UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
Commission File Number
(Exact name of Registrant as specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: 1-
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Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The number of shares of Registrant’s Common Stock outstanding as of May 4, 2021 was
Table of Contents
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PART I |
1 |
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Item 1. |
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Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 |
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Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 |
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Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
31 |
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Item 5. |
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Item 6. |
32 |
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33 |
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
WAITR HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
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March 31, |
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December 31, |
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2021 |
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2020 |
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Unaudited |
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ASSETS |
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CURRENT ASSETS |
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Cash |
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$ |
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$ |
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Accounts receivable, net |
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Capitalized contract costs, current |
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Prepaid expenses and other current assets |
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TOTAL CURRENT ASSETS |
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Property and equipment, net |
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Capitalized contract costs, noncurrent |
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Goodwill |
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Intangible assets, net |
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Operating lease right-of-use assets |
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— |
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Other noncurrent assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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LIABILITIES: |
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
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$ |
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Restaurant food liability |
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Accrued payroll |
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Short-term loans for insurance financing |
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Deferred revenue, current |
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Income tax payable |
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Operating lease liabilities |
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— |
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Other current liabilities |
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TOTAL CURRENT LIABILITIES |
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Long term debt - related party |
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Accrued medical contingency |
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Operating lease liabilities |
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— |
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Other noncurrent liabilities |
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TOTAL LIABILITIES |
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Commitments and contingent liabilities (Note 10) |
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STOCKHOLDERS’ EQUITY: |
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Common stock, $ and December 31, 2020, respectively |
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Additional paid in capital |
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Accumulated deficit |
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TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
WAITR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
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Three Months Ended March 31, |
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2021 |
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2020 |
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REVENUE |
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$ |
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$ |
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COSTS AND EXPENSES: |
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Operations and support |
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Sales and marketing |
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Research and development |
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General and administrative |
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Depreciation and amortization |
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(Gain) loss on disposal of assets |
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TOTAL COSTS AND EXPENSES |
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INCOME FROM OPERATIONS |
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OTHER EXPENSES (INCOME) AND LOSSES (GAINS), NET |
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Interest expense |
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Interest income |
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— |
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Other expense |
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NET LOSS BEFORE INCOME TAXES |
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Income tax expense |
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NET LOSS |
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$ |
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$ |
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LOSS PER SHARE: |
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Basic and diluted |
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$ |
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Weighted average shares used to compute net loss per share: |
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Weighted average common shares outstanding – basic and diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
WAITR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Three Months Ended March 31, |
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2021 |
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2020 |
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Cash flows from operating activities: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Non-cash interest expense |
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Amortization of operating lease assets |
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Stock-based compensation |
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(Gain) loss on disposal of assets |
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Depreciation and amortization |
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Amortization of capitalized contract costs |
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Other non-cash income |
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( |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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Capitalized contract costs |
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Prepaid expenses and other current assets |
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Other noncurrent assets |
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Accounts payable |
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Restaurant food liability |
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( |
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Deferred revenue |
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Income tax payable |
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Operating lease liabilities |
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( |
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Accrued payroll |
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Accrued medical contingency |
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Accrued workers’ compensation liability |
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Other current liabilities |
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( |
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Other noncurrent liabilities |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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Internally developed software |
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Acquisitions |
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Collections on notes receivable |
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Proceeds from sale of property and equipment |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Proceeds from issuance of stock |
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Equity issuance costs |
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Payments on long-term loan |
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Payments on acquisition loans |
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Payments on short-term loans for insurance financing |
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Proceeds from exercise of stock options |
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Taxes paid related to net settlement on stock-based compensation |
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Net cash (used in) provided by financing activities |
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Net change in cash |
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Cash, beginning of period |
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Cash, end of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Cash paid during the period for interest |
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$ |
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$ |
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Supplemental disclosures of non-cash investing and financing activities: |
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Stock issued as consideration in acquisition |
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$ |
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$ |
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Noncash impact of operating lease assets |
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Noncash impact of operating lease liabilities |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
WAITR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
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Three Months Ended March 31, 2021 |
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Common stock |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Shares |
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Amount |
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Balances at December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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Exercise of stock options and vesting of restricted stock units |
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— |
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— |
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Taxes paid related to net settlement on stock-based compensation |
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— |
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— |
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( |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Equity issued for acquisitions |
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— |
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— |
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Balances at March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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Three Months Ended March 31, 2020 |
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Common stock |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Shares |
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Amount |
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Balances at December 31, 2019 |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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Exercise of stock options and vesting of restricted stock units |
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— |
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— |
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Taxes paid related to net settlement on stock-based compensation |
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— |
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— |
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( |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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Balances at March 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
WAITR HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1. Organization
Waitr Holdings Inc., a Delaware corporation, together with its wholly owned subsidiaries (the “Company,” “Waitr,” “we,” “us” and “our”), operates an online ordering technology platform, providing delivery, carryout and dine-in options, connecting restaurants, drivers and diners in cities across the United States. The Company’s technology platform includes the Waitr and Bite Squad mobile applications, and more recently, the Delivery Dudes mobile application, collectively referred to as the “Platforms”. The Platforms allow consumers to browse local restaurants and menus, track order and delivery status, and securely store previous orders for ease of use and convenience. Restaurants benefit from the online Platforms through increased exposure to consumers for expanded business in the delivery market and carryout sales.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The unaudited interim condensed consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) as they apply to interim financial information. Accordingly, the interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete annual financial statements, although the Company believes that the disclosures made are adequate to make information not misleading. References to the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) included hereafter refer to the ASC and ASUs established by the Financial Accounting Standards Board (the “FASB”) as the source of authoritative GAAP.
The unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”). The interim condensed consolidated financial statements are unaudited, but in the Company’s opinion, include all adjustments that are necessary for a fair presentation of the results for the periods presented. The interim results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.
During the third quarter of 2020, the Company identified and corrected an immaterial error related to the understatement of an accrued medical contingency that affected previously issued consolidated financial statements. In order to present the impact of the updated estimated liability for the claim, previously issued financial statements have been revised. See Note 9 – Correction of Prior Period Error for additional details, including a summary of the revisions to certain previously reported financial information presented herein for comparative purposes.
Reclassifications
Certain amounts from prior periods have been reclassified to conform to the current period presentation.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all wholly owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in accordance with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates and judgments relied upon in preparing these condensed consolidated financial statements affect the following items:
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incurred loss estimates under our insurance policies with large deductibles or retention levels; |
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loss exposure related to claims such as the Medical Contingency (see Note 9 – Correction of Prior Period Error); |
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income taxes; |
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useful lives of tangible and intangible assets; |
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equity compensation; |
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contingencies; |
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goodwill and other intangible assets, including the recoverability of intangible assets with finite lives and other long-lived assets; and |
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• |
fair value of assets acquired and liabilities assumed as part of a business combination. |
The Company regularly assesses these estimates and records changes to estimates in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions believed to be reasonable under the circumstances. Changes in the economic environment, financial markets, and any other parameters used in determining these estimates could cause actual results to differ from those estimates.
Impact of COVID-19 on our Business
Waitr has thus far been able to operate during the pandemic caused by the outbreak of SARS-CoV-2 (“COVID-19”). We have taken several steps to help protect and support our restaurant partners, diners, independent contractor drivers and our employees during the COVID-19 outbreak, including offering no-contact delivery in select markets, offering no-contact grocery delivery in select markets, working with certain restaurant partners to waive diner delivery fees, deploying free marketing programs for certain restaurants and providing masks, gloves and hand sanitizer to drivers. We continue to monitor the impact of the COVID-19 outbreak, although there remains significant uncertainty related to the public health impact and the global economic situation.
Critical Accounting Policies and Estimates
See “Recent Accounting Pronouncements” below for a description of accounting principle changes adopted during the three months ended March 31, 2021 related to leases. There have been no other material changes to our critical accounting policies and estimates described in the 2020 Form 10-K. See “Revenue” below for a description of our revenue recognition policy.
Revenue
The Company generates revenue (“Transaction Fees”) primarily when diners place an order on one of the Platforms. In the case of diner subscription fees for our unlimited delivery subscription program, revenue is recognized for the receipt of the monthly fee in the applicable month for which the delivery service applies to. Revenue consists of the following for the periods indicated (in thousands):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Transaction Fees |
|
$ |
|
|
|
$ |
|
|
|
Setup and integration fees |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
|
|
|
$ |
|
|
Transaction Fees represent the revenue recognized from the Company’s obligation to process orders on the Platforms. The performance obligation is satisfied when the Company successfully processes an order placed on one of the Platforms and the restaurant receives the order at their location. The obligation to process orders on the Platforms represents a series of distinct performance obligations satisfied over time that the Company combines into a single performance obligation. Consistent with the recognition objective in ASC Topic 606, Revenue from Contracts with Customers, the variable consideration due to the Company for processing orders is recognized on a daily basis. As an agent of the restaurant in the transaction, the Company recognizes Transaction Fees earned from the restaurant on the Platform on a net basis. Transaction Fees also include a fee charged to the end user customer when they request the order be delivered to their location. Revenue is recognized for diner fees once the delivery service is completed. The contract period for substantially all restaurant contracts is one month as both the Company and the restaurant have the ability to unilaterally terminate the contract by providing notice of termination.
During the three months ended March 31, 2021 and 2020, the Company recognized revenue for non-refundable setup and integration fees for onboarding certain restaurants. In connection with modifications to the Company’s fee structure in July 2019, the Company discontinued offering fee arrangements with the upfront, one-time setup and integration fee.
The Company records a receivable when it has an unconditional right to the consideration. The balance of accounts receivable, net was $
6
Costs to Obtain a Contract with a Customer
The Company recognizes an asset for the incremental costs of obtaining a contract with a restaurant and recognizes the expense over the course of the period when the Company expects to recover those costs. The Company has determined that certain internal sales incentives earned at the time when an initial contract is executed meet these requirements. Capitalized sales incentives are amortized to sales and marketing expense on a straight-line basis over the period of benefit, which the Company has determined to be
Deferred costs related to obtaining contracts with restaurants were $
Costs to Fulfill a Contract with a Customer
The Company also recognizes an asset for the costs to fulfill a contract with a restaurant when they are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. The Company has determined that certain costs related to setup and integration activities meet the capitalization criteria under ASC Topic 340-40, Other Assets and Deferred Costs. Costs related to these implementation activities are deferred and then amortized to operations and support expense on a straight-line basis over the period of benefit, which the Company has determined to be
Deferred costs related to fulfilling contracts with restaurants were $
Recent Accounting Pronouncements
The Company considered the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on these unaudited condensed consolidated financial statements. Throughout fiscal year 2020, the Company qualified as an “emerging growth company” pursuant to the provisions of the JOBS Act. As an emerging growth company, the Company elected to use the extended transition period for complying with certain new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Effective January 1, 2021, the Company is no longer an emerging growth company.
Recently Adopted Accounting Standards
Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The principal objective of ASU 2016-02 is to increase transparency and comparability among organizations by recognizing “right-of-use” lease assets and lease liabilities on the consolidated balance sheet. ASU 2016-02 continues to retain a distinction between finance and operating leases but requires lessees to recognize a right-of-use asset representing its right to use the underlying asset for the lease term and a corresponding lease liability on the balance sheet for all leases with terms greater than twelve months. ASU 2016-02 was effective for and adopted by the Company on
The Company determines if an arrangement is a lease at inception of a contract. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company elected the optional practical expedient package, which includes retaining the current classification of leases, and is utilizing the practical expedient which allows the use of hindsight in determining the lease term and in assessing impairment of its operating lease right-of-use assets. Additionally, the Company has elected to treat lease and non-lease components as a single lease component for all assets. The Company has elected to apply the short-term scope exception for leases with original terms of twelve months or less, and accordingly, recognizes the lease payments for such leases in the statement of operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.
Under ASU 2016-02, the Company recorded in the unaudited condensed consolidated balance sheet as of January 1, 2021, lease liabilities for operating leases entered into prior to December 31, 2020 of $
7
which is estimated to be
Other
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income taxes and also improves consistent application by clarifying and amending existing guidance. ASU 2019-12 was effective for and adopted by the Company on
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of ASU 2017-11 addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced based on the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of ASU 2017-11 addresses the difficulty of navigating ASC Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in ASC 480. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. Part II of ASU 2017-11 does not have an accounting effect. ASU 2017-11 was effective for and adopted by the Company on
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 uses a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments and expands disclosure requirements. ASU 2016-13 was effective for and adopted by the Company on
Pending Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt, resulting in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation. ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impacts of the provisions of ASU 2020-06 on its consolidated financial statements and related disclosures.
3. Business Combinations
2021 Acquisition
On
8
|
(in thousands, except per share amount) |
|
|
|
|
|
Shares transferred at closing |
|
|
|
|
|
Value per share |
|
$ |
|
|
|
Total share consideration |
|
|
|
|
|
Plus: cash transferred to Delivery Dudes members |
|
|
|
|
|
Plus: net working capital deficit assumed |
|
|
|
|
|
Total estimated consideration |
|
$ |
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
Accounts receivable |
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
Intangible assets |
|
|
|
|
|
Other noncurrent assets |
|
|
|
|
|
Accrued expenses and other current liabilities |
|
|
( |
) |
|
Other noncurrent liabilities |
|
|
( |
) |
|
Total assets acquired, net of liabilities assumed |
|
|
|
|
|
Goodwill |
|
|
|
|
|
Total estimated consideration |
|
$ |
|
|
The Company engaged a third-party specialist to assist management in estimating the fair value of the assets and liabilities. Goodwill is attributable to the future anticipated economic benefits from combining operations of the Company and Delivery Dudes, including future growth into new markets, future customer relationships and the workforce in place. All of the goodwill is expected to be deductible for U.S. federal income tax purposes. While the Company has substantially completed the determination of the fair values of the assets acquired and liabilities assumed, the Company is still finalizing the calculation of the purchase price adjustments pursuant to the asset purchase agreement for the Delivery Dudes Acquisition, which could affect the final fair value analysis. The Company anticipates finalizing the determination of the fair values by the second quarter of 2021.
The following table sets forth the components of estimated identifiable intangible assets acquired from Delivery Dudes (in thousands) and their estimated useful lives as of the acquisition date:
|
|
|
Amortizable Life (in years) |
|
|
Value |
|
||
|
Customer relationships |
|
|
|
|
|
$ |
|
|
|
Franchise relationships |
|
|
|
|
|
|
|
|
|
Trade name |
|
|
|
|
|
|
|
|
|
Developed technology |
|
|
|
|
|
|
|
|
|
In-process research and development |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
The acquired identifiable intangible assets are amortized on a straight-line basis to reflect the pattern in which the economic benefits of the intangible assets are consumed. The acquired customer relationships were valued using the income approach, specifically, the multi-period excess earnings method, which measures the after-tax cash flows attributable to the existing customer relationships after deducting the operating costs and contributory asset charges associated with economic rents associated with supporting the existing customer relationships. The franchise relationships were also valued using the multi-period excess earnings method. The acquired trade name was valued using the income approach, specifically, the relief from royalty rate method, which measures the cash flow streams attributable to the trade name in the form of royalty payments that would be paid to the owner of the trade name in return for the rights to use the trade name. Developed technology was valued based on the cost approach, specifically the “with & without” methodology which considers the direct replacement and opportunity costs associated with the underlying technology, and in-process research and development assets were valued using the replacement cost method. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. These inputs required significant judgments and estimates at the time of the valuation.
9
The results of operations of Delivery Dudes are included in our unaudited condensed consolidated financial statements beginning on the acquisition date, March 11, 2021. Revenue and net loss of Delivery Dudes included in the unaudited condensed consolidated statement of operations in the three months ended March 31, 2021 totaled approximately $
In connection with the Delivery Dudes Acquisition, the Company incurred direct and incremental costs of $
Pro-Forma Financial Information (Unaudited)
The supplemental condensed consolidated results of the Company on an unaudited pro forma basis as if the Delivery Dudes Acquisitions had been consummated on January 1, 2020 are as follows (in thousands):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Net revenue |
|
$ |
|
|
|
$ |
|
|
|
Net income (loss) |
|
$ |
|
|
|
$ |
( |
) |
These pro forma results were based on estimates and assumptions, which the Company believes are reasonable. They are not the results that would have been realized had the Company been a consolidated company during the periods presented and are not indicative of consolidated results of operations in future periods. Acquisition costs and other non-recurring charges incurred are included in the period presented.
4. Accounts Receivable, Net
Accounts receivable consist of the following (in thousands):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Credit card receivables |
|
$ |
|
|
|
$ |
|
|
|
Receivables from restaurants and customers |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
|
|
|
$ |
|
|
|
Less: allowance for doubtful accounts and chargebacks |
|
|
( |
) |
|
|
( |
) |
|
Accounts receivable, net |
|
$ |
|
|
|
$ |
|
|
5. Intangibles Assets and Goodwill
Intangible Assets
Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives and include internally developed software, as well as software to be otherwise marketed, and trademarks/trade name/patents, customer relationships and franchise relationships. The Company has determined that the Waitr trademark intangible asset is an indefinite-lived asset and therefore is not subject to amortization but is evaluated annually for impairment. The Bite Squad and Delivery Dudes trade name intangible assets, however, are being amortized over their estimated useful lives.
10
Intangible assets are stated at cost or acquisition-date fair value less accumulated amortization and consist of the following (in thousands):
|
|
|
As of March 31, 2021 |
|
|||||||||||||
|
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Accumulated Impairment |
|
|
Intangible Assets, Net |
|
||||
|
Software |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Trademarks/Trade name/Patents |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
Customer Relationships |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Franchise Relationships |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020 |
|
|||||||||||||
|
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Accumulated Impairment |
|
|
Intangible Assets, Net |
|
||||
|
Software |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Trademarks/Trade name/Patents |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
Customer Relationships |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Franchise Relationships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
During the three months ended March 31, 2021, the Company acquired intangible assets in connection with the Delivery Dudes Acquisition (see Note 3 – Business Combinations). Additionally, during the three months ended March 31, 2021, the Company capitalized approximately $
The Company recorded amortization expense of $
|
|
|
Amortization |
|
|
|
The remainder of 2021 |
|
$ |
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total future amortization |
|
$ |
|
|
Goodwill
The change in the Company’s goodwill balance is as follows for the three months ended March 31, 2021 and the year ended December 31, 2020 (in thousands):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Balance, beginning of period |
|
$ |
|
|
|
$ |
|
|
|
Acquisitions during the period |
|
|
|
|
|
|
|
|
|
Impairments during the period |
|
|
— |
|
|
|
— |
|
|
Balance, end of period |
|
$ |
|
|
|
$ |
|
|
The Company recorded $
11
6. Other Current Liabilities
Other current liabilities consist of the following (in thousands):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Accrued insurance expenses |
|
$ |
|
|
|
$ |
|
|
|
Accrued estimated workers' compensation expenses |
|
|
|
|
|
|
|
|
|
Accrued medical contingency |
|
|
|
|
|
|
|
|
|
Accrued sales tax payable |
|
|
|
|
|
|
|
|
|
Accrued legal contingency |
|
|
|
|
|
|
— |
|
|
Other accrued expenses |
|
|
|
|
|
|
|
|
|
Unclaimed property |
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
|
|
|
|
|
|
|
Total other current liabilities |
|
$ |
|
|
|
$ |
|
|
7. Debt
The Company’s outstanding debt obligations are as follows (in thousands):
|
|
|
Coupon Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range in 2020 |
|
Effective |
|
|
|
|
March 31, |
|
|
December 31, |
|
|||
|
|
|
through 1Q21 |
|
Interest Rate |
|
|
Maturity |
|
2021 |
|
|
2020 |
|
|||
|
Term Loan |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Less: unamortized debt issuance costs on Term Loan |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Less: unamortized debt issuance costs on Notes |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Long term debt - related party |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans for insurance financing |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total outstanding debt |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Interest expense related to the Company’s outstanding debt totaled $
Amendments to Loan Agreements
On March 9, 2021, the Company entered into an amendment to the Credit Agreement and an amendment to the Convertible Notes Agreement (together, the “Amended Loan Agreements”). The Amended Loan Agreements provide, among other things, for the Delivery Dudes Acquisition being included in the definition of Permitted Acquisition (as defined in the Credit Agreement and Convertible Notes Agreement). Additionally, pursuant to the amendment to the Credit Agreement, the Company made a $
The Company evaluated the amendments in the Amended Loan Agreements under ASC 470-50, “Debt Modification and Extinguishment”, and concluded that the amendments did not meet the characteristics of debt extinguishments under ASC 470-50. Accordingly, the amendments were treated as a debt modification, and thus, no gain or loss was recorded. A new effective interest rate for the Term Loan that equates the revised cash flows to the carrying amount of the original debt is computed and applied prospectively.
Term Loan
The Company maintains an agreement with Luxor Capital Group, LP (“Luxor Capital”) (as amended or otherwise modified from time to time, the “Credit Agreement”). The Credit Agreement provides for a senior secured first priority term loan (the “Term Loan”) which is guaranteed by certain subsidiaries of the Company. In connection with the Term Loan, the Company issued to Luxor Capital warrants which are currently exercisable for
12
Interest on the Term Loan is payable quarterly, in cash or, at the election of the Company, as a payment-in-kind, with interest paid in-kind being added to the aggregate principal balance. The Credit Agreement includes a number of customary covenants that, among other things, limit or restrict the ability of each of the Company and its subsidiaries to incur additional debt, incur liens on assets, engage in mergers or consolidations, dispose of assets, pay dividends or repurchase capital stock and repay certain junior indebtedness. The Credit Agreement also includes customary affirmative covenants, representations and warranties and events of default. We believe that we were in compliance with all covenants under the Credit Agreement as of March 31, 2021.
Notes
Additionally, the Company issued unsecured convertible promissory notes (the “Notes”) to Luxor Capital Partners, LP, Luxor Capital Partners Offshore Master Fund, LP, Luxor Wavefront, LP and Lugard Road Capital Master Fund, LP (the “Luxor Entities”) pursuant to an agreement, herein referred to as the “Convertible Notes Agreement”.
The Company’s payment obligations on the Notes are not guaranteed. The Convertible Notes Agreement contains negative covenants, affirmative covenants, representations and warranties and events of default that are substantially similar to those that are set forth in the Credit Agreement (except those that relate to collateral and related security interests, which are not contained in the Convertible Notes Agreement or otherwise applicable to the Notes). We believe that we were in compliance with all covenants under the Convertible Notes Agreement as of March 31, 2021.
Short-Term Loans
The Company’s short-term loans include loans to finance portions of certain annual insurance premium obligations. The loans are payable in monthly installments until maturity.
8. Income Taxes
The Company provides for income taxes using an asset and liability approach under which deferred income taxes are provided for based upon enacted tax laws and rates applicable to periods in which the taxes become payable. The Company recorded income tax expense of $
As of March 31, 2021, the Company recognized $
9. Correction of Prior Period Error
During the third quarter of 2020, the Company identified and corrected an immaterial error related to the understatement of an accrued medical contingency (the “Medical Contingency”) that affected previously issued consolidated financial statements. The Company became liable for a claim due to the insolvency of a previous workers compensation insurer. The Company assessed the materiality of the error, both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin No. 99, and concluded that the error was not material to any of its previously reported financial statements based upon qualitative aspects of the error. However, as the error was large quantitatively, previously issued financial statements have been revised and are presented for comparative purposes. The Company engaged a third-party actuary to assist in the calculation of the estimated loss exposure and determined that the accrued liability recorded at December 31, 2018 for the claim was understated by approximately $
The cumulative impact of the error correction on the Company’s retained earnings and stockholders’ equity as of January 1, 2020 was $
13
Revised Consolidated Cash Flow Statement (unaudited) (in thousands)
|
|
|
Three Months Ended March 31, 2020 |
|
|||||||||
|
|
|
As Reported |
|
|
Adjustment |
|
|
As Revised |
|
|||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued medical contingency |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Accrued workers' compensation liability |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
— |
|
|
|
|
|
Revised Consolidated Balance Sheet (unaudited) (in thousands)
|
|
|
March 31, 2020 |
|
|||||||||
|
|
|
As Reported |
|
|
Adjustment |
|
|
As Revised |
|
|||
|
Other current liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued medical contingency - long term |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Accrued workers' compensation liability - long term |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
( |
) |
|
|
|
|
10. Commitments and Contingencies
Leases
As of March 31, 2021, the Company had operating lease agreements for office facilities in various locations in the United States, which expire on various dates through
The following table presents supplemental cash flow information and the weighted-average lease term and discount rate for the Company’s operating leases for the three months ended March 31, 2021:
|
|
|
Three Months Ended March 31, 2021 |
|
|
|
Cash paid for operating lease liabilities (in thousands) |
|
$ |
|
|
|
Weighted-average remaining lease term (years) |
|
|
|
|
|
Weighted-average discount rate |
|
|
|
% |
As of March 31, 2021, the future minimum lease payments required under non-cancelable operating leases were as follows (in thousands):
|
|
|
Amount |
|
|
|
The remainder of 2021 |
|
$ |
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total future lease payments |
|
$ |
|
|
|
Less: imputed interest |
|
|
( |
) |
|
Present value of operating lease liabilities |
|
$ |
|
|
14
Medical Contingency Claim
As of March 31, 2021 and December 31, 2020, the long-term portion of the estimated Medical Contingency claim totaled $
Workers Compensation and Auto Policy Claims
We establish a liability under our workers’ compensation and auto insurance policies for claims incurred and an estimate for claims incurred but not yet reported. As of March 31, 2021 and December 31, 2020, $
Legal Matters
In July 2016, Waiter.com, Inc. filed a lawsuit against Waitr Inc. in the United States District Court for the Western District of Louisiana, alleging trademark infringement based on Waitr’s use of the “Waitr” trademark and logo, Civil Action No.: 2:16-CV-01041. Plaintiff seeks injunctive relief and damages relating to Waitr’s use of the “Waitr” name and logo. During the third quarter of 2020, the trial date was rescheduled to June 2021, and in September 2020, the court ruled on various motions, certain of which ruled against defenses the Company had advanced. Waitr believes that the damages case lacks merit and that it has a defense to the infringement claims alleged. Waitr continues to vigorously defend the suit. The Company accrued a $
In April 2019, the Company was named as a defendant in a class action complaint filed by certain current and former restaurant partners, captioned Bobby’s Country Cookin’, et al v. Waitr, which is currently pending in the United States District Court for the Western District of Louisiana. Plaintiffs allege, among other things, claims for breach of contract, violation of the duty of good faith and fair dealing, and unjust enrichment, and seek recovery on behalf of themselves and two separate classes. Based on the current class definitions, as many as
In September 2019, Christopher Meaux, David Pringle, Jeff Yurecko, Tilman J. Fertitta, Richard Handler, Waitr Holdings Inc. f/k/a Landcadia Holdings Inc., Jefferies Financial Group, Inc. and Jefferies, LLC were named as defendants in a putative class action lawsuit entitled Walter Welch, Individually and on Behalf of all Others Similarly Situated vs. Christopher Meaux, David Pringle, Jeff Yurecko, Tilman J. Fertitta, Richard Handler, Waitr Holdings Inc. f/k/a Landcadia Holdings Inc., Jefferies Financial Group, Inc. and Jefferies, LLC. The case was filed in the Western District of Louisiana, Lake Charles Division. In the lawsuit, the plaintiff asserts putative class action claims alleging, inter alia, that various defendants made false and misleading statements in securities filings, engaged in fraud, and violated accounting and securities rules. A similar putative class action lawsuit, entitled Kelly Bates, Individually and on Behalf of all Others Similarly Situated vs. Christopher Meaux, David Pringle, Jeff Yurecko, Tilman J. Fertitta, Richard Handler, Waitr Holdings Inc. f/k/a Landcadia Holdings Inc., Jefferies Financial Group, Inc. and Jefferies, LLC, was filed in that same court in November 2019. These two cases were recently consolidated, and an amended complaint was filed in October 2020. The Company filed a motion to dismiss in February 2021. Waitr believes that this lawsuit lacks merit and that it has strong defenses to all of the claims alleged. Waitr continues to vigorously defend the suit.
In addition to the lawsuits described above, Waitr is involved in other litigation arising from the normal course of business activities, including, without limitation, labor and employment claims, allegations of infringement, misappropriation and other violations of intellectual property or other rights, lawsuits and claims involving personal injuries, physical damage and workers’ compensation benefits suffered as a result of alleged conduct involving its employees, independent contractor drivers, and third-party negligence. Although Waitr believes that it maintains insurance with standard deductibles that generally covers liability for potential damages in many of these matters where coverage is available on acceptable terms (it is not maintained for claims involving intellectual property), insurance coverage is not guaranteed, often these claims are met with denial of coverage positions by the carriers, and there are limits to insurance coverage; accordingly, we could suffer material losses as a result of these claims or the denial of coverage for such claims.
15
11. Stock-Based Awards and Cash-Based Awards
In June 2020, the Company’s stockholders approved the Waitr Holdings Inc. Amended and Restated 2018 Omnibus Incentive Plan (the “2018 Incentive Plan”), which permits the granting of awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based awards, and other stock-based or cash-based awards. As of March 31, 2021, there were
Stock-Based Awards
Stock Options
During the three months ended March 31, 2021,
The fair value of each stock option grant during the three months ended March 31, 2021 and 2020 was estimated as of the grant date using an option-pricing model with the assumptions included in the table below. Expected volatility for stock options is estimated based on a combination of the historical volatility of the Company’s stock price and the historical and implied volatility of comparable publicly traded companies.
|
|
|
2021 |
|
|
2020 |
|
||
|
Weighted-average fair value at grant |
|
$ |
|
|
|
$ |
|
|
|
Risk free interest rate |
|
|
|
|
|
|
||
|
Expected volatility |
|
|
|
|
|
|
||
|
Expected option life (years) |
|
|
|
|
|
|
|
|
The Company recognized compensation expense for stock options of $
The stock option activity under the Company’s incentive plans during the three months ended March 31, 2021 and 2020 is as follows:
|
|
|
Three Months Ended March 31, 2021 |
|
|
Three Months Ended March 31, 2020 |
|
||||||||||||||||||
|
|
|
Number of Shares |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Grant Date Fair Value |
|
|
Number of Shares |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Grant Date Fair Value |
|
||||||
|
Balance, beginning of period |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Outstanding stock options, which were fully vested and expected to vest and exercisable are as follows as of March 31, 2021 and December 31, 2020:
16
|
|
|
As of March 31, 2021 |
|
|
As of December 31, 2020 |
|
||||||||||
|
|
|
Options Fully Vested and Expected to Vest |
|
|
Options Exercisable |
|
|
Options Fully Vested and Expected to Vest |
|
|
Options Exercisable |
|
||||
|
Number of Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining contractual term (years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average exercise price |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Aggregate Intrinsic Value (in thousands) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the fair value of the common stock and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on each date. This amount will change in future periods based on the fair value of the Company’s stock and the number of options outstanding. The aggregate intrinsic value of awards exercised during the three months ended March 31, 2021 and 2020 was $
Restricted Stock
The Company’s restricted stock grants include performance-based and time-based vesting awards. The fair value of restricted shares is typically determined based on the closing price of the Company’s common stock on the date of grant.
Performance-Based Awards
As of March 31, 2021, there were
Awards with Time-Based Vesting
During the three months ended March 31, 2021,
The Company recognized compensation expense for restricted stock of $
The activity for restricted stock with time-based vesting under the Company’s incentive plans is as follows for the three months ended March 31, 2021 and 2020:
|
|
|
Three Months Ended March 31, 2021 |
|
|
Three Months Ended March 31, 2020 |
|
||||||||||||||||||
|
|
|
Number of Shares |
|
|
Weighted Average Grant Date Fair Value |
|
|
Weighted Average Remaining Contractual Term (years) |
|
|
Number of Shares |
|
|
Weighted Average Grant Date Fair Value |
|
|
Weighted Average Remaining Contractual Term (years) |
|
||||||
|
Nonvested, beginning of period |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares vested |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Forfeitures |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Nonvested, end of period |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
Cash-Based Awards
17
Performance Bonus Agreement
On April 23, 2020, the Company entered into a performance bonus agreement with Mr. Grimstad. Pursuant to the bonus agreement, upon the occurrence of a change of control in which the holders of the Company’s common stock receive per share consideration that is equal to or greater than $
12. Stockholders’ Equity
Common Stock
At March 31, 2021 and December 31, 2020, there were
Preferred Stock
At March 31, 2021 and December 31, 2020, the Company was authorized to issue
Warrants
In November 2018, the Company issued to Luxor Capital warrants which are currently exercisable for
13. Fair Value Measurements
At March 31, 2021 and December 31, 2020, the Company had an outstanding medical contingency claim which is measured at fair value on a recurring basis (see Note 10 – Commitments and Contingencies). The long-term portion of the liability for such claim is included in the unaudited condensed consolidated balance sheets under accrued medical contingency, with the short-term portion included within other current liabilities. The medical contingency claim is measured at fair value using a method that incorporates life-expectancy assumptions, along with projected annual medical costs for each future year, adjusted for inflation. An average annual inflation rate of
The medical contingency claim analysis represents a Level 3 measurement as it was based on unobservable inputs reflecting the Company’s assumptions used in developing the fair value estimate. The inputs used in the measurement, particularly life expectancy and projected medical costs, are sensitive inputs to the measurement and changes to either could result in significantly higher or lower fair value measurements. The Company utilized historical transactional data regarding the claim, along with projections for future comprehensive medical care costs. These inputs required significant judgments and estimates at the time of the valuation.
The following table presents the Company’s liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 (in thousands):
18
|
|
|
As of March 31, 2021 |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued medical contingency |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020 |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued medical contingency |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
The Company had
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Balance, beginning of the period |
|
$ |
|
|
|
$ |
|
|
|
Increases/additions |
|
|
|
|
|
|
— |
|
|
Reductions/settlements |
|
|
( |
) |
|
|
( |
) |
|
Balance, end of the period |
|
$ |
|
|
|
$ |
|
|
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record certain assets and liabilities at fair value on a non-recurring basis. The Company generally applies fair value concepts in recording assets and liabilities acquired in business combinations and asset acquisitions (see Note 3 – Business Combinations).
14. Loss Per Share Attributable to Common Stockholders
The calculation of basic and diluted loss per share attributable to common stockholders for the three months ended March 31, 2021 and 2020 is as follows (in thousands, except share and per share data):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Basic and diluted loss per share: |
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders - basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted average number of shares outstanding |
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share |
|
$ |
( |
) |
|
$ |
( |
) |
The Company has outstanding Notes which are convertible into shares of the Company’s common stock. See Note 7 – Debt for additional details on the Notes. Based on the conversion price in effect at the end of the respective periods, the Notes were convertible into
Additionally, the following table includes securities outstanding at the end of the respective periods, which have been excluded from the fully diluted calculations because the effect on net loss per common share would have been antidilutive:
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Antidilutive shares underlying stock-based awards: |
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
|
|
|
Restricted stock units |
|
|
|
|
|
|
|
|
|
Warrants (1) |
|
|
|
|
|
|
|
|
|
|
(1) |
Includes the Debt Warrants as of March 31, 2021 and 2020. See Note 12 – Stockholders’ Equity for additional details. |
15. Related-Party Transactions
19
In November 2018, the Company entered into the Credit Agreement, and in January 2019, the Company entered into an amendment to the Credit Agreement, with Luxor Capital and an amendment to the Convertible Notes Agreement with the Luxor Entities. In addition, Luxor Capital has warrants which are convertible into shares of the Company’s common stock (see Note 12 – Stockholders’ Equity). On each of May 21, 2019, July 15, 2020 and March 9, 2021, the Company entered into amendments to the Credit Agreement with Luxor Capital and amendments to the Convertible Notes Agreement with the Luxor Entities. Additionally, on May 1, 2020, the Company entered into a Limited Waiver and Conversion Agreement with respect to the Credit Agreement and Convertible Notes Agreement. Jonathan Green, a board member of the Company, is a partner at Luxor Capital.
