The surviving entity after
the Second Step Merger is hereinafter referred to as the Surviving Entity.
1.2 Closing;
Effective Time.
(a) The closing of
the First Step Merger (the Closing) will take place
concurrently with the execution and delivery of this Agreement at the offices of
Cooley LLP, 3175 Hanover Street, Palo Alto, California 94304. The date upon
which the Closing actually occurs shall be referred to herein as the
Closing Date. On the Closing Date, the parties hereto shall
cause the First Step Merger to be consummated by filing a Certificate of Merger
conforming to the requirements of the DGCL with the Secretary of State of the
State of Delaware (the Certificate of Merger),
in accordance with the applicable provisions of DGCL (the time of the acceptance
of such filing by the Secretary of State of the State of Delaware shall be
referred to herein as the Effective Time).
Following the Effective Time on a date to be selected by Parent no later than
two weeks after the Closing, Parent shall cause the Second Step Merger to be
consummated by filing a Certificate of Merger conforming to the requirements of
the DGCL and the LLC Act to be filed with the Secretary of State of the State of
Delaware (the Second
Step Certificate of Merger) in accordance with the applicable provisions of
the DGCL and the LLC Act.
(b) At the
Effective Time, the effect of the First Step Merger shall be as provided in the
applicable provisions of the DGCL and the CGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, except as
otherwise agreed to pursuant to the terms of this Agreement, all of the rights,
privileges, powers and franchises of the Company and Merger Sub I shall vest in
the Interim Surviving Corporation, and all restrictions, disabilities and duties
of the Company and Merger Sub I shall become the restrictions, disabilities and
duties of the Interim Surviving Corporation. At the effective time of the Second
Step Merger, the effect of the Second Step Merger shall be as provided in the
applicable provisions of DGCL, the CGCL and the LLC Act. Without limiting the
generality of the foregoing, and subject thereto, at the effective time of the
Second Step Merger, except as otherwise agreed to pursuant to the terms of this
Agreement, all of the rights, privileges, powers and franchises of the Interim
Surviving Corporation shall vest in Merger Sub II as the surviving entity in the
Second Step Merger, and all restrictions, disabilities and duties of the Interim
Surviving Corporation shall become the restrictions, disabilities and duties of
Merger Sub II as the surviving entity in the Second Step Merger.
2
(c) At the
Closing:
(i) the Company
shall deliver to Parent:
(A) a certificate duly
executed by the Chief Executive Officer of the Company certifying (and other
evidence in form and substance satisfactory to Parent) that the adoption of this
Agreement shall have been duly approved by all of the outstanding shares of
Company Capital Stock;
(B) the Escrow Agreement,
duly executed by the Stockholders Agent and the Escrow Agent;
(C) the Non-Competition
Agreements and Offer Letters, duly executed by each of the Major Stockholders;
(D) Release Agreements
substantially in the form of Exhibit D, duly executed
by each Major Stockholder of the Company;
(E) a certificate (the
Merger Consideration
Certificate), duly executed on
behalf of the Company by the Chief Executive Officer, containing the following
information (along with calculations of any such amounts) and the representation
and warranty of the Company that all of such information is true and accurate as
of the Closing:
(1) the aggregate Company
Debt and the aggregate amount of Acquired Company Transaction Expenses paid or
payable (including any Acquired Company Transaction Expenses that will become
payable after the Effective Time with respect to services performed or actions
taken prior to the Effective Time);
(2) the Fully Diluted
Company Share Number;
(3) the name and address
of record of each Person who is a stockholder of the Company immediately prior
to the Effective Time;
(4) the number of shares
of Company Capital Stock of each class and series held by each such stockholder
immediately prior to the Effective Time;
(5) the consideration
that each such stockholder is entitled to receive pursuant to Section 1.4
(broken down by cash and number of shares of Parent Class A Common
Stock);
(6) the (a) amount of
cash and (b) number of shares of Parent Class A Common Stock to be contributed
to the Escrow Fund with respect to the shares of Company Capital Stock held by
each such stockholder, and the Equity Pro Rata Portion applicable to each such
stockholder; and
3
(7) the total amount of
Taxes to be withheld from the Merger Consideration that each holder of shares of
Company Capital Stock immediately prior to the Effective Time is entitled to
receive pursuant to Section 1.4.
(F) written resignations
of all officers and directors of the Acquired Companies, effective as of the
Effective Time;
(G) the Certificate of
Merger, duly executed by the Company;
(H) a properly executed
statement, dated as of the Closing Date, in accordance with Treasury Regulation
Sections 1.897-2(h) and 1.1445-2(c)(3) and in a form reasonably acceptable to
Parent, certifying that an interest in the Company is not a U.S. real property
interest within the meaning of Code Section 897(c), together with the required
notice to the IRS and written authorization for Parent to deliver such statement
and notice to the IRS on behalf of the Company upon the Closing;
(I) written
acknowledgments pursuant to which the Companys outside legal counsel and any
financial advisor, accountant or other Person who performed services for or on
behalf of the Acquired Companies, or who is otherwise entitled to any
compensation from the Acquired Companies, in connection with this Agreement, any
of the transactions contemplated by this Agreement or otherwise (excluding
separate representation of the Stockholders Agent), acknowledges: (i) the total
amount of fees, costs and expenses of any nature that is payable or has been
paid to such Person in connection with this Agreement and any of the
transactions contemplated by this Agreement or otherwise; and (ii) that upon
payment in full of such amount, it will not be owed any other amount by any of
the Acquired Companies with respect to this Agreement, the transactions
contemplated by this Agreement or otherwise;
(J) evidence to Parent as
to the adoption by the board of directors of the Company of resolutions to
terminate the following, or a representation in the certificate referenced in
Section 1.2(c)(i)(A) that none of the following exist: (x) any Acquired Company
Employee Plan that contains a cash or deferred arrangement intended to qualify
under Section 401(k) of the Code; and (y) any group severance, separation or
salary continuation Acquired Company Employee Plans, programs or arrangements,
in each case effective no later than the date immediately preceding the date of
this Agreement;
(K) an investment
representation statement in the form of Exhibit I (the Investment Representation Letter), signed by each holder of Company Capital Stock
outstanding immediately prior to the Effective Time together with a duly filled
questionnaire (the Investor
Questionnaire), indicating that
such holder is an accredited investor for purposes of the Securities Act of
1933, as amended (the Securities
Act);
(L) a certificate,
validly executed by the Chief Executive Officer of the Company, certifying the
amount of Closing Date Net Working Capital and, based thereupon, the Working
Capital Adjustment, calculated in accordance with the calculations and
methodology used on Exhibit H (the Working Capital Certificate);
4
(M) either: (x) evidence
reasonably satisfactory to Parent that any agreements, contracts or arrangements
that may result, separately or in the aggregate, in the payment of any amount
and/or the provision of any benefit that would not be deductible by reason of
Section 280G of the Code and the Treasury Regulations thereunder (collectively,
Section 280G) or that would be subject to an excise tax under
Section 4999 of the Code have been approved by such number of stockholders of
the Company as is required by the terms of Section 280G in order for such
payments and benefits not to be deemed parachute payments under Section 280G,
and that such approval has been obtained in a manner which satisfies all
applicable requirements of Section 280G(b)(5)(B) of the Code and all applicable
regulations (whether proposed or final) relating to Section 280G; (y) in the
absence of such stockholder approval, a waiver in form and substance reasonably
satisfactory to Parent, duly executed by each Person who might receive any such
amount and/or benefit; or (z) confirmation in Part 2.14(c) of the Disclosure
Schedule that there are no exceptions to Section 2.14(c);
(N) a legal opinion
executed by Wilson Sonsini Goodrich & Rosati LLP in the form of Exhibit E;
and
(ii) Parent shall
deliver to the Stockholders Agent:
(A) the Escrow Agreement,
duly executed by Parent and the Escrow Agent;
(B) the Offer Letters
duly executed by Parent to each of the Major Stockholders; and
(C) evidence in form and
substance satisfactory to Stockholders Agent that the adoption of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly approved by (1) the board of directors of Parent, (2) the board
of directors and sole stockholder of Merger Sub I, and (3) the managers and sole
member of Merger Sub II.
1.3 Certificate
of Incorporation and Bylaws; Directors and Officers. Unless otherwise determined by Parent prior to the Effective Time:
(a) the
certificate of incorporation of the Interim Surviving Corporation shall be
amended and restated as of the Effective Time in a form acceptable to Parent;
(b) the bylaws of
the Interim Surviving Corporation shall be amended and restated as of the
Effective Time to conform to the bylaws of Merger Sub I as in effect immediately
prior to the Effective Time;
(c) the directors
of Merger Sub I immediately prior to the Effective Time shall be the directors
of the Interim Surviving Corporation immediately after the Effective Time and
the managers of the Surviving Entity immediately after the effective time of the
Second Step Merger, each to hold the office of a director/manager of the Interim
Surviving Corporation and the Surviving Entity, respectively, in accordance with
the provisions of DGCL and the certificate of incorporation and bylaws of the
Interim Surviving Corporation and the LLC Act and the Certificate of Formation
and the Limited Liability Company Agreement of the Surviving Entity until their
respective successors are duly elected and qualified;
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(d) the officers
of Merger Sub I immediately prior to the Effective Time shall be the officers of
the Interim Surviving Corporation immediately after the Effective Time and the
officers of the Surviving Entity after the effective time of the Second Step
Merger, each to hold office in accordance with the provisions of the bylaws of
the Interim Surviving Corporation and the Limited Liability Company Agreement of
the Surviving Entity, respectively;
(e) the
certificate of formation of Merger Sub II as in effect immediately prior to the
effective time of the Second Step Merger shall be the certificate of formation
of the Surviving Entity in the Second Step Merger until thereafter amended in
accordance with the LLC Act and as provided in such certificate of formation;
provided, however, that at the effective time of the Second Step Merger, Article
I of such certificate of formation shall be amended and restated in its entirety
to read as follows: The name of this limited liability company is Eat24, LLC;
and
(f) the Limited
Liability Company Agreement of Merger Sub II as in effect immediately prior to
the effective time of the Second Step Merger shall be the Limited Liability
Company Agreement of the Surviving Entity, until thereafter amended in
accordance with the LLC Act and as provided in such Limited Liability Company
Agreement; provided, however, that at the Effective Time, that the first
sentence of paragraph 1 of the Limited Liability Company Agreement shall be
amended and restated in its entirety to read as follows: The name of the
Company is Eat24, LLC.
1.4 Conversion
of Shares.
(a) Conversion. Subject to
Section 1.5, at the Effective Time, by virtue of the First Step Merger and
without any further action on the part of Parent, Merger Subs, the Company or
any stockholder of the Company, each share of Company Capital Stock outstanding
immediately prior to the Effective Time shall be converted into the right to
receive from Parent, following the surrender of the certificate representing
such share of Company Capital Stock in accordance with Section 1.5, the
following consideration:
(i) each share of
Company Capital Stock owned by Parent, Merger Sub I, the Company or any direct
or indirect wholly-owned subsidiary of Parent, Merger Sub I or the Company
immediately prior to the Effective Time, if any, shall, by virtue of the First
Step Merger, be canceled without payment of any consideration with respect
thereto;
(ii) each share of
Company Capital Stock outstanding immediately prior to the Effective Time
(except for shares included in clause (i) above) shall be converted into the
right to receive: (A) an amount in cash equal to the Per Share Amount;
plus (B) the Common Fraction of a share of Parent
Class A Common Stock; plus (C) the Per Share
Cash Escrow Property, as and when such disbursements are required to be
made plus (D) the Per Share Stock Escrow Property, as and
when such disbursements are required to be made; and
(iii) each share of
the common stock, par value $0.001 per share, of Merger Sub I outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Interim Surviving Corporation.
The amount of cash, if any,
that each stockholder of the Company is entitled to receive for the shares of
Company Capital Stock held by such stockholder shall be rounded to the nearest
cent (with $0.005 being rounded upward) and computed after aggregating the cash
amounts payable for all shares of each class and series of Company Capital Stock
held by such stockholder.
6
(b) Definitions. For purposes
of this Agreement:
(i) Cash Value shall mean $58,500,000, minus Company Debt, plus
or minus the Working Capital Adjustment (as applicable based on such definition),
minus the Acquired Company Transaction
Expenses.
(ii) Common
Fraction shall mean 1,094,221
divided by the Fully Diluted Company Share Number.
(iii) The
Escrow Cash shall mean $16,500,000 deposited in the Escrow
Fund.
(iv) The
Escrow Property shall mean: (i) the Escrow Cash then held in the
Escrow Fund, and (ii) the Escrow Shares then held in the Escrow
Fund.
(v) The
Escrow Shares shall mean 308,626 shares of Parent Class A
Common Stock.
(vi) The
Fully Diluted Company Share
Number shall be the aggregate
number of shares of Company Capital Stock outstanding immediately prior to the
Effective Time.
(vii) The
Per Share Amount shall be determined by dividing: (A) the Cash Value; by (B) the Fully Diluted
Company Share Number.
(viii) The Per Share Cash Escrow Property shall be determined by dividing: (A) any
disbursements of Escrow Property in the form of cash required to be made from
the Escrow Fund to the former holders of shares of Company Capital Stock (x) in
accordance with the terms of the Escrow Agreement and (y) after taking into
account any payments to be made pursuant to the Companys Key Employee Retention
Plan approved by the Companys Board of Directors on February 4, 2015 (the
Key Employee Retention Plan)
and deducted from the Escrow Fund pursuant to Section 1.4(c)(iv), as and when
such disbursements are required to be made; by
(B) the Fully Diluted Company Share Number.
(ix) The
Per Share Stock Escrow
Property shall be determined by
dividing: (A) any disbursements of Escrow Property in the
form of Parent Class A Common Stock required to be made from the Escrow Fund to
the former holders of shares of Company Capital Stock in accordance with the
terms of the Escrow Agreement, as and when such disbursements are required to be
made; by (B) the Fully Diluted Company Share Number.
(c) Escrow
Contribution. Immediately
following the Effective Time, Parent shall cause to be delivered to the Escrow
Agent, as a contribution to the Escrow Fund on behalf of Company Stockholders
and with respect to the shares of Company Capital Stock held by the stockholders
immediately prior to the Effective Time, the Escrow Cash and the Escrow Shares.
The Escrow Shares shall be issued in the name of the Escrow Agent, but shall be
held on behalf of the Company Stockholders, who are the beneficial owners of the
Escrow Shares and the Escrow Shares shall be reflected as issued and outstanding
as of the date hereof in the books and records of Parent. The Escrow Fund: (i)
shall be held by the Escrow Agent in accordance with the terms of this Agreement
and the terms of the Escrow Agreement; (ii) shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or other judicial
process of any creditor of any Person; (iii) shall be held and disbursed solely
for the purposes and in accordance with the terms of this Agreement and the
Escrow Agreement and (iv) shall be the source of funds for payments to be made
pursuant to the Key Employee Retention Plan and all associated Taxes to be paid
in connection with such payments (and Parent is authorized and permitted to
instruct the Escrow Agent, pursuant to Section 3.7 of the Escrow Agreement, to
make distributions from the cash portion of the Escrow Fund in respect of such
payments and Taxes). The Company Stockholders shall be entitled to exercise the
voting rights of the Escrow Shares transferred to the Escrow Fund and to receive
dividends (if declared) with respect to such shares (other than non-taxable
stock dividends, which shall be included as part of the Escrow Fund). Parent
shall be treated as the owner of cash in the Escrow Fund for tax purposes until
such funds are disbursed pursuant to this Agreement and the Escrow Agreement,
and all interest on or other taxable income, if any, earned from the investment
of such funds shall be treated for tax purposes as earned by Parent, subject to
Parents right to receive tax distributions in respect of such taxable income as
provided in the Escrow Agreement.
7
1.5 Exchange of
Certificates.
(a) Closing
Deliveries. At the Closing, the
Company shall deliver certificates for shares of Company Capital Stock
(Company Stock
Certificates) representing all
shares of Company Capital Stock outstanding as of the Closing, duly endorsed (or
accompanied by duly executed stock powers) and letters of transmittal
substantially the form of Exhibit G attached hereto (a Letter of Transmittal) executed by
each holder of shares of Company Capital Stock as of the Closing. The Company
Stock Certificates so delivered shall be canceled as of the Effective Time. From
and after the Effective Time, each Company Stock Certificate which prior to the
Effective Time represented shares of Company Capital Stock shall be deemed to
represent only the right
to receive the Merger
Consideration, if any, payable with respect to such shares, and the holder of
each such Company Stock Certificate shall cease to have any rights with respect
to the shares of Company Capital Stock formerly represented thereby.
(b) Delivery of
Merger Consideration. Promptly
after the Effective Time, subject to receipt of the deliveries required pursuant
to Section 1.5(a), Parent will deliver or, in the case of Parent Class A Common
Stock, cause its transfer agent to deliver, to the holder of shares of Company
Capital Stock as of the Closing: (a) by wire transfer to their respective
accounts as specified in their Letters of Transmittal, the cash amounts to be
paid to such holder at Closing pursuant to Section 1.4(a)(ii) and (b) by mail to
their respective addresses as specified in their Letters of Transmittal, stock
certificates representing the shares of Parent Class A Common Stock to be issued
to such holder at Closing pursuant to Section 1.4(a)(ii)).
(c) No dividends
or other distributions declared or made with respect to Parent Class A Common
Stock with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Company Stock Certificate, and no cash payment in lieu of any
fractional share shall be paid to any such holder, until such holder surrenders
such Company Stock Certificate in accordance with this Section 1.5 (at which
time such holder shall be entitled to receive all such dividends and
distributions and such cash payment).
(d) No fractional
shares of Parent Class A Common Stock shall be issued in connection with the
Merger, and no certificates for any such fractional shares shall be issued. In
lieu of such fractional shares, any holder of shares of Company Capital Stock
who would otherwise be entitled to receive a fraction of a share of Parent Class
A Common Stock (after aggregating all fractional shares of Parent Class A Common
Stock issuable to such holder) shall, upon surrender of such holders Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by the
FMV of Parent Class A Common Stock.
(e) The shares of
Parent Class A Common Stock to be issued in the Merger shall be characterized as
restricted securities for purposes of Rule 144 under the Securities Act, and
each certificate representing any such shares shall, until such time that the
shares are not so restricted under the Securities Act, bear a legend identical
or similar in effect to the following legend (together with any other legend or
legends required by applicable state securities laws or otherwise, if any):
8
THE SHARES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
ACT) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED
OR HYPOTHECATED UNLESS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE.
(f) Stock
Transfer Books. As of the
Effective Time, the stock transfer books of the Company shall be closed and
there shall not be any further registration of transfers of shares of Company
Capital Stock thereafter on the records of the Company. If, after the Effective
Time, Company Stock Certificates are presented to the Surviving Entity, they
shall be canceled and exchanged for the Merger Consideration, if any, payable
with respect to such shares as provided for in Section 1.4. No interest shall
accrue or be paid on any Merger Consideration payable upon the surrender of a
Company Stock Certificate which immediately before the Effective Time
represented outstanding shares of Company Capital Stock.
(g) Undistributed Payment Funds. Any portion of the Merger Consideration that remains undistributed to
Company Stockholders as of the date that is one year after the date of this
Agreement shall be delivered to Parent upon demand, and Company Stockholders who
have not theretofore surrendered their Company Stock Certificates in accordance
with this Section 1.5 shall thereafter look only to Parent for satisfaction of
their claims for the Merger Consideration payable with respect to the shares of
Company Capital Stock previously represented by such Company Stock Certificates,
without any interest thereon.