16. Subsequent Events
On April 23, 2021,
On April 23, 2021,
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”) and with the audited consolidated financial statements included in the Company’s 2020 Form 10-K filed with the SEC on March 8, 2021. The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences are set forth in the section titled “Cautionary Statement Regarding Forward-Looking Statements”. Dollar amounts in this discussion are expressed in thousands, except as otherwise noted.
Overview
Waitr operates an online ordering technology platform, providing delivery, carryout and dine-in options, connecting restaurants, drivers and diners in cities across the United States. Our strategy is to bring delivery, carryout and dine-in infrastructure to underserved populations of restaurants, grocery stores and diners and establish strong market presence or leadership positions in the markets in which we operate. Our business has been built with a restaurant-first philosophy by providing differentiated and brand additive services to the restaurants on the Platforms. Our Platforms allow consumers to browse local restaurants and menus, track order and delivery status, and securely store previous orders for ease of use and convenience. Restaurants benefit from the online Platforms through increased exposure to consumers for expanded business in the delivery market and carryout sales.
On March 11, 2021, we completed the acquisition of Delivery Dudes, a third-party delivery business primarily serving the South Florida market (see “Liquidity and Capital Resources” for additional details). The acquisition strengthens the Company’s market presence in the on-demand delivery service sector. At March 31, 2021, we had over 23,000 restaurants, in over 800 cities, on the Platforms. Average Daily Orders for the three months ended March 31, 2021 and 2020 were approximately 37,627 and 37,576, respectively, and revenue was $50,930 and $44,243, respectively.
We continued to build on our success from 2020, growing our revenue and generating positive operating cash flow in first quarter of 2021. The acquisition of Delivery Dudes and organic expansion into new markets during the first quarter of 2021 strengthened our market presence in both existing and new markets. In a continued effort to support our restaurants partners, we partnered with certain ordering integration systems, providing improved operational efficiency that benefits restaurants and customers. Additionally, during the first quarter of 2021, we added several national brands and delivery only “virtual” restaurant concepts to our Platforms, further bolstering our restaurant base and expanding selection for our diners.
Impact of COVID-19 on our Business
We have thus far been able to operate effectively during the COVID-19 pandemic. In response to economic hardships experienced during the COVID-19 pandemic, the U.S. federal government has rolled out stimulus payments in the first quarter of 2021 which we believe had a positive impact on our order volumes. We continue to implement measures to help protect and support our restaurant partners, diners, independent contractor drivers and our employees during these unprecedented times, including offering no-contact delivery for certain restaurant delivery orders and providing masks, gloves and hand sanitizer to drivers.
The potential short and long-term impacts and duration of the COVID-19 pandemic on the global economy and on the Company’s business, in particular, remain uncertain and may be difficult to assess or predict at this time. The pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, which may reduce the Company’s ability to access capital and continue to operate effectively. A prolonged recession or additional financial market corrections resulting from the spread of COVID-19, including an increase in the number of COVID-19 cases, could adversely affect demand for the Company’s services. To the extent that the COVID-19 pandemic adversely impacts the Company’s business, results of operations, liquidity or financial condition, it may also have the effect of heightening many of the other risks described in the risk factors in the Company’s 2020 Form 10-K. Management continues to monitor the impact of the COVID-19 outbreak and the possible effects on its financial position, liquidity, operations, industry and workforce.
21
Significant Accounting Policies and Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, along with related disclosures. We regularly assess these estimates and record changes to estimates in the period in which they become known. We base our estimates on historical experience and various other assumptions believed to be reasonable under the circumstances. Changes in the economic environment, financial markets, and any other parameters used in determining these estimates could cause actual results to differ from estimates. Significant estimates and judgements relied upon in preparing these condensed consolidated financial statements affect the following items:
|
|
• |
incurred loss estimates under our insurance policies with large deductibles or retention levels; |
|
|
• |
loss exposure related to claims such as the Medical Contingency (see Part I, Item 1, Note 9 – Correction of Prior Period Error); |
|
|
• |
income taxes; |
|
|
• |
useful lives of tangible and intangible assets; |
|
|
• |
equity compensation; |
|
|
• |
contingencies; |
|
|
• |
goodwill and other intangible assets, including the recoverability of intangible assets with finite lives and other long-lived assets; and |
|
|
• |
fair value of assets acquired and liabilities assumed as part of a business combination. |
Other than the changes disclosed in Part I, Item 1, Note 2 – Basis of Presentation and Summary of Significant Accounting Policies to our unaudited condensed consolidated financial statements in this Form 10-Q, there have been no material changes to our significant accounting policies and estimates described in the 2020 Form 10-K.
New Accounting Pronouncements and Pending Accounting Standards
See Part I, Item 1, Note 2 – Basis of Presentation and Summary of Significant Accounting Policies for a description of accounting standards adopted during the three months ended March 31, 2021. Also described in Note 2 are pending standards and their estimated effect on our unaudited condensed consolidated financial statements.
Through year-end 2020, we qualified as an “emerging growth company” pursuant to the provisions of the JOBS Act. As an emerging growth company, we were able to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Effective January 1, 2021, we are no longer an emerging growth company. Accordingly, for fiscal year 2021, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting.
Factors Affecting the Comparability of Our Results of Operations
Delivery Dudes Acquisition. The Delivery Dudes Acquisition was considered a business combination in accordance with ASC 805, and has been accounted for using the acquisition method. Under the acquisition method of accounting, total purchase consideration, acquired assets and assumed liabilities are recorded based on their estimated fair values on the acquisition date. The excess of the fair value of purchase consideration over the fair value of the assets less liabilities acquired has been recorded as goodwill on our unaudited condensed consolidated balance sheet as of March 31, 2021. The results of operations of Delivery Dudes are included in our unaudited condensed consolidated financial statements beginning on the acquisition date, March 11, 2021.
In connection with the Delivery Dudes Acquisition, we incurred direct and incremental costs during the three months ended March 31, 2021 of approximately $606, consisting of legal and professional fees, which are included in general and administrative expenses in the unaudited condensed consolidated statement of operations in such period.
Changes in Fee Structure. Our fee structure has changed at various times since our inception. We continue to review and update our current rate structure, as necessary, as we look to offer new and enhanced value-adding services to our restaurant partners. Any changes to our fee structure could affect the comparability of our results of operations from period to period.
Seasonality and Holidays. Our business tends to follow restaurant closure and diner behavior patterns. In many of our markets, we have historically experienced variations in order frequency as a result of weather patterns, university summer breaks and other vacation periods. In addition, a significant number of restaurants tend to close on certain major holidays, including Thanksgiving, Christmas Eve and Christmas Day. Further, diner activity may be impacted by unusually cold, rainy, or warm weather. Cold weather and rain typically drive increases in order volume, while unusually warm or sunny weather typically drives decreases in orders. Furthermore, snowstorms, ice storms, hurricanes and tropical storms have adverse effects on order volume, particularly if they cause
22
property damage or utility interruptions to our restaurant partners. The COVID-19 pandemic has had an impact on our typical seasonality trends and could impact future periods.
Acquisition Pipeline. We continue to maintain and evaluate an active pipeline of potential acquisition targets and may pursue acquisitions in the future. These potential business acquisitions may impact the comparability of our results in future periods relative to prior periods.
Key Factors Affecting Our Performance
Efficient Market Expansion and Penetration. Revenue growth and any corresponding improved cash flow and profitability is dependent on successful restaurant, diner and driver penetration of our markets and achieving scale in current and future markets. Failure in achieving this scale could adversely affect our working capital, which in turn, could slow our growth plans.
We typically target markets that we believe could achieve sustainable positive operating cash flows and profits, improve efficiency, and appropriately leverage the scale of our advertising, marketing, research and development, and other corporate resources. Our financial condition, cash flows, and results of operations depend, in significant part, on our ability to achieve and sustain our target profitability thresholds in our markets.
Waitr’s Restaurant, Diner and Driver Network. A significant part of our strategy is our ability to successfully expand our network of restaurants, diners and drivers using the Platforms. If we fail to retain existing or add new restaurants, diners and drivers, our revenue and overall financial results may be adversely affected.
Key Business Metrics
Defined below are the key business metrics that we use to analyze our business performance, determine financial forecasts, and help develop long-term strategic plans:
Active Diners. We count Active Diners as the number of diner accounts from which an order has been placed through the Platforms during the past twelve months (as of the end of the relevant period) and consider Active Diners an important metric because the number of diners using our Platforms is a key revenue driver and a valuable measure of the size of our engaged diner base.
Average Daily Orders. We calculate Average Daily Orders as the number of orders during the period divided by the number of days in that period, including holidays. Average Daily Orders is an important metric for us because the number of orders processed on our Platforms is a key revenue driver and, in conjunction with the number of Active Diners, a valuable measure of diner activity on our Platforms for a given period.
Gross Food Sales. We calculate Gross Food Sales as the total food and beverage sales, sales taxes, prepaid gratuities, and diner fees processed through the Platforms during a given period. Gross Food Sales are different than the order value upon which we charge our fee to restaurants, which excludes sales taxes, gratuities and diner fees. Prepaid gratuities, which are not included in our revenue, are determined by diners and may vary from order to order. Gratuities other than prepaid gratuities, such as cash tips, are not included in Gross Food Sales. Gross Food Sales is an important metric for us because the total volume of food sales transacted through our Platforms is a key revenue driver.
Average Order Size. We calculate Average Order Size as Gross Food Sales for a given period divided by the number of orders during the same period. Average Order Size is an important metric for us because the average value of gross food sales on our Platforms is a key revenue driver.
|
|
|
Three Months Ended March 31, |
|
|||||
|
Key Business Metrics(1) |
|
2021 |
|
|
2020 |
|
||
|
Active Diners (as of period end) |
|
|
1,966,815 |
|
|
|
2,186,640 |
|
|
Average Daily Orders |
|
|
37,627 |
|
|
|
37,576 |
|
|
Gross Food Sales (dollars in thousands) |
|
$ |
150,281 |
|
|
$ |
133,513 |
|
|
Average Order Size (in dollars) |
|
$ |
44.38 |
|
|
$ |
39.05 |
|
|
|
(1) |
The key business metrics include the operations of Delivery Dudes beginning on the acquisition date, March 11, 2021. |
23
Basis of Presentation
Revenue
We generate revenue primarily when diners place an order on one of the Platforms. We recognize revenue from diner orders when orders are delivered. Our revenue consists primarily of net Transaction Fees.
Cost and Expenses:
Operations and Support. Operations and support expense consists primarily of salaries, benefits, stock-based compensation, and bonuses for employees engaged in operations and customer service, as well as market managers, restaurant onboarding, and driver logistics personnel, and payments to independent contractor drivers for delivery services. Operations and support expense also includes payment processing costs incurred on customer orders and the cost of software and related services providing support for diners, restaurants and drivers.
Sales and Marketing. Sales and marketing expense consists primarily of salaries, commissions, benefits, stock-based compensation and bonuses for personnel supporting sales and marketing efforts, including restaurant business development managers, marketing employees and contractors, and third-party marketing expenses such as social media and search engine marketing, online display, team sponsorships and print marketing.
Research and Development. Research and development expense consists primarily of salaries, benefits, stock-based compensation and bonuses for employees and contractors engaged in the design, development, maintenance and testing of the Platforms. This expense also includes such items as software subscriptions that are necessary for the upkeep and maintenance of the Platforms.
General and Administrative. General and administrative expense consists primarily of salaries, benefits, stock-based compensation and bonuses for executive, finance and accounting, human resources and other administrative employees as well as third-party legal, accounting, and other professional services, insurance (including workers’ compensation, auto liability and general liability), travel, facilities rent, and other corporate overhead costs.
Depreciation and Amortization. Depreciation and amortization expense consists primarily of amortization of capitalized costs for software development, trademarks and customer relationships and depreciation of leasehold improvements, furniture, and equipment, primarily tablets deployed in restaurants. We do not allocate depreciation and amortization expense to other line items.
Other Expenses (Income) and Losses (Gains), Net. Other expenses (income) and losses (gains), net, primarily includes interest expense on outstanding debt, as well as any other items not considered to be incurred in the normal operations of the business.
Results of Operations
The following table sets forth our results of operations for the periods indicated, with line items presented in thousands of dollars and as a percentage of our revenue:
|
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
(in thousands, except percentages(1)) |
|
2021 |
|
|
% of Revenue |
|
|
2020 |
|
|
% of Revenue |
|
||||
|
Revenue |
|
$ |
50,930 |
|
|
|
100 |
% |
|
$ |
44,243 |
|
|
|
100 |
% |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations and support |
|
|
30,338 |
|
|
|
60 |
% |
|
|
26,365 |
|
|
|
60 |
% |
|
Sales and marketing |
|
|
4,016 |
|
|
|
8 |
% |
|
|
2,826 |
|
|
|
6 |
% |
|
Research and development |
|
|
999 |
|
|
|
2 |
% |
|
|
1,470 |
|
|
|
3 |
% |
|
General and administrative |
|
|
10,186 |
|
|
|
20 |
% |
|
|
10,778 |
|
|
|
24 |
% |
|
Depreciation and amortization |
|
|
2,917 |
|
|
|
6 |
% |
|
|
2,064 |
|
|
|
5 |
% |
|
(Gain) loss on disposal of assets |
|
|
(3 |
) |
|
|
0 |
% |
|
|
8 |
|
|
|
0 |
% |
|
Total costs and expenses |
|
|
48,453 |
|
|
|
95 |
% |
|
|
43,511 |
|
|
|
98 |
% |
|
Income from operations |
|
|
2,477 |
|
|
|
5 |
% |
|
|
732 |
|
|
|
2 |
% |
|
Other expenses (income) and losses (gains), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
1,901 |
|
|
|
4 |
% |
|
|
2,914 |
|
|
|
7 |
% |
|
Interest income |
|
|
— |
|
|
|
0 |
% |
|
|
(60 |
) |
|
|
0 |
% |
|
Other expense |
|
|
4,264 |
|
|
|
8 |
% |
|
|
(37 |
) |
|
|
0 |
% |
|
Net loss before income taxes |
|
|
(3,688 |
) |
|
|
(7 |
%) |
|
|
(2,085 |
) |
|
|
(5 |
%) |
|
Income tax expense |
|
|
24 |
|
|
|
0 |
% |
|
|
17 |
|
|
|
0 |
% |
|
Net loss |
|
$ |
(3,712 |
) |
|
|
(7 |
%) |
|
$ |
(2,102 |
) |
|
|
(5 |
%) |
24
________________
|
|
(1) |
Percentages may not foot due to rounding. |
The following section includes a discussion of our results of operations for the three months ended March 31, 2021 and 2020. The results of operations of Delivery Dudes are included in our unaudited condensed consolidated financial statements beginning on the acquisition date, March 11, 2021 (see Part I, Item 1, Note 3 – Business Combinations).
Revenue
|
|
|
Three Months Ended March 31, |
|
|
Percentage |
|
||||||
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
|
(dollars in thousands) |
|
|
|
|
|
|||||
|
Revenue |
|
$ |
50,930 |
|
|
$ |
44,243 |
|
|
|
15 |
% |
Revenue increased for the three months ended March 31, 2021 compared to March 31, 2020, primarily as a result of improved revenue unit economics. The Average Order Size increased to $44.38 from $39.05, an improvement of 14%, while Average Daily Orders remained relatively flat in the three months ended March 31, 2021 compared to March 31, 2020. Average Daily Orders were positively impacted during the three months ended March 31, 2021 by the rollout of federal stimulus payments, partially offset by the impact of extreme weather-related events.
Operations and Support
|
|
|
Three Months Ended March 31, |
|
|
Percentage |
|
||||||
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
|
(dollars in thousands) |
|
|
|
|
|
|||||
|
Operations and support |
|
$ |
30,338 |
|
|
$ |
26,365 |
|
|
|
15 |
% |
|
As a percentage of revenue |
|
|
60 |
% |
|
|
60 |
% |
|
|
|
|
Operations and support expenses increased in dollar terms for the three months ended March 31, 2021 compared to March 31, 2020, primarily due to the Company serving more markets in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, including costs for operations and support personnel and software related to supporting those markets. As a percentage of revenue, operations and support expenses remained flat for the three months ended March 31, 2021 compared to March 31, 2020.
Sales and Marketing
|
|
|
Three Months Ended March 31, |
|
|
Percentage |
|
||||||
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
|
(dollars in thousands) |
|
|
|
|
|
|||||
|
Sales and marketing |
|
$ |
4,016 |
|
|
$ |
2,826 |
|
|
|
42 |
% |
|
As a percentage of revenue |
|
|
8 |
% |
|
|
6 |
% |
|
|
|
|
Sales and marketing expense increased in dollar terms and as a percentage of revenue in the three months ended March 31, 2021 compared to March 31, 2020, primarily attributable to increased digital advertising.
Research and Development
|
|
|
Three Months Ended March 31, |
|
|
Percentage |
|
||||||
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
|
(dollars in thousands) |
|
|
|
|
|
|||||
|
Research and development |
|
$ |
999 |
|
|
$ |
1,470 |
|
|
|
(32 |
%) |
|
As a percentage of revenue |
|
|
2 |
% |
|
|
3 |
% |
|
|
|
|
Research and development expense decreased in dollar terms and as a percentage of revenue in the three months ended March 31, 2021 compared to March 31, 2020, primarily due to the capitalization of increased software development costs during the first quarter of 2021 as further features and functionality were incorporated into the Platforms.
General and Administrative
|
|
|
Three Months Ended March 31, |
|
|
Percentage |
|
||||||
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
|
(dollars in thousands) |
|
|
|
|
|
|||||
|
General and administrative |
|
$ |
10,186 |
|
|
$ |
10,778 |
|
|
|
(5 |
%) |
|
As a percentage of revenue |
|
|
20 |
% |
|
|
24 |
% |
|
|
|
|
25
General and administrative expense decreased in dollar terms and as a percentage of revenue in the three months ended March 31, 2021 compared to March 31, 2020, primarily as a result of a decrease in workers’ compensation insurance expenses, partially offset by increased stock-based compensation expense and $606 of business combination-related professional and other costs associated with the Delivery Dudes Acquisition.
Depreciation and Amortization
|
|
|
Three Months Ended March 31, |
|
|
Percentage |
|
||||||
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
|
(dollars in thousands) |
|
|
|
|
|
|||||
|
Depreciation and amortization |
|
$ |
2,917 |
|
|
$ |
2,064 |
|
|
|
41 |
% |
|
As a percentage of revenue |
|
|
6 |
% |
|
|
5 |
% |
|
|
|
|
Depreciation and amortization expense increased in dollar terms and as a percentage of revenue in the three months ended March 31, 2021 compared to March 31, 2020, driven by an increase in depreciation expense related to computer tablets for restaurants on the Platforms and amortization expense on intangible assets acquired in the Delivery Dudes Acquisition.
Other Expenses (Income) and Losses (Gains), Net
|
|
|
Three Months Ended March 31, |
|
|
Percentage |
|
||||||
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
|
(dollars in thousands) |
|
|
|
|
|
|||||
|
Other expenses (income) and losses (gains), net |
|
$ |
6,165 |
|
|
$ |
2,817 |
|
|
|
119 |
% |
|
As a percentage of revenue |
|
|
12 |
% |
|
|
6 |
% |
|
|
|
|
Other expenses (income) and losses (gains), net for the three months ended March 31, 2021 primarily consisted of a $4,000 accrual for a legal contingency and $1,860 of interest expense associated with the Term Loan and Notes. For the three months ended March 31, 2020, other expenses (income) and losses (gains), net primarily consisted of $2,860 of interest expense associated with the Term Loan and Notes.
Income Tax Expense
Income tax expense for the three months ended March 31, 2021 and 2020 was $24 and $17, respectively, entirely related to state taxes in various jurisdictions. We have historically generated net operating losses; therefore, a valuation allowance has been recorded on our net deferred tax assets.
Liquidity and Capital Resources
Overview
As of March 31, 2021, we had cash on hand of approximately $67,863. Our primary sources of liquidity have recently been cash flow from operations and proceeds from the issuance of stock.
In March 2021, the Company entered into amendments to the Credit Agreement and Convertible Notes Agreement to provide, among other things, for the Delivery Dudes Acquisition being included in the definition of Permitted Acquisition and for other acquisitions consummated after March 9, 2021 and on or prior to December 31, 2021, with aggregate purchase price consideration not to exceed $20,000, being included in the definition of Permitted Acquisitions. Total consideration for the Delivery Dudes Acquisition included $11,500 in cash, subject to certain purchase price adjustments, and 3,562,577 shares of the Company’s common stock. Additionally, pursuant to the amendment to the Credit Agreement, the Company made a $15,000 prepayment on the Term Loan on March 16, 2021.
The aggregate principal amount of outstanding long-term debt totaled $84,511 as of March 31, 2021, consisting of $35,007 for the Term Loan and $49,504 of Notes. As of March 31, 2021, the Company had $1,143 of outstanding short-term loans for insurance financing.
We currently expect that our cash on hand and estimated cash flow from operations will be sufficient to meet our working capital needs for at least the next twelve months; however, there can be no assurance that we will generate cash flow at the levels we anticipate. We may use cash on hand to repay additional debt or to acquire or invest in complementary businesses, products and technologies. We continually evaluate additional opportunities to strengthen our liquidity position, fund growth initiatives and/or combine with other businesses by issuing equity or equity-linked securities (in public or private offerings) and/or incurring additional debt. However, market conditions, our future financial performance or other factors may make it difficult or impossible for us to access sources of capital, on favorable terms or at all, should we determine in the future to raise additional funds.
26
We are continuously reviewing our liquidity and anticipated working capital needs, particularly in light of the uncertainty created by the COVID-19 pandemic. Thus far, we have been able to operate effectively during the pandemic, however, the potential impacts and duration of the COVID-19 pandemic on the economy and on our business, in particular, may be difficult to assess or predict.
Capital Expenditures
Our main capital expenditures relate to the purchase of tablets for restaurants on the Platforms and investments in the development of the Platforms, which are expected to increase as we continue to grow our business. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk Factors” in our 2020 Form 10-K.
Cash Flow
The following table sets forth our summary cash flow information for the periods indicated:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(in thousands) |
|
2021 |
|
|
2020 |
|
||
|
Net cash provided by operating activities |
|
$ |
12,809 |
|
|
$ |
7,027 |
|
|
Net cash used in investing activities |
|
|
(12,805 |
) |
|
|
(959 |
) |
|
Net cash (used in) provided by financing activities |
|
|
(16,847 |
) |
|
|
3,991 |
|
Cash Flows Provided by Operating Activities
For the three months ended March 31, 2021 and 2020, net cash provided by operating activities was $12,809 and $7,027, respectively. The increase in cash flows from operating activities was driven by an increase in net income, excluding non-cash expenses, as well as changes in operating assets and liabilities. During the three months ended March 31, 2021, the increase in the net change in operating assets and liabilities primarily consisted of an increase in other current liabilities of $7,911 related to accrued expenses at the end of the reporting period and an increase in the restaurant food liability of $1,589 due to the timing of payments to our restaurant partners at the end of the reporting period. The net change in operating assets and liabilities during the three months ended March 31, 2020 primarily consisted of a decrease in prepaid expenses and other current assets of $3,246 and an increase in accrued payroll of $2,129 due to the timing of payroll payments.
Cash Flows Used in Investing Activities
For the three months ended March 31, 2021, net cash used in investing activities consisted primarily of $10,927 for the acquisition of a business and related intangible assets and $1,722 of costs for internally developed software. For the three months ended March 31, 2020, net cash used in investing activities consisted primarily of $671 of costs for internally developed software.
Cash Flows (Used in) Provided by Financing Activities
For the three months ended March 31, 2021, net cash used in financing activities included a $14,472 principal payment on the Term Loan and $1,583 of payments on short-term loans for insurance financing. For the three months ended March 31, 2020, net cash provided by financing activities included net proceeds from the issuance of common stock of $6,470, less $2,028 of payments on short-term loans for insurance financing.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2021.
Cautionary Statement Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. All statements, other than statements of historical or current facts, that reflect future plans, estimates, beliefs or expected performance are forward-looking statements. In some cases, you can identify forward-looking statements because they are preceded by, followed by or include words such as “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions. These forward-looking statements are based on information available as of the date of this Form 10-Q and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties, including the following factors, in addition to the factors discussed elsewhere in this Form 10-Q, and the factors discussed in our 2020 Form 10-K (Part I, Item 1A, Risk Factors):
27
Operational Risks
|
|
• |
failure to retain existing diners or add new diners or our diners decreasing their number of orders or order sizes on the Platforms; |
|
|
• |
declines in our delivery service levels or lack of increases in business for restaurants; |
|
|
• |
loss of restaurants on the Platforms, including due to changes in our fee structure; |
|
|
• |
inability to sustain profitability in the future; |
|
|
• |
risks related to our relationships with the independent contractor drivers, including shortages of available drivers, loss of independent contractor drivers, adverse conditions impacting independent contractor drivers, and possible increases in driver compensation; |
|
|
• |
inability to maintain and enhance our brands or occurrence of events that damage our reputation and brands, including unfavorable media coverage; |
|
|
• |
seasonality and the impact of inclement weather, including major hurricanes, tropical cyclones, major snow and/or ice storms in areas not accustomed to them and other instances of severe weather and other natural phenomena; |
|
|
• |
inability to manage growth and meet demand; |
|
|
• |
inability to successfully improve the experience of restaurants and diners in a cost-effective manner; |
|
|
• |
changes in our products or to operating systems, hardware, networks or standards that our operations depend on; |
|
|
• |
dependence of our business on our ability to maintain and scale our technical infrastructure; |
|
|
• |
personal data, internet security breaches or loss of data provided by diners or restaurants on our Platforms; |
|
|
• |
inability to comply with applicable law or standards if we become a payment processor at some point in the future; |
|
|
• |
risks related to the credit card and debit card payments we accept; |
|
|
• |
reliance on third-party vendors to provide products and services; |
|
|
• |
substantial competition in technology innovation and distribution and inability to continue to innovate and provide technology desirable to diners and restaurants; |
|
|
• |
failure to pursue and successfully make additional acquisitions; |
|
|
• |
failure to comply with covenants in the agreements governing our debt; |
|
|
• |
additional impairments of the carrying amounts of goodwill or other indefinite-lived assets; |
|
|
• |
dependence on search engines, display advertising, social media, email, content-based online advertising and other online sources to attract diners to the Platforms; |
|
|
• |
loss of senior management or key operating personnel and dependence on skilled personnel to grow and operate our business; |
|
|
• |
inability to successfully integrate and maintain acquired businesses; |
|
|
• |
failure to protect our intellectual property; |
|
|
• |
patent lawsuits and other intellectual property rights claims; |
|
|
• |
potential liability and expenses for existing and future legal claims, including claims that may exceed insurance coverage or are not insured against; |
|
|
• |
our use of open source software; |
|
|
• |
insufficient capital to pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances; |
|
|
• |
unionization of our employees, the magnitude of which increases if our independent contractor drivers were ever reclassified as employees; and |
|
|
• |
failure to maintain an effective system of disclosure controls and internal control over financial reporting. |
Industry Risks
|
|
• |
the highly competitive and fragmented nature of our industry; |
|
|
• |
dependence on discretionary spending patterns in the areas in which the restaurants on our Platforms operate and in the economy at large; |
|
|
• |
general economic and business risks affecting our industry that are largely beyond our control; |
|
|
• |
risks related to health pandemics and other outbreaks, including the impact of the COVID-19 pandemic, including a prolonged recession or additional financial market corrections resulting from the spread of COVID-19; |
|
|
• |
implementation of fee caps by jurisdictions in areas where we operate; |
|
|
• |
failure of restaurants in our networks to maintain their service levels; |
|
|
• |
slower than anticipated growth in the use of the Internet via websites, mobile devices and other platforms; and |
|
|
• |
federal and state laws and regulations regarding privacy, data protection, and other matters affecting our business. |
These risks and uncertainties may be outside of our control. Forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be
28
required under applicable securities laws. Our actual results could differ materially from those discussed in these forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to interest rate risk and certain other market risks in the ordinary course of our business.
Interest Rate Risk
As of March 31, 2021, we had outstanding interest-bearing long-term debt totaling $84,511, consisting of the Term Loan in the amount of $35,007 and the Notes of $49,504. The interest rates under the Term Loan and Notes were reduced by 200 basis points for a one-year period, effective August 3, 2020, in connection with amendments to the loan agreements governing the Term Loan and Notes and a payment on the Term Loan. Although the interest rates decreased on August 3, 2020, we are not currently exposed to interest rate risk on our outstanding debt, as the new rates are fixed and set to revert back to the fixed rates in effect prior to the amendments. If we enter into variable-rate debt in the future, we may be subject to increased sensitivity to interest rate movements.
We invest excess cash primarily in bank accounts and money market accounts, on which we earn interest. Our current investment strategy is to preserve principal and provide liquidity for our operating and market expansion needs. Since our investments have been and are expected to remain mainly short-term in nature, we do not believe that changes in interest rates would have a material effect on the fair market value of our investments or our operating results.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level as of March 31, 2021.
Changes in Internal Controls Over Financial Reporting
There has not been any change in our internal control over financial reporting that occurred during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Effective January 1, 2021, we are no longer an emerging growth company. Accordingly, for fiscal year 2021, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In July 2016, Waiter.com, Inc. filed a lawsuit against Waitr Inc. in the United States District Court for the Western District of Louisiana, alleging trademark infringement based on Waitr’s use of the “Waitr” trademark and logo, Civil Action No.: 2:16-CV-01041. Plaintiff seeks injunctive relief and damages relating to Waitr’s use of the “Waitr” name and logo. During the third quarter of 2020, the trial date was rescheduled to June 2021, and in September 2020, the court ruled on various motions, certain of which ruled against defenses the Company had advanced. Waitr believes that the damages case lacks merit and that it has a defense to the infringement claims alleged. Waitr continues to vigorously defend the suit. The Company accrued a $4 million reserve in connection with this lawsuit during the first quarter of 2021. The accrued legal contingency is included in other current liabilities in the unaudited condensed consolidated balance sheet at March 31, 2021 and in other expenses in the unaudited condensed consolidated statement of operations for the three months ended March 31, 2021
In April 2019, the Company was named as a defendant in a class action complaint filed by certain current and former restaurant partners, captioned Bobby’s Country Cookin’, et al v. Waitr, which is currently pending in the United States District Court for the Western District of Louisiana. Plaintiffs allege, among other things, claims for breach of contract, violation of the duty of good faith and fair dealing, and unjust enrichment, and seek recovery on behalf of themselves and two separate classes. Based on the current class definitions, as many as 10,000 restaurant partners could be members of the two separate classes that the representative plaintiffs are attempting to certify. Plaintiff’s deadline to file a motion for class certification is October 2021. Waitr maintains that the underlying allegations and claims lack merit, and that the classes, as pled, are incapable of certification. Waitr continues to vigorously defend the suit.
In September 2019, Christopher Meaux, David Pringle, Jeff Yurecko, Tilman J. Fertitta, Richard Handler, Waitr Holdings Inc. f/k/a Landcadia Holdings Inc., Jefferies Financial Group, Inc. and Jefferies, LLC were named as defendants in a putative class action lawsuit entitled Walter Welch, Individually and on Behalf of all Others Similarly Situated vs. Christopher Meaux, David Pringle, Jeff Yurecko, Tilman J. Fertitta, Richard Handler, Waitr Holdings Inc. f/k/a Landcadia Holdings Inc., Jefferies Financial Group, Inc. and Jefferies, LLC. The case was filed in the Western District of Louisiana, Lake Charles Division. In the lawsuit, the plaintiff asserts putative class action claims alleging, inter alia, that various defendants made false and misleading statements in securities filings, engaged in fraud, and violated accounting and securities rules. A similar putative class action lawsuit, entitled Kelly Bates, Individually and on Behalf of all Others Similarly Situated vs. Christopher Meaux, David Pringle, Jeff Yurecko, Tilman J. Fertitta, Richard Handler, Waitr Holdings Inc. f/k/a Landcadia Holdings Inc., Jefferies Financial Group, Inc. and Jefferies, LLC, was filed in that same court in November 2019. These two cases were recently consolidated, and an amended complaint was filed in October 2020. The Company filed a motion to dismiss in February 2021. Waitr believes that this lawsuit lacks merit and that it has strong defenses to all of the claims alleged. Waitr continues to vigorously defend the suit.
In addition to the lawsuits described above, Waitr is involved in other litigation arising from the normal course of business activities, including, without limitation, labor and employment claims, allegations of infringement, misappropriation and other violations of intellectual property or other rights, lawsuits and claims involving personal injuries, physical damage and workers’ compensation benefits suffered as a result of alleged conduct involving its employees, independent contractor drivers, and third-party negligence. Although Waitr believes that it maintains insurance with standard deductibles that generally covers liability for potential damages in many of these matters where coverage is available on acceptable terms (it is not maintained for claims involving intellectual property), insurance coverage is not guaranteed, often these claims are met with denial of coverage positions by the carriers, and there are limits to insurance coverage; accordingly, we could suffer material losses as a result of these claims or the denial of coverage for such claims.
Item 1A. Risk Factors
Except as set forth below, there have been no material changes with respect to Waitr’s risk factors previously reported in Part I, Item 1A, of the 2020 Form 10-K.
The change in presidential administration could result in increased misclassification claims against the Company.
During the Trump administration, the U.S. Department of Labor (“DOL”) relaxed enforcement of misclassification claims under the Fair Labor Standards Act (“FLSA”). Additionally, just before President Trump left office, the DOL issued a new, company-friendly independent contractor standard via regulation that was set to go into effect in March 2021. However, after President Biden took office, the DOL paused and ultimately rescinded implementation of the regulation in May 2021. The DOL has not yet proposed a substitute regulation, meaning that previous, more worker-friendly standard is still in effect. Some legal experts expect the DOL to issue additional regulations or guidance proposing an even more worker-friendly standard, such as the “ABC” test that was implemented in California. Legal experts also expect the DOL under President Biden to become more aggressive in enforcing misclassification claims against
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companies, particularly in the gig economy space. The issuance of such additional regulations or guidance, or the increase in such DOL enforcement activity, could adversely affect our operations and profitability.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 11, 2021, the Company closed the acquisition of Delivery Dudes, a Florida-based third-party delivery business. Purchase consideration included the issuance of 3,562,577 shares of the Company’s common stock to the prior owners of Delivery Dudes. These shares were issued in reliance upon an exemption from registration afforded by Section 4(a)(2) of the Securities Act. No commissions were paid in connection therewith.
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None
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Item 6. Exhibits
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Description |
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10.1 |
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10.2 |
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10.3 |
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10.4 |
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10.5 |
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10.6 |
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10.7 |
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10.8 |
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21.1 |
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31.1 |
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Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule15d-14(a). (1) |
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31.2 |
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Certification of the Principal Financial Officer required by Rule 13a-14(b) or Rule15d-14(a). (1) |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
(1) Filed herewith
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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 thereunto duly authorized.