(h) Escheat. Notwithstanding
anything in this Agreement to the contrary, neither Parent nor any other Person
shall be liable to any holder of shares of Company Capital Stock or to any other
Person for any amount paid to a public official pursuant to applicable abandoned
property law, escheat law or similar Legal Requirement. Any amounts remaining
unclaimed by Company Stockholders shall, to the extent permitted by applicable
Legal Requirements, become the property of Parent free and clear of any
Encumbrance.
(i) Withholding. Each of the
Payment Agent, Parent, the Interim Surviving Corporation and the Surviving
Entity shall be entitled to deduct and withhold from any consideration payable
pursuant to this Agreement to any security holder or former security holder of
the Company such amounts as required to be deducted or withheld therefrom or in
connection therewith under the Code or any provision of state, local or foreign
Tax law or under any other applicable Legal Requirement and shall pay over such
amounts to the Governmental Body as required by any Legal Requirement. To the
extent such amounts are so deducted or withheld and paid over, such amounts
shall be treated for all purposes under this Agreement as having been paid to
the Person to whom such amounts would otherwise have been paid.
1.6 Further
Action. If, at any time after the Effective Time, any
further action is reasonably determined by Parent to be necessary or desirable
to carry out the purposes of this Agreement or to vest the Surviving Entity or
Parent with full right, title and possession of and to all rights and property
of the Merger Subs and the Company, the managers and officers of the Surviving
Entity and Parent shall be fully authorized (in the name of Merger Subs, the
Interim Surviving Corporation, the Surviving Entity, the Company and otherwise)
to take such action.
1.7 Reorganization Status. Parent and the Surviving Entity shall report the Merger for income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
including the filing of the statement required by Treasury Regulations Section
1.368-3, unless otherwise required by a taxing authority pursuant to a
determination within the meaning of Section 1313(a) of the Code; provided, however, even though it is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of
Section 368(a) of the Code and, subject to the proviso in the last sentence of
this Section 1.7, no party hereto shall take any action, or fail to take any
action, which could reasonably be expected to be inconsistent with such intent,
the parties make no representations or warranties to each other or to any holder
of Company Capital Stock that the Merger will qualify as a tax-free
reorganization under the Code (except for Parents representations in Section
3.1 that Merger Sub I and Merger Sub II are wholly-owned subsidiaries of
Parent). Parent agrees not to take any action, and will cause its affiliates not
to take any action, which would reasonably be expected to cause the Merger to
fail to qualify as a tax-free reorganization, provided, however, that the
preceding covenant shall not be considered to be violated by actions of Parent
or its affiliates contemplated under this Agreement.
9
2. Representations and Warranties of the Company
The Company represents and
warrants, to and for the benefit of the Indemnitees, except as set forth in the
Disclosure Schedule, as follows:
2.1 Due
Organization; Subsidiaries; Etc.
(a) Organization. Each of the
Acquired Companies has been duly organized, and is validly existing and in good
standing (to the extent that the laws of the jurisdiction of its formation
recognize the concept of good standing), under the laws of the jurisdiction of
its formation. Each of the Acquired Companies has all corporate or other
organizational power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts to which it is a party or by which
it is bound.
(b) Qualification. Each of the
Acquired Companies is qualified, licensed or admitted to do business as a
foreign corporation, and is in good standing (to the extent that the applicable
jurisdiction recognizes the concept of good standing), under the laws of all
jurisdictions where the property owned, leased or operated by it or the nature
of its business requires such qualification, license or admission and where the
failure to be so qualified, licensed or admitted would have a Material Adverse
Effect. Part 2.1(b) of the Disclosure Schedule accurately sets forth each
jurisdiction where an Acquired Company is qualified, licensed and admitted to do
business.
(c) Directors
and Officers. Part 2.1(c) of the
Disclosure Schedule accurately sets forth: (i) the names of the members of the
board of directors (or similar body) of each of the Acquired Companies; (ii) the
names of the members of each committee of the board of directors (or similar
body) of each of the Acquired Companies; and (iii) the names and titles of the
officers of each of the Acquired Companies.
(d) Subsidiaries. The Company
has never owned, beneficially or otherwise, any shares or other securities of,
or any direct or indirect equity interest in, any Entity. The Company has not
agreed, nor is obligated, to make any future investment in or capital
contribution to any Entity. The Company has not guaranteed and is not
responsible or liable for any obligation of any Entity.
(e) Name. The Company has not
conducted any business under or otherwise used, for any purpose or in any
jurisdiction, any fictitious name, assumed name, trade name or other name.
10
2.2 Charter Documents;
Records. The Company has made available to Parent accurate
and complete copies of: (a) the certificate of incorporation and bylaws,
memorandum of association and articles of association or equivalent governing documents, including all
amendments thereto, of each of the Acquired Companies (the Charter Documents); (b) the stock or share records of each of the
Acquired Companies; and (c) the minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or otherwise
without a meeting) of the stockholders or members, the board of directors (or
other similar body) and all committees of the board of directors (or other
similar body) of each of the Acquired Companies, which minutes or other records
contain a complete summary of all meetings of directors, stockholders and
members, and all actions taken thereat or by written consent. All actions taken
and all transactions entered into by each of the Acquired Companies have been
duly approved by all necessary action of the board of directors (or other
similar body) and stockholders of each of the Acquired Companies if such
approval was required. There has been no violation of any of the provisions of
the Charter Documents of any of the Acquired Companies, and no Acquired Company
has taken any action that is inconsistent in any material respect with any
resolution adopted by such Acquired Companys stockholders or members, board of
directors (or other similar body) or any committee of the board of directors (or
other similar body). The books of account, stock records, minute books and other
records of each of the Acquired Companies are accurate, up-to-date and complete
in all material respects, and have been maintained in accordance with prudent
business practices and all applicable Legal Requirements.
2.3 Capitalization.
(a) Outstanding
Securities. The authorized
capital stock of the Company consists of (i)15,000,000 shares of Company Common
Stock, of which 1,500,000 shares are issued and outstanding as of the date of
this Agreement, and (ii) 5,000,000 shares of Company Preferred Stock, ,none of
which are issued and outstanding as of the date of this Agreement. There are no
shares of capital stock held in the Companys treasury. The Company has never
declared or paid any dividends on any shares of Company Capital Stock. Part
2.3(a) of the Disclosure Schedule sets forth the names of the Companys
stockholders, the addresses of the Companys stockholders and the class, series
and number of shares of Company Capital Stock owned of record by each of such
stockholders. All of the outstanding shares of Company Capital Stock have been
duly authorized and validly issued, and are fully paid and nonassessable, and
none of such shares is subject to any repurchase option, forfeiture provision or
restriction on transfer (other than restrictions on transfer imposed by virtue
of applicable federal and state securities laws).
(b) No Other
Securities. Except as set forth
in Part 2.3(a) of the Disclosure Schedule, there is no: (i) outstanding
subscription, option, call, convertible note, warrant or right (whether or not
currently exercisable) to acquire any shares of Company Capital Stock or other
securities of the Company; (ii) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any shares of Company
Capital Stock (or cash based on the value of such shares) or other securities of
the Company; (iii) Contract under which the Company is or may become obligated
to sell or otherwise issue any shares of Company Capital Stock or any other
securities, including any promise or commitment to grant Company Options or
other securities of the Company to an employee of or other service provider to
any of the Acquired Companies; or (iv) condition or circumstance created by the
Company that would reasonably be expected to give rise to or provide a basis for
the assertion of a claim by any Person to the effect that such Person is
entitled to acquire or receive any shares of Company Capital Stock or other
securities of the Company. As of the Effective Time, there will be no
outstanding options, warrants, convertible notes or other rights to purchase
shares of Company Capital Stock.
(c) Legal
Issuance. All outstanding shares
of Company Capital Stock and all other securities that have ever been issued or
granted by the Company have been issued and granted in compliance with: (i) all
applicable securities laws and other applicable Legal Requirements; and (ii) all
requirements set forth in all applicable Contracts. None of the outstanding
shares of Company Capital Stock were issued in violation of any preemptive
rights or other rights to subscribe for or purchase securities of the Company.
Part 2.3(c) of the Disclosure Schedule accurately identifies each Acquired
Company Contract relating to any securities of any of the Acquired Companies
that contains any information rights, registration rights, financial statement
requirements or other terms that would survive the Closing unless terminated or
amended prior to the Closing.
11
(d) Repurchased
Shares. Part 2.3(d) of the
Disclosure Schedule accurately sets forth with respect to any shares of capital
stock ever repurchased or redeemed by the Company: (i) the name of the seller of
such shares; (ii) the number, class and series of shares repurchased or
redeemed; (iii) the date of such repurchase or redemption; and (iv) the price
paid by the Company for such shares. All shares of capital stock of the Company
ever repurchased or redeemed by the Company were repurchased or redeemed in
compliance with: (A) all applicable securities laws and other applicable Legal
Requirements; and (B) all requirements set forth in all applicable
Contracts.
(e) Allocation. The allocation
of the Merger Consideration set forth in Sections 1.4 and 1.5 and in the Merger
Consideration Certificate complies with all applicable Legal Requirements, the
Companys Charter Documents and all other plans and Contracts to which the
Company is party to or by which the Company is bound.
(f) Subsidiary
Shares. All of the shares of each
of the Subsidiaries of the Company are owned by the Company free and clear of
any Encumbrance. The outstanding shares of the Subsidiaries of the Company have
been duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance with all applicable securities laws and other
applicable Legal Requirements and were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase securities of
such Subsidiaries. There are no options, warrants or other rights outstanding to
subscribe for or purchase any shares or other securities of the Subsidiaries of
the Company and such Subsidiaries are not subject to any Contract or court or
administrative Order under which any of such Subsidiaries is or may become
obligated to sell or otherwise issue any shares or other securities. There are
no preemptive rights applicable to any shares of any of the Subsidiaries of the
Company. None of the Subsidiaries of the Company have the right to vote on or
approve or object to the Merger or any of the other transactions contemplated by
this Agreement.
2.4 Financial
Statements and Related Information.
(a) Delivery of
Financial Statements. The Company
has delivered to Parent complete copies of the following financial statements
and notes (collectively, the Company Financial
Statements): the audited consolidated balance sheets of the
Acquired Companies as of December 31, 2013 and December 31, 2014 (the
Balance Sheet
Date, and the audited balance
sheet of the Acquired Companies as of such date, the Balance Sheet), and the related audited consolidated
statements of income, consolidated statements of stockholders equity and
consolidated statements of cash flows for the years ended December 31, 2013 and
December 31, 2014, together with the notes thereto.
(b) Fair
Presentation. The Company
Financial Statements present fairly the financial position of the Acquired
Companies as of the respective dates thereof and the results of operations and
cash flows of the Acquired Companies for the periods covered thereby, in each
case, in conformity with GAAP applied on a consistent basis throughout the
periods covered. The Company Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered.
12
(c) Internal
Controls. The books, records and
accounts of the Acquired Companies accurately and fairly reflect, in reasonable
detail, the transactions in and dispositions of the assets of the
Acquired Companies. The
systems of internal accounting controls maintained by the Acquired Companies,
while not sufficient for a publicly traded company (it being acknowledged that
Parent will likely put in additional systems of internal accounting controls),
are designed to provide reasonable assurance that: (i) transactions are executed
in accordance with managements general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with managements general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. Part 2.4(c) of the Disclosure Schedule
lists, and the Company has delivered to Parent copies of, all written
descriptions of, and all policies, manuals and other documents promulgating,
such internal accounting controls.
2.5 Liabilities.
(a) No
Liabilities. None of the Acquired
Companies has any accrued, contingent or other Liabilities of any nature, either
matured or unmatured (whether or not required to be reflected in financial
statements in accordance with GAAP, and whether due or to become due), except
for: (i) Liabilities identified as such in the liabilities column of the
Balance Sheet; (ii) accounts payable or accrued salaries that have been incurred
by an Acquired Company since the Balance Sheet Date in the ordinary course of
business and consistent with such Acquired Companys past practices; (iii)
Liabilities under the Acquired Company Contracts that are expressly set forth in
and identifiable by reference to the text of such Acquired Company Contracts;
(iv) Acquired Company Transaction Expenses; and (v) the Liabilities identified
in Part 2.5(a) of the Disclosure Schedule.
(b) Accounts
Payable. Part 2.5(b) of the
Disclosure Schedule provides an accurate and complete breakdown and aging of:
(i) all accounts payable of each of the Acquired Companies as of the date of
this Agreement; and (ii) all notes payable of each of the Acquired Companies and
all other indebtedness of each of the Acquired Companies for borrowed money as
of the date of this Agreement.
(c) No
Off-Balance Sheet Arrangements.
None of the Acquired Companies has ever effected or otherwise been involved in
any off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of
Regulation S-K under the Securities Exchange Act of 1934, as amended). Without
limiting the generality of the foregoing, none of the Acquired Companies has
ever guaranteed any debt or other obligation of any other Person.
2.6 Absence of
Changes. Except as set forth in Part 2.6 of the Disclosure
Schedule, since the Balance Sheet Date:
(a) there has not
been any Material Adverse Effect, and no event has occurred or circumstance has
arisen that, in combination with any other events or circumstances, will or
would reasonably be expected to have or result in a Material Adverse Effect;
(b) there has not
been any material loss, damage or destruction to, or any material interruption
in the use of, any of the Acquired Companies material assets (whether or not
covered by insurance);
(c) none of the
Acquired Companies has declared, accrued, set aside or paid any dividend or made
any other distribution in respect of any shares of their respective capital
stock or other securities, and none of the Acquired Companies has repurchased,
redeemed or otherwise reacquired any of their respective shares of capital stock
or other securities;
13
(d) none of the
Acquired Companies has sold, issued, granted or authorized the sale, issuance or
grant of: (i) any capital stock or other security; (ii) any option, call,
warrant or right to acquire any capital stock or other security; or (iii) any
instrument convertible into or exchangeable for any capital stock (or cash based
on the value of such capital stock) or other security;
(e) the Company
has not amended or waived any of its rights under, or permitted the acceleration
of vesting under any restricted stock agreement;
(f) there has been
no amendment to any of the Charter Documents of any of the Acquired Companies,
and none of the Acquired Companies has effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(g) none of the
Acquired Companies has made any capital expenditure which, when added to all
other capital expenditures made on behalf of such respective Acquired Company,
exceeds US $50,000;
(h) none of the
Acquired Companies has amended or prematurely terminated, or waived any material
right or remedy under, any Contract that is or would constitute a Material
Contract (as defined in Section 2.11(a));
(i) none of the
Acquired Companies has: (i) acquired, leased or licensed any right or other
asset from any other Person: (ii) sold or otherwise disposed of, or leased or
licensed, any right or other asset to any other Person; or (iii) waived or
relinquished any right, except for immaterial rights or other immaterial assets
acquired, leased, licensed or disposed of in the ordinary course of business and
consistent with past practices of the Acquired Companies;
(j) none of the
Acquired Companies has written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness in excess of US $1,000 with respect to a single matter, or in
excess of US $25,000 in the aggregate;
(k) none of the
Acquired Companies has made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except for
pledges of immaterial assets made in the ordinary course of business and
consistent with such Acquired Companys past practices;
(l) none of the
Acquired Companies has: (i) lent money to any Person (other than pursuant to
routine and reasonable travel advances made to current employees of the Acquired
Companies in the ordinary course of business); or (ii) incurred or guaranteed
any indebtedness for borrowed money;
(m) none of the
Acquired Companies has: (i) established, adopted or amended any Acquired Company
Employee Plan; (ii) made any bonus, profit-sharing or similar payment to, or
increased the amount of wages, salary, commissions, fringe benefits or other
compensation (including equity-based compensation, whether payable in cash or
otherwise) or remuneration payable to, any of its directors, officers or
employees; or (iii) other than with respect to non-officer employees and in the
ordinary course of business and consistent with past practices, hired any new
employee;
14
(n) none of the
Acquired Companies has changed any of its methods of accounting or accounting
practices in any respect;
(o) none of the
Acquired Companies has made or changed any Tax election, adopted or changed a
material accounting method in respect of Taxes, entered into a Tax allocation
agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement,
settled or comprised a claim, notice, audit report or assessment in respect of
Taxes, or consented to an extension or waiver of the statutory limitation period
applicable to a claim or assessment in respect of Taxes;
(p) none of the
Acquired Companies has commenced or settled any Legal Proceeding;
(q) none of the
Acquired Companies has entered into any material transaction or taken any other
material action outside the ordinary course of business or inconsistent with its
past practices; and
(r) none of the
Acquired Companies has agreed or committed to take any of the actions referred
to in clauses (c) through (q) above.
2.7 Title to
Assets.
(a) Good
Title. This Section 2.7 only
applies to real property and tangible assets owned by any Acquired Company and
not to Intellectual Property or Intellectual Property Rights, for which
representations and warranties are solely as set forth in Section 2.10 below.
Each of the Acquired Companies owns, and has good and valid title to, all assets
purported to be owned by it, including: (i) all assets reflected on the Balance
Sheet except assets used, consumed or written off as obsolete since the Balance
Sheet Date in the ordinary course of business consistent with past practice;
(ii) all assets referred to in Part 2.10(a) of the Disclosure Schedule and all
of the rights of the Acquired Companies under the Contracts identified in Part
2.11(a) of the Disclosure Schedule; and (iii) all other assets reflected in the
books and records of the Acquired Companies as being owned by the Acquired
Companies. All of said assets are owned by the Acquired Companies free and clear
of any liens or other Encumbrances, except for: (A) any lien for current Taxes
not yet due and payable; (B) minor liens that have arisen in the ordinary course
of business and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of any of the Acquired Companies; and (C) mechanics, materialmans, suppliers,
and landlord liens that do not reflect delinquent payments by the Acquired
Companies.
(b) Leased
Assets. Part 2.7(b) of the
Disclosure Schedule identifies all assets that are material to the business of
any of the Acquired Companies and that are being leased to any of the Acquired
Companies for which the annual rental payment for each such asset exceeds US
$50,000.
2.8 Bank
Accounts.
(a) Part 2.8(a) of
the Disclosure Schedule provides the following information with respect to each
account maintained by or for the benefit of any of the Acquired Companies at any
bank or other financial institution: (a) the name of the bank or other financial
institution at which such account is maintained; (b) the account number; (c) the
type of account; and (d) the names of all Persons who are authorized to sign
checks or other documents with respect to such account.
15
(b) Part 2.8(b) of
the Disclosure Schedule lists all of the accounts receivable of each of the
Acquired Companies as of the date of this Agreement, including an aging by
customer. All such accounts receivable, whether billed or unbilled, of each of
the Acquired Companies arose in the ordinary course of business, are carried at
values determined in accordance with GAAP consistently applied, to the Knowledge
of the Company are not subject to any valid set-off or counterclaim, do not
represent obligations for goods sold on consignment, on approval or on a
sale-or-return basis and are not subject to any other repurchase or return
arrangement. No Person has any Encumbrance on any accounts receivable of any of
the Acquired Companies. No request or agreement for deduction or discount has
been made with respect to any accounts receivable of any of the Acquired
Companies other than those made in the ordinary course of business.
(c) Part 2.8(c) of
the Disclosure Schedule contains an accurate and complete list as of the date of
this Agreement of all loans and advances made by each of the Acquired Companies
to any employee, director, consultant or individual independent contractor,
other than routine travel advances made to employees in the ordinary course of
business.
2.9 Equipment;
Real Property.
(a) Equipment. All material
items of equipment, fixtures and other tangible assets owned by or leased to any
of the Acquired Companies or currently used in the operation of the business of
any of the Acquired Companies are reasonably adequate for the uses to which they
are being put, are in good condition and repair (ordinary wear and tear
excepted), are maintained in a reasonably prudent manner, and are adequate for
the conduct of each of the Acquired Companies respective businesses in the
manner in which such businesses are currently being conducted.
(b) Real
Property. The Acquired Companies
do not own any real property or any interest in real property, except for the
leasehold interests created under the real property leases identified in Part
2.9(b) of the Disclosure Schedule.
2.10 Intellectual Property.
(a) Registered
IP. Part 2.10(a) of the
Disclosure Schedule accurately identifies: (i) each item of Registered IP in
which the Company has or purports to have an ownership or security interest of
any nature (whether exclusively, jointly with another Person or otherwise); (ii)
the jurisdiction in which such item of Registered IP has been registered or
filed and the applicable registration or serial number; and (iii) any other
Person that has an ownership interest in such item of Registered IP and the
nature of such ownership interest. The Company has made available to Parent
complete and accurate copies of all applications, correspondence with any
Governmental Body and other nonprivileged material documents related to each
such item of Registered IP. Each aforementioned item of Registered IP is in
compliance with all Legal Requirements, and all filings, payments and other
actions required to be made or taken to maintain each of those items of
Registered IP in full force and effect have been made by the applicable
deadline.
(b) Inbound
Licenses. Part 2.10(b) of the
Disclosure Schedule accurately identifies: (i) each Contract pursuant to which
any Intellectual Property Right is or has been licensed, sold, assigned or
otherwise conveyed or provided to any Acquired Company (other than: (A)
agreements between the Acquired Company and its employees in the Acquired
Companys standard form thereof; (B) non-exclusive licenses to third party
software that is not incorporated into, or used in the development, testing,
distribution, maintenance or support of, any Acquired Company Software (as
defined below) and that is not otherwise material to the Acquired Companys
business); and (C) non-exclusive licenses to third party software that (1) not
incorporated into, or used in the development, testing, distribution,
maintenance or support of, any Acquired
Company Software (as defined below) and that is not otherwise material to the
Acquired Companys business, and (2) is licensed under a shrink-wrap,
click-through or other form of end user license agreement and is generally
commercially available for a license fee of no more than $25,000; and (D)
non-disclosure, evaluation and confidentiality agreements that are entered into
in the ordinary course of business); and (ii) whether the licenses or rights
granted to the Acquired Company in each such Contract are exclusive or
non-exclusive.
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(c) Outbound Licenses. Part 2.10(c) of the Disclosure Schedule
accurately identifies each Contract pursuant to which any Person has been
granted any license under, or otherwise has received or acquired any right
(whether or not currently exercisable and including a right to receive a
license) or interest in, any Acquired Company IP other than: (A) agreements
between the Acquired Company and a third party pursuant to a standard form
Acquired Company IP Contract that has been made available to Parent; and (B)
non-disclosure, evaluation and confidentiality agreements that do not differ in
any substantive way from any standard form Company agreement that has been made
available to Parent. No Acquired Company is bound by, and no Acquired Company IP
is subject to, any Contract containing any covenant or other provision (other
than a nonexclusive license) that limits or restricts the ability of any
Acquired Company to use, exploit, assert or enforce any Acquired Company IP
anywhere in the world.
(d) Royalty Obligations. Part 2.10(d) of the Disclosure Schedule contains
a complete and accurate list of all Acquired Company Contracts that require an
Acquired Company to pay royalties, fees, commissions and or other similar
amounts to any other Person (other than sales commissions paid to employees,
agents or contractors according to the Acquired Companys standard commissions
plan) upon or for the use, license, or distribution of any Acquired Company IP.
(e) Standard Form IP Agreements. The Company has made available to Parent a
complete and accurate copy of each standard form of Acquired Company IP Contract
currently (or, previously, if the previous form differed in any substantive way)
used by any of the Acquired Companies which may include a standard form of: (i)
end user license agreement; (ii) development agreement; (iii) employee agreement
containing any assignment or license of Intellectual Property or Intellectual
Property Rights or any confidentiality provision; (iv) consulting or independent
contractor agreement containing any assignment or license of Intellectual
Property or Intellectual Property Rights or any confidentiality provision; (v)
confidentiality or nondisclosure agreement; or (vi) Acquired Company User
Agreement. Part 2.10(e) of the Disclosure Schedule accurately identifies each
Acquired Company IP Contract that deviates in any material respect from the
corresponding standard form agreement delivered to Parent, including any
agreement with an employee, consultant or independent contractor in which the
employee, consultant or independent contractor expressly reserved or retained
any Intellectual Property Rights related to any Acquired Companys business,
research or development.
(f) Ownership Free and Clear. The Acquired Companies exclusively own all
right, title and interest to and in the Acquired Company IP (other than
Intellectual Property Rights exclusively licensed to any of the Acquired
Companies, as identified in Part 2.10(b) of the Disclosure Schedule) free and
clear of any Encumbrances. Without limiting the generality of the foregoing:
(i) all documents and
instruments necessary to establish, perfect, and maintain the rights of any
Acquired Company in the Registered IP in order to avoid abandonment have been
validly executed, delivered and filed in a timely manner with the appropriate
Governmental Body.
(ii) each Acquired Company
Employee and each individual independent contractor of any of the Acquired
Companies who is or was involved in the creation or development of any Acquired
Company IP has signed an enforceable agreement containing an irrevocable
assignment (with no rights of reversion or rescission) of Intellectual Property
Rights pertaining to such Acquired Company IP, for the full term of those
Intellectual Property Rights, to an Acquired Company and confidentiality
provisions protecting the Acquired Company IP;
17
(iii) each Acquired Company has
taken all reasonable steps to maintain the confidentiality of and otherwise
protect and enforce its rights in all proprietary trade secret information
pertaining to the Acquired Companies other than with regard to proprietary
information for which Company has decided to disclose in Registered IP; and
(iv) the Acquired Companies
own or otherwise have sufficient rights in, and immediately after the Closing
the Surviving Corporation and its Subsidiaries will continue to own or otherwise
have sufficient rights in, all Intellectual Property Rights needed to conduct
the business of the Acquired Companies as currently conducted.
(g) Valid and Enforceable. None of the issued Registered IP is invalid or
unenforceable. Without limiting the generality of the foregoing:
(i) no trademark or trade
name used by an Acquired Company conflicts or interferes with any trademark or
trade name owned, used or applied for by any other Person, and each Acquired
Company has taken reasonable steps to police the use of its trademarks;
(ii) Part 2.10(g)(ii) of the
Disclosure Schedule accurately identifies and describes each action, filing, and
payment that must be taken or made on or before the date that is 120 days after
the date of this Agreement in order to maintain such item of Registered IP in
full force and effect; and
(iii) no interference,
opposition, reissue, reexamination or other Legal Proceeding (other than a Legal
Proceeding brought by a Governmental Body in the ordinary course of prosecution
or registration of Registered IP) is pending or, threatened in writing (or, to
the Knowledge of the Company, not in writing), in which the scope, validity or
enforceability of any Registered IP is being contested or challenged. To the
Knowledge of the Company, there is no basis for a claim that any Acquired
Company IP is invalid or unenforceable.
(h) No Third Party Infringement of Acquired Company
IP. To The Knowledge of the
Company, no Person has infringed, misappropriated or otherwise violated, and no
Person is currently infringing, misappropriating or otherwise violating, any
Acquired Company IP. Part 2.10(h) of the Disclosure Schedule accurately
identifies (and the Company has made available to Parent a complete and accurate
copy of) each letter or other written or electronic communication or
correspondence that has been sent by or to any Acquired Company or any
representative of any Acquired Company to any Person regarding any actual,
alleged or suspected infringement or misappropriation of any Acquired Company
IP.
(i) Effects of This Transaction. Neither the execution, delivery or performance
of this Agreement or any other agreements referred to in this Agreement nor the
consummation of any of the transactions contemplated by this Agreement or any
such other agreement will, with or without notice or lapse of time, result in,
or give any other Person the right or option to cause or declare: (i) a loss of,
or Encumbrance on, any Acquired Company IP; (ii) a breach of or default under
any Acquired Company IP Contract; (iii) the release, disclosure or delivery of
any Acquired Company IP by or to any escrow agent or other Person; or (iv) the
grant, assignment or transfer to any other Person of any license or other right
or interest under, to or in any of the Acquired Company IP.
18
(j) No Infringement of Third Party IP
Rights. No Acquired Company has
ever infringed (directly, contributorily, by inducement or otherwise),
misappropriated or otherwise violated or made unlawful use of any Intellectual
Property Right of any other Person. No Acquired Company Software infringes,
based on the operation of the Company through the Closing Date, violates or
makes unlawful use of any Intellectual Property Right of, or contains any
Intellectual Property misappropriated from, any other Person. Without limiting
the generality of the foregoing:
(i) no infringement,
misappropriation or similar claim or Legal Proceeding is pending or, to the
Knowledge of the Company, threatened against any Acquired Company or against any
other Person to the extent any Acquired Company has an obligation to indemnify
such Person;
(ii) no Acquired Company has
ever received any written notice or other written communication relating to any
actual, alleged or suspected infringement, misappropriation or violation by any
Acquired Company, any Acquired Company Employee or agents of any Acquired
Company of any Intellectual Property Rights of another Person, including any
letter or other written communication suggesting or offering that any Acquired
Company obtain a license to any Intellectual Property Right of another Person;
and
(iii) no Acquired Company is
bound by any Contract to indemnify, defend, hold harmless or reimburse any other
Person with respect to, or otherwise assumed or agreed to discharge or otherwise
take responsibility for, any existing or potential intellectual property
infringement, misappropriation or similar claim (other than indemnification
provisions in the Acquired Companies standard forms of Acquired Company IP
Contracts).
(k) No Harmful Code. None of the software (including firmware and
other software embedded in hardware devices) owned, developed (or currently
being developed), used, marketed, distributed, licensed or sold by any Acquired
Company (collectively, Acquired Company Software) contains any back door,
drop dead device, time bomb, Trojan horse, virus, or worm (as such
terms are commonly understood in the software industry) or any other code
designed or intended to have, or capable of performing, any of the following
functions: (i) disrupting, disabling, harming or otherwise impeding in any
manner the operation of, or providing unauthorized access to, a computer system
or network or other device on which such code is stored or installed; or (ii)
damaging or destroying any data or file without the users consent.
(l) Source Code. No source code for any Acquired Company Software has been delivered,
licensed or made available to any escrow agent or other Person who is not an
employee, consultant or contractor of an Acquired Company. No Acquired Company
has any duty or obligation (whether present, contingent or otherwise) to
deliver, license or make available the source code for any Acquired Company
Software to any escrow agent or other Person. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will result in the delivery, license or disclosure of the source code for any
Acquired Company Software to any other Person.
(m) Use of Open Source Code. Part 2.10(m) of the Disclosure Schedule
accurately identifies and describes: (i) each item of Open Source Code that is
contained in, distributed with or used in the development of the Acquired
Company Software or from which any part of any Acquired Company Software is
derived; (ii) the applicable license terms for each such item of Open Source
Code; and (iii) the Acquired Company Software to which each such item of Open
Source Code relates. Except as expressly stated in Part 2.10(m) of the
Disclosure Schedule, no Acquired Company has used, licensed, distributed,
incorporated into other code, or modified Open Source Code in any manner that
would, with respect to any Acquired Company Software: (i) impose or would impose
a requirement or condition that any Acquired Company Software or part thereof:
(A) be disclosed or distributed in source code form; (B) be licensed for the
purpose of making modifications or derivative works; or (C) be redistributable
at no charge; or (ii) otherwise impose or would impose any other material
limitation, restriction, or condition on the right or ability of any Acquired
Company to use or distribute any Acquired Company Software.
19
(n) Privacy Policies. Part 2.10(n) of the Disclosure Schedule contains
each Acquired Company Privacy Policy in effect at any time and identifies, with
respect to each Acquired Company Privacy Policy: (i) the period of time during
which such privacy policy was or has been in effect; (ii) whether the terms of a
later Acquired Company Privacy Policy apply to the data or information collected
under such privacy policy; and (iii) if applicable, the mechanism (such as
opt-in, opt-out or notice only) used to apply a later Acquired Company Privacy
Policy to data or information previously collected under such privacy policy.
Each Acquired Company Privacy Policy hereof: (i) is incorporated into the
applicable Acquired Company User Agreement, (ii) states that User Data and
Personal Data may be transferred in a merger, acquisition, reorganization, or
sale of assets, (iii) states that User Data and Personal Data may be transferred
to the United States for processing, and (iv) states how User Data and Personal
Data is collected by any Acquired Company Web Site or any Acquired Company
Software. Each Acquired Company requires each user of the Acquired Company Web
Site and Acquired Company Software to agree and consent to the applicable
Acquired Company Privacy Policy. Each Acquired Company and the Acquired Company
Software has complied at all times and in all material respects with all of the
Acquired Company Privacy Policies and with all applicable Legal Requirements and
Acquired Company commitments pertaining to User Data and Personal Data. Neither
the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement nor the consummation of any of the
transactions contemplated by this Agreement or any such other agreements, nor
Parents possession or use of the User Data and Personal Data, will result in
any violation of any Acquired Company Privacy Policy or any Legal Requirement
pertaining to User Data or Personal Data.
(o) Personal Data. Part 2.10(c) of the Disclosure Schedule
identifies and describes each distinct electronic or other database containing
(in whole or in part) Personal Data maintained by or for any Acquired Company at
any time (the Acquired Company
Databases), and the types of
Personal Data in each such database. No breach or violation of any Acquired
Company security policy has occurred or, is threatened, and there has been no
unauthorized or illegal use of or access to any of the data or information in
any of the Acquired Company Databases.
(p) Preformation Activities for the Acquired
Companies. During the period
prior to formation of any of the Acquired Companies, no Person infringed,
misappropriated or otherwise violated any Intellectual Property Right of a third
Party or breached any contractual obligation in undertaking activities that
benefited any Acquired Company or contributed in any way to the creation of any
Acquired Company IP.
2.11
Contracts.
(a) List of Contracts. Part 2.11(a) of the Disclosure Schedule
accurately identifies:
(i) (A) each Acquired Company
Contract relating to the employment of, or the performance of services by, any
Acquired Company Employee (other than at will employment agreements entered
into in the ordinary course of business on the Companys standard form of offer
letter in the form made available to Parent without any material deviation
thereto); (B) any Acquired Company Contract pursuant to which any of the
Acquired Companies is or may become obligated to make any severance, termination
or similar payment to any Acquired Company Employee (other than post-termination
benefits continuation coverage required by applicable Legal Requirements); and
(C) any Acquired Company Contract pursuant to which any of the Acquired
Companies is or may become obligated to make any bonus or similar payment (other
than payment in respect of salary) to any Acquired Company
Employee;
20
(ii) each Acquired Company
Contract which provides for indemnification of any officer, director, employee
or agent;
(iii) each Acquired Company
Contract relating to the voting and any other rights or obligations of a
stockholder of any of the Acquired Companies;
(iv) each Acquired Company
Contract relating to the merger, consolidation, reorganization or any similar
transaction with respect to any of the Acquired Companies;
(v) each Acquired Company
Contract relating to the acquisition, transfer, development or sharing of any
technology, Intellectual Property or Intellectual Property Right (including any
joint development agreement, technical collaboration agreement or similar
agreement entered into by any of the Acquired Companies) (other than those under
a standard form of Acquired Company IP Contact made available to Parent without
material deviation under which any Acquired Company retains sole ownership of
the Intellectual Property or Intellectual Property Right developed under such
agreement);
(vi) each Acquired Company
Contract relating to the license of any patent, copyright, trade secret or other
Intellectual Property or Intellectual Property Right to or from any of the
Acquired Companies (other than: (A) agreements between the Acquired Company and
a third party pursuant to a standard form Acquired Company IP Contract made
available to Parent without material deviation; and (B) non-disclosure,
evaluation and confidentiality agreements that are entered into in the ordinary
course of business);
(vii) each Acquired Company
Contract relating to the hosting of any website of any Acquired Company;
(viii) each Acquired Company
Contract relating to the advertising or promotion of the business of any of the
Acquired Companies or pursuant to which any third parties advertise on any
websites operated by any of the Acquired Companies;
(ix) each Acquired Company
Contract relating to the acquisition, sale, spin-off or outsourcing of any
Subsidiary or business unit or operation of any of the Acquired Companies;
(x) each Acquired Company
Contract creating or relating to any partnership or joint venture or any sharing
of revenues, profits, losses, costs or liabilities;
(xi) each real estate lease of
any of the Acquired Companies;
(xii) each Acquired Company
Contract imposing any restriction on any of the Acquired Companies: (A) to
compete with or solicit any customer of, any other Person; (B) to acquire any
product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person; (C) to
solicit, hire or retain any Person as an employee, consultant or individual
independent contractor; or (D) to develop or distribute any technology;
21
(xiii) each Acquired Company
Contract: (A) granting exclusive rights to license, market, sell or deliver any
of the products or services of the Acquired Companies or of users of any
marketplace, website or service of any of the Acquired Companies; or (B)
otherwise contemplating an exclusive relationship between any Acquired Company
and any other Person;
(xiv) each Acquired Company
Contract creating or involving any agency relationship, distribution arrangement
or franchise relationship;
(xv) each Acquired Company
Contract regarding the acquisition, issuance or transfer of any securities,
including the provision of any right of first negotiation, right of first
refusal, or similar right, and each Acquired Company Contract affecting or
dealing with any securities of any of the Acquired Companies including any
restricted share agreements or escrow agreements;
(xvi) each Acquired Company
Contract involving any loan, guaranty, pledge, performance or completion bond or
indemnity or surety arrangement, or any similar obligation;
(xvii) each Acquired Company
Contract relating to the purchase or sale of any asset by or to, or the
performance of any services by or for, any Related Party;
(xviii) each Acquired Company
Contract relating to any liquidation or dissolution of any Acquired Company;
(xix) any Acquired Company
Contract that contemplates or involves: (A) the payment or delivery of cash or
other consideration by any Acquired Company in an amount or having a value in
excess of US $10,000 individually; or (B) the performance of services having a
value in excess of US $10,000 individually; and
(xx) any other Acquired
Company Contract that was entered into outside the ordinary course of business
or was inconsistent with the past practices of any of the Acquired Companies
that is material to the operation or business of the Acquired Companies.
(Contracts in the
respective categories described in clauses (i) through (xx) above and all
Contracts identified, or required to be identified, in Part 2.11(a) of the
Disclosure Schedule are referred to in this Agreement as Material Contracts.)
(b) Delivery of Contracts. The Company has made available to Parent
accurate and complete copies of all written Material Contracts identified in
Part 2.11(a) of the Disclosure Schedule, including all amendments thereto. Part
2.11(b) of the Disclosure Schedule provides an accurate and complete description
of the material terms of each Material Contract that is not in written form.
Each Contract identified in Part 2.11(a) of the Disclosure Schedule is valid and
in full force and effect, and is enforceable by the respective Acquired Company
in accordance with its terms, subject to: (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies. The Company has made available to Parent an accurate and complete copy
of each standard form of Acquired Company Contract to be used with any business
that sells food through the Company and identifies on Schedule 2.11(b) of the
Disclosure Schedule any Acquired Company Contract with any business that sells
food through the Company that deviates in any material respect from that
standard form.
(c) No Breach. Except as set forth in Part 2.11(c) of the Disclosure Schedule: (i)
none of the Acquired Companies has violated or breached, or committed any
default under, any Acquired Company Contract, which remains uncured, and, to the
Knowledge of the Company, no other Person has violated or breached, or committed
any default under, any Acquired Company Contract which remains uncured; (ii) to
the Knowledge of the Company, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or would
reasonably be expected to: (A) result in a violation or breach of any of the
provisions of any Acquired Company Contract; (B) give any Person the right to
declare a default or exercise any remedy under any Acquired Company Contract;
(C) give any Person the right to accelerate the maturity or performance of any
Acquired Company Contract; (D) give any Person the right to receive or require a
replacement, refund, rebate, chargeback, penalty or change in delivery schedule
under any Acquired Company Contract; or (E) give any Person the right to cancel,
terminate or modify any Acquired Company Contract; (iii) since January 1, 2013,
none of the Acquired Companies has received any written notice or other
communication regarding any actual or possible violation or breach of, or
default under, any Acquired Company Contract; and (iv) since January 1, 2013,
none of the Acquired Companies has waived any of its respective material rights
under any Acquired Company Contract.