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Dated: May 6, 2021 |
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By: |
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/s/ Leo Bogdanov |
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Leo Bogdanov |
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Chief Financial Officer |
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(Principal Financial Officer and Duly Authorized Officer) |
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33
Exhibit 10.1
AMENDMENT NO. 4
to
CREDIT AND GUARANTY AGREEMENT
This AMENDMENT NO. 4 TO CREDIT AND GUARANTY AGREEMENT (this “Amendment”) is made as of March 9, 2021, by and among WAITR INC., a Delaware corporation (“Borrower”), WAITR INTERMEDIATE HOLDINGS, LLC, a Delaware limited liability company (“Holdings”), LUXOR CAPITAL, LLC, as a Lender (as hereinafter defined) and LUXOR CAPITAL GROUP, LP, as administrative agent (in such capacity, “Administrative Agent”) and collateral agent (in such capacity, the “Collateral Agent”) for the Lenders.
WHEREAS, Borrower, Holdings, Administrative Agent, and the lenders from time to time party thereto (the “Lenders”) are parties to that certain Credit and Guaranty Agreement dated as of November 15, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof (including as amended pursuant to (i) that certain Amendment No. 1 to Credit and Guaranty Agreement dated as of January 17, 2019, (ii) that certain Amendment No. 2 to Credit and Guaranty Agreement dated as of May 21, 2019 and (iii) that certain Amendment No. 3 to Credit and Guaranty Agreement dated as of July 15, 2020), the “Existing Credit Agreement”; and the Existing Credit Agreement, as amended by this Amendment being referred to herein as the “Amended Credit Agreement”).
WHEREAS, Borrower has requested that Lenders amend the Existing Credit Agreement so as to effectuate the amendments contemplated by Section 2 hereof.
WHEREAS, Borrower, Holdings, Administrative Agent, and Lenders have agreed to such amendments upon and subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, Holdings, Administrative Agent, and Lenders hereby agree as follows:
Section 1.Defined Terms. Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Amended Credit Agreement.
Section 2.Amendments to Existing Credit Agreement. The Existing Credit Agreement is hereby amended, effective as of the Amendment No. 4 Effective Date (as defined below), as follows:
(a)Section 1.1 of the Existing Credit Agreement is hereby amended by adding the following defined terms in appropriate alphabetical order:
“Amendment No. 4 Effective Date” means March 9, 2021.
“Dude Delivery Acquisition” means the acquisition by Dude Delivery, LLC, a Delaware limited liability company, a Subsidiary of Holdings, of substantially all of the assets of Dude Holdings LLC, a Florida limited liability company pursuant to that certain
Asset Purchase Agreement dated on or about March 9, 2021.
(b)Section 2.9 of the Existing Credit Agreement is hereby amended to add the following new clause (h) to the end of such Section:
“(h) No later than the third Business Day following the date of consummation of the Dude Delivery Acquisition, Borrower shall prepay the Term Loan in an aggregate amount equal to $15,000,000.”
(c)Section 6.9(e) of the Existing Credit Agreement is hereby amended and restated in its entirety as follows:
“(e) Permitted Acquisitions; provided, that the aggregate consideration paid as purchase price consideration (including, without limitation, Cash consideration, unsecured earnouts (valued at the time of the making of such Investment in accordance with GAAP) and deferred purchase price payments) does not exceed (x) for any Permitted Acquisition consummated after the Amendment No. 4 Effective Date and on or prior to December 31, 2021, (i) $23,500,000 in connection with the Dude Delivery Acquisition and (ii) for any other Permitted Acquisitions (other than the Dude Delivery Acquisition), $20,000,000 in the aggregate from the Amendment No. 4 Effective Date to the date of determination (on or prior to December 31, 2021) and (y) for all other Permitted Acquisitions (other than pursuant to the preceding clause (x)) $10,000,000 in the aggregate from the Closing Date to the date of determination;”
Section 3.Representations and Warranties of the Credit Parties. By its execution and delivery of this Amendment, each Credit Party hereby represents and warrants that each of the representations and warranties contained in Section 4 of the Amended Credit Agreement (which are incorporated herein by this reference, mutatis mutandis) are true and correct in all material respects on and as of the Amendment No. 4 Effective Date (except for those representations and warranties that are conditioned by materiality, which are true and correct in all respects) to the same extent as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true and correct in all material respects (except for those representations and warranties that are conditioned by materiality, which were true and correct in all respects) on and as of such earlier date.
Section 4.Conditions of Effectiveness. This Amendment shall become effective on and as of the date (such date, the “Amendment No. 4 Effective Date”) upon which all of the following conditions set forth in this Section 4 shall have been satisfied:
(a)Receipt by Administrative Agent of counterparts of this Amendment duly executed by each Credit Party, Lenders and Administrative Agent.
(b)On the Amendment No. 4 Effective Date after giving effect to this Amendment, (i) each of the representations and warranties contained in Section 4 of the Existing Credit Agreement are true and correct in all material respects on and as of the Amendment No. 4 Effective Date (except for those representations and warranties that are conditioned by materiality, which are true and correct in all respects) to the same extent as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true and correct in all material respects (except for those representations and warranties that are conditioned by
2
materiality, which were true and correct in all respects) on and as of such earlier date, (ii) no event shall have occurred and be continuing or would result from the consummation of this Amendment that would constitute an Event of Default under the Existing Credit Agreement.
(c)Parent, Administrative Agent and Lenders (as defined therein) party to the Parent Convertible Notes Credit Agreement will have executed and delivered an amendment to the Parent Convertible Notes Credit Agreement in form and substance reasonably satisfactory to Administrative Agent.
Section 5.Reference to and Effect on the Credit Agreement.
(a)Upon the Amendment No. 4 Effective Date, each reference in the Existing Credit Agreement to “this Agreement,” “hereunder,” “hereof” or words of like import shall mean and be a reference to the Amended Credit Agreement and each reference in any other Credit Document to “the Credit Agreement” shall mean and be a reference to the Amended Credit Agreement.
(b)Except as specifically amended hereby, the Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. Other than as expressly set forth herein, nothing in this Amendment shall be deemed to constitute a waiver by Administrative Agent or any Lender of any Default or Event of Default, nor constitute a waiver of any provision of the Existing Credit Agreement, this Amendment, the Amended Credit Agreement, any Credit Document or any other documents, instruments or agreements executed and/or delivered in connection herewith or therewith, whether now existing or hereafter arising, or of any right, power or remedy that Administrative Agent or Lenders may have under any of the Credit Documents or applicable law. Upon the Amendment No. 4 Effective Date, this Amendment, the Amended Credit Agreement and the other Credit Documents constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties hereto with respect to the subject matter hereof.
(c)Borrower and the other parties hereto acknowledge and agree that, on and after the Amendment No. 4 Effective Date, this Amendment shall constitute a Credit Document for all purposes of the Amended Credit Agreement.
Section 6.Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York, but giving effect to federal laws applicable to national banks.
Section 7.Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.
Section 8.Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile, e-mailed .pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Amendment.
Section 9.Reaffirmation. Each of the Credit Parties as debtor, grantor, pledgor, guarantor, assignor, or in any other similar capacity in which such Credit Party grants liens or security
3
interests in its property or otherwise acts as an accommodation party or guarantor, as the case may be, (a) hereby ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Credit Documents to which it is a party (after giving effect hereto) and (b) to the extent such Credit Party granted liens on or security interests in any of its property pursuant to any Credit Document as security for or otherwise guaranteed the Obligations under or with respect to the Credit Documents, hereby ratifies and reaffirms such guarantee and grant of security interests and liens and confirms and agrees that such security interests and liens hereafter secure all of the Obligations as amended hereby. Each of the Credit Parties hereby consents to this Amendment and each of the transactions contemplated hereby and acknowledges that each of the Credit Documents (as amended through and including the date hereof) remains in full force and effect and is hereby ratified and reaffirmed.
Section 10.No Novation. Neither this Amendment nor the Amended Credit Agreement shall extinguish the obligations for the payment of money outstanding under the Existing Credit Agreement or discharge or release any Lien or priority of any Collateral Document or any Loan Guaranty or any other security therefor. Nothing herein contained shall be construed as a substitution or novation of the Obligations outstanding under the Existing Credit Agreement or any Collateral Document or instruments securing the same, which shall remain in full force and effect, except to any extent modified hereby or by instruments executed concurrently herewith. Nothing implied by this Amendment, the Amended Credit Agreement or in any other document contemplated hereby or thereby shall be construed as a release or other discharge of the Credit Parties under the Existing Credit Agreement, the Amended Credit Agreement or any other Credit Document. Each of the Existing Credit Agreement and the other Credit Documents shall remain in full force and effect, except to the extent specifically modified hereby or in connection herewith. It is the intention of the parties hereto that neither this Amendment nor the Amended Credit Agreement constitute a novation of the Obligations outstanding under the Existing Credit Agreement or any collateral securing the same, all of which shall remain in full force and effect after the date hereof, as amended by this Amendment.
Section 11.Release. Borrower and each Credit Party hereby waive, release, remise and forever discharge Administrative Agent, Collateral Agent, Lead Arranger and Lenders whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law of any kind or character, known or unknown, which Borrower and any other Credit Party ever had, now has or might hereafter have against Administrative Agent, Collateral Agent, Lead Arranger or Lenders and each other Indemnitee arising from any event occurring on or prior to the date hereof which relates, directly or indirectly, to the Term Loan or the Credit Documents or any acts or omissions of Administrative Agent, Collateral Agent, Lead Arranger, Lenders or any other Indemnitee in respect of the Term Loan or the Credit Documents.
[Signature Pages Follow]
4
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.
WAITR INC.
By /s/ Leo Bogdanov
Name: Leo Bogdanov
Title: Chief Financial Officer
WAITR INTERMEDIATE HOLDINGS, LLC
Name: Leo Bogdanov
Title: Chief Financial Officer
BiteSquad.com, LLC
By: /s/ Leo Bogdanov
Name: Leo Bogdanov
Title: Chief Financial Officer
KASA Delivery Corporation
By: /s/ Leo Bogdanov
Name: Leo Bogdanov
Title: Chief Financial Officer
CDMX Holdings, LLC
By: /s/ Leo Bogdanov
Name: Leo Bogdanov
Title: Chief Financial Officer
Catering on Demand LLC
By:/s/ Leo Bogdanov
Name: Leo Bogdanov
Title: Chief Financial Officer
Signature Page to
Amendment No. 4 to Credit and Guaranty Agreement
KASA Delivery, LLC
By: /s/ Leo Bogdanov
Name: Leo Bogdanov
Title: Chief Financial Officer
Delivery Logistics, LLC
By: /s/ Leo Bogdanov
Name: Leo Bogdanov
Title: Chief Financial Officer
Signature Page to
Amendment No. 4 to Credit and Guaranty Agreement
LUXOR CAPITAL GROUP, LP
as Administrative Agent, Lead Arranger and Collateral Agent
By: /s/ Norris Nissim
Name: Norris Nissim
Title: General Counsel
Signature Page to
Amendment No. 4 to Credit and Guaranty Agreement
LUXOR CAPITAL, LLC,
as Lender
By: Luxor Capital Group, LP,
its Manager
By: /s/ Norris Nissim
Name: Norris Nissim
Title: General Counsel
Signature Page to
Amendment No. 4 to Credit and Guaranty Agreement
Exhibit 10.2
AMENDMENT NO. 4
to
CREDIT AGREEMENT
This AMENDMENT NO. 4 TO CREDIT AGREEMENT (this “Amendment”) is made as of March 9, 2021, by and among WAITR HOLDINGS INC., a Delaware corporation (“Borrower”), LUXOR CAPITAL, LLC, as a Lender (as hereinafter defined) and LUXOR CAPITAL GROUP, LP, as administrative agent for Lenders (in such capacity, the “Administrative Agent”).
WHEREAS, Borrower, Administrative Agent, and the lenders from time to time party thereto (the “Lenders”) are parties to that certain Credit Agreement dated as of November 15, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof (including as amended pursuant to (i) that certain Amendment No. 1 to Credit Agreement dated as of January 17, 2019, (ii) that certain Amendment No. 2 to Credit Agreement dated as of May 21, 2019 and (iii) that certain Amendment No. 3 to Credit Agreement dated as of July 15, 2020), the “Existing Credit Agreement”; and the Existing Credit Agreement, as amended by this Amendment being referred to herein as the “Amended Credit Agreement”).
WHEREAS, Borrower has requested that Lenders amend the Existing Credit Agreement so as to effectuate the amendments contemplated by Section 2 hereof.
WHEREAS, Borrower, Administrative Agent, and Lenders have agreed to such amendments upon and subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, Administrative Agent, and Lenders hereby agree as follows:
Section 1.Defined Terms. Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Amended Credit Agreement.
Section 2.Amendments to Existing Credit Agreement. The Existing Credit Agreement is hereby amended, effective as of the Amendment No. 4 Effective Date (as defined below), as follows:
(a)Section 1.1 of the Existing Credit Agreement is hereby amended by adding the following defined terms in appropriate alphabetical order:
“Amendment No. 4 Effective Date” means March 9, 2021.
“Dude Delivery Acquisition” means the acquisition by Dude Delivery, LLC, a Delaware limited liability company, an indirect Subsidiary of Borrower, of substantially all of the assets of Dude Holdings LLC, a Florida limited liability company pursuant to that certain Asset Purchase Agreement dated on or about March 9, 2021.
(b)Section 6.9(e) of the Existing Credit Agreement is hereby amended and restated in its entirety as follows:
“(e) Permitted Acquisitions; provided, that the aggregate consideration paid as purchase price consideration (including, without limitation, Cash consideration, unsecured earnouts (valued at the time of the making of such Investment in accordance
with GAAP) and deferred purchase price payments) does not exceed (x) for any Permitted Acquisition consummated after the Amendment No. 4 Effective Date and on or prior to December 31, 2021, (i) $23,500,000 in connection with the Dude Delivery Acquisition and (ii) for any other Permitted Acquisitions (other than the Dude Delivery Acquisition), $20,000,000 in the aggregate from the Amendment No. 4 Effective Date to the date of determination (on or prior to December 31, 2021) and (y) for all other Permitted Acquisitions (other than pursuant to the preceding clause (x)) $10,000,000 in the aggregate from the Closing Date to the date of determination;”
Section 3. Representations and Warranties of Borrower. By its execution and delivery of this Amendment, Borrower hereby represents and warrants that each of the representations and warranties contained in Section 4 of the Amended Credit Agreement (which are incorporated herein by this reference, mutatis mutandis) are true and correct in all material respects on and as of the Amendment No. 4 Effective Date (except for those representations and warranties that are conditioned by materiality, which are true and correct in all respects) to the same extent as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true and correct in all material respects (except for those representations and warranties that are conditioned by materiality, which were true and correct in all respects) on and as of such earlier date.
Section 4.Conditions of Effectiveness. This Amendment shall become effective on and as of the date (such date, the “Amendment No. 4 Effective Date”) upon which all of the following conditions set forth in this Section 4 shall have been satisfied:
(a)Receipt by Administrative Agent of counterparts of this Amendment duly executed by Borrower, Lenders and Administrative Agent.
(b)On the Amendment No. 4 Effective Date after giving effect to this Amendment, (i) each of the representations and warranties contained in Section 4 of the Existing Credit Agreement are true and correct in all material respects on and as of the Amendment No. 4 Effective Date (except for those representations and warranties that are conditioned by materiality, which are true and correct in all respects) to the same extent as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true and correct in all material respects (except for those representations and warranties that are conditioned by materiality, which were true and correct in all respects) on and as of such earlier date, (ii) no event shall have occurred and be continuing or would result from the consummation of this Amendment that would constitute an Event of Default under the Existing Credit Agreement.
(c)Holdings, OpCo, Administrative Agent and Lenders party to the Credit and Guaranty Agreement will have executed and delivered an amendment to the Credit and Guaranty Agreement in form and substance reasonably satisfactory to Administrative Agent.
Section 5.Reference to and Effect on the Credit Agreement.
(a)Upon the Amendment No. 4 Effective Date, each reference in the Existing Credit Agreement to “this Agreement,” “hereunder,” “hereof” or words of like import shall mean and be a reference to the Amended Credit Agreement and each reference in any other Credit Document to “the Credit Agreement” shall mean and be a reference to the Amended Credit Agreement.
(b)Except as specifically amended hereby, the Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. Other than as expressly set forth herein, nothing in
2
this Amendment shall be deemed to constitute a waiver by Administrative Agent or any Lender of any Default or Event of Default, nor constitute a waiver of any provision of the Existing Credit Agreement, this Amendment, the Amended Credit Agreement, any Credit Document or any other documents, instruments or agreements executed and/or delivered in connection herewith or therewith, whether now existing or hereafter arising, or of any right, power or remedy that Administrative Agent or Lenders may have under any of the Credit Documents or applicable law. Upon the Amendment No. 4 Effective Date, this Amendment, the Amended Credit Agreement and the other Credit Documents constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties hereto with respect to the subject matter hereof.
(c)Borrower and the other parties hereto acknowledge and agree that, on and after the Amendment No. 4 Effective Date, this Amendment shall constitute a Credit Document for all purposes of the Amended Credit Agreement.
Section 6.Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York, but giving effect to federal laws applicable to national banks.
Section 7.Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.
Section 8.Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile, e-mailed .pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Amendment.
Section 9.Reaffirmation. Borrower hereby ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Credit Documents to which it is a party (after giving effect hereto). Borrower hereby consents to this Amendment and each of the transactions contemplated hereby and acknowledges that each of the Credit Documents (as amended through and including the date hereof) remains in full force and effect and is hereby ratified and reaffirmed.
Section 10.No Novation. Neither this Amendment nor the Amended Credit Agreement shall extinguish the obligations for the payment of money outstanding under the Existing Credit Agreement. Nothing herein contained shall be construed as a substitution or novation of the Obligations outstanding under the Existing Credit Agreement, which shall remain in full force and effect, except to any extent modified hereby or by instruments executed concurrently herewith. Nothing implied by this Amendment, the Amended Credit Agreement or in any other document contemplated hereby or thereby shall be construed as a release or other discharge of Borrower under the Existing Credit Agreement, the Amended Credit Agreement or any other Credit Document. Each of the Existing Credit Agreement and the other Credit Documents shall remain in full force and effect, except to the extent specifically modified hereby or in connection herewith. It is the intention of the parties hereto that neither this Amendment nor the Amended Credit Agreement constitute a novation of the Obligations outstanding under the Existing Credit Agreement, all of which shall remain in full force and effect after the date hereof, as amended by this Amendment.
Section 11.Release. Borrower hereby waives, releases, remises and forever discharges Administrative Agent, Lead Arranger and Lenders whether based in contract, tort, implied or
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express warranty, strict liability, criminal or civil statute or common law of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Administrative Agent, Lead Arranger or Lenders and each other Indemnitee arising from any event occurring on or prior to the date hereof which relates, directly or indirectly, to the Term Loan or the Credit Documents or any acts or omissions of Administrative Agent, Lead Arranger, Lenders or any other Indemnitee in respect of the Term Loan or the Credit Documents.
[Signature Pages Follow]
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.
WAITR HOLDINGS INC.
By: /s/ Leo Bogdanov
Name: Leo Bogdanov
Title: Chief Financial Officer
Signature Page to
Amendment No. 4 to Credit Agreement
LUXOR CAPITAL GROUP, LP
as Administrative Agent and Lead Arranger
By: /s/ Norris Nissim
Name: Norris Nissim
Title: General Counsel
Signature Page to
Amendment No. 4 to Credit Agreement
LUXOR CAPITAL PARTNERS, LP,
as Lender
By:Luxor Capital Group, LP,
its Investment Manager
By: /s/ Norris Nissim
Name: Norris Nissim
Title: General Counsel
LUXOR CAPITAL PARTNERS OFFSHORE MASTER FUND, LP,
as Lender
By:Luxor Capital Group, LP,
its Investment Manager
By: /s/ Norris Nissim
Name: Norris Nissim
Title: General Counsel
Signature Page to
Amendment No. 4 to Credit Agreement
LUXOR WAVEFRONT, LP,
as Lender
By:Luxor Capital Group, LP,
its Investment Manager
By: /s/ Norris Nissim
Name: Norris Nissim
Title: General Counsel
LUGARD ROAD CAPITAL MASTER FUND, LP
as Lender
By:Luxor Capital Group, LP,
its Investment Manager
By: /s/ Norris Nissim
Name: Norris Nissim
Title: General Counsel
Signature Page to
Amendment No. 4 to Credit Agreement
Exhibit 10.3
ASSET PURCHASE AGREEMENT
DATED AS OF MARCH 9, 2021
BY AND AMONG
WAITR HOLDINGS, INC.,
DUDE DELIVERY, LLC,
AND
DUDE HOLDINGS LLC
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Page |
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Article I PURCHASE AND SALE |
1 |
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1.1 |
Purchase of Assets |
1 |
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1.2 |
Excluded Assets |
2 |
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1.3 |
Assumption of Liabilities |
2 |
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1.4 |
Excluded Liabilities |
3 |
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1.5 |
Consent of Third Parties |
3 |
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1.6 |
Purchase Price |
3 |
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1.7 |
Closing Date Payment and Issuance |
3 |
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1.8 |
Closing |
4 |
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1.9 |
Estimated Closing Statement; Purchase Price Adjustment |
5 |
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1.10 |
Deliveries at Closing |
7 |
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1.11 |
Post-Closing Dispute Resolution Procedures |
9 |
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1.13 |
Allocation of Purchase Price |
10 |
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1.14 |
Tax Treatment |
11 |
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Article II REPRESENTATIONS AND WARRANTIES OF SELLER |
11 |
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2.1 |
Organization and Qualification |
11 |
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2.2 |
Contemplated Transactions General Compliance |
11 |
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2.3 |
Financial Statements |
13 |
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2.4 |
Indebtedness |
13 |
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2.5 |
No Undisclosed Liabilities |
13 |
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2.6 |
Absence of Certain Changes |
13 |
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2.7 |
Material Contracts |
14 |
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2.8 |
Assets |
16 |
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2.9 |
Intellectual Property |
17 |
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2.10 |
Litigation |
19 |
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2.11 |
Compliance with Laws or Orders; Permits; Regulatory |
19 |
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2.12 |
Environmental Matters |
20 |
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2.13 |
Employee Benefit Plans |
20 |
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2.14 |
Labor |
21 |
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2.15 |
Taxes |
22 |
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2.16 |
Insurance |
24 |
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2.17 |
Affiliate Transactions |
24 |
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2.18 |
Anti-Bribery; Anti-Money Laundering |
24 |
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2.19 |
Brokers’ Fees |
25 |
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2.20 |
Active Diners and Completed Orders |
25 |
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2.21 |
Investigation |
25 |
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2.22 |
Franchise Matters. |
25 |
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2.23 |
Disclaimer of Other Representations and Warranties |
29 |
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Article III REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER |
29 |
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3.1 |
Organization |
29 |
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3.2 |
Contemplated Transactions; General Compliance |
29 |
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3.3 |
Brokers’ Fees |
30 |
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3.4 |
Sufficiency of Funds |
30 |
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3.5 |
Litigation |
30 |
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3.6 |
Shares |
31 |
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3.7 |
SEC Reports; Financial Statements |
31 |
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3.8 |
Reporting Company |
31 |
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3.9 |
Listing |
31 |
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3.10 |
Sarbanes-Oxley Act |
31 |
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3.11 |
Investment Company |
31 |
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3.12 |
Investigation |
31 |
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3.13 |
Disclaimer of Other Representations and Warranties |
32 |
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Article IV COVENANTS |
32 |
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4.1 |
Conduct of Business Prior to the Closing |
32 |
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4.2 |
Access to Information |
34 |
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4.3 |
SEC Matters |
35 |
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4.4 |
Indebtedness Payoff |
35 |
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4.6 |
Franchise System |
35 |
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4.7 |
Satisfaction of Closing Conditions |
36 |
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4.8 |
Books and Records |
36 |
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4.9 |
Confidentiality |
36 |
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4.10 |
Non-Competition; Non-Solicitation; Non-Disparagement. |
37 |
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4.11 |
Further Assurances |
38 |
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4.12 |
Transfer Taxes |
39 |
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4.13 |
Apportioned Obligations |
39 |
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4.14 |
No Parent Stock Transactions |
39 |
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4.15 |
Audit |
39 |
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Article V Employees and Employee Benefit Plans |
39 |
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5.1 |
Employee Matters |
39 |
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Article VI CLOSING CONDITIONS |
40 |
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6.1 |
Conditions to Obligations of Parent and Buyer |
40 |
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6.2 |
Conditions to Obligations of Seller |
41 |
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Article VII INDEMNIFICATION |
42 |
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7.1 |
Survival |
42 |
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7.2 |
Indemnification by Seller |
42 |
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7.3 |
Indemnification by Buyer |
43 |
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7.4 |
Limitation on Indemnification |
43 |
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7.5 |
Notice of Claims |
44 |
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7.6 |
Third Party Claims |
45 |
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7.7 |
Tax Treatment |
47 |
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7.8 |
No Double Recovery |
47 |
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Article VIII TERMINATION |
47 |
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8.1 |
Termination |
47 |
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8.2 |
Effect of Termination |
48 |
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Article IX GENERAL PROVISIONS |
48 |
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9.1 |
Benefit and Assignment |
48 |
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9.2 |
Governing Law; Consent to Jurisdiction |
49 |
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9.3 |
Waiver of Jury Trial |
49 |
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9.4 |
Expenses |
50 |
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9.5 |
Notices |
50 |
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9.6 |
Counterparts |
51 |
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9.7 |
Computation of Time |
51 |
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9.8 |
Amendment, Modification and Waiver |
51 |
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9.9 |
Entire Agreement |
52 |
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9.10 |
Publicity |
52 |
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9.11 |
Severability |
52 |
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9.12 |
Specific Performance |
52 |
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9.13 |
Interpretation |
53 |
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9.14 |
Headings |
53 |
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of March 9, 2021, by and among Waitr Holdings Inc., a Delaware corporation (“Parent”), Dude Delivery, LLC, a Delaware limited liability company (“Buyer”) and Dude Holdings LLC, a Florida limited liability company (“Seller”). Parent, Buyer and Seller are sometimes referred to collectively as the “Parties” and individually as a “Party.” Except as otherwise set forth herein, capitalized terms used but not defined herein shall have the meaning specified in Appendix A.
RECITALS
A.The Company Group is engaged in the Business.
B.Buyer wishes to purchase from Seller, and Seller wishes to sell, assign and transfer to Buyer, certain assets and properties of Seller, upon the terms and subject to the conditions set forth herein.
C.Buyer has agreed to assume (directly or indirectly through its Subsidiaries) certain liabilities of Seller, upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, based upon the above premises and in consideration of the mutual representations, warranties, covenants and agreements set forth herein, the Parties hereby agree as follows:
Article I
PURCHASE AND SALE
1.1Purchase of Assets. Subject to the terms and conditions hereof, at the Closing Seller will (or will cause another member of the Company Group that is not an Acquired Subsidiary to) sell, transfer, assign and deliver to Buyer (or an Affiliate of Buyer nominated by Buyer), and Buyer (or such Affiliate of Buyer) will purchase from Seller (or such other member of the Company Group), all right, title and interest of Seller (or such other member of the Company Group) in the following assets:
(a)all equity or equity-like interests of any kind whatsoever held by the Seller or its Affiliates in the entities set forth on Schedule 1-A (the “Acquired Subsidiaries”);
(b)the Franchise Agreements set forth in Schedule 1-B, including rights to receive payment, goods or services and to assert claims and take other actions (the “Acquired Franchise Agreements”);
(c)the Intellectual Property Assets set forth in Schedule 1-C (the “Acquired Non-Cannabis IP”);
(d)the Intellectual Property Assets set forth in Schedule 1-D (the “Acquired Cannabis IP” and, together with the Acquired Non-Cannabis IP, the “Acquired IP”);
(e)the Leases set forth in Schedule 1-E (the “Acquired Leases”);
(f)the independent contractor agreements set forth in Schedule 1-F (the “Acquired Independent Contractor Agreements”); and
(g)all other properties, assets and rights of every nature, whether real, personal, tangible, intangible or otherwise and whether now existing or hereinafter acquired, owned (directly or indirectly) by the Company Group and relating to or used or held for use in connection with the Business except for the Excluded Assets (the “Acquired Seller Assets” and, together with the Acquired Subsidiaries, the Acquired Franchise Agreements, the Acquired IP, the Acquired Leases and the Acquired Independent Contractor Agreements, the “Assets”).
Subject to the terms and conditions hereof, at Closing, the Assets shall be transferred to Buyer free and clear of all liabilities, obligations, liens and Encumbrances excepting only Assumed Liabilities and Permitted Encumbrances.
1.2Excluded Assets. Notwithstanding anything to the contrary in Section 1.1 or elsewhere in the Agreement, Seller will retain and not sell transfer, assign or deliver, and Buyer will not purchase or acquire, the assets set forth in Schedule 1-G (the “Excluded Assets”).
1.3Assumption of Liabilities. Subject to the terms and conditions hereof, at the Closing Buyer shall assume and agree to pay, perform, assume and discharge when due the following liabilities existing at or arising on or after the Closing Date (collectively, the “Assumed Liabilities”):
(a)all liabilities relating to the Assets, including trade and other accounts payable as set forth in the Estimated Closing Statement, that have been incurred in the ordinary course of business and are reflected on the Estimated Closing Balance Sheet included in the Estimated Closing Statement;
(b)all Taxes imposed with respect to, arising out of, or relating to the operation of the Business or the ownership of the Assets following the Closing Date;
(c)all Liabilities arising after the Closing in respect of the Contracts and Governmental Approvals included in the Assets; and
(d)all Liabilities in respect of Transferred Employees arising after the Closing, other than any Liabilities retained by Seller or its Subsidiaries pursuant to Section 5.1.
1.4Excluded Liabilities. Except as set forth in Section 1.3 or any other provision hereof, Buyer shall not assume any Liabilities of any kind whatsoever (including Taxes of Seller or any Acquired Subsidiary except as provided in Section 4.10 (Transfer Taxes) and Section 4.11 (Apportioned Obligations) hereof) relating to or arising out of the operation of the Business or the ownership of the Assets on or prior to the Closing other than the Assumed Liabilities (the “Excluded Liabilities”), including, without limitation, (a) any Liabilities in respect of Transaction Expenses, (b) any Liabilities in respect of Indebtedness, and (c) any Liabilities of or in respect of the Non-Acquired Subsidiaries.
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1.5Consent of Third Parties. Notwithstanding anything to the contrary herein, this Agreement shall not constitute an agreement to assign or transfer any interest in any Permit or Contract or any claim or right arising thereunder if such assignment or transfer without the consent or approval of a Third Party would constitute a Breach thereof or affect adversely the rights of Buyer thereunder, and any such transfer or assignment shall be made subject to such consent or approval being obtained. In the event any such consent or approval is not obtained prior to Closing the Closing shall occur without any adjustment to the Purchase Price and Seller shall use commercially reasonable efforts to obtain any such consent or approval after the Closing, and Seller will cooperate with Buyer in any lawful and economically feasible arrangement to provide that Buyer shall receive the interest of Seller in the benefits under any such Permit or Contract, including performance by Seller as agent, provided that Buyer shall undertake to pay or satisfy the corresponding liabilities for the enjoyment of such benefit to the extent Buyer would have been responsible therefor if such consent or approval had been obtained. Seller shall bear all reasonable costs of seeking any such consent or approval. Nothing in this Section 1.5 shall be deemed a waiver by Buyer of its right to receive prior to Closing an effective assignment of all of the Assets nor shall this Section 1.5 be deemed to constitute an agreement to exclude from the Assets any assets described under Section 1.1.
1.6Purchase Price. The aggregate purchase price payable to Seller for the Assets shall equal twenty three million dollars ($23,000,000), subject to adjustment as set forth herein (such aggregate amount, the “Purchase Price”), consisting of the following:
(a)An amount in cash (the “Cash Consideration”) equal to eleven million and five hundred thousand dollars ($11,500,000) (the “Base Cash Consideration”), plus Closing Cash, plus the Closing Working Capital Excess Amount (if any), less the Closing Working Capital Deficiency Amount (if any), payable at the times and in the manner set forth in Section 1.7; and
(b)A number of shares of common stock of Parent equal to eleven million and five hundred thousand dollars ($11,500,000) divided by the Signing VWAP (the “Shares”), payable at the times and in the manner set forth in Section 1.7.
1.7Closing Date Payment and Issuance. At the Closing:
(a)Buyer shall pay to Seller an amount equal to (x) the Estimated Cash Consideration, less (x) the Payoff Amount, less (y) the Adjustment Holdback Amount less (z) the Indemnity Escrow Holdback Amount (such amount, the “Closing Cash Payment”), in cash, by wire transfer of immediately available funds to the account designated in writing by Seller;
(b)Buyer shall pay, or cause to be paid, by wire transfer of immediately available funds, the amounts payable pursuant to the Payoff Letters (the “Payoff Amount”) to the account(s) designated in the Payoff Letters;
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(c)Buyer shall deposit, or cause to be deposited, the Adjustment Holdback Amount with the Escrow Agent in accordance with the Escrow Agreement as security for any downward post-closing adjustment to the Purchase Price pursuant to Section 1.9;
(d)Buyer shall deposit, or cause to be deposited, the Indemnity Escrow Holdback Amount with the Escrow Agent in accordance with the Escrow Agreement as security for any indemnification claims made against Seller pursuant to Article VII;
(e)Buyer or Parent shall issue, or cause to be issued, to Seller (x) the Non-Indemnity Holdback Shares in book-entry form, and Buyer or Parent shall cause the record ownership of such Non-Indemnity Holdback Shares to be in the name of the Seller (or in the names and percentage allocations of such other Persons as Seller may request via written notice to Buyer and Parent on a date that is no less than five (5) Business Days prior to Closing, all of whom shall be members of the Seller), and (y) the Indemnity Holdback Shares in certificated form, and Buyer or Parent shall cause the record ownership of such Indemnity Holdback Shares to be in the name of the Seller, subject to the Indemnity Holdback Share Pledge and the share lockup restrictions set forth in Section 1.9(d); and
(f)the Parties shall deliver or cause to be delivered the documents set forth in Section 1.10.
1.8Closing. Subject to the terms and conditions of this Agreement, the purchase and sale of the Assets and the assumption of the Assumed Liabilities contemplated hereby shall take place at a closing (the “Closing”) to be held at 10:00am, Eastern time, on the date that is not more than five (5) Business Days after the last of the conditions to Closing set forth in Article VI have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), at the offices of Debevoise & Plimpton LLP, 919 Third Avenue, New York, New York 10022, or remotely via electronic exchange of documents and signatures, or at such other time or on such other date or at such other place as Seller and Buyer may mutually agree upon in writing (the day on which the Closing takes place being the “Closing Date”); provided that any requirement to deliver documents at the Closing may be satisfied by the electronic delivery of facsimile or portable document format signatures in accordance with Section 9.5.
1.9Estimated Closing Statement; Purchase Price Adjustment.
(a)Estimated Closing Statement. At least three (3) Business Days prior to the anticipated Closing Date, Seller shall deliver to Buyer a written statement (the “Estimated Closing Statement”) consisting of (i) Seller’s good faith estimate in reasonable detail (in each case determined as of the Calculation Time, without giving effect to the transactions contemplated by this Agreement to take place at the Closing, in accordance with the Accounting Principles) of (x) the Closing Balance Sheet (the “Estimated Closing Balance Sheet”), (x) Closing Cash (“Estimated Closing Cash”), (y) Closing Working Capital (the “Estimated Closing Working Capital”) and each element thereof, (z) the amount by which such Estimated Closing Working Capital differs from the Target Closing Working Capital (which may positive, negative or zero) and (ii) the Payoff Amount. If the Estimated Closing Working Capital as set forth in the Estimated Closing Statement is greater than Target Closing Working Capital, the “Estimated Working
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Capital Excess Amount” shall equal Estimated Closing Working Capital minus Target Closing Working Capital. If the Estimated Closing Working Capital as set forth in the Estimated Closing Statement is less than Target Closing Working Capital, the “Estimated Working Capital Deficiency Amount” shall equal Target Closing Working Capital minus Estimated Closing Working Capital. The “Estimated Cash Consideration” for purposes of Section 1.7 shall equal the Base Cash Consideration, plus the Estimated Closing Cash, plus the Estimated Working Capital Excess Amount (if any), less the Estimated Closing Working Capital Deficiency Amount (if any).