22
(d) No Renegotiation. No Person has a contractual right pursuant to
the terms of any Acquired Company Contract to renegotiate any amount paid or
payable to the respective Acquired Company under any Material Contract or any
other material term or provision of any Material Contract.
(e) Proposed Contracts. Part 2.11(e) of the Disclosure Schedule
identifies and provides a brief description of each proposed Contract as to
which any offer, award, written proposal, term sheet or similar document, in
each case that would contain binding obligations of any Acquired Company if
accepted by the recipient, has been submitted by the Company (other than
Acquired Company User Agreements).
(f) User Agreements. Part 2.10(f) of the Disclosure Schedule contains
each Acquired Company User Agreement in effect at any time and identifies, with
respect to each Acquired Company User Agreement, the period of time during which
such Acquired Company User Agreement was or has been in effect. Each Acquired
Company User Agreement: (i) is binding and enforceable with respect to each and
every user of each Acquired Company Web Site and Acquired Company Software, (ii)
is fully assignable by the Acquired Company, and (iii) includes an indemnity
from the user for any content linked or provided by the user.
2.12
Compliance with Legal
Requirements. Each of the Acquired Companies is, and has at all
times been, in compliance in all material respects with each Legal Requirement
that is applicable to it, to the conduct of its business, to the ownership of
its assets, or the distribution of Acquired Company Software. No event has
occurred, and no condition or circumstance exists, that will (with or without
notice or lapse of time) constitute or result in a violation by the any of the
Acquired Companies of, or a failure on the part of any of the Acquired Companies
to comply with, any Legal Requirement in any material respect. Except as set
forth in Part 2.12 of the Disclosure Schedule, since January 1, 2011, none of
the Acquired Companies has received any written notice or other communication
from any Person regarding any actual or possible violation of, or failure to
comply with, any Legal Requirement.
2.13
Governmental Authorizations;
No Subsidies.
(a) Governmental Authorizations. Part 2.13(a) of the Disclosure Schedule
identifies each Governmental Authorization held by the Acquired Companies that
is material to the operation of the Acquired Companies, and the Company has made
available to Parent accurate and complete copies of all Governmental
Authorizations identified in Part 2.13(a) of the Disclosure Schedule. The
Governmental Authorizations identified in Part 2.13(a) of the Disclosure
Schedule are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the respective Acquired Company
to conduct its business in the manner in which its business is currently being
conducted. Each of the Acquired Companies is, and has at all times been, in
compliance in all material respects with the terms and requirements of the
respective Governmental Authorizations identified in Part 2.13(a) of the
Disclosure Schedule. No Acquired Company has received any written notice or
other communication from any Governmental Body regarding: (i) any actual or
possible violation of or failure to comply with any term or requirement of any
Governmental Authorization; or (ii) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization. No Governmental Body has at any time challenged in
writing the right of any of the Acquired Companies to design, manufacture,
license, offer or sell any of its products or services.
23
(b) No Subsidies. None of the Acquired Companies possesses (or has
ever possessed) or has any rights or interests with respect to (or has ever had
any rights or interests with respect to) any grants, incentives or subsidies
from any Governmental Body.
(c) Certain Business Practices. None of the Acquired Companies has, and, to the
Knowledge of the Company, no director, officer, agent or employee of any of the
Acquired Companies has, (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (b)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (c)
taken any action that would constitute a violation of the Foreign Corrupt
Practices Act of 1977, as amended, if the Acquired Companies were publicly held.
2.14
Tax Matters.
(a) Tax Returns and Payments. All income and other material Tax Returns
required to be filed by or on behalf of the Acquired Companies (the
Acquired Company
Returns) have been timely and
properly filed and are true, accurate and complete in all material respects,
provided that, for the avoidance of doubt, Forms 1099-K shall be considered
material Tax Returns. All Taxes of the Acquired Companies that are or have been
due and payable have been timely and properly paid. All Taxes required to be
withheld by the Acquired Companies have been properly and timely withheld and
remitted. The Company has delivered to Parent accurate and complete copies of
all income and material Tax Returns filed by the Acquired Companies. Part
2.14(a) of the Disclosure Schedule lists each jurisdiction in which any Acquired
Company is required to file a Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Acquired Companies do not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. The Company
Financial Statements properly and adequately accrue or reserve for Tax
liabilities as of the Balance Sheet Date in accordance with GAAP.
(b) Audits; Claims. No Acquired Company has received from any
Governmental Body any: (i) written notice indicating an intent to open an audit
or other review; (ii) request for information related to Tax matters; or (iii)
written notice of deficiency or proposed Tax adjustment, in each case, relating
to a matter of Tax that has not been settled or otherwise resolved. No extension
or waiver of the limitation period applicable to any Tax Returns has been
granted by or requested from an Acquired Company with respect to a Tax Return
that has not already been filed. No claim or Legal Proceeding is pending or
threatened against any Acquired Company in respect of any Tax. There are no
liens for Taxes upon any of the assets of each of the Acquired Companies except
liens for current Taxes not yet due and payable (and for which there are
adequate accruals, in accordance with GAAP).
(c) Parachute Payments. No Acquired Company is a party to any Contract
that has resulted or would reasonably be expected to result, separately or in
the aggregate, in the payment of any excess parachute payment within the
meaning of Section 280G of the Code (or any corresponding provisions of state,
local or foreign Tax law).
24
(d) Items Affecting Post-Closing Tax Periods;
Etc. No Acquired Company will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion there) ending after the
Closing Date as a result of any change in method of accounting, closing
agreement, intercompany transaction, installment sale or prepaid amount in each
case executed, made or received prior to the Effective Time. No Acquired Company
is a party to or bound by any Tax allocation or sharing agreement executed prior
to the Effective Time. No Acquired Company has ever been a member of an
affiliated group other than a group for which the Company is the common parent.
(e) Distributed Stock. No Acquired Company has distributed stock of
another Person, or has had its stock distributed by another Person, in a
transaction that was purported or intended to be governed in whole or in part by
Section 355 of the Code.
(f) Tax Holidays. Part 2.14(f) of the Disclosure Schedule sets
forth all Tax exemptions, Tax holidays or other Tax reduction agreements or
arrangements applicable to any of the Acquired Companies. Each Acquired Company
has made available to the Parent all documentation relating to such Tax
exemptions, Tax holidays or other Tax reduction agreements or arrangements. Each
Acquired Company is in compliance with the requirements for any such Tax
exemption, Tax holiday or other Tax reduction agreement or arrangement and, to
the Knowledge of the Company, none of the Tax exemptions, Tax holidays or other
Tax reduction agreements or arrangements will be jeopardized by the transaction
contemplated in this Agreement.
(g) Section 481. No Acquired Company is currently, nor for any period for which a Tax
Return has not been filed will be, required to include any adjustment in Taxable
income for any Tax period (or portion thereof) pursuant to Section 481 of the
Code (or any comparable provision under state, local or foreign Tax laws) as a
result of transactions, events or accounting methods employed prior to the
Merger.
(h) Section 6662. Each Acquired Company has disclosed on its Tax
Returns any Tax reporting position taken in any Tax Return which would result in
the imposition of penalties under Section 6662 of the Code (or any comparable
provisions of state, local or foreign law).
(i) Tax Shelters. No Acquired Company has consummated or
participated in, or is currently participating in any transaction which was or
is a Tax shelter transaction as defined in Sections 6662 or 6111 of the Code
or the Treasury Regulations promulgated thereunder. Each Acquired Company has
not participated in, and is not currently participating in, a Listed
Transaction or a Reportable Transaction within the meaning of Section
6707A(c) of the Code or Treasury Regulation Section 1.6011-4(b), or any
transaction requiring disclosure under a corresponding or similar provision of
state, local, or foreign law.
(j) Section 1.1502-6. No Acquired Company has any Liability for the
Taxes of any Person (other than another Acquired Company) under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or
foreign law) as a transferee or successor, by Contract or otherwise.
(k) Section 1503. No Acquired Company has incurred a dual
consolidated loss within the meaning of Section 1503 of the Code.
25
(l) Foreign Tax. Each Acquired Company has in its possession official foreign government
receipts for any Taxes paid by it to any foreign Tax Authorities. No Acquired
Company has or has had a permanent establishment in any foreign country, as
defined in any applicable Tax treaty or convention between the United States of
America and such foreign country.
(m) Section 897. No Acquired Company is or has ever been a United States real property
holding corporation within the meaning of Section 897 of the Code, and each
Acquired Company has filed with the Internal Revenue Service all statements, if
any, which are required under Section 1.897-2(h) of the Treasury Regulations.
(n) Tax Withholding. Each Acquired Company has complied with all
applicable Legal Requirements relating to the payment, reporting and withholding
of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445
and 1446 of the Code or similar provisions under any foreign law), has, within
the time and in the manner prescribed by law, withheld from employee wages or
consulting compensation and timely paid over to the proper governmental
authorities (or is properly holding for such timely payment) all amounts
required to be so withheld and paid over under all applicable Legal
Requirements, including federal and state income Taxes, Federal Insurance
Contribution Act, Medicare, Federal Unemployment Tax Act, relevant state income
and employment Tax withholding laws, and has timely filed all withholding Tax
Returns, for all periods.
(o) Indebtedness. None of the outstanding indebtedness of any
Acquired Company constitutes indebtedness with respect to which any interest
deductions may be disallowed under Section 163(i), Section 163(l) or Section 279
of the Code or under any other provision of applicable Legal Requirements.
(p) Section 162(m). There is no Acquired Company Contract covering
any Acquired Company Employee that, considered individually or considered
collectively with any other such Acquired Company Contracts, will, or would
reasonably be expected to, as a result of the transactions contemplated hereby
(whether alone or upon the occurrence of any additional or subsequent events),
give rise directly or indirectly to the payment of any amount that could
reasonably be expected to be non-deductible under Section 162(m) of the Code (or
any corresponding or similar provision of state, local or foreign Tax Legal
Requirements).
2.15
Employee and Labor Matters;
Benefit Plans.
(a) Employee List. Part 2.15(a) of the Disclosure Schedule contains
a list of all current employees of the Acquired Companies as of the date of this
Agreement, and correctly reflects: (i) their dates of employment; (ii) their job
title; (iii) their rate of pay or annual salary; (iv) any other compensation
payable to them (including housing allowances, transportation allowances,
compensation payable pursuant to bonus, deferred compensation or commission
arrangements or other compensation); (v) their visa status; (vi) their current
paid time off eligibility; (vii) each Acquired Company Employee Plan in which
they participate or are eligible to participate; and (viii) any promises made to
them with respect to changes or additions to their compensation or benefits.
None of the Acquired Companies is, and none of the Acquired Companies has been,
bound by or a party to, or has a duty to bargain for, any collective bargaining
agreement or other Contract with a labor organization representing any Acquired
Company Employees and there are no labor organizations representing, purporting
to represent or, to the Knowledge of the Company, seeking to represent any
current Acquired Company Employees. No Acquired Company is engaged, and no
Acquired Company has ever been engaged, in any unfair labor practice of any
nature. None of the Acquired Companies has had any strike, slowdown, work
stoppage, lockout, job action or threat thereof, or question concerning
representation, by or with respect to any of the Acquired Company Employees. No
event has occurred, and no condition or circumstance exists, that might directly
or indirectly give rise to or provide a basis for the commencement of any such
strike, slowdown, work stoppage, lockout, job action, labor dispute or union
organizing activity or any similar activity or dispute.
26
(b) Leave of Absence. There is no current Acquired Company Employee
who is not fully available to perform work because of disability or other
leave.
(c) At Will Employment. Except as set forth in Part 2.15(c) of the
Disclosure Schedule, the employment of each of the current Acquired Company
Employees is terminable by the Company at will and any termination of such
employment would result in no Liability to any Acquired Company. The Company has
made available to Parent accurate and complete copies of all employee manuals
and handbooks, disclosure materials, policy statements and other materials
relating to the employment of the Acquired Company Employees.
(d) Employee Departures/Restrictions. To the Knowledge of the Company, no employee of
an Acquired Company: (i) has informed the Company of their intention to
terminate his employment with the Company; (ii) has received an offer to join a
business that may be competitive with an Acquired Companys business; or (iii)
is a party to or is bound by any confidentiality agreement, noncompetition
agreement or other Contract (with any Person) that may have an adverse effect
on: (A) the performance by such employee of any of his duties or
responsibilities as an employee of an Acquired Company; or (B) any Acquired
Companys business or operations.
(e) Employee Plans and Agreements. Part 2.15(e) of the Disclosure Schedule contains
an accurate and complete list of each Acquired Company Employee Plan and each
Acquired Company Employee Agreement. No Acquired Company intends or has
committed to establish or enter into any new Acquired Company Employee Plan or
Acquired Company Employee Agreement, or to modify any Acquired Company Employee
Plan or Acquired Company Employee Agreement (except to conform any such Acquired
Company Employee Plan or Acquired Company Employee Agreement to the requirements
of any applicable Legal Requirements, in each case as previously disclosed to
Parent in writing or as required by this Agreement).
(f) Delivery of Documents. As applicable with respect to each Acquired
Company Employee Plan, the Company has made available to Parent: (i) correct and
complete copies of all documents setting forth the terms of each Acquired
Company Employee Plan and each Acquired Company Employee Agreement, including
all amendments thereto and all related trust documents; (ii) the most recent
summary plan description together with the summaries of material modifications
thereto, if any, with respect to each Acquired Company Employee Plan; (iii) all
material written Contracts relating to each Acquired Company Employee Plan,
including administrative service agreements and group insurance contracts; (iv)
the annual reports (Form 5500 series) for the last three complete plan year; (v)
the most recent letter of determination from the U.S. Internal Revenue Service
relating to the tax-qualified status of the Plan, if any; (vi) all written
materials provided to any Acquired Company Employee relating to any Acquired
Company Employee Plan and any proposed Acquired Company Employee Plans, in each
case, relating to any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting schedules or other
events that would result in any liability to any Acquired Company; (vii) all
correspondence to or from any Governmental Body relating to any Acquired Company
Employee Plan; and (viii) all insurance policies in the possession of any
Acquired Company pertaining to fiduciary liability insurance covering the
fiduciaries for each Acquired Company Employee Plan.
(g) No Foreign Plans. None of the Acquired Companies has established
or maintained: (i) any plan, program, policy, practice, Contract or other
arrangement mandated by a Governmental Body other than the United States; (ii)
any Acquired Company Employee Plan that is subject to any of the Legal
Requirements of any jurisdiction outside of the United States; or (iii) any
Acquired Company Employee Plan that covers or has covered Company Employees
whose services are or have been performed primarily outside of the United
States.
27
(h) Absence of Certain Retiree
Liabilities. No Acquired Company
Employee Plan provides (except at no cost to any Acquired Company), or reflects
or represents any liability of any Acquired Company to provide, retiree life
insurance, retiree health benefits or other retiree employee welfare benefits to
any Person for any reason, except as may be required by applicable Legal
Requirements. Other than commitments made that involve no future costs to any
Acquired Company, no Acquired Company has ever represented, promised or
contracted (whether in oral or written form) to any Acquired Company Employee
(either individually or to Acquired Company Employees as a group) or any other
Person that such Acquired Company Employee(s) or other person would be provided
with retiree life insurance, retiree health benefit or other retiree employee
welfare benefits, except to the extent required by applicable Legal
Requirements.
(i) No Defaults. Each Acquired Company has performed all obligations required to be
performed by it under each Acquired Company Employee Plan and is not in material
default or material violation of, and no Acquired Company has Knowledge of any
default or violation by any other party to, the terms of any Acquired Company
Employee Plan. Each of the Acquired Company Employee Plans has been operated and
administered in all material respects in accordance with applicable Legal
Requirements, including, without limitation, the applicable tax qualification
requirements under the Code. No Acquired Company Employee Plan and no grants,
awards or benefits thereunder are subject to Section 409A(a) or 409A(b) of the
Code or, if subject to Section 409A(a) of the Code, have failed or will fail, in
form or operation, to meet the requirements of Section 409A(a)(2), 409A(a)(3) or
409A(a)(4) of the Code. All contributions to, and material payments from, any
Acquired Company Employee Plan which may have been required to be made in
accordance with the terms of such Acquired Company Employee Plan or applicable
Legal Requirements have been timely made, and all contributions for any period
ending on or before the date of this Agreement which are not yet due, but will
be paid on or prior to the date of this Agreement, are reflected as an accrued
liability on the Balance Sheet. Each Acquired Company Employee Plan can be
amended, terminated or otherwise discontinued after the date of this Agreement,
without liability to any of the Acquired Companies or Parent (other than
ordinary administration expenses). There are no audits, inquiries or Legal
Proceedings pending or, to the Knowledge of the Company, threatened by any
Governmental Body with respect to any Acquired Company Employee Plan.
(j) No Conflict. Except as set forth in Part 2.15(j) of the Disclosure Schedule, neither
the execution, delivery or performance of this Agreement, nor the consummation
of the Merger or any of the other transactions contemplated by this Agreement,
will, or is reasonably expected to, (either alone or upon the occurrence of any
additional or subsequent events): (i) constitute an event under any Acquired
Company Employee Plan, Acquired Company Employee Agreement, trust or loan that
will or may result (either alone or in connection with any other circumstance or
event) in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Acquired Company Employee; or
(ii) create or otherwise result in any Liability with respect to any Acquired
Company Employee Plan.
(k) Compliance. Each of the Acquired Companies: (i) is in compliance in all material
respects with all applicable Legal Requirements, Contracts and Orders of any
arbitrator or any court or other Governmental Body respecting employment,
employment practices, terms and conditions of employment, wages, hours or other
labor-related matters, including Legal Requirements and Orders relating to
discrimination, wages and hours, labor relations, leave of absence requirements,
occupational health and safety, privacy, harassment, retaliation, immigration,
wrongful discharge or violation of the personal rights of Acquired Company
Employees or prospective employees; (ii) has withheld and reported all amounts
required by any Legal Requirement or Contract to be withheld and reported with
respect to wages, salaries and other payments to any Acquired Company Employee;
(iii) has no Liability for any arrears of wages or any Taxes or any penalty for
failure to comply with any of the foregoing; and (iv) has no Liability for any
payment to any trust or other fund governed by or maintained by or on behalf of
any Governmental Body with respect to unemployment compensation benefits, social
security or other benefits or obligations for any Acquired Company Employee
(other than routine payments to be made in the normal course of business and
consistent with past practice).
28
(l) Labor Relations. Except as set forth in Part 2.15(l) of the
Disclosure Schedule, the Company has no Knowledge of any facts indicating that
the consummation of the Merger or any of the other transactions contemplated by
this Agreement will have an adverse effect on the labor relations of any of the
Acquired Companies. Except as set forth in Part 2.15(l) of the Disclosure
Schedule, there are no pending or, to the Knowledge of the Company, threatened
or reasonably anticipated claims or Legal Proceedings against any Acquired
Company under any workers compensation policy or long-term disability
policy.
(m) Claims Against Plans. Other than with respect to routine benefit
claims, there are no pending or, to the Knowledge of the Company, threatened or
reasonably anticipated claims or Legal Proceedings against any of the Acquired
Company Employee Plans, the assets of any of the Acquired Company Employee Plans
or the Acquired Companies, or the Acquired Company Employee Plan administrator
or any fiduciary of the Acquired Company Employee Plans with respect to the
operation of such Acquired Company Employee Plans.