(b)Post-Closing Purchase Price Adjustment. No later than sixty (60) days after the Closing Date, Buyer shall prepare and deliver a statement (the “Final Closing Statement”) consisting of the Buyer’s good faith estimate in reasonable detail (and, in each case, determined as of the close of business on the Closing Date without giving effect to the transactions contemplated by this Agreement to take place at the Closing) and in accordance with the Accounting Principles, (i) the Closing Balance Sheet, (ii) the Closing Cash, (iii) the Closing Working Capital, (iv) the Closing Working Capital Excess Amount (if any), (v) the Closing Working Capital Deficiency Amount (if any), and (vi) the Cash Consideration. During the forty-five (45) day period following Buyer’s delivery of the Final Closing Statement, Seller shall have, for the purposes of evaluating the Final Closing Statement, reasonable access (A) to the appropriate books and records of Buyer, including working papers, supporting schedules, calculations and other documentation used in the preparation of the Final Closing Statement and (B) to Buyer’s officers, employees, agents and representatives as may be reasonably required in connection with the review or analysis of the Final Closing Statement. The Final Closing Statement and the Cash Consideration set forth therein shall be final and binding upon the Parties, and deemed accepted by Seller, unless within forty-five (45) days after Seller’s receipt thereof, Seller provides Buyer with a written Objection Notice with respect to the Final Closing Statement (an “Objection Notice”). The Objection Notice shall specify in reasonable detail each item on the Final Closing Statement that Seller disputes and the nature of any objection so asserted and shall be limited to disputes or objections based on mathematical errors or based on Cash Consideration not being calculated in accordance with this Agreement (including, without limitation, not being calculated in accordance with the Accounting Principles). Seller shall be deemed to have agreed with all amounts and items contained in the Final Closing Statement to the extent such amounts and items are not raised in the Objection Notice. If Seller properly delivers an Objection Notice, any dispute raised therein shall be resolved pursuant to the procedures set forth in Section 1.11.
(c)Final Cash Consideration. The Cash Consideration shall be finally determined pursuant to Section 1.9(b) and, if applicable, Section 1.11. No later than five (5) Business Days after the date on which the Cash Consideration is finally determined:
(i)if Cash Consideration equals or exceeds Estimated Cash Consideration, then (x) Buyer shall pay to Seller an amount in cash equal to any excess of Cash Consideration over Estimated Cash Consideration (without any interest thereon) by wire transfer of immediately available funds to the account designated in writing by Seller and (y) Buyer and Seller shall jointly direct the Escrow Agent to release the full Adjustment Holdback Amount to Seller;
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(ii)if Estimated Cash Consideration exceeds Cash Consideration, then Buyer and Seller shall jointly direct the Escrow Agent to (x) release to Buyer from the Adjustment Holdback Amount an amount equal to such excess and (y) to the extent the Adjustment Holdback Amount is greater than such excess, to release to Seller any remaining portion of the Adjustment Holdback Amount; and
(iii)if Estimated Cash Consideration exceeds Cash Consideration, and the excess is greater than the Adjustment Holdback Amount, (x) Buyer and Seller shall jointly direct the Escrow Agent to release to Buyer the full amount of the Adjustment Holdback Amount and (y) Seller shall pay to Buyer, in cash (without any interest thereon), by wire transfer of immediately available funds to the account designated in writing by Buyer, an amount equal to (1) the excess of Estimated Cash Consideration over Cash Consideration minus (2) the Adjustment Holdback Amount, and (z) if Seller fails to make the payment to Buyer pursuant to the foregoing clause (y) then, in addition to any other rights or remedies available to Buyer, Buyer shall be entitled to claim any amounts due to Buyer pursuant to this Section 1.9(c)(iii) from the Indemnity Holdback Amount.
(d)Indemnity Holdback Amount. Until (and including) the Holdback Release Date, and in order to secure the Seller’s indemnification obligations set forth in Article VII, (i) the Escrow Agent will retain the Indemnity Escrow Holdback Amount, which shall be paid or released in accordance with Section 7.6(c), (ii) the Seller will retain, and will not sell, transfer, assign or otherwise distribute to its members or any other Person, any right, title or interest of any kind in the Indemnity Holdback Shares, other than as contemplated by Article VII (the “Indemnity Holdback Restriction”), and (iii) Seller will grant to Buyer a perfected first priority security interest in the Indemnity Holdback Shares (the “Indemnity Holdback Share Pledge”).
1.10Deliveries at Closing.
(a)At or prior to the Closing, Seller shall deliver or cause to be delivered to Buyer the following:
(i)duly executed counterpart to bills of sale, in forms and substance satisfactory to Buyer, with respect to the Assets (the “Bills of Sale”);
(ii)a duly executed counterpart to an assignment and assumption agreement, in form and substance satisfactory to Buyer, with respect to the Acquired Franchise Agreements and the Assumed Liabilities relating thereto (the “Franchise Agreements Assignment and Assumption Agreement”);
(iii)a duly executed counterpart to assignment and assumption agreements, in form and substance satisfactory to Buyer, with respect to the Acquired IP and the Assumed Liabilities relating thereto (the “IP Assignment and Assumption Agreements”);
(iv)a duly executed counterpart to an assignment and assumption agreement, in form and substance satisfactory to Buyer, with respect to the Acquired Leases and the
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Assumed Liabilities relating thereto (the “Lease Assignment and Assumption Agreement”);
(v)a duly executed counterpart to an assignment and assumption agreement, in form and substance satisfactory to Buyer, with respect to the Acquired Independent Contractor Agreements and the Assumed Liabilities relating thereto (the “Independent Contractor Agreements Assignment and Assumption Agreement”);
(vi)a duly executed counterpart to an assignment and assumption agreement, in form and substance satisfactory to Buyer, with respect to the Assumed Liabilities not otherwise assumed pursuant to the agreements set forth in paragraphs (ii) to (v) above (the “Other Assumed Liabilities Assignment and Assumption Agreement”);
(vii)a duly executed counterpart to the Transitional Services Agreement;
(viii)a duly executed counterpart from each of Delivery Dude Franchise Systems, LLC and Dude IP, LLC to the New License Agreement;
(ix)[reserved];
(x)a duly executed counterpart to the Escrow Agreement;
(xi)copies of all notices, consents (including consents to assignment) and approvals, and certain other assignments as directed by Buyer, with respect to the Contracts set forth in Schedule 1.10(a)(xi), in each case, in form and substance satisfactory to Buyer;
(xii)a true and correct copy of the resolutions of Seller’s board of managers authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby;
(xiii)a true and correct copy of the Seller Member Approval;
(xiv)a true and correct copy of each Payoff Letter, duly executed by each borrower and creditor thereunder, in customary form reasonably satisfactory to the Buyer and providing for (A) the termination of such Indebtedness and related documents and the termination and release of all Encumbrances securing such Indebtedness, and (B) with respect to the promissory note payable to each of Deerfield Beach Delivery Dudes, North Lauderdale Delivery Dudes and PBG Delivery Dudes, confirmation that all prior license and franchise agreements with the Company Group have been terminated and that all obligations associated therewith have been paid in full;
(xv)a copy of a fully executed mutual termination and release agreement by and among Delivery Dudes Franchise Systems, LLC, Pike Republic, LLC and Zachary Kern, in form and substance satisfactory to Buyer (the “Pike Republic Termination Agreement”);
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(xvi)a copy of a fully executed mutual termination and release agreement by and among Dude IP, LLC, Brentwood Delivery Dudes, LLC, Franklin Delivery Dudes, LLC, JARM, LLC, Done Good, LLC, Kim Stanke and Guy Stanke, as supplemented, in form and substance satisfactory to Buyer (the “TN Termination Agreement”);
(xvii)a copy of a fully executed amendment agreement, in form and substance satisfactory to Buyer, that amends the franchise agreement by and between Delivery Dudes Franchise Systems, LLC and Palm Beach Delivery Dudes, LLC (the “Amendment of Palm Beach Franchise Agreement”);
(xviii)copies of fully executed franchisee certificates from all Franchisees, in form and substance satisfactory to Buyer (the “Franchisee Certificates”);
(xix)a copy of the fully executed assignment and assumption agreement, in form and substance satisfactory to Buyer, with respect to the License Agreement by and among Dude IP, LLC and Delivery Dudes Franchise Systems, LLC dated June 1, 2014;
(xx)a copy of the fully executed termination letter referenced in Schedule 1.10(a)(xx);
(xxi)documents evidencing set up and authorization of wire drawdown and sweep arrangements with respect to certain Seller bank accounts, reasonably satisfactory to Buyer;
(xxii)a duly executed certificate pursuant to Treasury Regulations Section 1.1445-2(b) and IRS Form W-9 evidencing that Seller is not a foreign person within the meaning of Section 1445 and Section 1446 of the Code;
(xxiii)documents evidencing the Indemnity Holdback Share Pledge, reasonably satisfactory to Buyer;
(xxiv)a true and correct copy of the Seller’s IRS Form W-9;
(xxv)written resignation letters from each of the current directors, managers and officers of each Acquired Subsidiary, in form and substance satisfactory to Buyer;
(xxvi)the Purchase Price Allocation Schedule, in form and substance satisfactory to Buyer; and
(xxvii)such other documents as Buyer may reasonably request to effect the intent of this Agreement and consummate the transactions contemplated hereby.
(b)At or prior to the Closing, Buyer shall deliver or cause to be delivered to Seller the following:
(i)a duly executed counterpart to the Bills of Sale;
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(ii)a duly executed counterpart to the Franchise Agreement Assignment and Assumption Agreement;
(iii)duly executed counterparts to the IP Assignment and Assumption Agreements;
(iv)a duly executed counterpart to the Lease Assignment and Assumption Agreement;
(v)a duly executed counterpart to the Independent Contractor Agreements Assignment and Assumption Agreement;
(vi)a duly executed counterpart to the Other Assumed Liabilities Assignment and Assumption Agreement;
(vii)written appointments of any new directors, managers and/or officers of each Acquired Subsidiary effective as of the Closing;
(viii)a duly executed counterpart to the Transitional Services Agreement;
(ix)a duly executed counterpart to the New License Agreement;
(x)a duly executed counterpart to the Escrow Agreement; and
(xi)such other documents as the Seller may reasonably request to effect the intent of this Agreement and consummate the transactions contemplated hereby.
1.11Post-Closing Dispute Resolution Procedures. During the fifteen (15) Business Day period following the date on which a proper Objection Notice is received by Buyer, Buyer and Seller shall seek in good faith to resolve any objections contained therein. If Buyer and Seller are unable to resolve the dispute within such fifteen (15) Business Day period, then any disputed matter set forth in the Objection Notice, as the case may be, that remains unresolved shall be submitted by Buyer for final determination to Marcum LLP or, if Marcum LLP declines to serve, such other independent accounting firm of national reputation selected by the mutual agreement of Buyer and Seller (the “Independent Accounting Firm”). The Independent Accounting Firm shall, based solely on the presentations made by Buyer and Seller and within thirty (30) days after its appointment, render a written report as to the calculation of Final Closing Working Capital; provided that in no event shall the Independent Accounting Firm’s determination of Cash Consideration, as the case may be, be outside the range of disagreement between Buyer and Seller. The Independent Accounting Firm shall have exclusive jurisdiction over, and resort to the Independent Accounting Firm shall be the sole recourse and remedy of the Parties against one another or any other Person with respect to, any disputes arising out of or relating to the calculation of Cash Consideration; provided that no Party will be precluded by this sentence from enforcing the determination of the Independent Accounting Firm. The Independent Accounting Firm’s determination shall be conclusive and binding on all Parties and shall be enforceable in a court of law. In connection with the resolution of any dispute, each Party shall pay its own fees and expenses, including legal, accounting and consultant fees and expenses. The Independent
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Accounting Firm shall calculate the allocation of its fees and expenses between Buyer and Seller based upon a fraction (expressed as a percentage), (x) the numerator of which is the aggregate dollar value of the amount of Cash Consideration actually contested that is not awarded to Buyer or Seller (as the case may be) and (y) the denominator of which is the aggregate dollar value of Cash Consideration actually contested between the Parties. For purposes of the preceding sentence, the amount of Cash Consideration actually contested by each of Buyer or Seller shall be determined by reference to their respective written presentations submitted to the Independent Accounting Firm pursuant to this Section 1.11. For example and solely for the purposes of illustration, if Seller claims that the appropriate adjustments are $1,000 greater than the amount determined by Buyer and if the Independent Accounting Firm ultimately resolves such dispute by awarding to Seller $300 of the $1,000 contested, then the fees, costs and expenses of the dispute resolution process contemplated by this Section 1.11 will be allocated 30% (i.e., 300 divided by 1,000, expressed as a percentage) to Buyer and 70% (i.e., 700 divided by 1,000, expressed as a percentage) to Seller.
1.12Withholding Rights. Buyer shall be entitled to deduct and withhold such amounts as it is required to deduct and withhold with respect to the making of any payment under any provision of federal, state, local or foreign Tax Law; provided that Buyer shall use commercially reasonable efforts to notify the Seller of such amounts and provide the Seller or the relevant recipient a reasonable opportunity to mitigate or eliminate any withholding with respect to payments pursuant to this Agreement and the Parties shall cooperate to eliminate any withholding on payments made pursuant to this Agreement. To the extent that amounts are so withheld by Buyer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller. Buyer shall timely pay such withheld amounts to the applicable Governmental Authority. As of the date hereof, Buyer is not aware of any withholding obligations under any provision of federal, state, local or foreign Tax Law that would require Buyer to deduct or withhold any amounts pursuant to this Section 1.12, subject to receipt of the Seller’s IRS Form W-9.
1.13Allocation of Purchase Price. Buyer and Seller shall mutually agree in good faith upon an allocation of the Purchase Price (subject to any adjustment made pursuant to Section 1.9 in respect of Cash Consideration) and the Assumed Liabilities (the “Aggregate Consideration”) among the Assets in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder. The Purchase Price (and other consideration relevant for tax purposes) shall be allocated as set forth on a schedule to be agreed by Buyer and Seller prior to Closing (the “Purchase Price Allocation Schedule”), subject to adjustments of the Purchase Price pursuant to Section 1.9 and, if applicable, Section 1.11 (the “Proposed Allocation”). The Proposed Allocation of the Purchase Price (and other consideration relevant for tax purposes) shall comply with the allocation method required by Section 1060 of the Internal Revenue Code of 1986, as amended, shall be based upon the fair market value of each of the Assets immediately prior to Closing, the fair market value of the restrictive covenants contained in Article VIII and any additional Ancillary Agreements, shall be reflected on IRS Form 8594 (Asset Acquisition Statement under Section 1060), and shall be used by the Parties in preparing their respective income tax returns. The Parties covenant and agree with each other that none of them will take a position except as otherwise required by Laws on any income tax return or in any other proceeding that is in any way inconsistent with the allocation set forth on the Purchase Price Allocation Schedule, subject to adjustments of the Purchase Price hereunder.
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1.14Tax Treatment. Any payment by Buyer or Seller, as the case may be, pursuant to Section 1.9 or Article VII will be treated as an adjustment to the Purchase Price.
Article II
REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce Buyer to enter into this Agreement, Seller represents and warrants to Buyer and Parent (except as set forth in the applicable Schedules referenced below as well as any other section in this Agreement to which it is reasonably apparent from a reading of such Schedules without assuming any knowledge of the matters disclosed therein that such information is relevant to any other section), as follows:
2.1Organization and Qualification. Each member of the Company Group is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of its formation, with power and authority to carry on its business (including the Business) and to own or lease and to operate its properties as and in the places where such business is conducted and such properties are owned, leased or operated, except where the failure to be in good standing or have such authority would not have a Material Adverse Effect. Each member of the Company Group is duly qualified or licensed to do business in each jurisdiction in which the properties and assets owned, leased or operated by the respective Company Group member in the conduct of the Business or the nature of the Business makes such qualification necessary, except where the failure to be so licensed or qualified would not have a Material Adverse Effect. Seller has delivered to Buyer complete and correct copies of the organizational documents of each member of the Company Group (including the Seller Operating Agreement), in each case, as amended and in effect on the date hereof. Neither the Seller nor any other member of the Company Group is in violation of any of the provisions of its organizational documents, except where such violation would not have a Material Adverse Effect.
2.2Contemplated Transactions General Compliance.
(a)Enforceability; Authority. Seller has all requisite power and authority to enter into this Agreement and the other Ancillary Agreements to be executed and delivered by Seller, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. Assuming due authorization, execution and delivery of this Agreement by the other Parties hereto, this Agreement constitutes a valid and binding obligation of Seller and any other member of the Company Group, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other Laws affecting creditors’ rights generally and by general principles of equity (whether in a proceeding at law or in equity) (the “Creditor’s Rights Exception”). The execution, delivery and performance of this Agreement and the other agreements contemplated hereby to be executed and delivered by Seller and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite action on the part of Seller and any other member of the Company Group, including all actions required pursuant to the terms of the Seller Operating Agreement, and no other proceedings on the part of Seller or any other member of the Company Group are necessary to authorize the execution, delivery or performance of this Agreement or the other
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agreements contemplated hereby. The Seller has obtained the Seller Member Approval in accordance with the terms of the Seller Operating Agreement.
(b)No Conflict. The execution and delivery of this Agreement and the other agreements contemplated hereby and the consummation or performance of any of the transactions contemplated hereby or thereby will not: (i) conflict with or violate any provisions of the organizational documents of the Company or any other member of the Company Group; or (ii) Breach any provisions of or result in the termination, cancellation, modification, maturation or acceleration of, any rights or obligations under any Material Contract, Order or Law to which the Company or any other member of the Company Group is subject or by which any member of the Company Group’s properties or assets is bound except, in the case of this clause (ii), in respect of the notice and consent requirements set forth in Schedule 2.2(d), except in the cases of clauses (i) and (ii), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a Material Adverse Effect.
(c)Subsidiaries. Schedule 2.2(c) lists for each Subsidiary of the Seller its (i) authorized (A) common stock, preferred stock, membership interests or other equity interests, (B) securities entitled to convert into or be exchanged for any security described in clause (i)(A), and (3) any option, warrant or other right to purchase or otherwise acquire any security described in clauses (i)(A) and (i)(B) (collectively, the “Subsidiary Equity Interests”), (ii) the number and type of Subsidiary Equity Interests issued and outstanding, and (iii) the identity of each owner (of record and beneficially) of such Subsidiary Equity Interest and number held by each holder. Except as set forth on Schedule 2.2(c), all outstanding Subsidiary Equity Interests are owned of record by one or more members of the Company Group, free and clear of all Encumbrances. All the outstanding Subsidiary Equity Interests of each Subsidiary of the Seller have been duly authorized and validly issued. No Acquired Subsidiary of the Seller has any outstanding subscription, option, warrant, call or exchange right, convertible security, or other obligations in effect giving any Person the right to acquire any Subsidiary Equity Interests.
(d)Consents; Governmental Filings. Except as set forth in Schedule 2.2(d), no member of the Company Group is required pursuant to any Material Contract, Law or Order to give any notice to or obtain any consent from any Person in connection with the execution and delivery of this Agreement or the other agreements contemplated hereby or the consummation or performance of any of the transactions contemplated by this Agreement, except where the failure to give notice or obtain consent would not have a Material Adverse Effect. No filings or registration with, notification to, or authorization, license, clearance, permit, qualification, waiver, order, consent or approval of any Governmental Authority (collectively, “Governmental Filings”) are required in connection with the execution, delivery and performance of the transactions contemplated by this Agreement by Seller, except as stated on Schedule 2.2(d).
2.3Financial Statements.
(a)Attached as Schedule 2.3 are true and complete copies of the Financial Statements. The Financial Statements have been prepared in accordance with the Accounting Principles and fairly present, as of their respective dates, in all material respects the financial position, results of operation and cash flows of the Business at the dates and for the relevant periods indicated. The
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balance sheets included in the Financial Statements do not include any material assets or liabilities not intended to constitute a part of the Business or the Assets after giving effect to the transactions contemplated hereby (other than the Excluded Assets and the Excluded Liabilities). The statements of income and retained earnings and statements of cash flows included in the Financial Statements do not reflect the operations of any entity or business not intended to constitute a part of the Business or the Assets after giving effect to the transactions contemplated hereby (other than the Excluded Assets and the Excluded Liabilities).
(b)Seller has devised and maintained systems of internal accounting controls with respect to the Business sufficient to provide reasonable assurances that (i) all transactions are executed in accordance with management’s general or specific authorization, (ii) all transactions are recorded as necessary to permit the preparation of financial statements in conformity with the applicable past accounting practices and to maintain proper accountability for items and (iii) access to its property and assets is permitted only in accordance with management’s general or specific authorization.
2.4Indebtedness. Schedule 2.4 sets forth the Indebtedness of each member of the Company Group, other than current liabilities incurred in the ordinary course of business consistent with past practice.
2.5No Undisclosed Liabilities. None of the Company Group has any liabilities or obligations, whether known, unknown, absolute, accrued, contingent or otherwise and whether due or to become due, arising out of or relating to the Business or the Assets except (a) as set forth on Schedule 2.4 or Schedule 2.5, (b) as and to the extent reflected, disclosed or reserved against in the Latest Balance Sheet or specifically disclosed in the notes thereto and (c) for liabilities and obligations (i) that were incurred after the Latest Balance Sheet Date in the ordinary course of business consistent with past practice and reflected in the Estimated Closing Balance Sheet included in the Estimated Closing Statement and (ii) that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect.
2.6Absence of Certain Changes. Except as set forth in Schedule 2.6 or as otherwise expressly contemplated by this Agreement, from the Latest Balance Sheet Date until the date of this Agreement, (a) the Business has been conducted in all material respects in the ordinary course of business, (b) there have been no changes, events, results, occurrences, states of fact, circumstances or developments that would constitute a Material Adverse Effect and (c) Seller has not taken (or not taken) any action that, if taken (or not taken) from the date hereof would have required Buyer’s consent under Section 4.1.
2.7Material Contracts.
(a)Schedule 2.7(a) sets forth all Contracts, of the type described below, to which any member of the Company Group is a party and relate to the Business or the Assets or by which any of the Assets are bound, other than the Indebtedness disclosed pursuant to Section 2.4; Leases disclosed pursuant to Section 2.8(c); the Restaurant Agreements disclosed pursuant to Section 2.8(d); the IP Contracts and Licenses disclosed pursuant to Section 2.9(c); the Employee Benefit Plans disclosed pursuant to Section 2.13(a); the insurance policies disclosed pursuant to Section
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2.16, the Affiliate Contracts disclosed pursuant to Section 2.17, and the Franchise Agreements disclosed pursuant to Section 2.22 (all such Contracts, together with the Contracts disclosed on Schedule 2.7(a), the “Material Contracts”):
(i)each Contract that involves aggregate consideration in excess of $50,000 and that, in each case, cannot be cancelled by the member of the Company Group that is party thereto without penalty or without more than thirty (30) days’ notice;
(ii)each Contract or group of related Contracts with the same party for the purchase by any member of the Company Group of products or services (A) under which the undelivered balance exceeds $50,000, or (B) which based on monthly payments prior to the Closing Date, involves a payment obligation of any member of the Company Group in excess of $10,000 individually or in the aggregate;
(iii)each Contract or group of related Contracts with the same party for the sale of products or services by any member of the Company Group (A) under which the undelivered balance exceeds $50,000, or (B) which based on monthly payments prior to the Closing Date, involves a payment obligation to any member of the Company Group in excess of $10,000 individually or in the aggregate;
(iv)each Contract that requires a member of the Company Group to purchase its total requirements of any product or service from a third party or that contain “take or pay” provisions;
(v)each Contract that (A) prohibits any member of the Company Group from engaging in any line of business or competing with any Person or in any geographic area or (B) restricts the Persons to whom a member of the Company Group may sell products or deliver services, which prohibition or restriction set forth in (A) or (B) respectively, is material to the Business, taken as a whole;
(vi)each Contract that grants any rights of first refusal, rights of first offer or other similar rights to any Person with respect to any material asset of a member of the Company Group;
(vii)since January 1, 2018, each Contract pursuant to which a member of the Company Group has acquired or disposed of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise);
(viii)each Contract for the employment of any officer or individual employee, and any Contract for the provision of consulting services by any individual person or any Contract for the provision of services by any independent contractor, in either case which involves aggregate consideration in excess of $50,000 per year;
(ix)all Contracts that provide for the indemnification by a member of the Company Group of any Person or the assumption of liability of any Person and that are otherwise Material Contracts;
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(x)each lease or agreement under which a member of the Company Group is lessor of, or permits any third party to hold or operate, any tangible property, real or personal, owned by any member of the Company Group;
(xi)all Contracts with any Governmental Authority;
(xii)any Contracts that provide for any joint venture, partnership or similar arrangement by any member of the Company Group;
(xiii)all collective bargaining agreements or Contracts with any union or other labor organization;
(xiv)all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing consulting and advertising Contracts;
(xv)each Contract pursuant to which a member of the Company Group may be required to pay commissions or royalty payments;
(xvi)any Contract involving a license or franchise arrangement with any third party (including an Affiliate Contract) involving any Company Group Intellectual Property; and
(xvii)any other Contract that is material to the Assets or Business, taken as a whole, and not previously disclosed pursuant to this Section 2.7.
(b)Each Material Contract is valid and binding on the member of the Company Group that is party thereto in accordance with its terms and is in full force and effect, subject to the Creditor’s Rights Exception. Neither Seller nor, to Seller’s Knowledge, any other party thereto is in Breach under any Material Contract. To Seller’s Knowledge, the other parties to the Material Contracts have fully complied with their obligations thereunder. Except as set forth in Schedule 2.7(b), no party has delivered written notice of termination and, to Seller’s Knowledge, no party has threatened to exercise any termination right with respect to any Material Contract. Except as set forth in Schedule 2.7(b), to Seller’s Knowledge, no event or circumstances has occurred that, with notice or lapse of time or both, would constitute an event of default under any Material Contract or result in termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. True, correct and complete copies of the Material Contracts, including all amendments, schedules, exhibits and other attachments thereto, have been delivered to Buyer prior to the date hereof.
(c)Except as set forth in Schedule 2.7(c), no consent of any Third Party is required under any Material Contract as a result of or in connection with, and the terms of and enforceability of any Material Contract will not be affected by, the execution, delivery and performance of this Agreement or any of the other agreements contemplated hereby or the consummation of the transactions contemplated hereby and thereby, except where failure to obtain such consent would not reasonably be expected to have a Material Adverse Effect.
2.8Assets.
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(a)Title to Assets, etc. Seller (or another member of the Company Group, as applicable) has good and valid title to, or otherwise have the right to use pursuant to a valid and enforceable lease, license or similar contractual arrangement, all of the Assets except as may be disposed of in the ordinary course of business consistent with past practice after the date hereof and in accordance with this Agreement, in each case free and clear of any Encumbrance other than Permitted Encumbrances. Other than this Agreement, there are no agreements with, options or rights granted in favor of, any person to directly or indirectly acquire any Asset, or any interest therein or any tangible properties or assets of a member of the Company Group, other than in the ordinary course of business consistent with past practices. No tangible assets or properties used by each member of the Company Group in the conduct of its business, as currently conducted, are held in the name or in the possession of any person or entity other than such member of the Company Group. There are no voting trusts, proxies or other agreements, understandings or obligations in effect with respect to the voting, transfer or sale (including any rights of first refusal, rights of first offer or drag-along rights), issuance (including any pre-emptive or anti-dilution rights), redemption or repurchase (including any put or call or buy-sell rights), or registration (including any related lock-up or market standoff agreements) with respect to any of the Assets or any member of the Company Group.
(b)Sufficiency of Assets, etc. The Assets constitute all of the assets required for the conduct of the Business as conducted on the date hereof. To the Knowledge of Seller, there are no facts or conditions affecting any material Assets which would reasonably be expected, individually or in the aggregate, to interfere with the current use, occupancy or operation of such Assets.
(c)Real Property and Leases. No member of the Company Group currently owns or has in the past owned any real property. Schedule 2.8(c) sets forth true and correct addresses of all real property leased or rented by any member of the Company Group (the “Leased Property”). The Leased Property constitutes all of the facilities used or occupied in the conduct of the Business as currently conducted. Each parcel of the Leased Property is the subject of a written lease agreement (each, a “Lease”), and there are no oral terms inconsistent with the written terms thereof. To the Knowledge of Seller, the Company Group’s use and operation of the Leased Property conform to all applicable Laws, Permits and Orders in all material respects, and the Leased Property is free and clear of all Encumbrances other than Permitted Encumbrances. Seller has not received written notice from landlords or any Governmental Authority that: (i) relates to violations of building, zoning, safety or fire ordinances or regulations; (ii) claims any defect or deficiency with respect to any of such properties; or (iii) requests the performance of any repairs, alterations or other work to the Leased Property. Except as set forth in Schedule 2.8(c), an Acquired Subsidiary has exclusive possession of each Leased Property, there are no leases, subleases, licenses, concessions or other agreements, written or oral, granting to any other party or parties the right of use or occupancy with respect to such Leased Property. The Leased Property has been supplied with utilities and other services reasonably sufficient for the operation of the Business as currently conducted. All Leases are valid and binding agreements, enforceable in accordance with their respective terms, are in full force and effect and are not in default.
(d)Restaurant Agreements. The Company Group maintains a materially complete list of all restaurants with which it sustains an ongoing relationship, including a list of the Restaurant
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Agreements. Schedule 2.8(d) set forth a materially complete list of all restaurants for which there is a Restaurant Agreement. Accurate and complete copies of all Restaurant Agreements have been provided to and made available to the Buyer. Each Restaurant Agreement has been entered into with an Acquired Subsidiary.
2.9Intellectual Property.
(a)All of the Intellectual Property Assets are held by an Acquired Subsidiary or are otherwise Assets being acquired pursuant to Article I of this Agreement. Schedule 2.9(a) lists all issued patents, registered trademarks, registered copyrights, URLs, registered domain names and all applications for the registration or issuance of any of the foregoing owned by any member of the Company Group that are Intellectual Property Assets (collectively, the “Business Registered Intellectual Property”), indicating as to each item as applicable: (i) the jurisdictions in which such item is issued or registered or in which any application for issuance or registration has been filed, (ii) the respective issuance, registration, or application number of the item, (iii) the dates of application, issuance or registration of the item, (iv) expiration dates, and (v) name of registrant.
(b)Each item of the Business Registered Intellectual Property is (i) subsisting in good standing, and not the subject of any pending or, to Seller’s Knowledge, threatened proceeding before any Governmental Authority challenging its extent, validity, enforceability or Seller’s ownership thereof, and (ii) valid and enforceable.
(c)Schedule 2.9(c) lists all Contracts relating to the development, ownership, use, license of, registration, enforcement of or exercise of any rights under any Intellectual Property, including material written licenses, sublicenses, consents and other agreements: (i) by which any member of the Company Group is authorized to use any Intellectual Property Assets (other than commercially available off the shelf software for which the relevant member of the Company Group pays less than $50,000 in licensing or other fees per annum); (ii) by which any member of the Company Group is restricted from the use or exploitation of any Intellectual Property Assets (including, co-existence agreements and settlement agreements); (iii) by which a material Intellectual Property Asset owned or purported to be owned by a member of the Company Group is or has been developed for such member of the Company Group, assigned to such member of the Company Group, or assigned by such member of the Company Group to a Third Party (excluding agreements with Employees and contractors entered into in the ordinary course of business that grant all rights in such IP to such member of the Company Group); and (iv) by which a member of the Company Group authorizes a Third Party to use any Intellectual Property Assets owned by such member of the Company Group (other than non-exclusive licenses granted in the ordinary course of business to customers of the Business consistent with past practice in connection with the use of goods or services of the Business or to contractors, manufacturers or distributors in the ordinary course of business consistent with past practice in connection with the performance of services for the Business).
(d)Seller has taken commercially reasonable measures and steps to protect all Intellectual Property Assets owned by the Company Group.
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(e)A member of the Company Group is the sole owner of the Intellectual Property Assets free and clear of all Encumbrances, except Permitted Encumbrances or any requirement of any past (if outstanding), present or future payment. A member of the Company Group owns all right, title and interest in and to, or has a valid and enforceable license, sublicense, or right to use, all of the Intellectual Property Assets used in and necessary for the conduct of the Business as presently conducted.
(f)Schedule 2.9(f) sets forth a list of material software that constitutes Intellectual Property Assets owned by a member of the Company Group. No source code of such software is held by any other Person, whether pursuant to an escrow agreement or otherwise (other than contractors engaged to perform services for Seller). Except as set forth in Schedule 2.9(f), no open source software or freeware has been incorporated into any such software in a manner that would diminish in any material respect the relevant member of the Company Group’s rights of ownership in such software (including, rights to enforce any patent rights in such software).
(g)Except as set forth in Schedule 2.9(g), no member of the Company Group has any pending, unresolved notice, claim, demand or other assertion since January 1, 2018 made to or, as of the date hereof, from any other Person, including for the avoidance of doubt, any cease and desist letter or offer of license, (i) alleging any infringement, dilution or misappropriation (including, challenging the use) by a member of the Company Group of any other Person’s Intellectual Property with respect to the Business, (ii) challenging the ownership, use, validity or enforceability of any Intellectual Property Assets owned by a member of the Company Group or (iii) relating to the security of Company Data.
(h)Except as set forth in Schedule 2.9(h), (i) to Seller’s Knowledge the operation of the Business as currently conducted does not infringe upon, violate or constitute misappropriation of the Intellectual Property of any other Person, and (ii) to Seller’s Knowledge, since January 1, 2018, the Intellectual Property owned or licensed by a member of the Company Group or used in the operation of the Business has not been infringed, diluted or misappropriated by any other Person.
(i)The information technology systems and software included in the Assets are sufficient in all material respects for purposes for which they are used in the Business. No member of the Company Group has experienced any material defects that have not been corrected in connection with such systems and software. Such information technology systems and software (including, any related infrastructure, the “IT Infrastructure”) are protected by commercially reasonable security and disaster recovery arrangements. To the Seller’s Knowledge, since January 1, 2018, there has been no Breach of the security arrangements in place with respect to the IT Infrastructure.
(j)Seller and/or the appropriate members of the Company Group have in place written internal information security and data privacy policies maintained on the website of Seller, which includes guidelines for the use, processing, confidentiality and security of certain Personal Information (collectively, “Company Data”) and that are also consistent in all material respects with applicable Law, contractual commitments of each member of the Company Group and any publicly available information security and privacy policies of Seller (collectively, “Privacy
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Commitments”). The Company Group’s practices with regard to the collection, dissemination, safeguarding and use of Company Data are and have been in accordance in all material respects with the Privacy Commitments. To Seller’s Knowledge there has been no material loss of, or intentional and unauthorized access, use, disclosure or modification of any Company Data. Neither Seller nor any member of the Company Group has received any inquiries from or been subject to any audit or Litigation by any Governmental Authority regarding Company Data. No Litigation alleging (a) a material violation of any person’s privacy rights or (b) unauthorized access, use or disclosure of Company Data has been asserted or threatened against Seller or any member of the Company Group.