(n) Independent Contractors. Part 2.15(n) of the Disclosure Schedule
accurately sets forth, with respect to each Person who is an independent
contractor of the Acquired Companies and who has received or may be entitled to
receive in excess of US $50,000 from any of the Acquired Companies:
(i) the name of such
independent contractor, the Acquired Company with which such independent
contractor is or was under contract and the date as of which such independent
contractor was originally engaged by such Acquired Company;
(ii) such independent
contractors job function;
(iii) the aggregate dollar
amount of the compensation (including all payments or benefits of any type)
received by such independent contractor from the applicable Acquired Company
with respect to services performed in the fiscal year ended December 31, 2014;
and
(iv) the terms of compensation
of such independent contractor.
Part 2.15(n) of the Disclosure Schedule also accurately sets forth, with
respect to each other Person who was an independent contractor of the Acquired
Companies and who received in excess of US $50,000 from any of the Acquired
Companies, the name of such independent contractor, the date as of which such
independent contractor was originally engaged by such Acquired Company and the
date such engagement ended, and such independent contractors job
function.
(o) No Misclassified Employees. No current or former independent contractor of
any of the Acquired Companies would reasonably be expected to be a misclassified
employee. No independent contractor is eligible to participate in any Acquired
Company Employee Plan. No Acquired Company has ever had any temporary or leased
employees that were not treated and accounted for in all respects as employees
of such Acquired Company.
29
(p) Labor-Related Claims. Except as set forth in Part 2.15(p) of the
Disclosure Schedule, there is no Legal Proceeding, claim, labor dispute or
grievance pending or, to the Knowledge of the Company, threatened or would
reasonably be expected relating to any employment Contract, compensation, wages
and hours, leave of absence, plant closing notification, employment statute or
regulation, privacy right, labor dispute, workers compensation policy,
long-term disability policy, safety, retaliation, immigration or discrimination
matter involving any Acquired Company Employee, including charges of unfair
labor practices or harassment complaints.
2.16
Environmental
Matters. Each of the Acquired Companies is in compliance in
all material respects with all applicable Environmental Laws, which compliance
includes the possession by each respective Acquired Company of all Environmental
Licenses and other Governmental Authorizations required under applicable
Environmental Laws, and compliance in all material respects with the terms and
conditions thereof. None of the Acquired Companies has received any notice or
other communication, whether from a Governmental Body, citizens group, Acquired
Company Employee or otherwise, that alleges that such Acquired Company is not in
compliance with any Environmental Law, and, to the Knowledge of the Company,
there are no circumstances that may prevent or interfere with such Acquired
Companys compliance with any Environmental Law in the future. To the Knowledge
of the Company: (a) no current or prior owner of any property leased or
controlled by each of the Acquired Companies has received any notice or other
communication, whether from a Government Body, citizens group, Acquired Company
Employee or otherwise, that alleges that such current or prior owner or such
Acquired Company is not in compliance with any Environmental Law; (b) the
Acquired Companies have not caused or contributed to any Environmental Release
and there are no circumstances which may give rise to any Environmental Release
by the Acquired Companies; and (c) no Contaminants are stored or contained on or
under any of the Properties whether in storage tanks, land fills, pits, ponds,
lagoons or otherwise. All Governmental Authorizations currently held by each of
the Acquired Companies pursuant to Environmental Laws are identified in Part
2.16 of the Disclosure Schedule.
2.17
Insurance. Part 2.17 of the Disclosure Schedule identifies each insurance policy
maintained by, at the expense of or for the benefit of each of the Acquired
Companies as of the date of this Agreement and identifies all claims made
thereunder as of the date of this Agreement. The Company has made available to
Parent accurate and complete copies of the insurance policies identified on Part
2.17 of the Disclosure Schedule. Each of the insurance policies identified in
Part 2.17 of the Disclosure Schedule is in full force and effect. None of the
Acquired Companies has received any written notice or other communication
regarding any actual or possible: (i) cancellation or invalidation of any
insurance policy; (ii) refusal of any coverage or rejection of any claim under
any insurance policy; or (iii) material adjustment in the amount of the premiums
payable with respect to any insurance policy.
2.18
Related Party
Transactions. Except as set forth in Part 2.18 of the Disclosure
Schedule: (a) no Related Party has any interest in any material asset used in or
otherwise relating to the business of any of the Acquired Companies; (b) no
Related Party is indebted to any of the Acquired Companies (other than for
ordinary travel advances); (c) no Related Party has entered into, or has any
financial interest in, any Material Contract, transaction or business dealing or
involving any of the Acquired Companies; (d) no Related Party is competing with
any of the Acquired Companies; and (e) no Related Party has any claim or right
against any of the Acquired Companies (other than rights under Company Options
and rights to receive compensation for services performed as an employee of the
respective Acquired Company or other rights arising in the ordinary course of
employment).
2.19
Legal Proceedings;
Orders.
(a) Legal Proceedings. There is no pending Legal Proceeding and, to the
Knowledge of the Company, no Person has threatened to commence any Legal
Proceeding: (i) that involves any of the Acquired Companies or any of the assets owned or used by any of the
Acquired Companies or any Person whose liability any of the Acquired Companies
has or may have retained or assumed, either contractually or by operation of
law; (ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement; or (iii) that relates to the
ownership of any capital stock of any of the Acquired Companies, or any option
or other right to the capital stock of any of the Acquired Companies, or right
to receive consideration as a result of this Agreement. To the Knowledge of the
Company, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that will or could reasonably be expected to, give rise to
or serve as a basis for the commencement of any such Legal Proceeding. Except as
set forth in Part 2.19(a) of the Disclosure Schedule, no Legal Proceeding
involving claims in excess of $50,000 has ever been commenced by, and no Legal
Proceeding involving claims in excess of $50,000 has ever been pending against,
any of the Acquired Companies.
30
(b) Orders. There is no Order to which any of the Acquired Companies, or any of the
assets owned or used by each of the Acquired Companies, is subject. To the
Knowledge of the Company, no officer or other employee of any of the Acquired
Companies is subject to any Order that prohibits such officer or other employee
from engaging in or continuing any conduct, activity or practice relating to the
respective Acquired Companys business.
2.20
Authority; Binding Nature of
Agreement; Inapplicability of Anti-takeover Statutes.
(a) Authority; Binding Nature. The Company has the corporate power and
authority to enter into and to perform its obligations under this Agreement and
under each other agreement, document or instrument referred to in or
contemplated by this Agreement to which the Company is or will be a party; and
the execution, delivery and performance by the Company of this Agreement and of
each such other agreement, document and instrument have been duly authorized by
all necessary action on the part of the Company and its board of directors. This
Agreement and each other agreement, document and instrument referred to in or
contemplated by this Agreement to which the Company is a party constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to: (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors; and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
(b) Board Approval. The Companys board of directors has: (i)
unanimously determined that the Merger is advisable and fair and in the best
interests of the Company and its stockholders; (ii) unanimously authorized and
approved the execution, delivery and performance of this Agreement by the
Company and unanimously approved the Merger; and (iii) unanimously recommended
the adoption of this Agreement by Company Stockholders and directed that this
Agreement, the Merger be submitted for consideration by the Company
Stockholders.
(c) No Takeover Statute. No state or foreign takeover statute or similar
Legal Requirement applies or purports to apply to the Merger, this Agreement or
any of the transactions contemplated hereby.
31
2.21
Non-Contravention;
Consents. Except as set forth in Part 2.21 of the Disclosure
Schedule, neither: (1) the execution, delivery or performance by the Company of
this Agreement or any of the other agreements, documents or instruments referred
to in this Agreement to which the Company is or will be a party; nor (2) the
consummation by the Company of the Merger or any of the other transactions
contemplated by this Agreement or any such other agreement, document or
instrument, will (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation
of: (i) any of the provisions of any Charter Documents of any of the Acquired
Companies; or (ii) any resolution adopted by the stockholders, board of
directors or any committee of the board of directors of any of the Acquired
Companies;
(b) contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the right to challenge any of
the transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which any of the
Acquired Companies or any of the assets owned or used by any of the Acquired
Companies, is subject;
(c) contravene, conflict with or result in a violation
of any of the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by any of the Acquired Companies or that otherwise
relates to any such Acquired Companys business or to any of the assets owned or
used by any such Acquired Company;
(d) contravene, conflict with or result in a violation
or breach of, or result in a default under, any provision of any Acquired
Company Contract that is a Material Contract, or give any Person the right to:
(i) declare a default or exercise any remedy under any such Material Contract;
(ii) accelerate the maturity or performance of any such Material Contract; or
(iii) cancel, terminate or modify any such Material Contract; or
(e) result in the imposition or creation of any lien
or other Encumbrance upon or with respect to any asset owned or used by any of
the Acquired Companies (except for minor liens that will not, in any case or in
the aggregate, materially detract from the value of the assets subject thereto
or materially impair the operations of any of the Acquired Companies).
Except for the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and as set forth in Part 2.21 of the Disclosure
Schedule, none of the Acquired Companies is and none of the Acquired Companies
will be required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with: (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement; or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
2.22
Vote
Required. The affirmative vote of the holders of a majority
of the shares of Company Common Stock is the only vote of the holders of any
class or series of Company Capital Stock necessary to adopt this Agreement and
approve the other transactions contemplated by this Agreement (the
Required Merger Stockholder
Vote).
2.23
Brokers. No broker, finder or investment banker is entitled to any brokerage,
finders or other fee or commission in connection with the Merger or any of the
other transactions contemplated by this Agreement based upon arrangements made
by or on behalf of any of the Acquired Companies.
2.24
Full
Disclosure. To the Knowledge of the Company, this Agreement
(including the Disclosure Schedule) does not, and the Merger Consideration
Certificate (as defined in Section 1.2(c)(i)(E)) will not: (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact; or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances under which such
representations, warranties and information were or will be made or provided)
not false or misleading.
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2.25
No Existing
Discussions. No Acquired Company
nor any Representative of any of the Acquired Companies is currently engaged,
directly or indirectly, in any discussions with any Person (other than Parent
and Merger Subs) relating to any Acquisition Transaction.
3. Representations and Warranties of Parent and
Merger Sub
Parent and Merger Subs represent and warrant to the Company as follows:
3.1 Due Organization. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and
authority to conduct its business in the manner in which its business is
currently being conducted and to own and use its assets in the manner in which
its assets are currently owned and used. Merger Sub I is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub I is newly formed and was formed solely to effectuate the
First Step Merger. Merger Sub II is a limited liability company duly organized,
validly existing and in good standing under the Laws of Delaware. Merger Sub II
is newly formed and was formed solely to effectuate the Second Step Merger. All
of the issued and outstanding shares of capital stock of Merger Subs are owned,
beneficially and of record, by Parent.
3.2 Non-Contravention; Consents.
(a) Non-Contravention. Neither: (1) the execution, delivery or
performance by Parent or Merger Subs of this Agreement or any of the other
agreements, documents or instruments referred to in this Agreement to which
Parent or any of Merger Subs is or will be a party; nor (2) the consummation by
the Parent or Merger Subs of the Merger or any of the other transactions
contemplated by this Agreement or any such other agreement, document or
instrument, will (with or without notice or lapse of time):
(i) contravene, conflict with
or result in a violation of: (i) any of the provisions of any Charter Documents
of any of Parent or Merger Subs; or (ii) any resolution adopted by the
stockholders, board of directors or any committee of the board of directors of
any of Parent or Merger Subs;
(ii) contravene, conflict with
or result in a violation of, or give any Governmental Body or other Person the
right to challenge any of the transactions contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any Legal Requirement or any
Order to which any of Parent or Merger Subs or any of the assets owned or used
by any of Parent or Merger Subs, is subject;
(iii) contravene, conflict with
or result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorization that is held by any of Parent or Merger
Subs or that otherwise relates to any of Parent or Merger Subss business or to
any of the assets owned or used by any of Parent or Merger Subs; or
(iv) contravene, conflict with
or result in a violation or breach of, or result in a default under, any
provision of any contract of Parent or Merger Subs required to be filed by
Parent as a material contract pursuant to Item 601(b)(10) of Regulation S K
under the Securities Act of 1933, as amended, or give any Person the right to:
(i) declare a default or exercise any remedy under any such contract; (ii)
accelerate the maturity or performance of any such contract; or (iii) cancel or
terminate any such contract.
33
(b) Consents. Except for (i) the filing of the Certificate of Merger and the Second
Step Certificate of Merger with the Secretary of State of the State of Delaware,
(ii) any filings required to be made by Parent or Merger Subs with the
Securities and Exchange Commission and the New York Stock Exchange, and (iii)
the filing of such notices as may be required under the Securities Act or the
Exchange Act (in each case, including all regulations promulgated thereunder),
or as may be required under applicable state securities laws, in each case from
any Governmental Body in connection with the Integrated Merger, neither Parent
nor Merger Subs will be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with: (i) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement; or (ii) the consummation of the Integrated Merger
or any of the other transactions contemplated by this Agreement.
3.3 Authority; Binding Nature of
Agreement. Parent and Merger Subs have the absolute and
unrestricted right, power and authority to enter into and perform their
obligations under this Agreement and under each other agreement, document and
instrument referred to in this Agreement to which Parent or Merger Subs is a
party; and the execution, delivery and performance by Parent and Merger Subs of
this Agreement any of each such other agreement, document and instrument have
been duly authorized by all necessary action on the part of Parent and Merger
Subs and their respective boards of directors (or managers with respect to
Merger Sub II). No vote of Parents stockholders is needed to approve the
Merger. This Agreement and each other agreement, document or instrument referred
to in this Agreement to which Parent or Merger Subs is a party constitutes the
legal, valid and binding obligation of Parent and Merger Subs, as the case may
be, enforceable against them in accordance with its terms, subject to: (a) laws
of general application relating to bankruptcy, insolvency and the relief of
debtors; and (b) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.4 Legal Proceedings.
There is no pending Legal Proceeding and, to the knowledge of Parent and Merger
Subs, no Person has threatened to commence any Legal Proceeding, that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement.
3.5 Valid Issuance. The Parent Class A Common Stock to be issued in
the First Step Merger will, when issued in accordance with the provisions of
this Agreement, be duly authorized, validly issued, fully paid and nonassessable
and none of such shares will be subject to any repurchase option, forfeiture
provision or restriction on transfer (other than restrictions on transfer
imposed by virtue of applicable federal and state securities laws).
3.6 Brokers. No broker, finder or
investment banker is entitled to any brokerage, finders or other fee or
commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Merger Subs.
3.7 Sufficient Funds. Parent
has and will have, from and after the date of Agreement, sufficient funds on
hand and available through existing liquidity facilities to satisfy its payment
obligations to the extent arising under this Agreement or the other Transaction
Documents and any of the other transactions contemplated by this Agreement.
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4. Indemnification, Etc.
4.1 Survival of Representations,
Etc.
(a) General Survival. Subject to Section 4.1(b) and Section 4.1(d),
the representations and warranties made by the Company in this Agreement and the
representations and warranties set forth in the Merger Consideration
Certificate, in each case other than the Specified Representations, shall
survive the Effective Time and shall expire at 11:59 pm Pacific Time on the date
18 months after the date of this Agreement (the Termination Date); provided, however, that
if, at any time prior to the Termination Date, any Indemnitee delivers to the
Stockholders Agent a written notice alleging the existence of an inaccuracy in
or a breach of any of such representations and warranties and asserting a claim
for recovery under Section 4.2 based on such alleged inaccuracy or breach, then
the claim asserted in such notice shall survive the Termination Date until such
time as such claim is fully and finally resolved. It is the express intent of
the parties that, if the eighteen month survival period specified in this
Section 4.1(a) applicable to representations and warranties of the Company in
this Agreement (other than as specified in Section 4.1(b) or Section 4.1(d)) is
shorter than the statute of limitations that would otherwise apply to such
matters, then, by contract, the applicable statute of limitations shall be
reduced to such survival period.
(b) Specified Representations. Notwithstanding anything to the contrary
contained in Section 4.1(a), but subject to Section 4.1(d), the Specified
Representations shall survive the Effective Time until the expiration of the
statute of limitations (including any extensions thereof) applicable to a third
party claim, or to a Governmental Body bringing a Legal Proceeding, that, if
successful, would constitute an inaccuracy in or breach of such Specified
Representation as of the date of this Agreement or as of the
Closing; provided,
however, that if, at any time
prior to the applicable expiration date referred to in this sentence, any
Indemnitee delivers to the Stockholders Agent a written notice alleging the
existence of an inaccuracy in or a breach of any of such Specified
Representations and asserting a claim for recovery under Section 4.2 based on
such alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the Termination Date until such time as such claim is fully and finally
resolved.
(c) Parent Representations. All representations and warranties made by
Parent and Merger Subs shall terminate and expire as of the Effective Time, and
any liability of Parent or Merger Subs with respect to such representations and
warranties shall thereupon cease.
(d) Willful Misconduct; Fraud. Notwithstanding anything to the contrary
contained in Section 4.1(a) or Section 4.1(b), the limitations set forth in
Section 4.1(a) and 4.1(b) shall not apply in the case of claims based upon fraud
or willful misconduct (collectively Fraud).
(e) Representations Not Limited. The representations, warranties, covenants and
obligations of the Company, and the rights and remedies that may be exercised by
the Indemnitees, shall not be limited or otherwise affected by or as a result of
any information furnished to, or any investigation made by or knowledge of, any
of the Indemnitees or any of their Representatives.
(f) Disclosure Schedule. For purposes of this Agreement, each statement
or other item of information set forth in the Disclosure Schedule or in any
update to the Disclosure Schedule shall be deemed to be a representation and
warranty made by the Company in this Agreement.
35
4.2 Indemnification.
(a) Indemnification. From and after the Effective Time (but subject
to Section 4.1), each Major Stockholder (collectively, the Indemnitors), severally and not jointly and pro rata based upon the
amount of Merger Consideration payable to such stockholder (as compared with the
Merger Consideration payable to all Major Stockholders), shall hold harmless and
indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any Damages which are suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees otherwise
become subject (regardless of whether or not such Damages relate to any third
party claim) (it being understood that while the Indemnitees may bring a claim
for Damages they may suffer or incur or to which they may become subject, the
Indemnitees shall not recover any such Damages until such Damages are actually
suffered or incurred, or to which the Indemnitee has actually become subject)
and which arise from or as a result of:
(i) any inaccuracy in or
breach of any representation or warranty made by the Company in this Agreement
(other than representations or warranties related to Taxes or Tax Returns to the
extent the subject matter of claim is the subject of Section 4.2(a)(iii), which
claim shall be brought pursuant to Section 4.2(a)(iii));
(ii) any inaccuracy in or
breach of any representation or warranty set forth in the Merger Consideration
Certificate or the Working Capital Certificate;
(iii) any matter referred to on
Schedule
4.2(a)(iii);
(iv) any claim by any
securityholder of the Company in his/her/its capacity as a securityholder with
respect to events or circumstances occurring prior to or as of the Effective
Time (including claims with respect to (A) the authorization or approval of the
Merger or (B) the distribution of the Merger Consideration to the extent that
Parent makes payments in accordance with the Merger Consideration Certificate
and pursuant to the terms of this Agreement and the Escrow
Agreement);
(v) any (A) Taxes of any of
the Acquired Companies attributable to any Pre-Closing Tax Period (Pre-Closing
Taxes); (B) employment or other payroll Taxes imposed on the Company in
connection with payments to holders of any compensation payments occurring by
reason of the transactions contemplated by this Agreement; and (C) Liability for
the payment of any amounts as a result of any obligation to indemnify any other
Person, or any successor or transferee Liability, in respect of any of the items
described in clauses (A) and (B) except to the extent, in each case, that such
Taxes or Liability were taken into account as a current liability in the
calculation of Net Working Capital (or to the extent the subject matter of claim
is the subject of Schedule 4.2(a)(iii), in which case such claim shall be
brought pursuant to Section 4.2(a)(iii));
(vi) any Fraud committed by
the Company in connection with this Agreement or the transactions contemplated
hereby; and
(vii) subject to Section
4.5(d), third party claims against the Indemnitees following the Closing,
whether or not it is determined that there was a breach or inaccuracy of a
representation or warranty or any other matter specified in Section 4.2(a)(i) as
a basis for indemnification under this Agreement, if the facts and circumstances
alleged in such third party claim would give the Indemnitees a right to
indemnification under Section 4.2(a)(i) assuming for this purpose that such
facts and circumstances are accurate and the claims made therein are recoverable
by the third party claimant(s) in accordance therewith; provided, however, that
subject to Section 4.5(d), Indemnitees shall be entitled to recover only 50% of
Damages paid, incurred, suffered or sustained by them resulting from or arising
out of such third party claim unless the Indemnitees recover for such claim
pursuant to Section 4.2(a)(i).