2.10Litigation. Except as set forth on Schedule 2.10, since January 1, 2018, there has not been, and there is no pending or, to Seller’s Knowledge, threatened Litigation or Order: (i) by or against any member of the Company Group or any of the Assets; (ii) that challenges the transactions contemplated by this Agreement and the agreements contemplated hereby; or (iii) that seeks to enjoin or prohibit consummation of, or seeks other equitable relief with respect to, the transactions contemplated by this Agreement and the agreements contemplated hereby. To Seller’s Knowledge, no event has occurred or circumstance exists that (with or without notice or lapse of time or both) is reasonably likely to give rise to or serve as a basis for the commencement of any such Litigation or Order. Except as set forth in Schedule 2.10, there are no, and have been no, Orders against any member of the Company Group. There is no unsatisfied judgment or any open injunction binding upon any member of the Company Group that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Seller to enter into and perform its obligations under this Agreement. Since January 1, 2018, there have been no pending misclassification claims regarding any employee (including Business Employee) or independent contractor against Seller or any other member of the Company Group.
2.11Compliance with Laws or Orders; Permits; Regulatory.
(a)Except as set forth on Schedule 2.11(a), no member of the Company Group is or has been since January 1, 2018, in Breach of any Law or Order in any material respect. To Seller’s Knowledge, no event has occurred or circumstance exists that is reasonably likely to constitute or result in a violation of or failure to comply with any term or requirement of any Law or Order in any material respect.
(b)An Acquired Subsidiary holds and is in compliance with, to the extent required by applicable Law, all Permits required for the conduct of the Business. Schedule 2.11(b) lists all Permits issued in connection with the Business, including the names of the Permits, their holders, and their respective dates of issuance and expiration.
2.12Environmental Matters. Seller has complied since January 1, 2016, and is in compliance in all material respects with all applicable Environmental Laws pertaining to the Business or the Assets and the use and ownership thereof. No violation by any member of the Company Group is being or has been alleged in writing or, to the Knowledge of Seller, orally of any applicable Environmental Law relating to the Business or the Assets or the use or ownership thereof.
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2.13Employee Benefit Plans.
(a)Schedule 2.13(a) sets forth a complete and correct list of all material Benefit Plans. None of the Benefit Plans is a Standalone Plan and, except as set forth on Schedule 2.13(a), the Acquired Subsidiaries have no Liabilities under, or with respect to, any Benefit Plan. With respect to each material Benefit Plan, Seller has made available to Buyer a copy or summary of the applicable plan document.
(b)Each Benefit Plan (including any related trust) has been established, operated and administered in substantial compliance with its terms and applicable Law, including ERISA and the Code. No Benefit Plan is intended to be qualified under Section 401(a) of the Code and no member of the Company Group has maintained, sponsored or contributed to any Benefit Plan intended to be qualified under Section 401(a) of the Code. Except as would not reasonably be expected to result in any material Liability to an Acquired Subsidiary, all contributions or premiums required to be made by any Acquired Subsidiary, Seller or any Affiliates of the foregoing in respect of any Business Employees or compensation or benefits that were required to be paid or provided to the Business Employees have been timely made or accrued. As of the date of this Agreement, there is no pending or, to Seller’s Knowledge, threatened material Action relating to the Benefit Plans with respect to the Business Employees, except for routine claims for benefits.
(c)No member of the Company Group nor any of their ERISA Affiliates (i) maintains, sponsors, contributes to or has any obligation to contribute to, nor in the past six (6) years has maintained, sponsored or contributed to, any plan that is subject to Title IV of ERISA or (ii) has any liability (contingent or otherwise) with respect to, any plan that is subject to Title IV of ERISA. There are no circumstances under which Buyer or any of its Affiliates (including, after the Closing, the Acquired Subsidiaries) could reasonably expect to be assessed any Liability under Title IV of ERISA or Section 412 or 430 of the Code by reason of being treated as a single Person with Seller and its Affiliates prior to the Closing. No Benefit Plan provides welfare benefits after termination of employment except to the extent required by Section 4980B of the Code.
(d)Except as set forth on Schedule 2.13(d), the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not, whether alone or in combination with any other event, (i) entitle any Business Employee to severance pay or any other payment, (ii) result in any payment becoming due, accelerate the time of payment or vesting of benefits, or increase the amount of compensation due to any Business Employee, (iii) result in any forgiveness of indebtedness, trigger any funding obligation in respect of any Benefit Plan or otherwise or (iv) result in any “payment” to any “disqualified individual” (in each case within the meaning of Treasury Regulation Section 1.280G-1) that could reasonably be construed, individually or in combination with any other such payment, to constitute an “excess parachute payment” (within the meaning of Section 280G(b)(1) of the Code). No Person is entitled to receive any additional payment (including any tax gross-up or other payment) from any member of the Company Group as a result of the imposition of the excise Taxes under Section 4999 of the Code or any Taxes required by Section 409A of the Code or due to loss of any Tax deduction under Section 280G of the Code.
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2.14Labor
(a)Schedule 2.14(a) sets forth a list, as of the date hereof, of all Business Employees. Seller has provided or made available to Buyer, as of the date hereof, for each Business Employee, such employee’s title, annual base salary, the date of hire of each such employee and each such employee’s principal work location.
(b)No member of the Company Group is a party to, or bound by, any collective bargaining agreement and there are no labor unions or other organizations representing, purporting to represent or attempting to represent any Business Employees. There is no pending or, to Seller’s Knowledge, threatened, and since January 1, 2018, there has not been, any strike, lockout, slowdown, or work stoppage by or with respect to the Business Employees. The consent of, consultation of or the rendering of formal advice by any labor or trade union, works council or any other employee representative body is not required for the execution and delivery of this Agreement by the Seller or the consummation of the transactions contemplated hereby. There is no unfair labor practice charge or complaint, grievance or labor arbitration, pending or threatened, against Seller before the National Labor Relations Board or any Governmental Authority or arbitrator.
(c)Seller, each member of the Company Group, and each of their Affiliates is in substantial compliance with all applicable Laws respecting terms and conditions of employment or engagement, fair employment practices, employment standards, workers’ compensation, meal and rest breaks, occupational safety and health requirements, plant closings, wages and hours, pay equity, worker classification, withholding of taxes, benefit plan participation, discrimination, sexual harassment, affirmative action, work authorization, immigration, Form I-9 matters, continuation coverage under group health plans, pension commitments, disability rights or benefits, equal opportunity, human rights, labor relations, employee leave issues and unemployment insurance and related matters. With respect to each individual who renders services to or on behalf of the Business, whether directly or indirectly (including through a third person), Seller, each member of the Company Group, and each of their Affiliates has accurately classified each such individual as an employee, independent contractor, or otherwise under any and all applicable Laws, and each individual classified as an employee has been properly classified as exempt or nonexempt under any and all applicable Laws. With respect to the Business Employees, Seller and its Affiliates have not, any time within the six (6) months preceding the date of this Agreement, had any “plant closing” or “mass layoff” (as defined in the WARN Act) or other terminations of employees that would create any obligations upon, or liabilities for, any Acquired Subsidiaries or Buyer under the WARN Act or similar state and local laws.
(d)There are no complaints, lawsuits or other proceedings pending or, to Seller’s Knowledge, threatened against Seller, any member of the Company Group, or any of their Affiliates brought by or on behalf of any Business Employee or any current or former prospective employee or individual service provider of the Acquired Subsidiaries, including any pending or threatened complaint filed by any such individual with the National Labor Relations Board, the Equal Employment Opportunity Commission, or any equivalent Governmental Authority responsible for the prevention of unlawful employment practices.
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(e)There is no pending or, to Seller’s Knowledge, threatened claim or litigation against any Acquired Subsidiary with respect to allegations of sexual harassment, discrimination or other workplace misconduct, and in the last three (3) years (i) there have been no reported internal or external complaints accusing any supervisory or managerial Business Employee (or employee of Seller, any member of the Company Group, and their Affiliates who performed services for the Business) of sexual harassment, discrimination or other workplace misconduct and (ii) there has been no settlement of, or payment arising out of or related to, any litigation or complaint with respect to sexual harassment, discrimination or other workplace misconduct.
2.15Taxes.
(a)All Tax Returns required to have been filed with respect to the Business or the Assets or any Acquired Subsidiary have been duly and timely filed. All such Tax Returns were correct and complete in all material respects. Except as set forth on the Schedule 2.15(a), all Taxes due and owing by Seller with respect to the Business or the Assets or by any Acquired Subsidiary have been duly and timely paid. Neither Seller nor any Acquired Subsidiary is currently the beneficiary of, or has made any outstanding request with respect to the Business or Assets (in the case of Seller) for, any extension of time within which to file any Tax Return. No written notice that any claim that could affect the Business or Assets in the hands of Buyer or any Acquired Subsidiary is currently outstanding by a Governmental Authority in a jurisdiction where Seller or an Acquired Subsidiary does not pay a particular type of Tax or file a particular type of Tax Return that Seller or such Acquired Subsidiary is or may be subject to such taxation by, or required to file any such Tax Return with, that jurisdiction. There are no liens for Taxes (other than Taxes not yet due and payable) existing, pending or, to Seller’s Knowledge, threatened upon any of the Assets or any assets of any Acquired Subsidiary.
(b)All Taxes required to have been withheld with respect to the Business or the Assets or by any Acquired Subsidiary have been duly and timely withheld and such withheld Taxes have been either duly and timely paid to the proper Governmental Authority or properly set aside in accounts for such purpose.
(c)Except as set forth on Schedule 2.15(c), no tax audits, investigations or administrative or judicial Tax proceedings are pending or being conducted that could affect any Acquired Subsidiary or the Business or Assets in the hands of Buyer. All deficiencies asserted as a result of any tax audit or examination that could affect any Acquired Subsidiary or the Business or Assets in the hands of Buyer have been paid in full or finally settled. Neither Seller nor any Acquired Subsidiary has received from any Governmental Authority (including jurisdictions where Seller or such Acquired Subsidiary has not filed a Tax Return) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any Governmental Authority, in each case that could affect any Acquired Subsidiary or the Business or Assets in the hands of Buyer.
(d)No Person has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, in each case that could affect
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any Acquired Subsidiary or the Business or Assets in the hands of Buyer, which waiver or extension is currently in effect.
(e)Seller and each Acquired Subsidiary has charged, collected and remitted on a timely basis all material Taxes (in the case of Seller, with respect to the Business and the Assets) as required under material applicable Laws on any sale, supply, provision of services or delivery whatsoever.
(f)No transaction contemplated by this Agreement is subject to withholding under any provision of applicable Law (including Section 1445 or Section 1446 of the Code).
(g)Neither Buyer nor any Acquired Subsidiary 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 thereof) ending after the Closing Date as a result of any of the following: (i) change in method of accounting of any Acquired Subsidiary for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Section 7121 of the Code (or any similar provision of other applicable Law) executed by Seller or any Acquired Subsidiary prior to the Closing Date; (iii) installment sale or open transaction disposition made by Seller or any Acquired Subsidiary prior to the Closing Date; or (iv) any prepaid amount received or deferred revenue accrued, by Seller or any Acquired Subsidiary prior to the Closing Date.
(h)No Acquired Subsidiary has, and Buyer will not have by reason of the transactions contemplated by this Agreement, any liability for the Taxes of any other Person whether under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, or by Contract. No Acquired Subsidiary is or has been a member of any affiliated, consolidated, combined or unitary group for purposes of filing Tax Returns or paying Taxes.
(i)Schedule 2.15(i) sets forth the current U.S. federal income tax classification of each Acquired Subsidiary.
2.16Insurance. Schedule 2.16 sets forth a complete and accurate list of all policies and Contracts for insurance (including coverage amounts, policy numbers, issuer, type of insurance, annual premiums and expiration dates) relating to the Assets or the Business as of the date hereof (collectively, the “Insurance Policies”), and complete and accurate copies of such Insurance Policies have been made available to Buyer. All Insurance Policies are in full force and effect in accordance with their terms. No written notice of cancellation, termination, premium increase or alteration of coverage has been received by Seller with respect to any Insurance Policy. All Insurance Policies (a) are valid and binding in accordance with their terms, (b) are provided by carriers who are financially solvent, and (c) have not been subject to any lapse in coverage. No insurance carrier under any Insurance Policy has issued a reservation of rights with regard to or disputed its obligation with respect to any material claim.
2.17Affiliate Transactions. Except as set forth in Schedule 2.17, there are no Contracts, transactions, or arrangements between a member of the Company Group, on the one hand, and any Affiliate of a member of the Company Group, on the other hand (each, an “Affiliate Contract”). Except as set forth in Schedule 2.17, no current officer or director of any member of the Company Group or, to Seller’s Knowledge, any current member or employee, or any “affiliate” or “associate” (as those terms are defined in Rule 405 promulgated under the Securities Act) of any such person, has had, either directly or indirectly, a material interest in: (a) any person or entity that purchases from, or sells, licenses or furnishes to, any member of the Company Group any goods, property, technology, intellectual or other property rights or services; or (b) any Contract to which a member of the Company Group is a party or by which it may be bound.
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2.18Anti-Bribery; Anti-Money Laundering.
(a)Since January 1, 2016, neither Seller, its Affiliates, nor any director, officer or employee of or, to Seller’s Knowledge, agent, distributor, affiliate, representative or any other Person acting on behalf of, Seller or its Affiliates or the Business, has directly or indirectly made any bribes, rebates, payoffs, influence payments, kickbacks, illegal payments, illegal political contributions, or other payments, in the form of cash, gifts, or otherwise, or taken any other action, in violation of the Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010 or any other applicable anti-bribery or anti-corruption law (collectively, the “Anti-Bribery Laws”).
(b)Since January 1, 2016, Seller has not received written notice that Seller or to Seller’s Knowledge, its Affiliates, any director, officer or Employee of or, to Seller’s Knowledge, agent, distributor, affiliate or representative acting on behalf of, Seller or its Affiliates or the Business, are or have been the subject of any investigation or inquiry by any Governmental Authority with respect to potential violations of Anti-Bribery Laws.
(c)Since January 1, 2016 Seller has not received any written notice that it, or to Seller’s Knowledge, its Affiliates, any director, officer or Employee of or, to Seller’s Knowledge, agent, distributor, affiliate or representative acting on behalf of, Seller or its Affiliates or the Business, have been the subject of current, pending, or, to Seller’s Knowledge, threatened investigation, inquiry or enforcement proceedings for violations of Anti-Money Laundering Laws, or violated or received any notice, request or citation for any actual or potential noncompliance with Anti-Money Laundering Laws.
(d)Since January 1, 2016, the Business has been conducted in compliance with applicable Anti-Money Laundering Laws in all material respects.
2.19Brokers’ Fees. Except for Montminy & Co., the fees and expenses of which shall be borne by Seller, no member of the Company Group has incurred, or made commitments for, any brokerage, finders’, investment bankers’ or similar fee or commission in connection with the transactions contemplated by this Agreement.
2.20Active Diners and Completed Orders. Schedule 2.20 sets forth a true and correct calculation of (a) the number of Active Diners during the Measurement Period and (b) the number of Completed Orders during the Measurement Period presented for each calendar quarter during the Measurement Period (the “Measurement Period Completed Orders”).
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2.21Investigation. Seller has conducted its own independent investigation, review and analysis of Buyer. Seller acknowledges and agrees that (a) in making its decision to enter this Agreement and to consummate the transactions contemplated hereby, Seller (i) has relied solely upon its own investigation and the express representations and warranties of Buyer set forth in Article III hereof, (ii) has had such time as Seller deems necessary and appropriate to fully and completely review and analyze the information, documents and other materials related to Buyer that have been provided to Seller by or on behalf of Buyer or which are publicly available to Seller and (iii) has been provided an opportunity to ask questions of Buyer with respect to such information, documents and other materials and has received satisfactory answers to such questions and (b) none of Buyer or any other Person has made any representation or warranty as to Buyer or this Agreement whatsoever, express or implied, except as expressly set forth in Article III hereof.
2.22Franchise Matters.
(a)Franchise System. Other than the Franchise System, no member of the Company Group has owned or operated any franchise system. The Franchise System has not been operated outside the U.S.
(b)Franchise Agreements. Schedule 2.22(b) sets forth a list of all Franchise Agreements that are currently in effect between a member of the Company Group and any Franchisee. The Seller has made available to Buyer accurate and complete copies of each Franchise Agreement. The list of Franchise Agreements on Schedule 2.22(b) accurately includes (i) the name of the franchisor, if other than Delivery Dudes Franchise System LLC (ii) the name of the Franchisee, (iii) the business address of each franchised location operated by such Franchisee, (iv) the effective and expiration dates, (v) the number of remaining renewal options, and (vi) the date, name and description of any material addenda, amendments, waivers, extensions, side letters, or other modifications of any Franchise Agreement since the execution of such Franchise Agreement to which any member of the Company Group, or any of its or their agents, have agreed to, entered into, or acquiesced.
(c)Violations. Except as set forth in Schedule 2.22(c), no member of the Company Group is in or has received notice of any Breach under any Franchise Agreement, and to the Knowledge of the Seller, neither the Franchisee or any other party thereto is in, or has received notice of any Breach under any Franchise Agreement, the Breach of which has not been cured. Each Franchise Agreement is a valid and binding Contract of a member of the Company Group, is in full force and effect, and is enforceable against a member of the Company Group, and, is valid, binding and enforceable against each Franchisee or any other party thereto. No Franchise Agreement is subject to any claim of, or right to, termination, cancellation or rescission by any Franchisee or to the Knowledge of the Seller, any third party thereto, in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). To the Knowledge of the Seller, the certifications made by each Franchisee and each Franchisee’s owner(s) in each Franchisee Certificate are true and correct.
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(d)Options. Except as described in Schedule 2.22(d), no Franchisee or other Person has any enforceable, unexpired right of first refusal, option or other right or arrangement to sign any Franchise Agreement or acquire any Franchised Business.
(e)Franchisee Funds. Except as described in Schedule 2.22(e), there is and never has been any funds or cooperatives administered by or paid to a member of the Company Group on behalf of any Franchisees, including funds that Franchisees contributed for advertising and promotion.
(f)Disputes. Either the FDDs or Schedule 2.22(f) contains a summary of all (i) Franchise-related, license related, Franchisee-related and licensee-related arbitrations, litigation, class proceedings, material complaints or disputes, including claims that any member of the Company Group is vicariously or jointly liable with any Franchisee or licensee, or with respect to any Franchisee’s or licensee’s employees, (ii) “litigation” required for disclosure under the FTC Rule, and (iii) other Proceedings which were or are pending or, to the Knowledge of the Seller, threatened, from any Franchisee, licensee, association purporting to represent a group of Franchisees or licensees, or Governmental Authority.
(g)FDDs. The Seller has made available to Buyer the 2017 and 2019 Franchise Disclosure Document of Delivery Dudes Franchise System LLC (collectively, the “FDDs”) used to offer or sell franchises. Except as set forth on Schedule 2.22(g), the FDDs (i) have contained all information required by the FTC Rule and other Franchise Laws, (ii) have been prepared and delivered to prospective Franchisees in compliance with the FTC Rule and other Franchise Laws, and (iii) have not contained any statement which is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein not false or misleading in light of the circumstances under which they are made. Except as set forth on Schedule 2.22(g)(ii), Seller has not sent or received any material correspondence to or from any Governmental Authority concerning compliance with Franchise Laws or any other Laws, or related to any anti-poaching or non-compete provisions in its Franchise Agreements.
(h)Franchise Agreements. The Seller has made available to Buyer a copy of the 2017 and 2019 form of Delivery Dudes franchise agreement included as an exhibit to the FDDs. Except as set forth in Schedule 2.22(h), no member of the Company Group has entered into any material waivers, alterations, addenda, amendments or other modifications of any Franchise Agreement.
(i)Financial Performance. No “Financial Performance Representation” (as defined in the FTC Rule) has ever been made to any Franchisee or prospective franchisee by a member of the Company Group, or an officer, general partner, limited partner, salesperson, or representative of a member of the Company Group, except Financial Performance Representations which have been incorporated properly into the applicable FDD.
(j)Jurisdictions. Schedule 2.22(j) sets forth a list of the jurisdictions in which any member of the Company Group is or has been actively offering or selling franchises and any jurisdiction in which it is or has been registered or authorized to offer and sell franchises, or is exempt from such registration, under a Franchise Law. There are no stop orders or other
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Proceedings currently in effect or threatened that would prohibit or impede the Buyer’s ability to offer or sell franchises or enter into Franchise Agreements immediately following the Closing Date, except for any amendment filings and changes to the FDD (if any) that might be required to describe the transactions contemplated by this Agreement.
(k)Franchise Laws. Each member of the Company Group is in compliance in all material respects with all Franchise Laws, other than as set forth in Schedule 2.22(k)(i). All former Franchisees and former licensees that have ceased operation since January 1, 2017, and the reasons each such Franchisee or licensee is no longer a Franchisee or a licensee are set forth on Schedule 2.22(k)(ii), and (u) no Franchise Laws were violated by any member of the Company Group in connection with any such former Franchisees’ or former licensees’ default, termination, non-renewal or transfer of such franchise or license agreement, (v) no former Franchisee or former licensee has a valid claim for Losses arising out of or related to the applicable Franchise Agreement or license agreement, any other agreements by the former Franchisee or former licensee with any member of the Company Group, or the franchise or license relationship, (w) no former Franchisee or former licensee is operating a competing delivery service business utilizing Company Group Intellectual Property other than in connection with a transition to a Delivery.com franchise platform, and such parties are set forth in Schedule 2.22(k)(iii), (x) no former Franchisee or licensee, to Seller’s Knowledge, has violated its post-termination contractual obligations, (y) no former Franchisee or Licensee has any valid claim that such former Franchisee or former licensee still has the right to operate its business using the Company Group Intellectual Property or that its franchise agreement or license agreement has not been fully terminated, or (z) no restriction exists on any member of the Company Group or their Affiliates, or their respective successors and assigns, from operating itself or licensing or franchising a third party to operate in any market using the Company Group Intellectual Property, other than as set forth in Schedule 2.22(k)(iv).
(l)Territories. No Franchisee has been granted protected or exclusive territory rights, a protected or exclusive designated area, or an option, right of first refusal or other arrangement regarding additional territory rights except as set forth in the Franchise Agreements. No Franchisee has been granted any non-exclusive territory rights or designated area, except as set forth in the Franchise Agreements. To the Knowledge of Seller, no Franchisee’s protected or exclusive territory rights or designated area are violated in any way by another Franchisee’s protected or exclusive territory rights or designated area.
(m)Franchise Sellers; Sales Agents. No member of the Company Group has used any independent sales agents, sales brokers and referral sources to assist with the sale of Franchises. No Person other than Jayson Koss, Ryan Sturgis and Peter DeBaptiste have sold franchises by or on behalf of Delivery Dudes Franchise System, LLC or the Franchise System.
(n)Rebates; Products. Except as described in Schedule (n), Delivery Dudes Franchise Systems, LLC has not entered into any Contract whereby a member of the Company Group or any Affiliate receives rebates, allowances, discounts or other payments or remuneration of any kind (collectively, “Rebates”) from suppliers or other third parties selling products or services, directly or indirectly, to Franchisees. No member of the Company Group or any of its or their Affiliates has made any commitment, promise or pledge (oral or written) to share with Franchisees any Rebates. Except as described in Schedule 2.22(m), Delivery Dudes Franchise Systems, LLC has
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not received any revenue or other consideration, directly or indirectly, as a result of Franchisees’ required purchases or leases of products or services or delivery of services.
(o)Councils. Except as described in Schedule 2.22(o), to the Knowledge of the Seller, no franchise association or organization is acting as a representative of any group of two or more Franchisees. Any franchise council or advisory group (whether independently formed or sponsored by a member of the Company Group) presently in place is advisory in nature and is disclosed on Schedule 2.22(o).
(p)Consents. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will (i) require the consent or approval by any Franchisee, council, association, or other third party, or (ii) result in a violation of or a default under, or give rise to a claim for Losses or damages, right of termination, modification, cancellation, rescission or acceleration of any obligation or loss of material benefits under, any Franchise Agreement.
(q)Non-Competes. A member of the Company Group has not waived enforcement of any non-compete restriction under any Franchise Agreement, and, to the Knowledge of the Seller, no current or former Franchisee is in violation of any non-compete covenant under any Franchise Agreement to which the current or former Franchisee is or was a party.
(r)Accounts Payable; Promissory Notes. Except as set forth in Schedule 2.22(r), no Franchise has a promissory note payable to a member of the Company Group, or an accounts payable balance owed to any member of the Company Group for past due amounts.
(s) Enforcement. Except as described in Schedule 2.22(s), Each member of the Company Group has consistently enforced the terms of the Franchise Agreements, including enforcement, in all material respects, of all required operating standards set forth in the operations manuals of any member of the Company Group applicable to the Franchised Businesses.
(t)Franchisee Employees. No member of the Company Group has exercised control over, or issued policies that would enable a member of the Company Group to exercise control over, any Franchisee’s relationship with its employees, including hiring, firing, disciplining, compensation, benefits, supervision, and scheduling. No member of the Company Group has been alleged to be, and has not received, any formal or informal complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee or third party or Governmental Authority that any member of the Company Group is or may be joint employers with or subject to joint employment liability with any Franchisee. To the Knowledge of the Seller, no Franchisee is a party to or bound by any written or oral collective bargaining agreement or any other Contract or commitment with any labor union or other labor organization, and no union organizing or decertification activities are underway or threatened with respect to the employees of any of the Franchisees.
(u)Insurance. Each Franchisee is required to provide evidence to Delivery Dudes Franchise System LLC that it is currently in compliance with the insurance requirements of the Franchise Agreement. To the Knowledge of the Seller, Franchisee is in compliance with their respective Franchise Agreement’s insurance requirements.
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2.23Disclaimer of Other Representations and Warranties. Except as previously set forth in this Article II (as modified by the Schedules), neither Seller nor any related Person or Person acting on behalf of any of them make any representation or warranty, express or implied, at law or in equity, with respect to Seller or any of its assets, liabilities or operations or the transactions contemplated by this Agreement, and Seller hereby disclaims all liability and responsibility for any other representations, warranties, Projections, forecasts, statements or information made, communicated or furnished (orally or in writing) to Buyer, its Affiliates or representatives. Notwithstanding anything contained in this Agreement to the contrary, Seller makes no representations or warranties to Buyer regarding any Projections or the future or probable profitability, success, business, opportunities, relationships and operations of Seller.
Article III
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer represent and warrant to Seller (except as set forth in the applicable Schedules referenced below as well as any other section in this Agreement to which it is reasonably apparent from a reading of such Schedules without assuming any knowledge of the matters disclosed therein that such information is relevant to any other section) as follows:
3.1Organization. Parent is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. Buyer is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware.
3.2Contemplated Transactions; General Compliance.
(a)Enforceability; Authority. Each of Parent and Buyer has all requisite corporate power and authority to enter into this Agreement and the other agreements contemplated hereby to be executed and delivered by Parent or Buyer, as applicable, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. Assuming due authorization, execution and delivery of this Agreement by the other Parties hereto, this Agreement constitutes a valid and binding obligation of Parent and Buyer, enforceable against Parent and Buyer in accordance with its terms, subject to the Creditor’s Rights Exception. The execution, delivery and performance of this Agreement and the other agreements contemplated hereby to be executed and delivered by Parent and Buyer and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite corporate action on the part of Parent and Buyer, and no other proceedings on the part of Parent or Buyer or their respective shareholders are necessary to authorize the execution, delivery or performance of this Agreement or the other agreements contemplated hereby.
(b)No Conflict. The execution and delivery of this Agreement and the other agreements contemplated hereby, and the consummation or performance of any of the transactions contemplated hereby or thereby will not: (i) conflict with or violate any provisions of the organizational documents of Parent or Buyer; or (ii) Breach any provisions of or result in the termination, maturation or acceleration of, any rights or obligations under any Contract, Order or Law, to which Parent or Buyer is subject, to which Parent or Buyer is a party or by which any of Parent’s or Buyer’s properties or assets is bound, except in the case of clause (ii) where such
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Breach, termination, maturation or acceleration would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on Parent or Buyer’s ability to consummate the transactions contemplated by this Agreement.
(c)Governmental Filings. No Governmental Filings are required in connection with the execution, delivery and performance of the transactions contemplated by this Agreement by Buyer, except for the consents stated in Schedule 2.2(d) and in respect of applicable requirements of the Federal Securities Laws.
3.3Brokers’ Fees. Neither Parent nor Buyer has incurred, or made commitments for, any brokerage, finders’, investment bankers’ or similar fee or commission in connection with the transactions contemplated by this Agreement.
3.4Sufficiency of Funds. Buyer has available to it sufficient funds to enable it to make payment of the Closing Cash Payment and consummate the transactions contemplated by this Agreement.
3.5Litigation. There is no pending or, to Parent’s or Buyer’s Knowledge, threatened Litigation or Order by or against Parent or Buyer (i) that challenges the transactions contemplated by this Agreement and the agreements contemplated hereby; or (ii) that seeks to enjoin or prohibit consummation of, or seeks other equitable relief with respect to, the transactions contemplated by this Agreement and the agreements contemplated hereby. No event has occurred or circumstance exists that (with or without notice or lapse of time or both) is reasonably likely to give rise to or serve as a basis for the commencement of any such Litigation or Order. There are no, and have been no, Orders against the Parent or the Buyer. There is no unsatisfied judgment or any open injunction binding upon the Parent or the Buyer that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Parent or Buyer to enter into and perform their obligations under this Agreement.
3.6Shares. The Shares to be issued pursuant to this Agreement, upon issuance, will be validly issued and outstanding as fully paid and non-assessable shares in the capital of Parent and shall be free and clear of any lien, claim or encumbrance other than any such liens, claims or encumbrances contemplated by this Agreement.
3.7SEC Reports; Financial Statements. Parent has filed all reports required to be filed by it with the SEC since January 1, 2019 (collectively, as they have been amended since the time of their filing and including all exhibits thereto, the “SEC Reports”). None of the SEC Reports, as of their respective dates (or if amended or superseded by a filing prior to the date of this Agreement or the Closing Date, then on the date of such filing), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The audited financial statements and unaudited interim financial statements (including, in each case, the notes and schedules thereto) included in the SEC Reports complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto and except with respect to
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unaudited statements as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited interim financial statements included therein, to normal year-end adjustments and the absence of complete footnotes) in all material respects the financial position of Parent as of the respective dates thereof and the results of their operations and cash flows for the respective periods then ended.
3.8Reporting Company. Parent is a publicly-held company subject to reporting obligations pursuant to Section 13 of the Exchange Act, and the Parent Stock is registered pursuant to Section 12(b) of the Exchange Act.
3.9Listing. The Parent Stock is listed on NASDAQ. Parent satisfies all the requirements for the continued listing of the Parent Stock on NASDAQ. Parent is in material compliance with all applicable NASDAQ listing and corporate governance rules.
3.10Sarbanes-Oxley Act. Parent is in compliance with applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by the SEC thereunder in effect as of the date of this Agreement, except where such noncompliance could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
3.11Investment Company. Parent is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
3.12Investigation. Each of Parent and Buyer acknowledges and agrees that it has conducted its own inquiry, independent investigation, review and analysis of Seller, the Assets and the Assumed Liabilities. Each of Parent and Buyer acknowledges and agrees that (a) in making its decision to enter this Agreement and to consummate the transactions contemplated hereby, each of Parent and Buyer (i) has relied upon such inquiry, investigation, review and analysis and the representations and warranties of Seller set forth herein, (ii) has formed an independent judgment concerning the Business and the Assets and the transactions contemplated by this Agreement, (iii) has had such time as Buyer and Parent deem necessary and appropriate to fully and completely review and analyze the information, documents and other materials related to Seller, the Business, the Assets and the Assumed Liabilities that have been provided to Buyer by or on behalf of Seller or which are publicly available to Buyer and Parent and (iv) has been provided an opportunity to ask questions of Seller with respect to such information, documents and other materials and has received satisfactory answers to such questions and (b) except as expressly set forth in this Agreement, Buyer shall acquire the Assets and assume the Assumed Liabilities in “as is” condition and on a “where is” basis. For the avoidance of any doubt and without limiting the generality of the foregoing, Buyer acknowledges and agrees that there are uncertainties inherent in attempting to make the Projections, that each of Buyer and Parent is familiar with such uncertainties, that each of Parent and Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all Projections so furnished to them and any use of or reliance by Buyer or Parent on such Projections shall be at their sole risk, and neither Parent nor Buyer shall have any claim against anyone with respect thereto.
3.13Disclaimer of Other Representations and Warranties. Except as previously set forth in this Article III, Buyer makes no representation or warranty, express or implied, at law or in
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equity, with respect to it or any of its assets, liabilities or operations, and any such other representations or warranties are hereby expressly disclaimed.
Article IV
COVENANTS
4.1Conduct of Business Prior to the Closing. Except as contemplated on Schedule 4.1, or with the written consent of Buyer, which may not be unreasonably withheld, conditioned or delayed, during the period from the date hereof until the earlier of the Closing and the termination of this Agreement in accordance with its terms, Seller shall (i) conduct the Business in the ordinary course of business and (ii) use commercially reasonable efforts to preserve the Business’s business organization and relationships with third parties (including lessors, licensors, suppliers, distributors and customers) and keep available the service of their present employees and service providers. Without limiting the generality of the foregoing, and except as otherwise permitted in this Agreement or with the prior written consent of Buyer (which shall not be unreasonably withheld, conditioned or delayed), Seller shall not, during the period from the date hereof until the earlier of the Closing and the termination of this Agreement in accordance with its terms, directly or indirectly do, or propose or commit to do, or otherwise cause to occur, any of the following with respect to any member of the Company Group:
(a)make any change in or amendment to its organizational documents;
(b)declare, set aside, make or pay any dividend or other distribution, other than distributions paid solely in cash;
(c)(i) except in the ordinary course of business, (A) enter into any Contract that, had it been entered into prior to the date of this Agreement, would be a Material Contract or an Affiliate Contract, or (B) materially amend, modify, terminate or cancel (x) any existing Material Contract or (y) any Contract that, had it been entered into prior to the date of this Agreement, would be a Material Contract or (ii) fail to perform any of its obligations under all Contracts relating to or affecting the Assets or Business;
(d)enter into any agreement that restricts the ability of any member of the Company Group to engage or compete in any line of business, or enter into any agreement that restricts the ability of any member of the Company Group to enter a new line of business;
(e)except in the ordinary course of business, discontinue any business material to the Business or sell, lease, license, transfer or otherwise dispose or permit the cancellation, abandonment or dedication to the public domain of any of the material property rights (including material Intellectual Property) or assets of the Business, other than as required pursuant to existing Contracts or commitments;
(f)acquire (by merger, consolidation, purchase, or other acquisition of equity interests or assets) any Person or any material properties or assets of any Person, except for
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acquisitions of properties, assets, inventory and equipment in the ordinary course of business;
(g)incur any Indebtedness, issue any debt securities, or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any Person;
(h)make any loans, advances or capital contributions to, or investments in, any other Person, or forgive, cancel or compromise any debt or claim, in each case, other than in the ordinary course of business;
(i)fail to pay its debts, Taxes and other obligations when due;
(j)except as required by applicable Law or the terms of any Benefit Plan as in effect on the date of this Agreement, (A) amend, terminate, enter into or adopt any Benefit Plan (or any arrangement that would be a Benefit Plan if it was in effect on the date hereof) or any collective bargaining agreement; (B) grant or increase the compensation or benefits or other pay (including base salary or hourly rate, bonus, severance, termination, commissions and incentive compensation) of any Business Employee or other individual service provider of the Business; (C) pay, grant, or increase any severance or termination pay to (or otherwise amend any such existing arrangement with) any current or former Business Employee or other individual service provider of the Business; (D) accelerate the vesting or payment of, or fund or in any other way secure the payment, compensation or benefits under, any Benefit Plan or otherwise; or (E) grant any new awards, or modify the terms of any outstanding awards under any Benefit Plan or otherwise;
(k)hire or modify any employment arrangement with any Business Employee or terminate the employment of any such Business Employee, other than (y) terminations for cause, or (z) any hourly Business Employees in the ordinary course of business;
(l)cancel, compromise or settle any material Litigation, or intentionally waive or release any material rights, with respect to the Business;
(m)make any changes to its accounting principles or practices, other than as may be required by law or GAAP;
(n)other than in the ordinary course of business or consistent with past practices, change in any material respect the policies or practices of the Business with regard to the extension of discounts or credit to customers or collection of receivables from customers;
(o)make any change to any tip pooling arrangement or to any practices of any member of the Company Group with respect to tips and gratuities in effect as of the date hereof, unless required by applicable Law;
(p)change or revoke any material Tax election; change any method of accounting for Tax purposes; settle or compromise any Litigation in respect of Taxes; enter
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into any “closing agreement” as described in Section 7121 of the Code (or any similar provision of state, local, foreign or other Law); knowingly surrender any right to claim a Tax refund; file any amended Tax Return or consent to any extension or waiver of any limitation period with respect to any claim or assessment for Taxes; fail to make any estimated Tax payments or fail to properly accrue for Taxes in a manner consistent with the Seller’s past practices and applicable Law (and such estimated Tax payments or accruals shall not take into account any deductions arising on or prior to the Closing Date as a result of the payments pursuant to or as contemplated by this Agreement), in each case with respect to any Acquired Subsidiary or the Business or Assets to the extent such action would be binding on Buyer or such Acquired Subsidiary following the Closing Date;
(q)violate any applicable Law or Order;
(r)enter into or adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger or consolidation or other reorganization; or
(s)agree, authorize, recommend, propose or announce an intention to do any of the foregoing, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.