36
(b) Damage to Parent. The
parties acknowledge and agree that, if the Surviving Entity suffers, incurs or
otherwise becomes subject to any Damages as a result of or in connection with
any inaccuracy in or breach of any representation, warranty, covenant or
obligation, then (without limiting any of the rights of the Surviving Entity as
an Indemnitee) Parent shall also be deemed, by virtue of its ownership of the
stock of the Surviving Entity, to have incurred Damages as a result of and in
connection with such inaccuracy or breach.
4.3 Other Limitations.
(a) Threshold. Subject to
Section 4.3(b), the Indemnitors will not have any obligation to indemnify the
Indemnitees for any Damages pursuant to this Section 4 unless and until the
aggregate amount of all Damages in respect of which the Indemnitors are
otherwise entitled to indemnification pursuant to this Section 4 exceeds an
amount equal to $1,000,000 (the "Threshold") at which point
the Indemnitors shall be entitled to indemnification for the entire amount of
Damages, including the Threshold.
(b) Applicability of Threshold. The limitations set forth in Section 4.3(a) shall not apply: (i) in the
case of Fraud; (ii) to inaccuracies in or breaches of any of the Specified
Representations; (iii) to the matters referred to in Sections 4.2(a)(ii),
4.2(a)(iii), 4.2(a)(iv), 4.2(a)(v) and 4.2(a)(vi); or (iv) to the matters
referred to in Section 4.2(a)(vii) (to the extent related to breaches of any of
the Specified Representations).
(c) Recourse to Escrow.
(i) Subject to Section 4.3(d), recourse by the Indemnitees to the Escrow
Property shall be the Indemnitees sole and exclusive remedy for monetary
Damages resulting from the matters referred to in Section 4.2.
(ii) Notwithstanding anything to the contrary in this Agreement, the total
amount of indemnification payments that any of the Indemnitors can be required
to make to the Indemnitees pursuant to item 1 of Schedule 4.2(a)(iii) shall be
limited to such Indemnitors pro rata portion of $1,000,000 (based on the pro
rata portion of the Merger Consideration payable to all Indemnitors).
(iii) The Indemnitees first source of recovery for indemnification claims
under Section 4.2 shall be recourse against the Escrow Property (and the
Stockholders Agent may elect, or if no such election is made, Parent may elect,
whether recovery from the Escrow Fund for such claims is in the form of Escrow
Shares, Escrow Cash or a combination thereof, so long as the full amount of the
indemnification obligation is satisfied); claims may only be made directly
against the Indemnitors (to the extent such claims are not limited to the Escrow
Property pursuant to Section 4.3(c)(i)) when the aggregate value of pending
indemnification claims exceeds the value of Escrow Property then held in the
Escrow Fund (and then only to the extent of excess).
(iv) For purposes of this Section 4, each Escrow Share shall be deemed to have
a per share value equal to the average of the closing price of Parent Class A
Common Stock for the 30 consecutive trading days ending on the trading day
immediately before the date satisfaction of a claim for indemnification
hereunder, subject to appropriate adjustments for stock splits, combinations or
similar corporate events affecting the shares of Parent Class A Common
Stock.
(d) Applicability of Liability Cap. The limitations set forth in Section 4.3(c)(i) shall not apply: (i) in
the case of Fraud; or (ii) to inaccuracies in or breaches of any of the
Specified Representations. Except in
the case of Fraud committed by such Indemnitor, the total amount of
indemnification payments that any of the Indemnitors can be required to make to
the Indemnitees pursuant to Section 4.2 shall be limited to the portion of the
Merger Consideration received by such Indemnitor.
37
(e) Other Limitations.
(i) This Section 4 shall constitute the exclusive remedy after the Closing
for recovery of Damages by the Indemnitees pursuant to or in connection with
this Agreement, except in the case of claims for Fraud against the Indemnitor
committing such Fraud; provided, however, subject to the limitations set forth herein, nothing in this Agreement
shall limit the rights or remedies of any Indemnitee (A) to specific
performance, injunctive and other equitable relief or (B) pursuant to any other
agreement executed by an Indemnitor.
(ii) The amount of any Damages for which indemnification is provided under
this Section 4 shall be net of any amounts actually recovered by the Indemnitee
under insurance policies with respect to such Damages (net of any costs to
recover such insurance payments and the costs of any increased premiums to the
extent resulting therefrom); provided that Parent shall only have the obligation
to seek insurance recovery to the extent commercially reasonable in light of the
circumstances and only with respect to insurance policies obtained by the
Company prior to the Closing for which premiums were paid in full prior to the
Closing.
(iii) Notwithstanding anything to the contrary contained in this Agreement,
under no circumstances will either Party be liable to the other for any punitive
or exemplary damages (except to the extent such punitive or exemplary damages
are awarded to a third party pursuant to a third party claim).
(iv) To
the extent required by applicable Legal Requirements, the Indemnitee shall act
in good faith and a commercially reasonable manner to mitigate any Damages they
may pay, incur, suffer or sustain for which indemnification is available
hereunder.
(v) For the avoidance of doubt and in order to prevent duplication of payment
by the Indemnitors, the Indemnitors will not have any obligation to indemnify
the Indemnitees for any Damages pursuant to this Section 4 to the extent that
such Damages were previously included in calculating the Closing Date Net
Working Capital or Working Capital Adjustment.
4.4 No Contribution. Each Indemnitor waives, and acknowledges and
agrees that he shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
right or remedy against any Merger Sub or any of the Acquired Companies in
connection with any indemnification obligation or any other liability to which
he may become subject under or in connection with this Agreement or any other
agreement or document delivered to Parent in connection with this Agreement.
4.5 Defense of Third Party Claims. In the event of the assertion or commencement by any third party of any
claim or Legal Proceeding (whether against any Merger Sub, any of the Acquired
Companies, Parent or any other Person) with respect to which any Indemnitor may
become obligated to hold harmless, indemnify, compensate or reimburse any
Indemnitee pursuant to Section 4, Parent shall have the right, at its election,
to proceed with the defense of such claim or Legal Proceeding on its own with
counsel reasonably satisfactory to the Stockholders Agent. If Parent so
proceeds with the defense of any such claim or Legal Proceeding:
(a)
subject to the other provisions of
Section 4, all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by the Indemnitors to the
extent the Indemnitors are obligated to indemnify under this Section 4 for such
claim or Legal Proceeding;
38
(b) each Indemnitor shall make available to Parent any documents and
materials in his possession or control that may be necessary to the defense of
such claim or Legal Proceeding;
(c) The Stockolders Agent shall have the right, in its discretion and at its
or the Major Stockholders own expense, to participate in, but not control, the
defense of such claim, and Parent shall keep the Stockolders Agent reasonably
informed as to the defense of such claim; and
(d) Parent shall have the right to settle, adjust or compromise such claim or
Legal Proceeding; provided,
however, that notwithstanding
anything to the contrary in the last paragraph of Section 4.2(a)(vii) or Section
4.5, if Parent settles, adjusts or compromises any such claim or Legal
Proceeding without the consent of the Stockholders Agent (it being understood
that if Parent requests that the Stockholders Agent consent to a settlement,
adjustment or compromise, the Stockholders Agent shall not unreasonably
withhold or delay such consent), such settlement, adjustment or compromise shall
not be conclusive evidence of the amount of Damages incurred by the Indemnitee
in connection with such claim or Legal Proceeding or whether the Indemnitors are
obligated to indemnify the Indemnitors under this Section 4 for such claim or
Legal Proceeding.
Parent shall give the
Stockholders Agent prompt written notice of the commencement of any such Legal
Proceeding against Parent, any Merger Sub or any of the Acquired Companies;
provided, however, that any failure on the part of Parent to so
notify the Stockholders Agent shall not limit any of the obligations of the
Indemnitors under Section 4 (except to the extent such failure materially
prejudices the defense of such Legal Proceeding). If Parent does not elect to
proceed with the defense of any such claim or Legal Proceeding, the
Stockholders Agent may proceed with the defense of such claim or Legal
Proceeding with counsel reasonably satisfactory to Parent; provided, however, that the Stockholders Agent may not settle,
adjust or compromise any such claim or Legal Proceeding without the prior
written consent of Parent (which consent may not be unreasonably withheld or
delayed).
4.6 Tax Matters. The parties
agree to treat any indemnification payment made under this Article 4 as an
adjustment to the Merger Consideration for all purposes, including, to the
extent permitted under applicable Tax Law, all federal, state, local and foreign
Tax purposes, and the parties agree to, and shall cause their respective
affiliates to, file their Tax Returns accordingly.
5. Miscellaneous Provisions
5.1 Stockholders Agent.
(a) Appointment. By virtue of
the adoption of this Agreement, the Indemnitors irrevocably nominate, constitute
and appoint Nadav Sharon as the agent and true and lawful attorney in fact of
the stockholders (the Stockholders Agent),
with full power of substitution, to act in the name, place and stead of the
Indemnitors for purposes of executing any documents and taking any actions that
the Stockholders Agent may, in his sole discretion, determine to be necessary,
desirable or appropriate in connection with any claim for indemnification,
compensation or reimbursement under Section 4 or under the Escrow Agreement or
any matter referred to in this Agreement. Nadav Sharon hereby accepts his
appointment as Stockholders Agent.
39
(b) Authority. The Indemnitors
grant to the Stockholders Agent full authority to execute, deliver,
acknowledge, certify and file on behalf of such Indemnitors (in the name of any
or all of the Indemnitors or otherwise) any and all documents that the
Stockholders Agent may, in his sole discretion, determine to be necessary,
desirable or appropriate, in such forms and containing such provisions as the
Stockholders Agent may, in his sole discretion, determine to be appropriate, in
performing his duties as contemplated by Section 5.1(a), which shall include but
not be limited to the following:
(i) to
take such actions and to execute and deliver such amendments, modifications,
waivers and consents in connection with this Agreement and the agreements
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby as the Stockholders Agent, in its reasonable discretion, may deem
necessary or desirable to give effect to the intentions of this Agreement and
the other agreements contemplated hereby;
(ii) as
the Stockholders Agent of the Indemnitors, to enforce and protect the rights
and interests of the Indemnitors and to enforce and protect the rights and
interests of the Stockholders Agent arising out of or under or in any manner
relating to this Agreement and each other agreement contemplated hereby and, in
connection therewith, to (A) resolve all questions, disputes, conflicts and
controversies concerning indemnification claims pursuant to Section 4; (B)
employ such agents, consultants and professionals, to delegate authority to its
agents, to take such actions and to execute such documents on behalf of the
Indemnitors in connection with Section 4 as the Stockholders Agent, in its
reasonable discretion, deems to be in the best interest of the Indemnitors; (C)
assert or institute any claim, action, proceeding or investigation; (D)
investigate, defend, contest or litigate any claim, action, proceeding or
investigation initiated by Parent, any Indemnitee, or any other Person, against
the Stockholders Agent and/or the Indemnitors, and receive process on behalf of
any or all Indemnitors in any such claim, action, proceeding or investigation
and compromise or settle on such terms as the Stockholders Agent shall
determine to be appropriate, give receipts, releases and discharges on behalf of
all of Indemnitors with respect to any such claim, action, proceeding or
investigation; (E) file any proofs, debts, claims and petitions as the
Stockholders Agent may deem advisable or necessary; (F) settle or compromise
any claims asserted under Section 4; (G) assume, on behalf of all of
Indemnitors, the defense of any claim that is the basis of any claim asserted
under Section 4; and (H) file and prosecute appeals from any decision, judgment
or award rendered in any of the foregoing claims, actions, proceedings or
investigations, it being understood that the Stockholders Agent shall not have
any obligation to take any such actions, and shall not have liability for any
failure to take such any action;
(iii) to
enforce payment of any amounts payable to Indemnitors, in each case on behalf of
Indemnitors, in the name of the Stockholders Agent;
(iv) to
authorize, if required, the reduction against the Escrow Fund in favor of any
Indemnitee pursuant to Section 4 and also any other amounts to be paid to Parent
pursuant to this Agreement;
(v) to
waive or refrain from enforcing any right of any Indemnitor and/or of the
Stockholders Agent arising out of or under or in any manner relating to this
Agreement or any other agreement contemplated hereby; and
(vi) to
make, execute, acknowledge and deliver all such other agreements, guarantees,
orders, receipts, endorsements, notices, requests, instructions, certificates,
stock powers, letters and other writings, and, in general, to do any and all
things and to take any and all action that the Stockholders Agent, in its sole
and absolute direction, may consider necessary or proper or convenient in
connection with or to carry out the
activities described in paragraphs (i) through (v) above and the transactions
contemplated by this Agreement and the other agreements contemplated hereby.
40
(c) Notwithstanding anything to the contrary contained in this Agreement or
in any other agreement executed in connection with the transactions contemplated
hereby: (i) each Indemnitee shall be entitled to deal exclusively with the
Stockholders Agent on all matters relating to any claim for indemnification,
compensation or reimbursement under Section 4 or under the Escrow Agreement; and
(ii) each Indemnitee shall be entitled to rely conclusively (without further
evidence of any kind whatsoever) on any document executed or purported to be
executed on behalf of any Indemnitor by the Stockholders Agent, and on any
other action taken or purported to be taken on behalf of any stockholder by the
Stockholders Agent, as fully binding upon such stockholder.
(d) In
dealing with this Agreement and any instruments, agreements or documents
relating thereto, and in exercising or failing to exercise all or any of the
powers conferred upon the Stockholders Agent hereunder or thereunder, (i) the
Stockholders Agent will not assume any, and will incur no, responsibility
whatsoever to any Indemnitors by reason of any error in judgment or other act or
omission performed or omitted hereunder or in connection with this Agreement or
any other agreement contemplated hereby, unless by the Stockholders Agents
gross negligence or willful misconduct, and (ii) the Stockholders Agent will be
entitled to rely on the advice of counsel, public accountants or other
independent experts experienced in the matter at issue, and any error in
judgment or other act or omission of the Stockholders Agent pursuant to such
advice will in no event subject the Stockholders Agent to liability to any
Indemnitor unless by the Stockholders Agents gross negligence or willful
misconduct. The Indemnitors shall indemnify the Stockholders Agent and hold the
Stockholders Agent harmless against any loss, liability or expense incurred
without gross negligence or willful misconduct on the part of the Stockholders
Agents duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Stockholders Agent.
(e) Power of Attorney. The
Indemnitors recognize and intend that the power of attorney granted in Section
5.1(a): (i) is coupled with an interest and is irrevocable; (ii) may be
delegated by the Stockholders Agent; and (iii) shall survive the death or
incapacity of each of the Indemnitors.
(f) Replacement. If the
Stockholders Agent shall die, resign, become disabled or otherwise be unable to
fulfill his responsibilities hereunder, the Indemnitors shall (by consent of
those Persons entitled to at least a majority of the Merger Consideration),
within 10 days after such death, disability or inability, appoint a successor to
the Stockholders Agent (who shall be reasonably satisfactory to Parent) and
immediately thereafter notify Parent of the identity of such successor. Any such
successor shall succeed the Stockholders Agent as Stockholders Agent
hereunder. If for any reason there is no Stockholders Agent at any time, all
references herein to the Stockholders Agent shall be deemed to refer to the
Indemnitors.
5.2 Further Assurances.
Each party hereto shall execute
and cause to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may reasonably
request (prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
5.3 Tax Matters.
(a) The
Stockholders Agent shall prepare, or cause to be prepared, at the expense of
the Company Stockholders, and shall timely file, or cause to be timely filed,
all Tax Returns for the Company that are required to be filed after the Closing
Date for any Tax period ending on or prior to the Closing Date with respect to
which the items of income, gain, loss, deduction and other Tax items pass
through to the Company Stockholders
(the Income Tax
Returns). All Income Tax Returns
shall be prepared in accordance with applicable Law and consistent with past
practices. Each Income Tax Return shall be provided to Parent for its review and
comment at least fifteen (15) days prior to the due date for filing, and the
Stockholders Agent shall consider in good faith such revisions as are
reasonably requested by Parent. The Company Stockholders shall be solely
responsible for and shall timely pay when due any Taxes of the Company
Stockholders in connection with the Income Tax Returns.
41
(b) Parent
shall prepare and timely file, or cause to be prepared and timely filed, all Tax
Returns other than Income Tax Returns for the Company required to be filed after
the Closing Date, and shall timely remit, or cause to be remitted, to the
appropriate Governmental Body all Taxes reflected on such Tax Returns, subject
to its right to be indemnified for Pre-Closing Taxes pursuant to Article IV. To
the extent such Tax Returns include any Pre-Closing Tax Period, (i) such Tax
Returns shall be prepared consistent with the past practices of the Company, as
applicable, in all material respects, except as otherwise required by applicable
law and (ii) any such Tax Return that reports any tax for which indemnification
is required under this Agreement, along with a statement setting forth the
amount of Taxes for which the Company Stockholders are responsible with respect
thereto, shall be provided to the Stockholders Agent for its review and comment
at least fifteen (15) days prior to the due date for filing such Tax Return, and
Parent shall consider in good faith such revisions as are reasonably requested
by the Stockholders Agent.
(c) All
liability for transfer, sales, use, value added, excise, stamp, recording,
registration and any similar Taxes that become payable in connection with
consummation of the transactions contemplated by this Agreement
(Transfer Taxes) shall be borne by the Company Stockholders, on
the one hand, and the Parent, on the other hand. The party required by law to
file to file a Tax Return with respect to such Transfer Taxes shall do so in the
time and manner prescribed by law, and the non-filing party shall promptly
reimburse the filing party for its share of any Transfer Taxes upon receipt of
evidence reasonably satisfactory to the non-filing party of the amount of such
Transfer Taxes.
(d) The
Company and the Company Stockholders on one hand, and Parent on the other, shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns and any audit, examination, claim,
dispute or controversy by any Governmental Body relating to Taxes (including the
Tax-related matters referred to in Section 4.2(a)(iii) (each a Tax Contest). Parent shall promptly notify the Stockholders
Agent upon receipt by Parent or any Affiliate of Parent (including the Company
after the Closing Date) of written notice of any Tax Contest with respect to an
Income Tax Return or relating to Pre-Closing Taxes, provided, that the failure to promptly deliver any such notice will not relieve
the Company Stockholders of their obligations under this Agreement, except to
the extent the Stockholders are materially prejudiced as a result thereof.
Notwithstanding anything to the contrary in this Agreement, in the case of any
Tax Contest concerning an Income Tax Return , the Stockholders Agent shall have
the right, at the expense of the Company Stockholders, using the counsel and
representatives of the Stockholders Agents choice, to represent the interests
of the Company in such Tax Contest and control the conduct of such Tax Contest,
provided, however, Parent shall have the right to participate at its own expense
in any proceeding, or portion thereof, relating to the Company that the
Stockholders Agent controls. All other Tax Contests shall be governed by
Section 4.5. In the event of any inconsistency between this Section 5.3 and
Section 4.5, this Section 5.3 shall govern.
(e) Parent
shall not amend or cause to be amended any Tax Return of the Company (or file
any new Tax Return) for any Pre-Closing Tax Period (including the portion of any
Tax Return for a tax period that includes but does not end on the Closing Date
that relates to the Pre-Closing Tax Period) if such amendment (or new filing)
would result in an increase of Taxes of the Company Stockholders or for which
Parent is indemnified pursuant to this Agreement, without the written consent of
the Stockholders Agent, such consent
not to be unreasonably withheld, conditioned or delayed. For the avoidance of
doubt, notwithstanding anything in this Agreement to the contrary, Parent and
the Company shall not file any IRS Form 1099-K for any Pre-Closing Tax Period
unless such filing is required by a Governmental Body in connection with a Tax
Contest.
42
5.4 Fees and Expenses.
Subject to Sections 1.4, 1.9 and
Article 4, the Escrow Agreement and Exhibit F, each party to
this Agreement shall bear and pay all fees, costs and expenses that have been
incurred or that are incurred in the future by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of: (a) the
negotiation, preparation and review of this Agreement (including the Disclosure
Schedule) and all agreements, certificates, opinions and other instruments and
documents delivered or to be delivered in connection with the transactions
contemplated by this Agreement; (b) the preparation and submission of any filing
or notice required to be made or given in connection with any of the
transactions contemplated by this Agreement, and the obtaining of any Consent
required to be obtained in connection with any of such transactions; and (c) the
consummation of the Merger.
5.5 Attorneys Fees.
Subject to Section 4.2 and
Section 4.5, if any Legal Proceeding relating to this Agreement or the
enforcement of any provision of this Agreement is brought against any party
hereto, each party shall be responsible for its own attorneys fees.
5.6 Notices.
Any notice or other communication
required or permitted to be delivered to any party under this Agreement shall be
in writing and shall be deemed properly delivered, given and received: (a) if
delivered by hand, when delivered; (b) if sent via facsimile with confirmation
of receipt, when transmitted and receipt is confirmed; (c) if sent by electronic
mail, telegram, cablegram or other electronic transmission, upon delivery; (d)
if sent by registered, certified or first class mail, the third business day
after being sent; and (e) if sent by overnight delivery via a national courier
service, one business day after being sent, in each case to the address or
facsimile telephone number set forth beneath the name of such party below (or to
such other address or facsimile telephone number as such party shall have
specified in a written notice given to the other parties hereto):
If to Parent or any Merger Sub:
Yelp Inc.
140 New Montgomery, 9th Floor
San Francisco,
CA 94105
Attention: Laurence Wilson
Facsimile: 415-908-3833
Email:
with a copy (which shall
not constitute notice) to:
Cooley LLP
101 California Street, 5th Floor
San Francisco, CA 94111
Attention: David Peinsipp and Jennifer F. Fitchen
Facsimile:
415-693-2222
Email: dpeinsipp@cooley.com; jfitchen@cooley.com
43
If to the Company:
Eat24Hours.com, Inc.
1097 Sneath Lane
San Bruno, CA 94066
Attention: Nadav Sharon
Email:
with a copy (which shall
not constitute notice) to:
Wilson Sonsini Goodrich
& Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Elton
Satusky
Facsimile: (650) 493-6811
Email: esatusky@wsgr.com
If to the Stockholders Agent:
Nadav Sharon
Email:
5.7 Headings.
The bold-faced headings contained
in this Agreement are for convenience of reference only, shall not be deemed to
be a part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
5.8 Counterparts and Exchanges by Electronic Transmission or
Facsimile. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement. The exchange of a fully executed
Agreement (in counterparts or otherwise) by electronic transmission in .PDF
format or by facsimile shall be sufficient to bind the parties to the terms and
conditions of this Agreement.
5.9 Governing Law; Dispute Resolution.
(a) Governing Law. This
Agreement shall be construed in accordance with, and governed in all respects
by, the internal laws of the State of Delaware (without giving effect to
principles of conflicts of laws).
(b) Venue. Except as otherwise
provided in the Escrow Agreement or in Section 5.9(c), any Legal Proceeding
relating to this Agreement or the enforcement of any provision of this Agreement
(including a Legal Proceeding based upon Fraud) may be brought or otherwise
commenced in any state or federal court located in the County of San Francisco,
State of California. Each party to this Agreement: (i) expressly and irrevocably
consents and submits to the jurisdiction of each state and federal court located
in the County of San Francisco, State of California (and each appellate court
located in the County of San Francisco, State of California) in connection with
any such Legal Proceeding; (ii) agrees that each state and federal court located
in the County of San Francisco, State of California shall be deemed to be a
convenient forum; and (iii) agrees not to assert (by way of motion, as a defense
or otherwise), in any such Legal Proceeding commenced in any state or federal
court located in the County of San Francisco, State of California, any claim
that such party is not subject personally to the jurisdiction of such court,
that such Legal Proceeding has been brought in an inconvenient forum, that the
venue of such proceeding is improper
or that this Agreement or the subject matter of this Agreement may not be
enforced in or by such court.
44
(c) Indemnification Claims.
Any claim for indemnification, compensation or reimbursement pursuant to Section
4 (and, at the option of any Indemnitee, any other claim for a monetary remedy,
such as in the case of a claim based upon Fraud, relating to this Agreement or
the Merger after the Closing) shall be brought and resolved exclusively in
accordance with Exhibit
F (it being understood that, for the avoidance of
doubt and without limiting any portion of Section 5.9(b): (i) at the option of
any Indemnitee, any claim based upon intentional misrepresentation or fraud may
be brought and resolved in accordance with Section 5.9(b) rather than in
accordance with Exhibit
F; and (ii) nothing in this
Section 5.9(c) shall prevent Parent from seeking preliminary injunctive relief
from a court of competent jurisdiction).
5.10 Successors and Assigns.
This Agreement shall be binding
upon: (a) the Company and its successors and assigns (if any); (b) Parent and
its successors and assigns (if any); and (c) each Merger Sub and its successors
and assigns (if any). This Agreement shall inure to the benefit of: (i) the
Company; (ii) Parent; (iii) Merger Subs; (iv) the other Indemnitees; and (v) the
respective successors and assigns (if any) of the foregoing. Parent may freely
assign any or all of its rights under this Agreement (including its
indemnification rights under Section 4), in whole or in part, to any other
Person without obtaining the consent or approval of any other party hereto or of
any other Person.
5.11 Remedies Cumulative; Specific Performance. Except as otherwise set forth in this Agreement, the rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement, for the benefit of any other party to this Agreement:
(a) such other party shall be entitled (in addition to any other remedy that may
be available to it) to: (i) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision; and (ii) an injunction restraining such breach or threatened
breach; and (b) such other party shall not be required to provide any bond or
other security in connection with any such decree, order or injunction or in
connection with any related action or Legal Proceeding.
5.12 Waiver.
No failure on the part of any
Person to exercise any power, right, privilege or remedy under this Agreement,
and no delay on the part of any Person in exercising any power, right, privilege
or remedy under this Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy. No Person shall be deemed to have
waived any claim arising out of this Agreement, or any power, right, privilege
or remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly executed
and delivered on behalf of such Person; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
5.13 Waiver of Jury Trial.
To the extent permitted by applicable law, each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any Legal Proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
5.14 Amendments.
This Agreement may not be
amended, modified, altered or supplemented other than by means of a written
instrument duly executed and delivered on behalf of Parent and the Stockholders
Agent (acting exclusively for and on behalf of all of the Company Stockholders).
45
5.15 Severability.
In the event that any provision
of this Agreement, or the application of any such provision to any Person or set
of circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
5.16 Parties in Interest.
Except for the provisions of
Section 4, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
5.17 Entire Agreement.
This Agreement and the other
agreements referred to herein set forth the entire understanding of the parties
hereto relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof.
5.18 Disclosure Schedule.
The Disclosure Schedule shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained herein permitting such disclosure, and the information disclosed in
any numbered or lettered part shall be deemed to relate to and to qualify only
the particular representation or warranty set forth in the corresponding
numbered or lettered section herein permitting such disclosure and
any other numbered or lettered section herein if it is readily apparent from the
face of such disclosure (and without any further knowledge) that such disclosure
would be applicable to such other numbered or lettered section.
5.19 Construction.
(a) Gender; Etc. For purposes
of this Agreement, whenever the context requires: the singular number shall
include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; the feminine gender shall include the masculine and
neuter genders; and the neuter gender shall include the masculine and feminine
genders.
(b) Ambiguities. The parties
hereto agree that any rule of construction to the effect that ambiguities are to
be resolved against the drafting party shall not be applied in the construction
or interpretation of this Agreement.
(c) Including. As used in this
Agreement, the words include and including, and variations thereof, shall
not be deemed to be terms of limitation, but rather shall be deemed to be
followed by the words without limitation.
(d) References. Except as
otherwise indicated, all references in this Agreement to Sections, Schedules
and Exhibits are intended to refer to Sections of this Agreement and Schedules
and Exhibits to this Agreement.
[Remainder of page
intentionally left blank]
46
The parties hereto have
caused this Agreement to be executed and delivered as of the date first written
above.
Yelp Inc., |
a Delaware corporation |
|
|
By: |
/s/ Laurence Wilson |
Name: |
Laurence Wilson |
Title: |
Senior Vice President,
General Counsel |
|
and Secretary |
|
|
|
|
Kale Acquisition
Corp., |
a Delaware corporation |
|
|
By: |
/s/ Laurence Wilson |
Name: |
Laurence Wilson |
Title: |
President |
|
|
|
|
Quinoa Acquisition
LLC, |
a Delaware limited liability
company |
|
|
By: |
/s/ Laurence Wilson |
Name: |
Laurence Wilson |
Title: |
Authorized Person |
|
|
|
|
Eat24hours.Com,
Inc., |
a Delaware corporation |
|
|
By: |
/s/ Nadav Sharon |
Name: |
Nadav Sharon |
Title: |
Chief Executive Officer |
|
|
|
|
Stockholders
Agent: |
|
|
/s/ Nadav Sharon |
Nadav
Sharon |
MERGER AGREEMENT SIGNATURE
PAGE
/s/ Nadav Sharon |
Nadav Sharon |
|
|
/s/ Haim Erez |
Haim Erez |
|
|
/s/ Moran Hacmon |
Moran Hacmon |
|
|
/s/ Chen Shashar |
Chen Shashar |
|
|
/s/ Asaf Sharon |
Asaf Sharon |
|
|
/s/ Amir Eisenstein |
Amir Eisenstein |
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the
Agreement (including this Exhibit
A):
Acquired Companies.
Acquired Companies shall mean: (a) the Company; (b) each Subsidiary
of the Company; and (c) each corporation or other Entity that has been merged
into or that otherwise is a predecessor to any of the Entities identified in
clauses (a) and (b) above.
Acquired
Company Contract. Acquired Company
Contract shall mean any
Contract: (a) to which any of the Acquired Companies is a party; (b) by which
any of the Acquired Companies or any of its assets is or may become bound or
under which any of the Acquired Companies has, or may become subject to, any
obligation; or (c) under which any of the Acquired Companies has or may acquire
any right or interest.
Acquired Company
Employee. Acquired Company Employee shall mean any current or former employee or
director of any of the Acquired Companies or any affiliate of any of the
Acquired Companies.
Acquired Company
Employee Agreement. Acquired Company Employee
Agreement shall mean each
management, employment, severance, consulting, relocation, repatriation or
expatriation agreement or other Contract between any Acquired Company and any
Acquired Company Employee.
Acquired Company
Employee Plan. Acquired Company Employee Plan shall mean any plan, program, policy, practice,
Contract or other arrangement providing for compensation, severance, termination
pay, deferred compensation, performance awards, stock or stock-related awards,
fringe benefits or other material employee benefits or remuneration of any kind,
whether written or unwritten, funded or unfunded, that is or has been
maintained, contributed to, or required to be contributed to, by any Acquired
Company for the benefit of any Acquired Company Employee, or with respect to
which an Acquired Company has or may reasonably be expected to have any
liability or obligation, including the Key Employee Retention Plan, and
excluding any Acquired Company Employee Agreement.
Acquired Company IP.
Acquired Company IP shall mean all Intellectual Property and
Intellectual Property Rights in which any of the Acquired Companies has (or
purports to have) an ownership interest or an exclusive license.
Acquired Company IP
Contract. Acquired Company IP Contract shall mean any Contract to which any of the
Acquired Companies is or was a party or by which any of the Acquired Companies
is bound, that contains any assignment or license of, or any covenant not to
assert or enforce, any Intellectual Property Right.
Acquired Company Privacy
Policy. Acquired Company Privacy Policy shall mean each external or internal, past or
present privacy policy of any Acquired Company, including any policy relating
to: (a) the privacy of users of any Acquired Company Website; (b) the
collection, storage, transmission, disclosure, transfer and use of any User Data
or Personal Data, and (c) any employee information.
Acquired Company
Transaction Expenses. Acquired Company
Transaction Expenses shall mean
(a) all unpaid fees, costs, expenses, payments, expenditures or Liabilities of
the Acquired Companies, incurred at or prior to the Effective Time (regardless
whether or not invoiced prior to the Effective Time), that relate to the Agreement, any of the transactions
contemplated by the Agreement, including any fees, costs or expenses payable to
the Acquired Companies outside legal counsel or to any financial advisor,
accountant, employee or other Person who performed services for or on behalf of
the Acquired Companies, or who is otherwise entitled to any compensation,
severance, bonus, change of control payment from the Acquired Companies, in
connection with the Agreement, any of the transactions contemplated by the
Agreement, or the process resulting in such transactions and (b) all fees,
costs, expenses, payments, expenditures or Liabilities, including all Taxes, of
the Acquired Companies relating to the matter referred to in Part 2.6(a) of the
Disclosure Schedule.
A-1
Acquired Company User
Agreement. Acquired Company User Agreement shall mean each standard form Acquired Company
Contract that constitutes a user agreement, terms of use, terms of service,
advertiser agreement, or end user license agreement that governs (or is intended
to govern) each users (including businesses that sell food using the Companys
platform and their customers) or advertisers access to and use of any Acquired
Company Web Site, any Acquired Company Software, or any services available
through any of the foregoing.
Acquired Company Web Site. Acquired Company Web
Site shall mean any public or
private website (including mobile apps) owned, maintained, or operated at any
time by or on behalf of any of the Acquired Companies.
Acquisition
Transaction. Acquisition Transaction
shall mean any transaction or series of transactions involving:
(a) the sale, license or disposition of all or a material portion of any of
the Acquired Companies business or assets;
(b) the issuance, disposition or acquisition of: (i) any capital stock or
other equity security of any of the Acquired Companies (other than Company
Common Stock issued to employees of the Company upon exercise of Company
Options); (ii) any option, call, warrant or right (whether or not immediately
exercisable) to acquire any capital stock, unit or other equity security of any
of the Acquired Companies; or (iii) any security, instrument or obligation that
is or may become convertible into or exchangeable for any capital stock, unit or
other equity security of any of the Acquired Companies, in each case other than
those reflected as being outstanding on Part 2.3(a) of the Disclosure Schedule;
or
(c) any merger, consolidation, business combination, reorganization or
similar transaction involving any of the Acquired Companies.
Agreement.
Agreement shall mean the Agreement of Merger to which this
Exhibit A is attached (including the Disclosure Schedule),
as it may be amended from time to time.
Closing Date Net Working Capital. Closing Date Net Working Capital shall mean the Net Working Capital of the Acquired Companies on a
consolidated basis as of the Closing.
Code. Code shall mean the
Internal Revenue Code of 1986, as amended.
Company Capital
Stock. Company Capital Stock shall mean the shares of Company Common Stock
and Company Preferred Stock.
A-2
Company Common
Stock. Company Common Stock shall mean the shares of common stock of the
Company, par value $0.001 per share.
Company Debt. Company Debt shall mean,
without duplication, outstanding as of the Closing: (a) the principal of and
premium (if any) in respect of (i) indebtedness of the Acquired Companies for
money borrowed; and (ii) indebtedness for money borrowed evidenced by notes,
debentures, bonds, letters of credit or other similar instruments for the
payment of which any Acquired Company is responsible or liable; (b) all
obligations of the Acquired Companies issued or assumed as the deferred purchase
price of assets or property, all conditional sale obligations of the Acquired
Companies and all obligations of the Acquired Companies under any title
retention agreement (but excluding trade accounts payable, other payable and
other accrued current liabilities arising in the ordinary course of business);
(c) all obligations under capital leases; (d) all obligations under any
currency, interest rate or other hedge agreement or any other hedging
arrangement; (e) all obligations of the type referred to in clauses (a)
through (d) of any Persons for the payment of which any Acquired Company is
responsible or directly liable, as obligor, guarantor or surety, and (f) all
accrued interest, prepayment premiums, penalties and other amounts related to
any of the foregoing. For the avoidance of doubt, Company Debt shall not include
(A) any undrawn letters of credit or (B) any intercompany accounts, payables or
loans of any kind or nature.
Company Preferred
Stock. Company Preferred Stock shall mean the shares of preferred stock of the
Company, par value $0.00001.
Company Stockholders.
Company Stockholders shall mean the holders of Company Capital Stock
immediately prior to Closing.
Confidentiality
Agreement. Confidentiality Agreement shall mean that certain Mutual Nondisclosure
Agreement, dated June 6, 2013 between Parent and the Company.
Consent. Consent shall mean any
approval, consent, ratification, permission, waiver or authorization (including
any Governmental Authorization).
Contaminant.
Contaminant includes any material, substance, chemical, gas,
liquid, waste, effluent, pollutant or contaminant which, whether on its own or
admixed with another, is identified or defined in or regulated by or pursuant to
any Environmental Laws or which upon release into the Environment presents a
danger to the Environment or to the health or safety or welfare of any Person.
Contract. Contract shall mean any
written, oral or other agreement, contract, subcontract, lease, understanding,
arrangement, instrument, note, warranty, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature.
Damages. Damages shall include any
loss, damage, injury, decline in value, Liability, claim, demand, settlement,
judgment, award, fine, penalty, Tax, fee (including reasonable attorneys fees),
charge, cost (including costs of investigation) or expense of any
nature.
Disclosure
Schedule. Disclosure Schedule shall mean the schedule (dated as of the date of
the Agreement) delivered to Parent on behalf of the Company and prepared in
accordance with Section 5.18 of the Agreement.
Encumbrance.
Encumbrance shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim or restriction of any
nature (other than nonexclusive licenses granted pursuant to the Contracts listed in Part 2.10(c) of the
Disclosure Schedule or which are not required to be listed in Part 2.10(c) of
the Disclosure Schedule.
A-3
Entity. Entity shall mean any
corporation (including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization or entity.
Environment.
Environment includes: (a) any and all buildings, structures, fixtures, fittings,
appurtenances, pipes, conduits, valves, tanks, vessels and containers whether
above or below ground level; and (b) ambient air, land surface, sub-surface
strata, soil, surface water, ground water, river sediment, marshes, wet lands,
flora and fauna.