4.2Access to Information. Between the date of this Agreement and the earlier of the Closing and the termination of this Agreement in accordance with its terms, Seller shall (a) afford the officers, employees, accountants, counsel, financial advisors and other representatives of Buyer reasonable access during normal business hours to such of the properties, books, Contracts, commitments, records, officers and employees of the Company Group as Buyer may reasonably request and (b) furnish Buyer and its representatives with such financial, operating and other data related to the Business as Buyer or any of its representatives may reasonably request; provided that (i) such access shall be exercised in such a manner as to not interfere unreasonably with the conduct of the Business, (ii) the Party granting access may withhold any document (or portions thereof) or information (x) that is subject to the terms of a non-disclosure agreement with a third party, (y) that may constitute privileged attorney-client communications or attorney work product and the transfer of which, or the provision of access to which, as reasonably determined by such Party’s counsel, constitutes a waiver of any such privilege or (z) if the provision of access to such document (or portion thereof) or information, as determined by such Party’s counsel, would reasonably be expected to conflict with applicable Law.
4.3SEC Matters. Seller shall, and shall cause each member of the Company Group to, as promptly as reasonably practicable, provide Parent with all information concerning the Company Group, its respective businesses, management, operations and financial condition, in each case, that is reasonably required to be included in any form, report, schedule or other document filed by Parent with the SEC and all amendments, modifications and supplements thereto. It is the sole responsibility of Parent to interpret and determine appropriate SEC guidance as it applies to Parent and Buyer and to timely communicate requirements to the Seller. Seller shall fully cooperate and make commercially reasonable best efforts to timely provide any information to Parent that is required to be included within any SEC filing. Seller shall make, and
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shall cause each member of the Company Group to make, their Affiliates, directors, officers, managers, employees, accountants and auditors reasonably available to Parent and its counsel in connection with the drafting of any filings to be made by Parent under the Federal Securities Laws.
4.4Indebtedness Payoff. On or prior to the Closing Date, Seller shall obtain and provide to Parent a true and correct copy of a payoff letter with respect to each of the items listed on Schedule 2.4 (collectively, the “Payoff Letters”) duly executed by each borrower, creditor and other party thereunder, in customary form and providing for the termination of such Indebtedness and related documents and the termination and release of all Encumbrances securing such Indebtedness.
4.5Franchise System. During the period from the date hereof until the earlier of the Closing and the termination of this Agreement in accordance with its terms, each member of Company Group will continue to operate in the ordinary course of business with regard to the Franchisees, the Franchise Agreements and the operation of the Franchise System, subject to any limitations or restrictions imposed under applicable Franchise Laws as a result of the execution and delivery of this Agreement and the transactions contemplated hereby, and no member of the Company Group shall, without the prior written consent of the Buyer, and whether or not in the ordinary course of business, (i) rescind or cancel any Franchise Agreement, (ii) materially amend, modify, terminate, renew, not renew, or consent to a transfer or assignment of any Franchise Agreement or any Franchised Business, (iii) purchase any Franchised Business, or exercise any option to purchase or right of first refusal related to any Franchised Business, (iv) enter any Contract related to any Franchise Agreement or Franchised Business, whether with a Franchisee or a third party, or (v) offer or sell Franchised Businesses or Franchise Agreements. To the extent Delivery Dudes Franchise System, LLC desires or is required to amend any FDDs to disclose the transaction contemplated by this Agreement, or changes related to the transaction, or other matters, the Seller shall provide Buyer with the proposed FDD changes for Buyer’s review, sufficiently in advance of issuing and filing any amended FDD, to provide Buyer with a reasonable opportunity to comment on and approve such changes.
4.6Satisfaction of Closing Conditions. Subject to the terms and conditions of this Agreement, (i) each Party shall use its commercially reasonable efforts to cause the conditions set forth in Article VI to be satisfied and to take or cause to be taken all actions, to do or cause to be done and to assist and cooperate with the other Parties hereto in doing all things necessary, proper or advisable under applicable Laws and regulations to consummate the transactions contemplated herein in the most expeditious manner practicable, including: (x) obtaining applicable consents, waivers or approvals of any third parties (including any Governmental Filings); and (y) the execution and delivery of such instruments, and the taking of such other actions as the other Parties may reasonably require in order to carry out the intent of this Agreement.
4.7Books and Records. From and after the Closing, Buyer agrees that it shall preserve and keep the records acquired or otherwise held by it or its Affiliates as of the Closing Date relating to the Business, the Assets and the Assumed Liabilities for a period of five (5) years from the Closing Date. In the event that Buyer wishes to destroy such records after that time, Buyer shall first give ninety (90) days prior written notice to Seller, and Seller shall have the right at its option
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and expense, upon prior written notice given to Buyer within that ninety (90) day period, to take possession of the records within one-hundred eighty (180) days after the date of such notice.
4.8Confidentiality
(a)The Parties and their respective representatives shall treat all nonpublic information obtained in connection with this Agreement and the transactions contemplated hereby as confidential in accordance with the terms of the Confidentiality Agreement. The terms of the Confidentiality Agreement shall continue in full force and effect until the Closing, at which time such Confidentiality Agreement shall terminate. If this Agreement is, for any reason, terminated prior to the Closing, the Confidentiality Agreement shall continue in full force and effect as provided in Section 8.2 in accordance with its terms.
(b)From and after the Closing, Seller will keep in strict confidence, and will not, directly or indirectly, except as required by Law or, if applicable, in the course of any member of Seller performing his or her duties after the Closing as a partner, officer or employee of Buyer, at any time, disclose, furnish, disseminate, make available or use any trade secrets or confidential business and technical information of the Business or Buyer, any of its Subsidiaries, affiliated or related companies, or any of their respective clients, customers or vendors, whatever its nature and form and without limitation as to when or how Seller may have acquired such information. Such confidential information includes the unique selling and servicing methods and business techniques, training, service and business manuals, promotional materials, training courses and other training and instructional materials, vendor and product information, customer and prospective customer lists, other customer and prospective customer information and other confidential business information with respect to the Business or Buyer. Such confidential information does not include any information that is or becomes publicly known other than as a result of a Breach of Seller’s obligations (whether under this Agreement or otherwise) or any confidential information included in or retained by the Seller solely in connection with the Excluded Assets. Seller specifically acknowledges that all such confidential information, whether reduced to writing, maintained on any form of electronic media or maintained in the mind or memory of such Person and whether compiled by Seller, derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from its disclosure or use, that reasonable efforts have been made to maintain the secrecy of such information, that such information will be the sole property of Buyer and that any retention and use of such information by Seller (except, if applicable, in the course of any member of Seller performing his or her duties after the Closing as a partner, officer or Employee of Buyer) will constitute a misappropriation of Buyer’s trade secrets and a Breach of this Agreement. In the event that Seller or its representatives becomes legally compelled to disclose any information referred to in this Section 4.8(a), Seller shall provide Buyer with prompt written notice before such disclosure, to the extent legally permitted, sufficient to enable Buyer either to seek a protective order, at Buyer’s expense, or another appropriate remedy preventing or prohibiting such disclosure.
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4.9Non-Competition; Non-Solicitation; Non-Disparagement.
(a)For a period of three (3) years commencing on the Closing Date, Seller shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, (i) engage in or assist others in engaging in any Competitive Activity in the Territory except with respect to Buyer or its Subsidiaries or (ii) intentionally interfere in any material respect with the business relationships (whether formed before or after the date of this Agreement) between Buyer or its Subsidiaries and customers or suppliers of Buyer or its Subsidiaries (including, for the avoidance of doubt, with respect to the Business and the Assets). For purposes of this Section 4.9(a), “Territory” means North America.
(b)For a period of three (3) years commencing on the Closing Date, Seller shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, hire, solicit or induce, or attempt to hire, solicit or induce, any employee of Buyer or its Subsidiaries or encourage any such employee to leave or reduce such employment or hire any such employee who has left such employment (including, for the avoidance of doubt, employees of the Business); provided that nothing in this Section 4.9(b) shall prevent Seller or any of its Subsidiaries from hiring (x) any employee whose employment has been terminated by Buyer or its Subsidiaries without cause; or (y) after 180 calendar days from the date of termination of employment, any employee whose employment has been terminated by the employee.
(c)For a period of three (3) years commencing on the Closing Date, Seller shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, solicit, call on or entice, or attempt to solicit, call on or entice, any customers of Buyer or its Subsidiaries (including, for the avoidance of doubt, any customers of the Business), in each case for purposes of diverting business or services from Buyer or its Subsidiaries; provided however this clause (c) shall not prohibit the Seller, its Subsidiaries or any Affiliates from soliciting or hiring any person who responds to a general advertisement or solicitation, including but not limited to advertisements or solicitations through newspapers, trade publications, periodicals, radio or internet database.
(d)Seller acknowledges that a Breach or threatened Breach of this Section 4.9 may give rise to irreparable harm to Buyer, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a Breach or a threatened Breach by Seller of any such obligations, Buyer shall, in addition to any and all other rights and remedies that may be available to it in respect of such Breach, be entitled to seek equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).
(e)Seller and Buyer agree and intend that Seller’s obligations under this Section 4.9 be tolled during any period that Seller is in Breach of any of the obligations under this Section 4.9, so that Buyer is provided with the full benefit of the restrictive periods set forth herein.
(f)Seller acknowledges that the restrictions contained in this Section 4.9 are reasonable and necessary to protect the legitimate interests of Buyer and constitute a material inducement to Buyer to enter into this Agreement and consummate the transactions contemplated by this Agreement. In the event that any covenant contained in this Section 4.9 should ever be
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adjudicated to exceed the time, geographic, product or service, or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service, or other limitations permitted by applicable Law. The covenants contained in this Section 4.9 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.
(g)For a period of three (3) years commencing on the Closing Date, Seller will refrain from, in any manner, directly or indirectly, all conduct, oral or otherwise, that disparages or damages or could disparage or damage the reputation, goodwill, or standing in the community of the Buyer, its Subsidiaries, the Business or the Assets. It shall not however be a breach of this Subsection to testify truthfully in any judicial, administrative or arbitration proceeding or to make statements or allegations in legal filings, depositions or responses to interrogatories that are based on reasonable belief and are not made in bad faith. Notwithstanding anything herein to the contrary, nothing in this paragraph shall prevent Buyer or Parent from exercising its authority or enforcing its rights or remedies hereunder or that Buyer or Parent may otherwise be entitled to enforce or assert under any other agreement or applicable Law, or limit such rights or remedies in any way.
4.10Further Assurances. The Parties shall cooperate reasonably with the other Parties hereto and with their respective representatives in connection with any steps required to be taken as part of their respective obligations under this Agreement, and shall (a) furnish upon request to each other such further information, (b) execute and deliver to each other such other documents, and (c) do such other acts and things, all as any other Party may reasonably request for the purpose of carrying out the intent of this Agreement and the transactions contemplated hereby.
4.11Transfer Taxes. All Transfer Taxes shall be paid when due and shall be borne by Seller. Seller shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Buyer shall reasonably cooperate with respect thereto).
4.12Apportioned Obligations. All real or personal property and similar ad valorem Taxes for a taxable period that includes the Closing Date (“Apportioned Obligations”), shall be apportioned between the portion of such taxable period ending on the Closing Date (the “Pre-Closing Tax Period”) and the portion beginning on the day after the Closing Date (the “Post-Closing Tax Period”) on a per diem basis. Seller shall be liable for any such Apportioned Obligations apportioned to the Pre-Closing Tax Period and Buyer shall be liable for any such Apportioned Obligations apportioned to the Post-Closing Tax Period.
4.13No Parent Stock Transactions. From and after the date of this Agreement until the Closing, no member of the Company Group nor any of the Company’s Affiliates, directly or indirectly, shall engage in any transactions involving the securities of Parent. Seller shall use commercially reasonable efforts to require each of its Affiliates and representatives to comply with the foregoing sentence.
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4.14Audit. Seller shall cooperate with Parent in the event that Parent needs to obtain an audit of the Company Group or the Seller and Acquired Subsidiaries for any period ending prior to Closing; provided that the Parent shall make available any Transferred Employees necessary to assist the Seller in connection therewith.
4.15Change of Name or Liquidation. Unless otherwise agreed to by Buyer, within 30 Business Days of Closing, Seller shall (or shall cause the relevant members of the Company Group to) (i) change the name of each Non-Acquired Subsidiary to a name that does not include “Delivery Dudes”, “DD”, or any other permutation thereof, and that is otherwise not a name that may suggest an affiliation of any kind with the Business, Assets and/or Acquired Subsidiaries or (y) liquidate, dissolve or wind up each Non-Acquired Subsidiary.
Article V
Employees and Employee Benefit Plans
5.1Employee Matters
(a)Effective as of the Closing Date, Buyer shall offer, or cause its applicable Affiliate to offer, employment to each Business Employee. Each Business Employee who accepts Buyer’s or its Affiliate’s offer of employment pursuant to this Section 5.1 shall be referred to herein as a “Transferred Employee”.
(b)Following the Closing, Seller and its Affiliates (other than the Acquired Subsidiaries) shall retain and be responsible for (and shall indemnify and hold the Buyer and the Acquired Subsidiaries from and against) (i) any and all Liabilities, whenever arising or occurring, under the Benefit Plans (other than any Standalone Plan), (ii) any and all Liabilities relating to the employment, compensation and employee benefits of the Transferred Employees which arise or are incurred prior to the Closing and (iii) any and all Liabilities relating to any Seller employee who is not a Transferred Employee, whenever arising or occurring. Except as set forth in the immediately preceding sentence, Buyer shall be solely responsible for all Liabilities related to the Transferred Employees that relate exclusively to periods after the Closing Date.
(c)This Section 5.1 shall be binding upon and inure solely to the benefit of each of the Parties to this Agreement, and nothing in this Section 5.1, expressed or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Section 5.1. Without limiting the foregoing, no provision of this Section 5.1 will (i) be treated as an amendment to any particular Benefit Plan, (ii) prevent Buyer from amending or terminating any of its benefit plans in accordance their terms, (iii) prevent Buyer or its Affiliates, on or after the Closing Date, from terminating the employment of any Transferred Employee, or (iv) confer any rights or remedies (including third-party beneficiary rights) on any current or former director, Business Employee, employee, or individual service provider of Seller, any Acquired Subsidiary, Buyer or any of their respective Affiliates or any beneficiary or dependent thereof or any other Person.
Article VI
CLOSING CONDITIONS
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6.1Conditions to Obligations of Parent and Buyer. Except as may be waived in writing by Parent and Buyer, the obligations of Parent and Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver by Buyer of the following conditions at or prior to the Closing:
(a)Governmental Orders. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Order or Law which is in effect and has the effect of making the transactions contemplated by this Agreement unlawful or otherwise restraining or prohibiting consummation of such transactions.
(b)Representations and Warranties. The representations and warranties of Seller contained in Article II shall be true and correct as of the date hereof and as of the Closing Date, as though made on and as of the Closing Date, except (i) that representations and warranties that are made as of a specific date need be true and correct only as of such date and (ii) for breaches and inaccuracies of representations and warranties of Seller other than the Fundamental Representations, the effect of which would not, individually or in the aggregate, be material to the Business or the Assets and Assumed Liabilities taken as a whole.
(c)Covenants. Seller shall have performed and complied with in all material respects all covenants and agreements hereunder required to be performed or complied with by them on or prior to the Closing Date.
(d)Closing Certificate. Seller shall have delivered to Buyer a certificate, executed by an officer of Seller certifying to the satisfaction of the conditions specified in Section 6.1(b) above.
(e)No Material Adverse Effect. Since the date of this Agreement, no Material Adverse Effect shall have occurred.
(f)Payoff Letters. Seller shall have delivered or caused to be delivered to Buyer the Payoff Letters providing for the matters set forth in Section 1.10(a)(xiv).
(g)Business Employees. Not less than fifty percent (50%) of the Business Employees (including each of the Key Employees) shall have executed standard employee onboarding documentation, satisfactory to Buyer.
(h)Consents. Seller shall have delivered to Buyer evidence of the consents, assignments and other items set forth on Schedule 1.10(a)(xi).
(i)FIRPTA Certificate/W-9. Seller shall have delivered to Buyer a certificate pursuant to Treasury Regulations Section 1.1445-2(b) and an IRS Form W-9 evidencing that Seller is not a foreign person within the meaning of Section 1445 and Section 1446 of the Code.
(j)Joinder of Buyer. Buyer shall been joined as a credit party to the Luxor Credit and Guaranty Agreement.
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6.2Conditions to Obligations of Seller. Except as may be waived in writing by Seller, the obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver by Seller of the following conditions at or prior to the Closing:
(a)Governmental Orders. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Order or Law which is in effect and has the effect of making the transactions contemplated by this Agreement unlawful or otherwise restraining or prohibiting consummation of such transactions.
(b)Representations and Warranties. The representations and warranties of Parent and Buyer contained in Article IV shall be true and correct as of the date hereof and as of the Closing Date, as though made on and as of the Closing Date, except (i) that representations and warranties that are made on and as of a specific date need be true and correct only as of such date and (ii) for breaches and inaccuracies that would not prevent or materially impair or delay consummation by Buyer of the transactions contemplated hereby.
(c)Covenants. Each of Parent and Buyer shall have performed and complied with in all material respects all covenants and agreements hereunder required to be performed or complied with by it on or prior to the Closing Date.
(d)Closing Certificate. Each of Parent and Buyer shall have delivered to Seller a certificate, executed by an officer of Parent or Buyer (as applicable), certifying to the satisfaction of the conditions specified in Section 6.2(b) above.
Article VII
INDEMNIFICATION
7.1Survival. Subject to the limitations and other provisions of this Agreement, representations and warranties contained herein shall survive the Closing and remain in full force and effect until the date that is eighteen (18) months from the Closing Date; provided that the Fundamental Representations shall survive until the date that is four (4) years from the Closing Date. All covenants and agreements of the Parties contained herein which are to be performed prior to the Closing shall terminate at the Closing, except that the covenants and agreements set forth in Section 4.1 and Section 4.5 shall survive the Closing and remain in full force and effect until the date that is eighteen (18) months from the Closing Date. All other covenants and agreements shall survive for the duration of their terms. Notwithstanding anything to the contrary in this Agreement, including Section 7.4, any claim for Fraud may be brought within the applicable statute of limitations and nothing herein shall limit or reduce the amounts recoverable for any such claim. If a Claim Notice has been given by an Indemnified Party to an Indemnifying Party within the applicable limitation period provided for in this Section 7.1, the end of the survival period that would otherwise apply to such claim shall be extended (solely with respect to the claim underlying such Claim Notice) until such later date as such claim has been fully and finally resolved.
7.2Indemnification by Seller. From and after the Closing, subject to the terms and conditions of this Article VII, Seller shall indemnify and defend Buyer, its Affiliates and its
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representatives (collectively, the “Buyer Indemnified Parties”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, Buyer Indemnified Parties based upon, arising out of, with respect to or by reason of:
(a)any inaccuracy in or Breach of any of the representations or warranties of Seller contained in this Agreement (except for representations and warranties made as of a specific date, the inaccuracy or Breach of which will be determined with reference to such date);
(b)any Breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller pursuant to this Agreement;
(c)the Excluded Liabilities; or
(d)the offer or sale by any member of the Company Group of any franchise or license in violation of any Franchise Laws since January 1, 2018.
7.3Indemnification by Buyer. From and after the Closing, subject to the terms and conditions of this Article VII, Parent and Buyer shall jointly and severally indemnify and defend Seller, its Affiliates and its representatives (collectively, the “Seller Indemnified Parties”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Seller Indemnified Parties based upon, arising out of, with respect to or by reason of:
(a)any inaccuracy in or Breach of any of the representations or warranties of Parent or Buyer contained in this Agreement as of the Closing Date (except for representations and warranties made as of a specific date, the inaccuracy or Breach of which will be determined with reference to such date); or
(b)any Breach or non-fulfillment of any covenant, agreement or obligation to be performed by Parent or Buyer prior to the Closing pursuant to this Agreement; and
(c)the Assumed Liabilities.
7.4Limitation on Indemnification. The party making a claim under this Article VII is referred to as the “Indemnified Party” and the party against whom such claims are asserted under this Article VII is referred to as the “Indemnifying Party.” The indemnification provided for in Section 7.2 and Section 7.3 hereof shall be subject to the following limitations:
(a)The Indemnifying Party shall not be liable to the Indemnified Party for indemnification under Section 7.2(a) or Section 7.3(a), as the case may be, until the aggregate amount of all Losses suffered in respect of indemnification under Section 7.2(a) or Section 7.3(a) exceeds $120,000 (the “Deductible”), in which event the Indemnifying Party shall be liable for all such Losses in excess of the Deductible.
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(b)The aggregate amount of all Losses for which an Indemnifying Party shall be liable pursuant to Section 7.2(a) or Section 7.3(a), as the case may be, shall not exceed the sum of (x) $1,725,000 plus (y) the aggregate Market Value of the Indemnity Holdback Shares (the “Cap”).
(c)Notwithstanding the foregoing, the limitations set forth in Sections 7.4(a) and (b) above shall not apply to Losses arising out of or resulting from any Breach of the Fundamental Representations; provided that in no event shall the aggregate liability of Seller for any Losses arising under this Agreement exceed the Purchase Price.
(d)For purposes of this Article VII, determinations of the existence of any inaccuracy, Breach or non-fulfillment and calculations of the amount of any Losses arising out of or resulting from any such inaccuracy, Breach or non-fulfillment shall be made without regard to any reference to “Material Adverse Effect,” “materiality” or any other correlative materiality qualifications.
(e)The amount of any and all Losses under this Article VII shall exclude exemplary or punitive damages, except to the extent arising from Fraud or actually awarded to a Third Party in an Action brought against an Indemnified Party.
7.5Notice of Claims.
(a)Any Indemnified Party shall, within the limitation period provided for in Section 7.1, give, in the case of indemnification sought by: (i) any Seller Indemnified Party, to Buyer; or (ii) any Buyer Indemnified Party, to Seller, a written notice (a “Claim Notice”) that includes a general description of the facts giving rise to the claim for indemnification hereunder that is the subject of the Claim Notice (if and to the extent then known), a good faith estimate of the amount of such claim and a reference to the provision of this Agreement upon which such claim is based along with disclosure of any policy of insurance which may afford coverage for all or part of the Claim. A Claim Notice shall be given promptly following the claimant’s determination that facts or events give rise to a claim for indemnification hereunder; provided that the failure to give such written notice (i) shall not relieve any Indemnifying Party of its obligations under this Article VII, except to the extent it shall have been actually and materially prejudiced by such failure, and (ii) shall not relieve any Indemnifying Party of any other obligation or liability it may have to any Indemnified Party otherwise than under this Article VII.
(b)An Indemnifying Party shall have thirty (30) days after the giving of any proper Claim Notice pursuant hereto to: (i) agree to the amount set forth in the Claim Notice and to pay or cause to be paid such amount to such Indemnified Party (A) in the case of a claim by the Seller Indemnified Parties, in immediately available funds, or (B) in the case of a claim by the Buyer Indemnified Parties, (1) by the Buyer and Seller jointly directing the Escrow Agent to release from the Indemnity Escrow Holdback Amount the amount set forth in the Claim Notice (the “Indemnification Amount”), and (2) if the Indemnification Amount exceeds the available balance of the Indemnity Escrow Holdback Amount, and the full amount of the Indemnity Escrow Holdback Amount has been released pursuant to Section 7.5(b)(a)(1) above, by the Seller transferring back to Parent or a nominee thereof (for no consideration) from the Indemnity
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Holdback Shares the number of shares of Parent Stock equal to (x) the amount by which the Indemnification Amount exceeds the available balance of the Indemnity Escrow Holdback Amount divided by (y) the Market Value as of the date of the Claim Notice; or (ii) provide such Indemnified Party with written notice that it disagrees with the claim set forth in the Claim Notice (the “Dispute Notice”). For a period of sixty (60) days after the giving of any Dispute Notice, a representative of the Indemnifying Party and the Indemnified Party shall negotiate in good faith to resolve the matter. In the event that the controversy is not resolved within sixty (60) days after the date the Dispute Notice is given, the Parties may thereupon proceed to pursue any and all available remedies at law. If the Indemnifying Party agrees to the Claim Notice pursuant to clause (i) above or fails to provide a timely Dispute Notice pursuant to clause (ii) above, then: (x) if the Indemnified Party is a Buyer Indemnified Party, Buyer shall be entitled to the indemnification payment released by the Escrow Agent as contemplated by Section 7.5(b)(i)(B), or (y) if the Indemnified Party is a Seller Indemnified Party, then Buyer shall, using its own immediately available funds, pay Seller the amount set forth in the Claim Notice.
7.6Third Party Claims.
(a)If a claim by a third Person (including any audit, notice or request for information from a Tax Regulatory Authority) (a “Third Party Claim”) is made against an Indemnified Party, and if such Indemnified Party intends to seek indemnity with respect thereto under this Article VII, such Indemnified Party shall promptly notify: (i) Buyer, in the case of indemnification sought by any Seller Indemnified Party; or (ii) Seller, in the case of indemnification sought by any Buyer Indemnified Party, in writing of such claims (a “Third Party Claim Notice”). The Third Party Claim Notice shall include a general description of the facts giving rise to the claim for indemnification hereunder that is the subject of the Third Party Claim Notice, (if and to the extent then known) the amount or an estimate of the amount of such claim and all material documentation relevant to the claim described in the Third Party Claim Notice. A Third Party Claim Notice shall be given promptly following the claimant’s determination that facts or events give rise to a claim for indemnification hereunder; provided that in respect of any Action at law or suit in equity by or against a third Person as to which indemnification will be sought shall be given promptly after the Action or suit is commenced; and provided, further, that the failure to give such written notice (i) shall not relieve any Indemnifying Party of its obligations under this Article VII, except to the extent it shall have been actually and materially prejudiced by such failure, and (ii) shall not relieve any Indemnifying Party of any other obligation or liability it may have to any Indemnified Party otherwise than under this Article VII.
(b)The Indemnifying Party may at any time deliver written notice to the Indemnified Party that it intends to undertake, conduct and control, through counsel of its own choosing of recognized standing and competence and at its own expense, the settlement or defense thereof, and the Indemnified Party shall cooperate with it in connection therewith; provided that (i) the Indemnifying Party shall only be entitled to undertake, conduct and control such settlement or defense if it acknowledges, in writing, to the Indemnified Party its obligation to fully indemnify the Indemnified Party hereunder against any Losses that may result from such Third Party Claim (subject to, if applicable pursuant to Section 7.4, the Cap and Deductible) and (ii) if (A) in the reasonable opinion of counsel for such Indemnified Party, there is a reasonable likelihood of a conflict of interest between the Indemnifying Party and the Indemnified Party or (B) the Third
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Party Claim is related to Taxes, then the Indemnified Party shall be entitled to participate in such settlement or defense through one counsel of its own choosing. If the Indemnifying Party undertakes to conduct and control the settlement or defense of a Third Party Claim, it shall take all steps reasonably necessary in the settlement or defense of such Third Party Claim, and shall diligently pursue the resolution of such Third Party Claim. Should an Indemnifying Party elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. If the Indemnifying Party elects to assume the defense of a Third Party Claim, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood, however, that the Indemnifying Party shall control the defense. If the Indemnifying Party does not notify the Indemnified Party in writing that it elects to undertake the defense thereof, the Indemnified Party shall have the right to undertake the defense or prosecution of the claim through counsel of its own choice, and the reasonable fees and expenses incurred in connection with such defense or prosecution shall be considered Losses hereunder with respect to the subject matter of such claim, indemnifiable to the extent provided in this Article VII. Notwithstanding the foregoing, the Indemnifying Party shall be entitled to assume the settlement or defense of a Third Party Claim under this Section 7.6(b) only if: (A) the Third Party Claim involves solely monetary damages and (B) to the extent that the Cap applies, the potential Losses relating to such Third Party Claim are less than the Cap.
(c)Subject to Section 7.6(e), on the first Business Day following the Holdback Release Date, (i) Buyer and Seller shall jointly instruct the Escrow Agent to release to Seller in accordance with the Escrow Agreement the remaining amount of the Indemnity Escrow Holdback Amount net of the amount of any unresolved or pending claims properly asserted by Buyer prior to the Holdback Release Date (“Unresolved Claims”), in cash, by wire transfer of immediately available funds to the account designated in writing by Seller, and (ii) the remaining number of Indemnity Holdback Shares, net of the number of Indemnity Holdback Shares corresponding to the amount by which the Unresolved Claims exceeds the available balance of the Indemnity Escrow Holdback Amount, shall be released from the Indemnity Holdback Restriction. Buyer or Parent shall cause the record ownership of the released Indemnity Holdback Shares to be in the name of the Seller or in the names and percentage allocations of such other Persons as Seller may request via written notice to Buyer and Parent on a date that is no less than five (5) Business Days prior to the Holdback Release Date, all of whom shall be members of the Seller. Thereafter, any remaining Indemnity Escrow Holdback Amount retained by the Escrow Agent and any remaining Indemnity Holdback Shares that continue to be subject to the Indemnity Holdback Restriction with respect to the Unresolved Claims (if any), shall be released by the Escrow Agent or from the Indemnity Holdback Restriction, as applicable, upon resolution of such Unresolved Claims.
(d)Neither Buyer nor Seller shall settle or consent to the entry of judgment of any Third Party Claim without the prior written consent of the other Party, which consent shall not be unreasonably conditioned, withheld or delayed, unless such settlement or judgment (i) does not provide for injunctive or other equitable relief and (ii) will be fully satisfied by the Indemnifying Party.
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(e)In the event that a third party acquires all of the equity interests in Parent or all or substantially all of Parent’s assets, operations and businesses (including the Business) (other than any such transaction(s) relating to internal reorganizations, restructures, amalgamations, and other similar transactions) (a “Third Party Acquisition”), then prior to or contemporaneously with the consummation of such Third Party Acquisition, (i) Buyer and Seller shall jointly instruct the Escrow Agent to release to Seller in accordance with the Escrow Agreement the remaining amount of the Indemnity Escrow Holdback Amount net of the amount of any Unresolved Claims, in cash, by wire transfer of immediately available funds to the account designated in writing by Seller, and (ii) the remaining number of Indemnity Holdback Shares, net of the number of Indemnity Holdback Shares corresponding to the amount by which the Unresolved Claims exceeds the available balance of the Indemnity Escrow Holdback Amount, will be released from the Indemnity Holdback Restriction. Buyer or Parent shall cause the record ownership of the released Indemnity Holdback Shares to be in the name of the Seller or in the names and percentage allocations of such other Persons as Seller may request via written notice to Buyer and Parent on a date that is no less than five (5) Business Days prior to the Holdback Release Date, all of whom shall be members of the Seller. Thereafter, any remaining Indemnity Escrow Holdback Amount retained by the Escrow Agent and any remaining Indemnity Holdback Shares that continue to be subject to the Indemnity Holdback Restriction with respect to the Unresolved Claims (if any), shall be released by the Escrow Agent or from the Indemnity Holdback Restriction, as applicable, upon resolution of such Unresolved Claims.
7.7Tax Treatment. All indemnification payments made under this Agreement shall be treated by the Parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.
7.8No Double Recovery. In no event shall the Indemnified Party be entitled under this Agreement to the recovery of the same Loss more than once, regardless of whether the claim for the Loss may be brought under multiple provisions of this Agreement. No amount may be recovered as a Loss with respect to any particular matter to the extent such amount with respect to such matter was expressly listed on the Closing Statement (as finally determined pursuant to Section 1.9(b)) or specifically taken into account as part of the Purchase Price adjustments under Sections 1.9(b) or 1.9(c).
7.9Exclusive Remedy. Subject to Section 9.11, the Parties acknowledge, covenant and agree that, from and after the Closing, their sole and exclusive remedy with respect to any and all claims for any breach of any representation, warranty, covenant, agreement or obligation set forth herein, shall be pursuant to the indemnification provisions set forth in this Article VII. Nothing in this Section 7.9 shall limit any Person's right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to Section 9.11. Notwithstanding anything to the contrary in this Agreement, nothing will prohibit, limit or in any way restrict claims or remedies for Fraud in connection with any breach of any representation, warranty, covenant, agreement or obligation set forth herein (or in any exhibit or schedule hereto or in the Schedules) or otherwise relating to the subject matter of this Agreement.
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Article VIII
TERMINATION
8.1Termination. This Agreement may be terminated as follows:
(a)at any time before the Closing by the mutual written consent of Buyer and Seller;
(b)by either Buyer or Seller if the Closing shall not have occurred on or before April 30, 2021 (the “Outside Date”); provided that the right to terminate this Agreement under this paragraph shall not be available to any Party whose failure to fulfill or comply with any obligation or covenant under this Agreement or contemplated hereby has been the principal cause of, or resulted in, the failure of the Closing to occur on or prior to such date;
(c)by Buyer, in the event that a Material Adverse Effect shall have occurred prior to Closing;
(d)by Buyer, if a breach of this Agreement by Seller results or would result in any of the conditions set forth in Section 6.1(b) not being satisfied and such breach cannot be cured or, if curable, remains uncured within the earlier of (i) 15 days after Seller has received written notice from Buyer of the occurrence of such breach and (ii) the Outside Date; provided that Buyer may not terminate pursuant to this Section 8.1(d) if Seller’s breach has been primarily caused by a breach of any provision of this Agreement by Buyer;
(e)by Seller, if a breach of this Agreement by Buyer results or would result in any of the conditions set forth in Section 6.2(b) not being satisfied and such breach cannot be cured or, if curable, remains uncured within the earlier of (i) 15 days after Buyer has received written notice from Seller of the occurrence of such breach and (ii) the Outside Date; provided that Seller may not terminate pursuant to this Section 8.1(e) if the Buyer’s breach has been primarily caused by a breach of any provision of this Agreement by Seller; or
(f)either Buyer or Seller, if any Governmental Authority shall have issued an Order or enacted a Law enjoining or otherwise prohibiting the Closing and such Order or Law shall have become final and nonappealable; provided that the right to terminate this Agreement under this paragraph shall not be available to any Party whose failure to fulfill or comply with any obligation or covenant under this Agreement has been the cause of, or resulted in, the issuance of such nonappealable Order or Law.
8.2Effect of Termination. In the event of the termination of this Agreement pursuant to Section 8.1, written notice thereof shall be promptly delivered by the Party seeking termination to the other Parties and such termination shall be immediately effective upon the delivery of such notice by a Party entitled to effect such termination. Upon any such valid termination, (a) each Party will redeliver to the other Parties all documents, work papers and other materials of the other Parties relating to the transactions contemplated hereby, whether obtained before or after the execution of this Agreement, (b) this Agreement shall become void and no Party shall have any
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further rights, Liabilities or obligations hereunder except with respect to those obligations set forth in the Confidentiality Agreement and Sections 4.8(a), 8.2 and Article IX hereof, which shall survive any such termination, and (c) termination shall not relieve any Party from liability for Fraud or any intentional or willful breaches of this Agreement prior to the date of such termination. An “intentional or willful breach” means a breach or failure to perform, in each case, that is the consequence of an act or omission by a Party with the actual knowledge that the taking of such act or failure to take such act would, or would reasonably be expected to, cause a Breach of this Agreement.
Article IX
GENERAL PROVISIONS
9.1Benefit and Assignment. This Agreement may not be assigned in whole or in part by Parent, Buyer or Seller without the prior written consent of the other Parties, whether by merger, operation of law, or otherwise and any purported assignment without such consent shall be void; provided that Buyer may assign any or all of its rights hereunder to one of more of its Affiliates upon written notice of the same to Seller, which assignment shall not relieve Buyer of any of its obligations hereunder. This Agreement shall be binding upon and inure to the sole benefit of the Parties hereto and their respective successors and permitted assigns and is not intended, nor shall be construed, to give any Person, other than the Parties hereto and their respective successors and permitted assigns any legal or equitable right, remedy or claim hereunder.
9.2Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal Laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of Delaware, and without reference to any rules of construction regarding the Party responsible for the drafting hereof. Each Party (a) agrees that any suit, Action or other legal proceeding arising out of this Agreement shall be brought before any federal or state court located in the State of Delaware having subject matter jurisdiction in the event any dispute arises out of this Agreement, (b) consents to the exclusive jurisdiction of any such court in any such suit, Action or proceeding (c) agrees that service of process or notice in any such suit, Action or proceeding shall be effective if delivered in compliance with Section 9.5 hereof, and (d) waives any objection which such Party may have to the laying of venue, personal jurisdiction, forum nonconveniens and improper service of process (provided such service of process is in accordance with Section 9.5) of any such suit, Action or proceeding in any such court.
9.3Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE AGREEMENTS CONTEMPLATED HEREBY IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, TO THE FULLEST EXTENT PERMITTED BY LAW, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION (INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER AGREEMENTS CONTEMPLATED
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HEREBY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND KNOWINGLY WITH ITS, HIS OR HER, AS THE CASE MAY BE, LEGAL COUNSEL, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.3. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.4Expenses. Except as otherwise provided herein, Seller shall be responsible for and shall pay all costs, liabilities and other obligations incurred by it and, up to and including the Closing, the Business in connection with preparing, negotiating and entering into this Agreement and the performance of and compliance with all transactions, agreements and conditions contained in this Agreement to be performed or complied with by it and, up to and including the Closing, the Business, including legal, accounting and financial advisory and investment banking fees incurred by Seller or, up to and including the Closing, the Business, and each of Parent and Buyer shall be responsible for and shall pay all costs, liabilities and other obligations incurred by it in connection with preparing, negotiating and entering into this Agreement and the performance of and compliance with all transactions, agreements and conditions contained in this Agreement to be performed or complied with by it, including its legal, accounting and financial advisory and investment banking fees incurred by Parent or Buyer, and all costs, liabilities and other obligations first incurred by the Business after Closing in connection with the performance of and compliance with all transactions, agreements and conditions contained in this Agreement to be performed or complied with by the Business after Closing. For the avoidance of doubt, any provider of legal, accounting, financial advisory or investment banking services or any other provider of professional services of Seller or the Business up to and including the Closing Date may continue to provide services to Seller following the Closing solely at Seller’s expense.
9.5Notices. Any and all notices, demands, and communications provided for herein or made hereunder shall be given in writing and shall be delivered personally, by overnight delivery service, by facsimile, by email or sent by certified, registered or express air mail, postage prepaid and shall be deemed given to a Party (i) when actually delivered to such Party, if delivered by hand, (ii) one Business Day after deposited with an overnight delivery service, if delivered by overnight delivery, (iii) upon electronic confirmation of receipt, when facsimile transmitted to such Party to the facsimile number indicated for such Party below (or to such other facsimile number for a Party as such Party may have substituted by notice pursuant to this section) during normal business hours, (iv) if sent by email, upon effectiveness of another delivery method hereunder or (v) five days after mailing if mailed to such Party by registered or certified U.S. Mail
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(return receipt requested) and addressed to such Party at the address designated below for such Party (or to such other address for such Party as such Party may have substituted by notice pursuant to this section):
(a)If to Seller:
Dude Holdings, LLC
102 NE 1st Avenue
Delray Beach, FL 33444
Email: jkoss@deliverydudes.com
Attn: Jayson Koss
With a copy (which shall not constitute notice) to:
Lewis Brisbois
110 SE 6th St., 26th Floor
Fort Lauderdale, FL 33301
Email: Michael.Platner@LewisBrisbois.com
Attn: Michael.Platner
(b)If to Parent or Buyer:
Waitr Holdings, Inc.
214 Jefferson St., Suite 200
Lafayette, LA 70501
Email: Thomas.pritchard@waitrapp.com
Attn: Thomas C. Pritchard
Dude Delivery, LLC
214 Jefferson St., Suite 200
Lafayette, LA 70501
Email: Thomas.pritchard@waitrapp.com
Attn: Thomas C. Pritchard
With a copy (which shall not constitute notice) to:
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
Facsimile Number: (212) 521-7870
Email: ggooding@debevoise.com
Attn: Gregory V. Gooding
9.6Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, provided that all such counterparts, in the aggregate, shall contain
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the signatures of all Parties hereto. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or portable document format shall be effective as delivery of a manually executed counterpart to this Agreement.
9.7Computation of Time. Whenever the last day for the exercise of any privilege or the discharge of any duty hereunder shall fall upon a Saturday, Sunday, or any date on which banks in New York City, New York are authorized to be closed, the Party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a regular Business Day.
9.8Amendment, Modification and Waiver. This Agreement may not be modified, amended or supplemented except by mutual written agreement of Parent, Buyer and Seller. Any Party may waive in writing any term or condition contained in this Agreement and intended to be for its benefit; provided that no waiver by any Party, whether by conduct or otherwise, in any one or more instances, shall be deemed or construed as a further or continuing waiver of any such term or condition.
9.9Entire Agreement. This Agreement, the agreements contemplated hereby, and the appendices, exhibits and schedules delivered herewith, and the Confidentiality Agreement represent the full and complete agreement of the Parties with respect to the subject matter hereof and supersede and replace any prior understandings and agreements among the Parties with respect to the subject matter hereof.
9.10Publicity. None of the Parties shall and, each Party shall cause its Affiliates not to, make or issue any public announcement or press release to the general public with respect to this Agreement or the transactions contemplated by this Agreement without the prior written consent of the other Parties, which consent shall not be unreasonably withheld, conditioned or delayed; provided, that no such consent or prior notice shall be required in connection with any public announcement or press release the content of which is consistent with that of any prior or contemporaneous public announcement or press release by any Party in compliance with this Section 9.10. Nothing in this Section 9.10 shall limit any Party from making any announcements, statements or acknowledgments that such Party is required by applicable Law or the requirements of any national securities exchange to make, issue or release (including in connection with the exercise of the fiduciary duties of the board of directors of Parent); provided, that, to the extent practicable, the Party making such announcement, statement or acknowledgment shall provide such announcement, statement or acknowledgment to the other Parties prior to release and consider in good faith any comments from such other Parties.
9.11Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. If it is ever held by any Governmental Authority of competent jurisdiction that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, such restriction shall be enforced to the maximum extent permitted by Law and, to the extent necessary, the Parties hereto will amend or otherwise modify this Agreement to replace any provision contained herein that is held invalid or unenforceable with a valid and enforceable provision giving effect to the original intent of the Parties.
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9.12Specific Performance. The Parties agree that irreparable damage for which monetary damages, even if available, may not be an adequate remedy, may occur in the event that any Party does not perform its obligations under the provisions of this Agreement (including failing to take such actions as are required of them) or otherwise Breaches this Agreement. The Parties acknowledge and agree that (a) the Parties shall be entitled to an injunction, specific performance, or other equitable relief, to prevent Breaches of this Agreement and to enforce specifically the terms and provisions hereof, without proof of damages, prior to the valid termination of this Agreement in accordance with Section 8.1, this being in addition to any other remedy to which they are entitled under this Agreement, and (b) the right of specific enforcement is an integral part of the transactions contemplated by this Agreement and without that right, none of Parent, Buyer or Seller would have entered into this Agreement. Each Party agrees that it shall not oppose the granting of specific performance and other equitable relief on the basis that the other Parties have an adequate remedy at Law or that an award of specific performance is not an appropriate remedy for any reason at Law or equity. The Parties acknowledge and agree that any Party seeking an injunction to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section shall not be required to provide any bond or other security in connection with any such injunction.
9.13Interpretation.
(a)References to “dollars” or “$” are to U.S. dollars.
(b)This Agreement was prepared jointly by the Parties hereto and no rule that it be construed against the drafter will have any application in its construction or interpretation.
(c)Whenever the words “ordinary course of business” are used in this Agreement, they shall be deemed to be followed by the words “consistent with past practice.”
(d)Unless otherwise indicated to the contrary herein by the context or use thereof: (i) the words, “herein,” “hereto,” “hereof,” “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular Section or paragraph hereof; (ii) the word “including” means “including, but not limited to”; (iii) masculine gender shall also include the feminine and neutral genders, and vice versa; (iv) words importing the singular shall also include the plural, and vice versa; (v) the word “or” is disjunctive but not necessarily exclusive; and (vi) accounting terms which are not otherwise defined in this Agreement shall have the meanings given to them under GAAP or in the Accounting Principles.
(e)Unless the context of this Agreement otherwise requires, references to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation.
(f)Whenever reference is made to a “partner” or “member” that is an entity, each such term shall be deemed to include the ultimate holders of such entity.
(g)The word “day” means calendar day unless Business Day is expressly specified.
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9.14Headings. The headings contained in this Agreement are inserted for convenience only and shall not be considered in interpreting or construing any of the provisions contained in this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date set forth in the first paragraph hereof.
SELLER:
Dudes Holdings LLC
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By: |
/s/ Jayson Koss |
PARENT:
Waitr Holdings, Inc.
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By: |
/s/ Leo Bogdanov |
BUYER:
Dude Delivery, LLC
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By: |
/s/ Leo Bogdanov |
[Signature Page of Asset Purchase Agreement]
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DEFINITIONS
The following terms, as used in this Agreement, shall have the following meanings:
“Accounting Principles” means the accounting principles, practices and methodologies set forth in Exhibit A.
“Acquired Cannabis IP” has the meaning set forth in Section 1.1(d).
“Acquired Franchise Agreements” has the meaning set forth in Section 1.1(b).
“Acquired Independent Contractor Agreements” has the meaning set forth in Section 1.1(f).
“Acquired IP” has the meaning set forth in Section 1.1(d).
“Acquired Leases” has the meaning set forth in Section 1.1(e).
“Acquired Non-Cannabis IP” has the meaning set forth in Section 1.1(c).
“Acquired Seller Assets” has the meaning set forth in Section 1.1(g).
“Acquired Subsidiaries” has the meaning set forth in Section 1.1(a).
“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, audit, notice of violation, proceeding, Litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.
“Active Diner” means any unique email address associated with at least one (1) Completed Order on the Delivery Dudes Web Site during the Measurement Period.
“Adjustment Holdback Amount” means $100,000.
“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Affiliate Contract” has the meaning set forth in Section 2.17.
“Aggregate Consideration” has the meaning set forth in Section 1.13.
“Agreement” has the meaning set forth in the Preamble.
“Amendment of Palm Breach Franchise Areement” has the meaning set forth in Section 1.10(a)(xvii).
“Ancillary Agreements” means, collectively, (i) the Bills of Sale, (ii) the Assignment and Assumption Agreements, (iii) the Escrow Agreement, (iv) the Transitional Services Agreement, (v) the Indemnity Holdback Share Pledge, and (vi) the New License Agreement.
“Anti-Bribery Laws” has the meaning set forth in Section 2.18(a).
“Anti-Money Laundering Laws” means laws, regulations, rules or guidelines relating to money laundering, including, without limitation, financial recordkeeping, reporting requirements and anti-money laundering program requirements, which apply to the Business, such as, without limitation, the Bank Secrecy Act of 1970, as amended, and the implementing regulations of the U.S. Treasury Department’s Financial Crimes Enforcement Network, the U.S. Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, the U.S. Currency and Foreign Transaction Reporting Act of 1970, as amended, the U.S. Money Laundering Control Act of 1986, as amended, the Annunzio-Wylie Anti-Money Laundering Act of 1992, as amended and all money laundering-related laws of other jurisdictions where Seller or any of its Subsidiaries conduct business or own assets, and any related or similar law issued, administered or enforced by any Governmental Authority.
“Apportioned Obligations” has the meaning set forth in Section 4.12.
“Assets” has the meaning set forth in Section 1.1.
“Assignment and Assumption Agreements” means, collectively, the Franchise Agreements Assignment and Assumption Agreement, the IP Assignment and Assumption Agreements, the Lease Assignment and Assumption Agreement, the Independent Contractor Agreements Assignment and Assumption Agreement, and the Other Assumed Liabilities Assignment and Assumption Agreement.
“Assumed Liabilities” has the meaning set forth in Section 1.3.
“Base Cash Consideration” has the meaning set forth in Section 1.6(a).
“Benefit Plan” means each “employee benefit plan,” as defined in Section 3(3) of ERISA, whether or not subject to ERISA and whether or not funded, and each other Contract, plan, program, practice, arrangement or policy (whether written or unwritten), in each case, which is sponsored, maintained or contributed to, or for which any potential Liability is borne, by a member of the Company Group and which covers or provides benefits to any Business Employee or former employee of the Business (or their eligible dependents), providing for severance, equity or equity-based compensation, stock or stock-purchase, bonus, profit-sharing, incentive or deferred compensation, retention, change in control, vacation or other paid-time-off, disability, health or welfare benefits, sick pay, perquisite or fringe benefits, employment or consulting, pension, retirement or supplemental retirement benefits or other compensation or employee benefits or remuneration of any kind.
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“Bills of Sale” has the meaning set forth in Section 1.10(a)(i).
“Books and Records” means the books, records, manuals and other materials (in any form), including financial and accounting records, records maintained at the headquarters of the Business, advertising, catalogues, sales and promotional materials, price lists, correspondence, customer, mailing and distribution lists, referral sources, photographs, production data, purchasing materials and records, personnel records, research and development files, records, data and laboratory books, service and warranty records, equipment logs, operating guides and manuals, sales order files and litigation files.
“Breach” means any breach of, default (or an event which, with notice or lapse of time or both, would constitute a default) under or failure to perform or comply with, any covenant, provision, term or other obligation or right.
“Business” means the third party restaurant and food delivery business as conducted, and contemplated to be conducted, by the Company Group as of the date hereof.
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized by Law to close.
“Business Employee” means each employee of Seller or any of its Affiliates who wholly or primarily provides services to the Business and whose name is set forth on Schedule 2.14(a), as it may be updated from time to time in accordance with this Agreement.
“Business Intellectual Property” has the meaning set forth in Section 2.9(a).
“Business Registered Intellectual Property” has the meaning set forth in Section 2.9(a).
“Buyer” has the meaning set forth in the Preamble.
“Buyer Indemnified Parties” has the meaning set forth in Section 7.2.
“Calculation Time” means 11:59 p.m. on the day prior to the Closing Date.
“Cap” has the meaning set forth in Section 7.4(b).
“Cash” means the sum of the fair market value (expressed in United States dollars) of all cash and cash equivalents of any kind (including without limitation marketable securities and short term investments), excluding restricted cash, determined in accordance with GAAP.
“Cash Consideration” has the meaning set forth in Section 1.6(a).
“Claim Notice” has the meaning set forth in Section 7.5.
“Closing” has the meaning set forth in Section 1.8.
“Closing Balance Sheet” means the unaudited consolidated balance sheet of the Business as of the Calculation Time, reflecting the Assets and the Assumed Liabilities, prepared in
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accordance with GAAP maintained and applied on a basis consistent with the Business’s past accounting practices and the Accounting Principles, provided, that in the event of a conflict between the Accounting Principles and GAAP, the Accounting Principles shall control.
“Closing Cash” means the aggregate amount of Cash held by the Acquired Subsidiaries or otherwise included in the Assets.
“Closing Cash Payment” shall have the meaning set forth in Section 1.7(a).
“Closing Date” has the meaning set forth in Section 1.8.
“Closing Working Capital” means (i) current assets included in the Assets minus (ii) current liabilities included in the Assumed Liabilities, each as of the Calculation Time, as calculated and defined in accordance with the Accounting Principles and the illustrative calculation of Closing Working Capital set forth in Exhibit B.
“Closing Working Capital Deficiency Amount” means, if the Closing Working Capital is less than the Target Closing Working Capital, (i) the Target Closing Working Capital minus (ii) the Closing Working Capital.
“Closing Working Capital Excess Amount” means, if the Closing Working Capital is greater than the Target Closing Working Capital, (i) the Closing Working Capital minus (ii) the Target Closing Working Capital.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Data” has the meaning set forth in Section 2.9(j).
“Company Group” means Seller and its Subsidiaries, collectively.
“Competitive Activity” means, either individually or in partnership, jointly or in conjunction with any other Person, firm, association, syndicate, trust, franchise, company or corporation, whether as owner, partner, officer, director, investor, shareholder, beneficiary, franchisee, licensee, employee, consultant, agent, lender or in any manner whatsoever, engaging in, carrying on or be otherwise concerned with, employed by, associated with, or have any interest in, managing, advising, lending money to, guaranteeing the debts or obligations of, rendering services or advice to, in whole or in part, any Person that conducts a business that is competitive with the Business; provided, however a Competitive Activity shall not include any Person from participating as a stockholder, member, or investor in a business entity through the ownership of not more than a five percent (5%) passive interest in a public or private company.
“Completed Order” means any order placed through the Delivery Dudes Web Site and delivered to customer.
“Confidentiality Agreement” means that certain Confidentiality Agreement by and between Waitr Holdings Inc. and Dude Holdings, LLC, dated as of January 29, 2020, as amended.
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“Contracts” means, with respect to any Person, any written or oral contracts, agreements, leases, indentures, insurance policies, commitments, settlements, or other obligations, including all amendments and modifications thereto, to which such Person is a party or by which such Person is bound or to which any of such Person’s assets or properties is subject.
“Creditor’s Rights Exception” has the meaning set forth in Schedule 2.2(a).
“Deductible” has the meaning set forth in Section 7.4(a).
“Delivery Dudes Web Site” means any public or private website (including mobile apps) developed by the Company Group.
“Dispute Notice” has the meaning set forth in Section 7.5(b).
“Employees” means current or former employees employed (or formerly employed) in the operation of the Business.
“Encumbrances” means, any encumbrance, charge, claim, community or other marital property interest, condition, equitable interest, lien, option, pledge, security interest, mortgage, deed of trust, hypothecation, right of way, easement, encroachment, servitude, right of first option, right of first refusal or similar restriction, conditional sale or restriction on transfer of title, including any restriction on use, voting (in the case of any security or equity interest), receipt of income or exercise of any other attribute of ownership, whether imposed by agreement, Law, equity or otherwise.
“Environmental Law” means any law, code, license, permit, authorization, approval, consent, common law, legal doctrine, requirement or agreement with any Governmental Authority relating to (i) the protection, preservation or restoration of the environment (including air, water, vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of hazardous substances.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
“ERISA Affiliate” means all Persons (whether or not incorporated) that are treated with Seller as a “single employer” within the meaning of Section 414 of the Code.
“Escrow Agent” means Bank of America Merill Lynch, or such other similar financial institution agreed to by the Buyer and the Seller.
“Escrow Agreement” means the escrow agreement to be entered into at Closing with the Escrow Agent in a form mutually agreed by and among Buyer, Seller and the Escrow Agent.
“Estimated Cash Consideration” has the meaning set forth in Section 1.9(a).
“Estimated Closing Balance Sheet” has the meaning set forth in Section 1.9(a).
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“Estimated Closing Cash” has the meaning set forth in Section 1.9(a).
“Estimated Closing Statement” has the meaning set forth in Section 1.9(a).
“Estimated Closing Working Capital” has the meaning set forth in Section 1.9(a).
“Estimated Closing Working Capital Deficiency Amount” has the meaning set forth in Section 1.9(a).
“Estimated Closing Working Capital Excess Amount” has the meaning set forth in Section 1.9(a).
“Estimated Working Capital Deficiency Amount” has the meaning set forth in Section 1.9(a).
“Estimated Working Capital Excess Amount” has the meaning set forth in Section 1.9(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Excluded Assets” has the meaning set forth in Section 1.2.
“Excluded Liabilities” has the meaning set forth in Section 1.4.
“Federal Securities Laws” means the Exchange Act, the Securities Act and the rules and regulations promulgated thereunder
“Final Allocation” has the meaning set forth in Section 1.13.
“Final Closing Statement” has the meaning set forth in Section 1.9(b).
“Financial Statements” means the unaudited consolidated financial statements (including balance sheets and income statements) of the Seller for the fiscal year ended December 31, 2020.
“Fraud” with respect to any Person shall mean common law fraud.
“Franchise Agreement” means any Contract pursuant to which any member of the Company Group has granted any right or option to acquire a right to develop or operate, or grant to another the right to develop or operate, any Franchised Business under the Franchise System, including single or multi-unit franchise or license Contracts, area development Contracts, master franchise or license Contracts, area representative agreements, regional developer agreements and similar Contracts that cover the development or franchising of Franchised Businesses of the Franchise System, or the delegation of duties by any member of the Company Group with respect to its or their obligations as a franchisor, and including any schedules, exhibits, addenda, amendments, waivers, extensions, renewals, side letters or other modifications, and any guarantees or instruments in favor of a member of the Company Group related to any of the foregoing.
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“Franchise Agreements Assignment and Assumption Agreement” has the meaning set forth in Section 1.10(a)(ii).
“Franchise Law” means the FTC Rule and any other domestic or foreign Law regulating the offer or sale of franchises, business opportunities, seller-assisted marketing plans or similar relationships (including any pre-sale registration or disclosure Law), or governing the relationships between franchisors and franchisees, including without limitation those Laws that address unfair practices related to, or the default, termination, non-renewal, or transfer of, franchises.
“Franchise System” means the franchise system owned and operated under the brand names and service marks known as “Delivery Dudes”.
“Franchised Business” means any business developed and operated pursuant to a franchise (as such term is defined under the Franchise Laws) grant from Seller using the Franchise System.
“Franchisee” means a Person other than a member of the Company Group that is granted a right (whether directly by the Seller or by another Franchisee) to develop or operate, or is granted a right to license others to develop or operate, a Franchised Business.
“Franchisee Certificates” has the meaning set forth in Section 1.10(a)(xviii).
“FTC Rule” means the United States Federal Trade Commission trade regulation rule entitled “Disclosure Requirements and Prohibitions Concerning Franchising,” 16 CFR Part 436.1 et seq.
“Fundamental Representations” means the representations and warranties of Seller set forth in Section 2.1 (Organization and Qualification), Section 2.2 (Contemplated Transactions General Compliance), Section 2.8(a) (Title to Assets, etc.), Section 2.15 (Taxes), and Section 2.19 (Brokers’ Fees).
“GAAP” means United States generally accepted accounting principles, as in effect at the date of preparation of any relevant statement, document or analysis.
“Governmental Authority” means the government of the United States or any foreign jurisdiction, any state, county, municipality or other governmental or quasi-governmental unit, or any agency, board, bureau, instrumentality, department or commission (including any court or other tribunal) of any of the foregoing, any arbitrator or arbitral body or any self-regulatory authority with similar powers.
“Governmental Filings” has the meaning set forth in Section 2.2(d).
“Holdback Release Date” means the date that is eighteen (18) months from the Closing Date.
“Indebtedness” means, without duplication and with respect to any member of the Company Group, all (a) indebtedness for borrowed money, including drawings under lines of
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credit, (b) obligations for the deferred purchase price of property or services, including earn-out and contingent payments (c) long or short-term obligations evidenced by notes, bonds, debentures or other similar instruments, (d) obligations under any interest rate, currency swap or other hedging agreement or arrangement, (e) capital lease obligations, (f) reimbursement obligations under any letter of credit, banker’s acceptance or similar credit transactions, (g) any Taxes relating to the Assets to the extent relating to any Pre-Closing Tax Period, and (h) guarantees made by a member of the Company Group on behalf of any third party in respect of obligations of the kind referred to in the foregoing clauses (a) through (g), and (i) any unpaid interest, prepayment penalties, premiums, costs and fees that would arise or become due as a result of the prepayment of any of the obligations referred to in the foregoing clauses (a) through (h).
“Indemnification Amount” has the meaning set forth in Section 7.5(b).
“Indemnified Party” has the meaning set forth in Section 7.4.
“Indemnifying Party” has the meaning set forth in Section 7.4.
“Indemnity Escrow Holdback Amount” means the amount that is fifty percent (50%) of the Indemnity Holdback Amount.
“Indemnity Holdback Amount” means $3,450,000.
“Indemnity Holdback Restriction” has the meaning set forth in Section 1.9(d).
“Indemnity Holdback Shares” means the number of shares of Parent Stock determined by dividing (x) fifty percent (50%) of the Indemnity Holdback Amount by (y) the Signing VWAP.
“Indemnity Holdback Share Pledge” has the meaning set forth in Section 1.9(d).
“Independent Accounting Firm” has the meaning set forth in Section 1.11.
“Independent Contractor Agreements Assignment and Assumption Agreement” has the meaning set forth in Section 1.10.
“Insurance Policies” has the meaning set forth in Section 2.15(a).
“Intellectual Property Assets” means all Intellectual Property relating to or used in connection with the Business (including rights and remedies in respect of past, present and future infringements thereof).
“Intellectual Property” means all rights arising anywhere in the world in or under: registered and unregistered trademarks and applications for registration of same, service marks, trade names, logos, slogans, trade dress, URLs, domain names and other indicators of source (and all goodwill associated with any of the foregoing); copyrights, copyright registrations and applications for copyright registration, including any copyrights arising in computer software or corollary database rights, and mask work rights; patents, patent applications (including all reissues, divisions, continuations, continuations in part and extensions thereof); inventions, invention
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disclosures, trade secrets, formulae, processes, methodologies, know-how and any other intellectual property or proprietary rights and any licenses related to any of the foregoing.
“IP Assignment and Assumption Agreements” has the meaning set forth in Section 1.10.
“IT Infrastructure” has the meaning set forth in Section 2.9(i).
“Key Employees” means each of the employees listed on Schedule 1-H hereto.
“Knowledge” means, (a) when applied to Buyer, the actual knowledge of Carl Grimstad, Thomas Pritchard or Leo Bogdanov, and (b) when applied to Seller, the actual knowledge of Jayson Koss, Ryan Sturgis and Peter DeBaptiste.
“Latest Balance Sheet” means the unaudited consolidated balance sheet of Seller as of December 31, 2020.
“Latest Balance Sheet Date” means December 31, 2020.
“Laws” means, collectively, all federal, state, local, municipal, foreign or international (including multi-national) constitutions, laws, statutes, ordinances, rules, regulations, codes, order, treaties or principles of common law, judgment or decree or other pronouncement of any Governmental Authority.
“Lease” has the meaning set forth in Section 2.8(c).
“Lease Assignment and Assumption Agreement” has the meaning set forth in Section 1.10.
“Leased Property” has the meaning set forth in Section 2.8(c).
“Liabilities” or, individually, “Liability” means, with respect to any Person, any debt liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested executory, determined, and whether or not the same is required to be accrued on the financial statements of such Person.
“Litigation” means any claim, action, arbitration, audit, hearing, investigation, litigation, appeal, suit, or other proceeding (whether civil, criminal, administrative, judicial, or investigative, whether formal or informal, whether public or private) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority or arbitrator.
“Losses” means all reasonably foreseeable losses, claims, damages, settlements, judgments, awards, fines, fees (including reasonable attorneys’ fees), charges, liabilities, penalties, Taxes and costs and expenses (including reasonable costs of investigation, remediation or other response actions) of any nature.
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“Luxor Credit and Guaranty Agreement” means the Credit and Guaranty Agreement dated as of November 15, 2018, as amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof (including as amended pursuant to (i) that certain Amendment No. 1 to Credit and Guaranty Agreement dated as of January 17, 2019, (ii) that certain Amendment No. 2 to Credit and Guaranty Agreement dated as of May 21, 2019, (iii) that certain Amendment No. 3 to Credit and Guaranty Agreement dated as of July 15, 2020, (iv) that certain Amendment No. 4 to Credit and Guaranty Agreement dated as of March 9, 2021) by and among Waitr Inc., a Delaware corporation, as Borrower, Waitr Intermediate Holdings, LLC, a Delaware limited liability company, the other Credit Parties party thereto, Luxor Capital, LLC, as a Lender, the other Lenders from time to time party thereto and Luxor Capital Group, LP, as Administrative Agent and Collateral Agent for the Lenders.
“Market Value” means, as of any date, the VWAP for the five consecutive trading days ending on the trading day immediately prior to such date.
“Material Adverse Effect” means any effect, change, event, result, occurrence, state of facts, circumstance or development that, individually or in the aggregate has had or could reasonably be expected to have a material adverse effect on the Business, Assets, Assumed Liabilities, operations or results of operations of the Business or condition (financial or otherwise) of the Business taken as a whole; provided that none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect under this definition: any adverse change, event, development or effect arising from or relating to (i) general business, political or economic conditions affecting the industry in which the Business operates, (ii) acts of war, sabotage, military actions armed hostilities or terrorism, (iii) changes in financial, banking or securities markets, (iv) any changes in Laws or GAAP or the enforcement or interpretation thereof, (v) any change relating to the identity of, or facts and circumstances relating to, Buyer and including any actions by customers, suppliers or personnel, (vi) any action taken by Buyer and any of its Affiliates, agents or representatives expressly required by this Agreement, (vii) act of God including any hurricane, flood, tornado, earthquake or other natural disaster or any other force majeure event, (viii) any failure to meet internal or published Projections, estimates or forecasts of revenues, earnings, or other measures of financial or operating performance for any period (provided that the underlying causes of such failures shall not be excluded) or (ix) the taking of any action required to be taken by this Agreement, except in the case of the foregoing clauses (i) through (iv) to the extent such change, event, development or effect has a disproportionate adverse impact on the Business in a disproportionately adverse manner relative to other companies in the industries and markets in which the Business operates.
“Material Contracts” has the meaning set forth in Section 2.7(a).
“Measurement Period” means the twelve (12) month period commencing at 4:01 a.m. Eastern Standard Time on January 1, 2020, and ending at 3:59 a.m. Eastern Standard Time on December 31, 2020.
“Measurement Period Completed Orders” has the meaning set forth in Section 2.20.
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“NASDAQ” means The Nasdaq Stock Market LLC.
“New License Agreement” means the license agreement entered into at Closing with respect to the non-exclusive, limited right to use certain trademarks for the purpose of redirecting existing customers to a specific website, by and among the Buyer, Dude Franchise Systems, LLC, and Dude IP, LLC., in form and substance reasonably satisfactory to Buyer.
“Non-Acquired Subsidiaries” has the meaning set forth in Schedule 1-G.
“Non-Indemnity Holdback Shares” means the Shares other than the Indemnity Holdback Shares.
“Objection Notice” has the meaning set forth in Section 1.9(b).
“Orders” means all decisions, injunctions, writs, guidelines, orders, arbitrations, awards, judgments, subpoenas, verdicts or decrees entered, issued, made or rendered by any Governmental Authority.
“Other Assumed Liabilities Assignment and Assumption Agreement” has the meaning set forth in Section 1.10.
“Outside Date” has the meaning set forth in Section 8.1(a).
“Parent” has the meaning set forth in the Preamble.
“Party” and “Parties” have the meaning set forth in the Preamble.
“Payoff Amount” has the meaning set forth in Section 1.7(b).
“Payoff Letters” has the meaning set forth in Section 4.4.
“Permits” means, collectively, governmental, regulatory and administrative permits, approvals, certifications, authorizations, licenses, franchises, orders, registrations, and accreditations.
“Permitted Encumbrances” means Encumbrances for Taxes not yet due and payable, (b) mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the Business and do not exceed $5,000 individually or $20,000 in the aggregate, or (c) Encumbrances arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the Business and do not exceed $5,000 individually or $20,000 in the aggregate
“Person” means an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture or other entity or a Governmental Authority.
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“Personal Information” means personally identifiable information as defined by relevant Law.
“Pike Republic Termination Agreement” has the meaning set forth in Section 1.10(a)(xv).
“Post-Closing Tax Period” has the meaning set forth in Section 4.12.
“Pre-Closing Tax Period” has the meaning set forth in Section 4.12.
“Privacy Commitments” has the meaning set forth in Section 2.9(j).
“Projections” means, collectively, any projections, business plan information, estimates, forecasts, budgets, pro-forma financial information (historical or prospective) or other statements communicated (orally or in writing) to or made available to Buyer of future revenues, profitability, expenses or expenditures, future results of operations (or any component thereof), future cash flows or future financial component (or any component thereof) of the Business.
“Proposed Allocation” has the meaning set forth in Section 1.13.
“Purchase Price” has the meaning set forth in Section 1.6.
“Purchase Price Allocation Schedule” has the meaning set forth in Section 1.13.
“Restaurant Agreement” means any Contract entered into by one or more member(s) of the Company Group with one or more third party vendors and relating to the delivery of products and services in connection with the Business.
“Schedules” means the disclosure schedules delivered by (i) Seller to Buyer on the date hereof setting forth any and all exceptions or supplemental information to the representations and warranties contained in Article II and containing certain other disclosure as referenced throughout this Agreement and (ii) Buyer to Seller on the date hereof setting forth any and all exceptions or supplemental information to the representations and warranties contained in Article III and containing certain other disclosure as referenced throughout this Agreement.
“SEC” means the United States Securities and Exchange Commission.
“SEC Reports” has the meaning set forth in Section 3.7.
“Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Seller” has the meaning set forth in the Preamble.
“Seller Indemnified Parties” has the meaning set forth in Section 7.3.
“Seller Member Approval” means the consent of the holders of the requisite voting units of the Seller required under the Seller Operating Agreement to approve and adopt, as the case may be, this Agreement, the Ancillary Agreements and the other transactions contemplated hereby, in
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each case, in accordance with the Seller Operating Agreement, and which shall include a waiver in accordance with Applicable Law by such holders of any appraisal, dissenters’ or similar rights that may be available to such holders in connection with this Agreement, the Ancillary Agreement and/or the other transactions contemplated hereby.