Environmental
Law. Environmental Law shall mean: (a) the common law; and (b) all
Legal Requirements, by-laws, orders, instruments, directives, decisions,
injunctions and judgments of any government, local government, international,
supranational, executive, administrative, judicial or regulatory authority or
agency and all approved codes of practice (whether voluntary or compulsory)
relating to the protection of the Environment or of human health or safety or
welfare or to the manufacture, formulation, processing, treatment, storage,
containment, labeling, handling, transportation, distribution, recycling, reuse,
release, disposal, removal, remediation, abatement or clean-up of any
Contaminant and any amendment thereto and any and all regulations, orders and
notices made or served thereunder or pursuant thereto).
Environmental
Licenses. Environmental License means any Consent or Governmental Approval
required by or pursuant to any applicable Environmental Laws.
Environmental
Release. Environmental Release means the spilling, leaking, pumping, pouring,
emitting, releasing, emptying, discharging, injecting, escaping, leaching,
dumping, leaving, discarding or disposing of any Contaminant into or upon the
Environment.
Equity Pro Rata
Portion. Equity Pro Rata Portion shall mean with respect to each Stockholder, the
Escrow Shares multiplied by a fraction having a numerator equal to the aggregate
number of shares of Company Capital Stock held by such Stockholder, and having a
denominator equal to the aggregate number of shares of Company Capital Stock
outstanding immediately prior to the Effective Time held by all Stockholders.
Escrow Agent.
Escrow Agent shall mean Wells Fargo Bank,
N.A..
Escrow Agreement.
Escrow Agreement shall mean the escrow agreement to be entered
into among Parent, the Stockholders Agent and the Escrow Agent on the date of
the Agreement, substantially in the form of Exhibit B to the Agreement.
Escrow Fund.
Escrow Fund shall mean the escrow fund established pursuant to the Escrow
Agreement.
FMV of Parent Class A
Common Stock. FMV of Parent Class A Common Stock shall mean $53.462667.
GAAP. GAAP shall mean generally
accepted accounting principles in the United States set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board,
that are applicable to the circumstances of the date of determination,
consistently applied.
A-4
Governmental
Authorization. Governmental Authorization shall mean any: (a) permit, license,
certificate, franchise, permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or (b)
right under any Contract with any Governmental Body.
Governmental
Body. Governmental Body shall mean any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; (b) federal, state, local, municipal, foreign or other government; or
(c) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
Indemnitees.
Indemnitees shall mean the following Persons: (a) Parent;
(b) Parents current and future affiliates (including Merger Subs, the Interim
Surviving Corporation and the Surviving Entity); and (c) the respective
successors and assigns of the Persons referred to in clauses (a) and (b)
above; provided,
however, that the Company
Stockholders shall not be deemed to be Indemnitees.
Intellectual
Property. Intellectual
Property shall mean sales
methodologies and processes, training protocols and similar methods and
processes, algorithms, APIs, apparatus, circuit designs and assemblies, gate
arrays, net lists, test vectors, databases, data collections, diagrams,
formulae, inventions (whether or not patentable), know-how, logos, marks
(including brand names, product names, logos, and slogans), methods, network
configurations and architectures, processes, proprietary information, protocols,
schematics, specifications, software, software code (in any form, including
source code and executable or object code), subroutines, techniques, user
interfaces, URLs, web sites, works of authorship and other forms of technology
(whether or not embodied in any tangible form and including all tangible
embodiments of the foregoing, such as instruction manuals, laboratory notebooks,
prototypes, samples, studies and summaries).
Intellectual Property
Rights. Intellectual Property Rights shall mean all legally protectable rights of the
following types, which may exist or be created under the laws of any
jurisdiction in the world: (a) rights associated with works of authorship,
including exclusive exploitation rights, copyrights and moral rights; (b)
trademark and trade name rights and similar rights; (c) trade secret rights; (d)
patent and industrial property rights; (e) other proprietary rights in
Intellectual Property; and (f) proprietary rights in or relating to
registrations, renewals, extensions, divisions, and reissues of, and
applications for, any of the rights referred to in clauses (a) through (e)
above.
Knowledge. An individual
shall be deemed to have Knowledge of a particular
fact or other matter if: (a) such individual is actually aware of such fact or
other matter; or (b) such individual could have discovered such fact or other
matter following a due inquiry that as reasonable to be made in light of the
circumstances. The Company shall be deemed to have Knowledge of a particular
fact or other matter if any officer or director of any of the Acquired
Companies, any of the Major Stockholders, or, solely for purposes on Sections
2.8 and 2.14 only, any other person who previously fulfilled the duties and
responsibilities of the Chief Financial Officer (regardless of whether such
person held such title) has Knowledge of such fact or other matter.
Legal
Proceeding. Legal Proceeding shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.
A-5
Legal
Requirement. Legal Requirement shall mean any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
Liability.
Liability shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with GAAP and regardless of whether such
debt, obligation, duty or liability is immediately due and
payable.
Made available.
Made available shall mean included in the Dropbox diligence
folder to which Parent and its legal advisors were given access on or prior to
February 2, 2015 and at all times thereafter through the Closing or has been
emailed to Parents internal legal counsel or to Mike Ghaffary, Peter Curzon or
Jay Ganata, in each case at their Parent email address, prior to 5 pm on
February 6, 2015.
Material Adverse
Effect. Material Adverse Effect shall mean any change, event, effect, claim,
circumstance or matter (each, an Effect) that (considered
together with all other Effects) has had, or would reasonably be expected to
have, a material adverse effect on: (a) the business, condition, assets,
capitalization, liabilities, operations or results of operations of the Acquired
Companies taken as a whole; (b) the ability of the Company to perform any of its
material covenants or obligations under this Agreement or under any other
Contract or instrument executed, delivered or entered into in connection with
any of the transactions contemplated by this Agreement; provided, however, that Material Adverse Effect shall not include
any Effect resulting from any of the following, either alone or in combination:
(i) general economic or political conditions (including those affecting the
securities markets), except to the extent such conditions affect the Company in
a disproportionate manner or to a disproportionate extent; (ii) conditions in or
generally affecting the industries or markets in which the Company operates,
except to the extent such conditions affect the Company in a disproportionate
manner or to a disproportionate extent; (iii) acts of war (whether or not
declared), sabotage or terrorism, military actions or the escalation thereof or
other force majeure events occurring after the date hereof unless they affect
the Company in a disproportionate manner; (iv) any change in applicable Legal
Requirements; or (v) any change in GAAP or other accounting rules.
Merger
Consideration. Merger
Consideration shall mean the
cash consideration and shares of Parent Class A Common Stock that a Company
Stockholder is entitled to receive in exchange for such shares of Company
Capital Stock pursuant to Section 1.4.
Net Working Capital. Net Working Capital shall
mean the current assets of the Company less current liabilities of the Company
(excluding the Acquired Company Transaction Expenses and Company Debt), as
determined in accordance with GAAP consistent with past practices.
Open Source
Code. Open Source Code shall mean any software code that is distributed
as free software or open source software or is otherwise distributed
publicly in source code form under terms that permit modification and
redistribution of such software. Open Source Code includes software code that is
licensed under the GNU General Public License, GNU Lesser General Public
License, Mozilla License, Common Public License, Artistic License, Apache
License, BSD License, or Sun Community Source License.
Order. Order shall mean any
order, writ, injunction, judgment, decree, ruling or award of any arbitrator or
any court or other Governmental Body.
A-6
Parent Class A Common
Stock. Parent Class A Common Stock shall mean the Class A common stock, par value
$0.000001 per share, of Parent.
Person. Person shall mean any
individual, Entity or Governmental Body.
Personal
Data. Personal Data shall mean a natural persons name, street
address, telephone number, e-mail address, photograph, social security number,
drivers license number, passport number, or customer or account number, or any
other piece of information that allows the identification of a natural person,
as well as any other information that any Acquired Company directly or
indirectly associates with any of the foregoing.
Pre-Closing Tax
Period. Pre-Closing Tax Period shall mean (i) any Tax period ending on or
before the Closing Date, and (ii) in the case of any Tax period that includes,
but does not end on the Closing Date, the portion of such Tax period through the
Closing Date. For purposes of a Tax period described in clause (ii), the
portion of such Tax that relates to the portion of such Tax period ending on the
Closing Date shall (A) in the case of any property or similar Taxes, be deemed
to be the amount of such Tax for the entire period multiplied by a fraction the
numerator of which is the number of days in the period ending on the Closing
Date and the denominator of which is the number of days in the entire period,
and (B) in the case of any other Tax, be deemed equal to the amount which would
by payable if the period ended on the Closing Date, except that exemptions, allowances or deductions
that are calculated on an annual basis (including depreciation and amortization
deductions) other than with respect to property placed into service after the
Closing Date shall be allocated on a per diem basis.
Properties.
Properties means the leasehold properties held or occupied
by the Acquired Companies.
Registered
IP. Registered IP shall mean all Intellectual Property Rights that
are registered, filed or issued under the authority of, with or by any
Governmental Body, including all patents, registered copyrights, registered
trademarks and all applications for any of the foregoing.
Related
Party. Related Party shall mean: (a) each stockholder (other than the
Company) who holds more than 1% of an Acquired Company; (b) each individual who
is, or who has at any time since inception been, an officer or director of any
of the Acquired Companies; (c) each member of the immediate family of each of
the individuals referred to in clauses (a), and (b) above; and (d) any trust
or other Entity (other than the Company) in which any one of the Persons
referred to in clauses (a), (b) and (c) above holds (or in which more than
one of such Persons collectively hold), beneficially or otherwise, a material
voting, proprietary or equity interest.
Representatives.
Representatives shall mean officers, directors, employees,
agents, attorneys, accountants, advisors and representatives.
Specified
Representations. Specified Representations shall mean: (a) the representations and
warranties set forth in Sections 2.1, 2.3, 2.14 and 2.20 of the Agreement; and
(b) the representations and warranties set forth in the Merger Consideration
Certificate, to the extent such representations and warranties relate to any of
the matters addressed in any of the representations and warranties specified in
clause (a) of this sentence.
Subsidiary. An entity
shall be deemed to be a Subsidiary of another Person if such Person directly
or indirectly owns or purports to own, beneficially or of record: (a) an amount
of voting securities of or other interests in such Entity that is sufficient to
enable such Person to elect at least a majority of the members of such Entitys board of directors or
other governing body; or (b) at least 50% of the outstanding equity, voting,
beneficial or financial interests in such Entity.
A-7
Tax. Tax includes all forms of
taxation and statutory, governmental, supra-governmental, state, principal,
local government or municipal impositions, duties, contributions, charges and
levies, whenever imposed, and all penalties, charges, surcharges, costs,
expenses and interest relating thereto and without limitation all employment
taxes and any deductions or withholdings of any sort regardless of whether any
such taxes, impositions, duties, contributions, charges and levies are
chargeable directly or primarily against or attributable directly or primarily
to the Acquired Companies, or any other person and of whether any amount in
respect of any of them is recoverable from any other person.
Tax
Return. Tax Return shall mean any return (including any information return and including,
for the avoidance of doubt, any IRS Form 1099-K), report, statement,
declaration, estimate, schedule, notice, notification, form, election,
certificate or other document or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
User Data.
User Data shall mean any
Personal Data or other data or information collected by or on behalf of any
Acquired Company from users of any Acquired Company Website or any Acquired
Company Software.
Working Capital
Adjustment. Working Capital Adjustment shall mean the difference between
<$800,000> (negative eight hundred thousand dollars) (the Working Capital
Target) and the Closing Date Net Working Capital, with the Working Capital
Adjustment to result in either: (a) a downward adjustment at Closing, on a
dollar-for-dollar basis, in an amount equal to any such difference, if the
Working Capital Target is greater than the Closing Date Net Working Capital or
(b) an upward adjustment at Closing, on a dollar-for-dollar basis, in an amount
equal to any such difference, if the Closing Date Net Working Capital is greater
than the Working Capital Target.
A-8
Yelp Acquires Leading
Online Food Ordering Service Eat24
Addition of Eat24
Strengthens Consumer Experience and Transaction Business
SAN FRANCISCO, February 10,
2015 /PRNewswire/ -- Yelp Inc. (NYSE: YELP), the company that connects consumers
with great local businesses, today announced it has acquired Eat24, a leading
web and app-based online food ordering service. With this acquisition, Yelp will
drive daily engagement in the key restaurant vertical and plans to expand
Eat24s offering to the one million U.S. restaurants listed on its
platform.
Based in San Bruno,
California, Eat24 was founded in 2008 to expand online food ordering while
providing an improved customer experience. Eat24 provides approximately 20,000
restaurants in over 1,500 cities nationwide with the ability to offer online
delivery and takeout services. Its intuitive site and app design and unrelenting
focus on the consumer experience, including 24/7 live chat, email and phone
support, make ordering easy.
"As more food ordering
transactions move online, further integrating Eat24 will enhance our user
experience with an easy-to-use product and service that allows our large
consumer audience to transact directly with businesses," said Jeremy Stoppelman,
Yelp co-founder and chief executive officer. "Eat24 has developed a great
solution and unique service that has already added great value to the Yelp
Platform. With this acquisition, we gain more tools and expertise to help engage
our users from discovery through transaction in a key vertical for Yelp.
"We're excited to join the
Yelp team to deliver an even better consumer experience inside this top
destination for finding local businesses," said Nadav Sharon, Eat24's co-founder
and chief executive officer. "Yelp has an impressive ability to connect its
users directly with businesses. This is an incredible opportunity to further
connect with Yelps highly engaged users and to expand our reach to even more
local businesses on its platform.
Acquisition Details
The transaction is valued at
approximately $134 million, consisting of approximately 1.4 million shares of
Yelp Class A common stock and $75 million cash, less certain transaction
expenses and subject to customary working capital adjustments. The transaction,
which was approved by the boards of directors of both companies, closed on
February 9, 2015 and the purchase price will be recorded in Yelp's first quarter
2015 financial statements.
Business Outlook
Yelp is making the following
adjustments to its previous outlook for the first quarter and full year of 2015:
For the first quarter 2015,
Yelp is increasing its revenue outlook and expects net revenue to be in the
range of $118.5 million to $120.5 million. Adjusted EBITDA is still expected to
be in the range of $19 million to $21 million.
For the full year 2015, Yelp
is increasing its revenue outlook and expects net revenue to be in the range of
$574 million to $579 million. Yelp is also increasing its Adjusted EBITDA
outlook, which is now expected to be in the range of $102 million to $105
million for the full year 2015.
For the first quarter 2015, Yelp expects its weighted average fully diluted share count to be approximately 79 million shares. For
the full year 2015, Yelp expects its weighted average fully diluted share count to be approximately 80 million shares.
For the first quarter 2015,
Yelp expects to record an increase in amortization of intangibles and an
increase in stock based compensation. Yelp will update full year 2015
stock-based compensation and amortization outlook when it reports first quarter
2015 financial results.
About Yelp
Yelp Inc.
(http://www.yelp.com) connects people with great local businesses. Yelp was
founded in San Francisco in July 2004. Since then, Yelp communities have taken
hold in major metros across 29 countries. Yelp had a monthly average of
approximately 135 million unique visitors in the fourth quarter of 2014.* By the
end of the same quarter, Yelpers had written approximately 71 million rich,
local reviews, making Yelp the leading local guide for real word-of-mouth on
everything from boutiques and mechanics to restaurants and dentists.
Approximately 72 million unique visitors visited Yelp via their mobile device on
a monthly average basis during the fourth quarter of 2014.**
* Source: "Users" as measured
by Google Analytics
** Average
monthly mobile unique visitors based on the number of unique visitors accessing
Yelp via mobile web and unique devices accessing the app on a monthly average
basis over a given three-month period.
Non-GAAP Financial Measures
This press release includes
information relating to Adjusted EBITDA, which the Securities and Exchange Commission has defined as
a "non-GAAP financial measure." Adjusted EBITDA has been included in this press
release because it is a key measure used by Yelp's management and board of
directors to understand and evaluate core operating performance and trends, to
prepare and approve its annual budget and to develop short- and long-term
operational plans. The presentation of this financial information, which is not
prepared under any comprehensive set of accounting rules or principles, is not
intended to be considered in isolation or as a substitute for the financial
information prepared and presented in accordance with generally accepted
accounting principles in the United States ("GAAP").
Adjusted EBITDA has
limitations as an analytical tool, and you should not consider it in isolation
or as a substitute for analysis of Yelp's results as reported under GAAP. Some
of these limitations are:
● |
although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized may have to be replaced in the
future, and adjusted EBITDA does not reflect cash capital expenditure
requirements for such replacements or for new capital expenditure
requirements; |
|
|
● |
adjusted EBITDA does not reflect changes in, or cash requirements
for, Yelp's working capital needs; |
● |
adjusted EBITDA does not consider the potentially dilutive impact
of equity-based compensation; |
● |
adjusted EBITDA does not reflect tax payments that may represent a
reduction in cash available to us; |
● |
adjusted EBITDA does not take into account restructuring and
integration costs associated with our acquisition of Eat24; |
● |
and other companies, including those in Yelp's industry, may
calculate adjusted EBITDA differently, which reduces its usefulness as a
comparative measure. |
Because of these limitations,
you should consider adjusted EBITDA alongside other financial performance
measures, including various cash flow metrics, net income (loss) and Yelp's
other GAAP results. Additionally, Yelp has not reconciled its adjusted EBITDA
outlook for the first quarter and full year 2015 to its net income (loss)
outlook because it does not provide an outlook for other income (expense) and
provision for income taxes, which are reconciling items between net income
(loss) and adjusted EBITDA. As items that impact net income (loss) are out of
Yelp's control and cannot be reasonably predicted, Yelp is unable to provide
such an outlook. Accordingly, reconciliation to net income (loss) outlook for
the first quarter and full year 2015 is not available without unreasonable
effort.
Forward-Looking Statements
This press release contains
forward-looking statements relating to, among other things, the anticipated
benefits of Yelps acquisition of Eat24, the timing and impact of the
acquisition of Eat24 on Yelps financial statements, the expected financial
results for the first quarter and full year 2015, Yelps strategy, plans,
objectives, expectations (financial or otherwise) and intentions with respect to
Eat24, including with respect to offering Eat24 products to Yelp-listed
businesses, the future performance of Yelp and its consolidated subsidiaries,
the timing of Yelps announcement of stock-based compensation and amortization
outlook, its ability to drive daily engagement in the restaurant vertical and
expand Eat24s offering to the restaurants listed on its platform and other
statements that are not historical facts. These forward-looking statements are
based on Yelps current expectations, forecasts and assumptions, and inherently
involve significant risks and uncertainties. Actual results and timing of events
could differ materially from those predicted or implied in such forward-looking
statements as a result of these risks and uncertainties, which include, without
limitation, risks associated with the acquisition, such as the risk that the
businesses will not be integrated successfully or that such integration may be
more difficult, time consuming or costly than expected; risks related to future
opportunities and plans for the combined company, including whether Eat24s
customers will continue to use the service following the acquisition, whether
Yelp will be able to leverage its large distribution network to increase the
customers using the service and whether the acquisition will drive engagement on
Yelp; risks related to the potential disruption of both businesses in connection
with the transaction; and the competitive and regulatory environment while Yelp
continues to expand and introduce new products as new laws and regulations
related to Internet companies come into effect. The forward-looking statements
in this release do not include the potential impact of any acquisitions or
divestitures that may be announced and/or completed after the date hereof.
More information about factors
that could affect Yelps operating results is included under the captions Risk
Factors and Managements Discussion and Analysis of Financial Condition and
Results of Operations in Yelps most recent Quarterly Report on Form 10-Q at
www.yelp-ir.com or the SECs website at www.sec.gov. Undue reliance should not
be placed on the forward-looking statements in this release, which are based on
information available to Yelp on the date hereof. Yelp assumes no obligation to
update such statements.
Investor Relations Contact
Information
Yelp Investor Relations
Wendy Lim
(415) 568-3240
ir@yelp.com
SOURCE Yelp Inc.
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