“Seller Operating Agreement” means Seller’s Third Amended and Restated Operating Agreement dated August 2018, as amended on July 16, 2020, as in effect at the time of Closing.
“Shares” shall have the meaning set forth in Section 1.6(b).
“Signing VWAP” means the average VWAP of Parent Stock (rounded to the nearest one-hundredth of one cent) for the five (5) consecutive trading days ending the day prior to the date hereof.
“Standalone Plan” means any Benefit Plan that is sponsored, maintained or contributed to or required to be contributed to solely by one or more of the Acquired Subsidiaries and in which solely Business Employees are participants.
“Subsidiaries” means each corporation or other Person in which a Person owns or controls, directly or indirectly, capital stock or other equity interests representing at least 50% of the outstanding voting stock or other equity interests.
“Subsidiary Equity Interests” has the meaning set forth in Section 2.2(c).
“Target Closing Working Capital” means $0.
“Tax” means any income, gross receipts, license, payroll, employment, franchise, excise, severance, stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees’ income withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Authority or payable under any tax-sharing agreement or any other Contract; and any liability for the payment of any of the foregoing as a successor, transferee or otherwise.
“Tax Return” means any return (including any information return), report, statement, schedule, notice, form, declaration, claim for refund or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Authority (including any supplement or attachment thereto and any amendment thereof) 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 Laws relating to any Tax.
“Territory” has the meaning set forth in Section 4.9(a).
“Third Party” means a Person that is not a party to this Agreement.
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“Third Party Claim” has the meaning set forth in Section 7.6(a).
“Third Party Claim Notice” has the meaning set forth in Section 7.6(a).
“Third Party Acquisition” has the meaning set forth in Section 7.6(e).
“TN Termination Agreement” has the meaning set forth in Section 1.10(a)(xvi).
“Transaction Expenses” means any investment banking, accounting, attorney, other professional fees or other expenses incurred by Seller or any member of the Company Group in connection with the negotiation, preparation, execution, delivery and consummation of this Agreement or any other agreement contemplated hereby and the transactions contemplated hereby and thereby.
“Transfer Taxes” means any sales, use, stock transfer, real property transfer, real property gains, transfer, stamp, registration, documentary, recording or similar duties or Taxes together with any interest thereon, penalties, fines, costs, fees, additions to Tax or additional amounts with respect thereto incurred in connection with the transactions contemplated by this Agreement.
“Transferred Employee” has the meaning set forth in Section 5.1(a).
“Transitional Services Agreement” means the transitional services agreement to be entered into at Closing in a form mutually agreed by Buyer and Seller.
“Unresolved Claims” has the meaning set forth in Section 7.6(c).
“VWAP” means, for any trading day, the volume weighted average price per share of Parent Stock on the NASDAQ (as reported by Bloomberg L.P. or, its successor, or, if not available, by another authoritative source mutually agreed by Buyer and Seller) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on such trading day.
“WARN Act” means the U.S. Worker Adjustment and Retraining Notification Act, and any other similar applicable Law.
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Executive Employment Agreement
This Employment Agreement (the “Agreement”) is made and entered into as of July 1, 2020 (the “Effective Date”) by and between Thomas Pritchard (“Executive”) and Waitr Holdings Inc., a corporation organized under the laws of the State of Delaware (the “Company”).
WHEREAS, the Company desires to employ Executive on the terms and conditions set forth herein; and
WHEREAS, Executive desires to be employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1.At-Will Employment Basis. Executive’s at-will employment hereunder shall be effective as of the Effective Date and shall continue on an at-will basis until such time as Executive’s employment with the Company terminates pursuant to Section 5 of this Agreement (such period is hereinafter referred to as the “Employment Term”).
2.Position and Duties.
2.1Position. During the Employment Term, Executive shall serve as the General Counsel of the Company, reporting to the Chief Executive Officer of the Company, or at the Chief Executive Officer’s option, the Board of Directors of the Company (the “Board”). In such position, Executive shall have such duties, authority, and responsibilities as shall be determined from time to time by the Chief Executive Officer, which duties, authority, and responsibilities are consistent with Executive’s position. Executive shall, if requested, also serve as a member of the Board or as an officer or director of any affiliate of the Company for no additional compensation.
2.2Duties. During the Employment Term, Executive shall devote not less than twenty (20) hours per week to the performance of Executive’s duties hereunder and will not engage in any other business, profession, or occupation for compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly without the prior written consent of the Chief Executive Officer. Notwithstanding the foregoing, Executive will be permitted to (a) perform legal services for parties other than the Company for his sole economic benefit, (b) act or serve as a director, trustee, committee member, or principal of any type of business, civic, or charitable organization and (c) purchase or own membership interest or shares as an investment in any public or private corporation; provided that, the activities described in clauses (a), (b) and (c) do not (i) result in any breach of Executive’s obligations under Section 7 or Section 8, (ii) interfere with the performance of Executive’s duties and responsibilities to the Company as provided hereunder, including, but
not limited to, the obligations set forth in Section 1 hereof, or (iii) conflict or compete in any way with the business of the Company or any of its subsidiaries or affiliates.
3.Place of Performance. Executive shall work remotely; provided that, Executive may be required to travel on Company business during the Employment Term.
4.1Base Salary. During the Employment Term, the Company shall pay Executive an annual rate of base salary of $240,000 in periodic installments, less applicable deductions and withholdings, in accordance with the Company’s customary payroll practices and applicable wage payment laws, but no less frequently than monthly. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “Base Salary”. The parties acknowledge and agree that a portion of Executive’s Base Salary shall constitute consideration for Executive’s compliance with the restrictions and covenants set forth in Section 8 of this Agreement.
4.2Equity Award. On or as soon as practicable following the Effective Date, Executive shall receive an award of 400,000 restricted stock units (the “RSU Award”) under the Waitr Holdings Inc. 2018 Omnibus Incentive Plan (the “Incentive Plan”), each restricted stock unit representing the right, subject to terms and conditions of the Incentive Plan and RSU Award to one share of Company common stock if and when the underlying RSU Award vests. The RSU Award will vest in three (3) equal installments on the first, second and third anniversaries of the grant date, subject to Executive’s continued employment through the applicable vesting date. The RSU Award will vest in full upon a Change in Control (as defined in the Incentive Plan), subject to Executive’s continued employment through the closing of such Change in Control. The RSU Award shall be subject to the terms and conditions of the Incentive Plan and become effective upon entry into a written award agreement by and between the Company and Executive. All other terms and conditions applicable to the Award shall be determined by the Board or the Compensation Committee of the Board.
4.3Fringe Benefits and Perquisites. During the Employment Term, Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company and governing benefit plan requirements (including plan eligibility provisions), and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.
4.4Employee Benefits. During the Employment Term, Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”), to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or terminate any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.
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4.5Vacation; Paid Time-Off. Executive shall receive vacation and other paid time-off in accordance with the Company’s policies for executive officers as such policies may exist from time to time.
4.6Business Expenses. Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment, and travel expenses incurred by Executive in connection with the performance of Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.
(a)In the event that Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by Executive or the Company related to any contest or dispute between Executive and the Company or any of its affiliates with respect to this Agreement or Executive’s employment hereunder, by reason of the fact that Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, Executive shall be indemnified and held harmless by the Company to the maximum extent permitted under applicable law and the Company’s bylaws from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys’ fees). Reasonable costs and expenses incurred by Executive in defense of such Proceeding (including attorneys’ fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the Company of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount, and nature of the costs and expenses for which payment is being sought; and (iii) an undertaking adequate under applicable law made by or on behalf of Executive to repay the amounts so paid if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company under this Agreement.
(b)During the Employment Term and for a period of six (6) years thereafter, the Company or any successor to the Company shall purchase and maintain, at its own expense, directors’ and officers’ liability insurance providing coverage to Executive on terms that are no less favorable than the coverage provided to other directors and similarly situated executives of the Company.
4.8Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).
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5.Termination of Employment. The Employment Term and Executive’s at-will employment hereunder may be terminated by either the Company or Executive at any time and for any reason. Upon termination of Executive’s employment during the Employment Term, Executive shall not be entitled to any additional compensation and benefits from the Company or any of its affiliates post-Termination Date (as defined below).
5.1Termination by the Company or Executive.
(a)Executive’s employment hereunder may be terminated by either the Company or Executive, for any or no reason. Upon termination, Executive shall be entitled to receive:
(i)any accrued but unpaid Base Salary through the Termination Date, which shall be paid on the pay date immediately following the Termination Date in accordance with the Company’s customary payroll procedures;
(ii)reimbursement for unreimbursed business expenses properly incurred by Executive through the Termination Date, which shall be subject to and paid in accordance with the Company’s expense reimbursement policy (the amounts described in 5.1(a)(i) and (ii) are collectively referred to as “Accrued Amounts”); and
(iii)such employee benefits, if any, to which Executive may be entitled under the Company’s employee benefit plans as of the Termination Date; provided that, in no event shall Executive be entitled to any payments in the nature of severance or termination payments.
(a)Executive’s employment hereunder shall terminate automatically upon Executive’s death and Executive’s estate and/or beneficiaries, as the case may be, shall be entitled to receive the following:
(ii)any post-employment benefits due under the terms and conditions of the Employee Benefit Plans.
5.3Notice of Termination. Any termination of Executive’s employment hereunder by the Company or by Executive (other than termination pursuant to Section 5.2 on account of Executive’s death) shall be communicated by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with Section 25.
5.4Termination Date. Executive’s “Termination Date” shall be:
(a)if Executive’s employment hereunder terminates on account of Executive’s death, the date of Executive’s death; and
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(b)if either the Company terminates Executive’s or Executive terminates his employment, upon the date the Notice of Termination is delivered to the respective party.
Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which Executive incurs a “separation from service” within the meaning of Section 409A (as defined in Section 23 of this Agreement).
5.5Resignation of All Other Positions. Upon termination of Executive’s employment hereunder for any reason, Executive agrees to resign, effective on the Termination Date, from all positions that Executive holds as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates.
(a)Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement, or otherwise) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), the Company shall either (i) reduce (but not below zero) such payments or benefits received or to be received by Executive so that the aggregate present value of the payments and benefits received by Executive is $1.00 less than the amount which would otherwise cause Executive to incur an Excise Tax, or (ii) be paid in full, whichever results in the greatest net after-tax payment to Executive.
(b)All calculations and determinations under this Section 5.6 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel”) whose determinations shall be conclusive and binding on the Company and Executive for all purposes. For purposes of making the calculations and determinations required by this Section 5.6, the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 5.6. The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.
6.Cooperation. The parties agree that certain matters in which Executive will be involved during the Employment Term may necessitate Executive’s cooperation in the future. Accordingly, following the termination of Executive’s employment for any reason, to the extent reasonably requested by the Board, Executive shall cooperate with the Company in connection with matters arising out of Executive’s service to the Company; provided that, the Company shall make reasonable efforts to minimize disruption of Executive’s other activities. The Company shall
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reimburse Executive for reasonable expenses incurred in connection with such cooperation and, to the extent that Executive is required to spend substantial time on such matters, the Company shall compensate Executive at an hourly rate based on Executive’s Base Salary on the Termination Date.
7.Confidential Information. Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.
7.1Confidential Information Defined.
For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or to and information that is used, developed or obtained by the Company or any of its affiliates (collectively, the “Company Group”) in connection with its business, including, but not limited to, information, observations and data obtained by Executive during Executive’s employment with the Company concerning: business affairs, business processes, practices, products, methods, policies, plans, publications, documents, research, operations, services, fees, pricing structures, analyses, photographs, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, computer programs, computer software, applications, operating systems, software design, web design, work-in-process, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, restaurant partner list of the Company Group or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company Group in confidence.
Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.
Executive understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if
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the Company furnished the same Confidential Information to Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to Executive; provided that, such disclosure is through no direct or indirect fault of Executive or person(s) acting on Executive’s behalf.
(b)Company Creation and Use of Confidential Information.
Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money, and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the field of restaurant delivery services. Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.
(c)Disclosure and Use Restrictions.
Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed, published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises or control of the Company, except as required in the performance of Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. Executive shall promptly provide written notice of any such order to the Board.
(d)Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”). Notwithstanding any other provision of this Agreement:
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(i)Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that:
(A)is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or
(B)is made in a complaint or other document filed under seal in a lawsuit or other proceeding.
(ii)If Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive:
(A)files any document containing trade secrets under seal; and
(B)does not disclose trade secrets, except pursuant to court order.
Executive understands and acknowledges that his obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon Executive first having access to such Confidential Information (whether before or after he begins employment by the Company) and shall continue during and after his employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of Executive’s breach of this Agreement or breach by those acting in concert with Executive or on Executive’s behalf.
8.1Acknowledgement. Executive understands that the nature of Executive’s position gives him access to and knowledge of Confidential Information and places him in a position of trust and confidence with the Company. Executive understands and acknowledges that the intellectual services he provides to the Company are unique, special, or extraordinary. Executive further understands and acknowledges that the Company’s ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by Executive is likely to result in unfair or unlawful competitive activity.
8.2Non-Competition. Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to Executive, during the Employment Term and for the twelve (12) month period beginning on the last day of Executive’s employment with the Company, Executive agrees and covenants not to engage in Prohibited Activity within any state or jurisdiction in which the Company or its subsidiaries
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then operate, have operated at any time during the Employment Term or demonstrably propose or intend to operate (the “Restricted Territory”).
For purposes of this Section 8, “Prohibited Activity” is activity in which Executive contributes his knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, stockholder, officer, volunteer, intern, or any other similar capacity to an entity engaged in the same or similar business as the Company, including those engaged in the business of food delivery. Prohibited Activity also includes activity that may require or inevitably requires disclosure of trade secrets, proprietary information, or Confidential Information.
The Company regards the following as its primary, but not exclusive, competitors engaged in the business of food delivery: Ubereats, Postmates, GrubHub and DoorDash.
Nothing herein shall prohibit Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that Executive is not a controlling person of, or a member of a group that controls, such corporation.
This Section 8 does not, in any way, restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. Executive shall promptly provide written notice of any such order to the Board.
8.3Non-Solicitation of Employees. Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company during the Employment Term and a twenty-four (24) month period beginning on the last day of Executive’s employment with the Company.
8.4Non-Solicitation of Customers. Executive understands and acknowledges that because of Executive’s experience with and relationship to the Company, he will have access to and learn about much or all of the Company’s customer information. “Customer information” includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information, and other information identifying facts and circumstances specific to the customer and relevant to sales and services.
Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm to the Company.
Executive agrees and covenants, during the Employment Term and the twenty-four (24) month period beginning on the last day of Executive’s employment with the
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Company, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact, or meet with the Company’s current customers located in the Restricted Territory for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company.
9.Non-Disparagement. Executive agrees and covenants that he will not at any time, directly or indirectly, make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Company or its businesses, or any of its employees, officers, shareholders, members or advisors, or any member of the Board.
This Section 9 does not, in any way, restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. Executive shall promptly provide written notice of any such order to the Board.
The Company agrees and covenants that it shall cause its officers and directors to refrain from making any defamatory or disparaging remarks, comments, or statements concerning Executive to any third parties.
10.Acknowledgement. Executive acknowledges and agrees that the services to be rendered by him to the Company are of a special and unique character; that Executive will obtain knowledge and skill relevant to the Company’s industry, methods of doing business and marketing strategies by virtue of Executive’s employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company.
Executive further acknowledges that the amount of his compensation reflects, in part, his obligations and the Company’s rights under Section 7, Section 8, and Section 9 of this Agreement; that he has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; and that he will not be subject to undue hardship by reason of his full compliance with the terms and conditions of Section 7, Section 8, and Section 9 of this Agreement or the Company’s enforcement thereof.
11.Remedies. In the event of a breach or threatened breach by Executive of Section 7, Section 8, or Section 9 of this Agreement, Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages, or other available forms of relief.
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12.Arbitration. Any dispute, controversy, or claim arising out of or related to this Agreement, except for disputes arising under Section 7, Section 8, or Section 9 of this Agreement (including, without limitation, any claim for injunctive relief), or its interpretation, application, implementation, breach or enforcement which the parties hereto are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in Lafayette, Louisiana (unless the parties hereto agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the parties hereto agree to provide all discovery deemed necessary by the arbitrator. The arbitration shall be a documents-only proceeding. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The prevailing party in such arbitration shall be entitled to reimbursement from the non-prevailing party for the totality of the arbitrator’s, administrative, and reasonable legal fees and costs. Upon the request of any of the parties hereto, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association.
13.1Work Product. Executive acknowledges and agrees that all right, title, and interest in and to all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research, proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived, or reduced to practice by Executive individually or jointly with others during the period of his employment by the Company and relate in any way to the business or contemplated business, products, activities, research, or development of the Company or result from any work performed by Executive for the Company (in each case, regardless of when or where prepared or whose equipment or other resources is used in preparing the same), all rights and claims related to the foregoing, and all printed, physical and electronic copies, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to US and foreign (a) patents, patent disclosures and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including computer programs), and rights in data and databases, (d) trade secrets, know-how, and other confidential information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any part of the world (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of the Company.
For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, computer programs, computer applications, software design, web design, work in process, databases,
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manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information, and sales information.
13.2Work Made for Hire; Assignment. Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, Executive hereby irrevocably assigns to the Company, for no additional consideration, Executive’s entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.
13.3Further Assurances; Power of Attorney. During and after his employment, Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments, and other documents and instruments as shall be requested by the Company. Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on Executive’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by Executive’s subsequent incapacity.
13.4No License. Executive understands that this Agreement does not, and shall not be construed to, grant Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software, or other tools made available to him by the Company.
14.1Security and Access. Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems,
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facilities access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication technologies (“Facilities and Information Technology Resources”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of Executive’s employment by the Company, whether termination is voluntary or involuntary. Executive agrees to notify the Company promptly in the event he learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction, or reverse engineering of, or tampering with any Facilities and Information Technology Resources or other Company property or materials by others.
14.2Exit Obligations. Upon (a) voluntary or involuntary termination of Executive’s employment or (b) the Company’s request at any time during Executive’s employment, Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines, equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, e-mail messages, recordings, tapes, disks, thumb drives or other removable information storage devices, hard drives, negatives, and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of Executive, whether they were provided to Executive by the Company or any of its business associates or created by Executive in connection with his employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations, and media in Executive’s possession or control.
15.Publicity. Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives and licensees, of Executive’s name, voice, likeness, image, appearance, and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes, and all other printed and electronic forms and media throughout the world, at any time during or after the period of his employment by the Company, for all legitimate commercial and business purposes of the Company (“Permitted Uses”) without further consent from or royalty, payment, or other compensation to Executive. Executive hereby forever waives and releases the Company and its directors, officers, employees, and agents from any and all claims, actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by the Company, arising directly or indirectly from the Company’s and its agents’, representatives’, and licensees’ exercise of their rights in connection with any Permitted Uses.
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16.Governing Law: Jurisdiction and Venue. This Agreement, for all purposes, shall be construed in accordance with the laws of the State of Louisiana without regard to conflicts of law principles and irrespective of Executive’s work location. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the State of Louisiana, Parish of Lafayette. The parties hereby irrevocably submit to the non-exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
17.Entire Agreement. Unless specifically provided herein, this Agreement contains all of the understandings and representations between Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement.
18.Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by Executive and by the Board. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
19.Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.
The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.
The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
20.Captions. Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.
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21.Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
22.Tolling. Should Executive violate any of the terms of the restrictive covenant obligations articulated herein, the obligation at issue will run from the first date on which Executive ceases to be in violation of such obligation.
23.1General Compliance. This Agreement is intended to comply with Section 409A of the Code and the regulations, rules and other guidance promulgated thereunder (“Section 409A”) or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by Executive on account of non-compliance with Section 409A.
23.2Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date or, if earlier, on Executive’s death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date and interest on such amounts calculated based on the applicable federal rate published by the Internal Revenue Service for the month in which Executive’s separation from service occurs shall be paid to Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
23.3Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
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(a)the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b)any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(c)any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
24.Successors and Assigns. This Agreement is personal to Executive and shall not be assigned by Executive. Any purported assignment by Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.
25.Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):
Waitr Holdings Inc.
214 Jefferson Street
Lafayette, LA 70501
Attn: Carl Grimstad, Chief Executive Officer
If to Executive, to his address most recently on file with the Company.
26.Representations of Executive. Executive represents and warrants to the Company that:
(a)Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement, or understanding to which he is a party or is otherwise bound; and
(b)Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not violate any non-solicitation, non-competition, or other similar covenant or agreement of a prior employer.
27.Withholding. The Company shall have the right to withhold from any amount payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
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28.Survival. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
29.Acknowledgement of Full Understanding. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS AGREEMENT.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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WAITR HOLDINGS INC. |
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By: /s/ Carl Grimstad Name: Carl Grimstad Title: Chief Executive Officer |
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EXECUTIVE |
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/s/ Thomas Pritchard Thomas Pritchard
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Executive Employment Agreement
This Employment Agreement (the “Agreement”) is made and entered into as of July 1, 2020 (the “Effective Date”) by and between David J. Cronin (“Executive”) and Waitr Holdings Inc., a corporation organized under the laws of the State of Delaware (the “Company”).
WHEREAS, the Company desires to employ Executive on the terms and conditions set forth herein; and
WHEREAS, Executive desires to be employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1.At-Will Employment Basis. Executive’s at-will employment hereunder shall be effective as of the Effective Date and shall continue on an at-will basis until such time as Executive’s employment with the Company terminates pursuant to Section 5 of this Agreement (such period is hereinafter referred to as the “Employment Term”).
2.1Position. During the Employment Term, Executive shall serve as the Chief Engagement Officer of the Company, reporting to the chief executive officer, or at the chief executive officer’s option, the Board of Directors of the Company (the “Board”). In such position, Executive shall have such duties, authority, and responsibilities as shall be determined from time to time by the chief executive officer, which duties, authority, and responsibilities are consistent with Executive’s position. Executive shall, if requested, also serve as a member of the Board or as an officer or director of any affiliate of the Company for no additional compensation.
2.2Duties. During the Employment Term, Executive shall devote substantially all of his business time and attention to the performance of Executive’s duties hereunder and will not engage in any other business, profession, or occupation for compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly without the prior written consent of the chief executive officer. Notwithstanding the foregoing, Executive will be permitted to (a) with the prior written consent of the chief executive officer, act or serve as a director, trustee, committee member, or principal of any type of business, civic, or charitable organization as long as such activities are disclosed in writing to the chief executive officer, and (b) purchase or own membership interest or shares in any publicly traded securities of any corporation; provided that, such ownership represents a passive investment and that Executive is not a controlling person of, or a member of a group that controls, such company or publicly traded corporation; provided further that, the activities described in clauses (a) and (b) do not (i)
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result in any breach of Executive’s obligations under Section 7 or Section 8, (ii) interfere with the performance of Executive’s duties and responsibilities to the Company as provided hereunder, including, but not limited to, the obligations set forth in Section 2 hereof, or (iii) conflict or compete in any way with the business of the Company or any of its subsidiaries or affiliates.
3.Place of Performance. The Executive shall work remotely; provided that, Executive may be required to travel on Company business during the Employment Term.
4.1Base Salary. During the Employment Term, the Company shall pay Executive an annual rate of base salary of $185,000 in periodic installments, less applicable deductions and withholdings, in accordance with the Company’s customary payroll practices and applicable wage payment laws, but no less frequently than monthly. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “Base Salary”. The parties acknowledge and agree that a portion of Executive’s Base Salary shall constitute consideration for Executive’s compliance with the restrictions and covenants set forth in Section 8 of this Agreement.
4.2Bonus. Executive shall be eligible to receive a bonus, in the sole discretion of the Board.
4.3Equity Award. On or as soon as practicable following the Effective Date, Executive shall receive an award of 250,000 restricted stock units (“RSU Award”) under the Waitr Holdings Inc. 2018 Omnibus Incentive Plan (the “Incentive Plan”), each restricted stock unit representing the right, subject to terms and conditions of the Incentive Plan and RSU Award to one share of Company common stock if and when the underlying RSU Award vests. The RSU Award will vest in three (3) equal installments as follows, subject to Executive’s continued employment through each applicable vesting date: (i) 83,333 RSU’s will vest on the first anniversary date of this Agreement; (ii) 83,333 RSU’s will vest on the second anniversary date of this Agreement; and (iii) 83,333 RSU’s will vest on the third anniversary date of this Agreement. The RSU Award will vest in full upon a Change in Control (as defined in the Incentive Plan), subject to Executive’s continued employment through the closing of such Change in Control. The RSU Award shall be subject to the terms and conditions of the Incentive Plan and become effective upon entry into a written award agreement by and between the Company and Executive. All other terms and conditions applicable to the Award shall be determined by the Board.
4.4Fringe Benefits and Perquisites. During the Employment Term, Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company and governing benefit plan requirements (including plan eligibility provisions), and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.
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4.5Employee Benefits. During the Employment Term, Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”), to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or terminate any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.
4.6Vacation; Paid Time-Off. Executive shall receive vacation and other paid time- off in accordance with the Company’s policies for executive officers as such policies may exist from time to time.
4.7Business Expenses. Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment, and travel expenses incurred by Executive in connection with the performance of Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.
4.8Indemnification. In the event that Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by Executive or the Company related to any contest or dispute between Executive and the Company or any of its affiliates with respect to this Agreement or Executive’s employment hereunder, by reason of the fact that Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, Executive shall be indemnified and held harmless by the Company to the maximum extent permitted under applicable law and the Company’s bylaws from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys’ fees).
4.9Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).
5.Termination of Employment. The Employment Term and Executive’s at-will employment hereunder may be terminated by either the Company or Executive at any time and for any reason. Upon termination of Executive’s employment during the Employment Term, Executive shall not be entitled to any additional compensation and benefits from the Company or any of its affiliates post-Termination Date (as defined below).
5.1Termination by the Company or Executive.
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(a)Executive’s employment hereunder may be terminated by either the Company or the Executive, for any or no reason. Upon termination, Executive shall be entitled to receive:
(i)any accrued but unpaid Base Salary through the Termination Date which shall be paid on the pay date immediately following the Termination Date in accordance with the Company’s customary payroll procedures;
(ii)reimbursement for unreimbursed business expenses properly incurred by Executive through the Termination Date, which shall be subject to and paid in accordance with the Company’s expense reimbursement policy (the amounts described in 5.1(a)(i) and (ii) are collectively referred to as “Accrued Amounts”); and
(iii)such employee benefits, if any, to which Executive may be entitled under the Company’s employee benefit plans as of the Termination Date; provided that, in no event shall Executive be entitled to any payments in the nature of severance or termination payments.
(a)Executive’s employment hereunder shall terminate automatically upon Executive’s death and Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following.
(ii)any post-employment benefits due under the terms and conditions of the Employee Benefit Plans (provided that, in no event, shall the estate of Executive be entitled to any severance or termination payments).
5.3Notice of Termination. Any termination of Executive’s employment hereunder by the Company or by Executive (other than termination pursuant to Section 5.2 on account of Executive’s death) shall be communicated by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with Section 25.
5.4Termination Date. Executive’s “Termination Date” shall be:
(a)if Executive’s employment hereunder terminates on account of Executive’s death, the date of Executive’s death; and
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(b)if either the Company terminates the Executive’s employment or Executive terminates his employment, upon the date the Notice of Termination is delivered to the respective party.
5.5Resignation of All Other Positions. Upon termination of Executive’s employment hereunder for any reason, Executive agrees to resign, effective on the Termination Date, from all positions that Executive holds as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates.
(a)Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement, or otherwise) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), the Company shall either (i) reduce (but not below zero) such payments or benefits received or to be received by Executive so that the aggregate present value of the payments and benefits received by Executive is $1.00 less than the amount which would otherwise cause Executive to incur an Excise Tax, or (ii) be paid in full, whichever results in the greatest net after-tax payment to Executive.
(b)All calculations and determinations under this Section 5.6 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel”) whose determinations shall be conclusive and binding on the Company and Executive for all purposes. For purposes of making the calculations and determinations required by this Section 5.6, the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 5.6. The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.
6.Cooperation. The parties agree that certain matters in which Executive will be involved during the Employment Term may necessitate Executive’s cooperation in the future. Accordingly, following the termination of Executive’s employment for any reason, to the extent reasonably requested by the Board, Executive shall cooperate with the Company in connection with matters arising out of Executive’s service to the Company; provided that, the Company shall make reasonable efforts to minimize disruption of Executive’s other activities. The Company shall reimburse Executive for reasonable expenses incurred in connection with such cooperation and, to
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the extent that Executive is required to spend substantial time on such matters, the Company shall compensate Executive at an hourly rate based on Executive’s Base Salary on the Termination Date.
7.Confidential Information. Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.
7.1Confidential Information Defined.
For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or to and information that is used, developed or obtained by the Company or any of its affiliates (collectively, the “Company Group”) in connection with its business, including, but not limited to, information, observations and data obtained by Executive during Executive’s employment with the Company concerning: business affairs, business processes, practices, products, methods, policies, plans, publications, documents, research, operations, services, fees, pricing structures, analyses, photographs, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, computer programs, computer software, applications, operating systems, software design, web design, work-in-process, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, restaurant partner list of the Company Group or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company Group in confidence.
Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.
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Executive understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if the Company furnished the same Confidential Information to Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to Executive; provided that, such disclosure is through no direct or indirect fault of Executive or person(s) acting on Executive’s behalf.
(b)Company Creation and Use of Confidential Information.
Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money, and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the field of restaurant delivery services. Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.
(c)Disclosure and Use Restrictions.
Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed, published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises or control of the Company, except as required in the performance of Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. Executive shall promptly provide written notice of any such order to the Board.
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(d)Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”). Notwithstanding any other provision of this Agreement:
(i)Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that:
(A)is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or
(B)is made in a complaint or other document filed under seal in a lawsuit or other proceeding.
(ii)If Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive:
(A)files any document containing trade secrets under seal; and
(B)does not disclose trade secrets, except pursuant to court order.
Executive understands and acknowledges that his obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon Executive first having access to such Confidential Information (whether before or after he begins employment by the Company) and shall continue during and after his employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of Executive’s breach of this Agreement or breach by those acting in concert with Executive or on Executive’s behalf.
8.1Acknowledgement. Executive understands that the nature of Executive’s position gives him access to and knowledge of Confidential Information and places him in a position of trust and confidence with the Company. Executive understands and acknowledges that the intellectual services he provides to the Company are unique, special, or extraordinary. Executive further understands and acknowledges that the Company’s ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that
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improper use or disclosure by Executive is likely to result in unfair or unlawful competitive activity.
8.2Non-Competition. Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to Executive, during the Employment Term and for the twelve (12) month period beginning on the last day of Executive’s employment with the Company, Executive agrees and covenants not to engage in Prohibited Activity within any state or jurisdiction in which the Company or its subsidiaries then operate, have operated at any time during the Employment Term or demonstrably propose or intend to operate (the “Restricted Territory”).
For purposes of this Section 8, “Prohibited Activity” is activity in which Executive contributes his knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, stockholder, officer, volunteer, intern, or any other similar capacity to an entity engaged in the same or similar business as the Company, including those engaged in the business of food delivery. Prohibited Activity also includes activity that may require or inevitably requires disclosure of trade secrets, proprietary information, or Confidential Information.
The Company regards the following as its primary, but not exclusive, competitors engaged in the business of food delivery: Ubereats, Postmates, GrubHub and DoorDash.
Nothing herein shall prohibit Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that Executive is not a controlling person of, or a member of a group that controls, such corporation.
This Section 8 does not, in any way, restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. Executive shall promptly provide written notice of any such order to the Board.
8.3Non-Solicitation of Employees. Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company during the Employment Term and a twenty- four (24) month period beginning on the last day of Executive’s employment with the Company.
8.4Non-Solicitation of Customers. Executive understands and acknowledges that because of Executive’s experience with and relationship to the Company, he will have access to and learn about much or all of the Company’s customer information. “Customer information” includes, but is not limited to, names, phone numbers, addresses,
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e-mail addresses, order history, order preferences, chain of command, pricing information, and other information identifying facts and circumstances specific to the customer and relevant to sales and services.
Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm to the Company.
Executive agrees and covenants, during the Employment Term and the twenty-four (24) month period beginning on the last day of Executive’s employment with the Company, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact, or meet with the Company’s current customers located in the Restricted Territory for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company.
9.Non-Disparagement. Executive agrees and covenants that he will not at any time, directly or indirectly, make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Company or its businesses, or any of its employees, officers, shareholders, members or advisors, or any member of the Board.
This Section 9 does not, in any way, restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. Executive shall promptly provide written notice of any such order to the Board.
The Company agrees and covenants that it shall cause its officers and directors to refrain from making any defamatory or disparaging remarks, comments, or statements concerning Executive to any third parties.
10.Acknowledgement. Executive acknowledges and agrees that the services to be rendered by him to the Company are of a special and unique character; that Executive will obtain knowledge and skill relevant to the Company’s industry, methods of doing business and marketing strategies by virtue of Executive’s employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company.
Executive further acknowledges that the amount of his compensation reflects, in part, his obligations and the Company’s rights under Section 7, Section 8, and Section 9 of this Agreement; that he has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; and that he will not be subject to undue hardship by reason of his full compliance with the terms and conditions of Section 7, Section 8, and Section 9 of this Agreement or the Company’s enforcement thereof.
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11.Remedies. In the event of a breach or threatened breach by Executive of Section 7, Section 8, or Section 9 of this Agreement, Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages, or other available forms of relief.
12.Arbitration. Any dispute, controversy, or claim arising out of or related to this Agreement, except for disputes arising under Section 7, Section 8, or Section 9 of this Agreement (including, without limitation, any claim for injunctive relief), or its interpretation, application, implementation, breach or enforcement which the parties hereto are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in Lafayette, Louisiana (unless the parties hereto agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the parties hereto agree to provide all discovery deemed necessary by the arbitrator. The arbitration shall be a documents-only proceeding. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The prevailing party in such arbitration shall be entitled to reimbursement from the non-prevailing party for the totality of the arbitrator’s, administrative, and reasonable legal fees and costs. Upon the request of any of the parties hereto, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association.
13.1Work Product. Executive acknowledges and agrees that all right, title, and interest in and to all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research, proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived, or reduced to practice by Executive individually or jointly with others during the period of his employment by the Company and relate in any way to the business or contemplated business, products, activities, research, or development of the Company or result from any work performed by Executive for the Company (in each case, regardless of when or where prepared or whose equipment or other resources is used in preparing the same), all rights and claims related to the foregoing, and all printed, physical and electronic copies, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to US and foreign (a) patents, patent disclosures and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including computer programs), and rights in data and databases, (d) trade secrets, know-how, and other
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confidential information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any part of the world (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of the Company.
For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, computer programs, computer applications, software design, web design, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information, and sales information.
13.2Work Made for Hire; Assignment. Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, Executive hereby irrevocably assigns to the Company, for no additional consideration, Executive’s entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.
13.3Further Assurances; Power of Attorney. During and after his employment, Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments, and other documents and instruments as shall be requested by the Company. Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on Executive’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by Executive’s subsequent incapacity.
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13.4No License. Executive understands that this Agreement does not, and shall not be construed to, grant Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software, or other tools made available to him by the Company.
14.1Security and Access. Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication technologies (“Facilities and Information Technology Resources”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of Executive’s employment by the Company, whether termination is voluntary or involuntary. Executive agrees to notify the Company promptly in the event he learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction, or reverse engineering of, or tampering with any Facilities and Information Technology Resources or other Company property or materials by others.
14.2Exit Obligations. Upon (a) voluntary or involuntary termination of Executive’s employment or (b) the Company’s request at any time during Executive’s employment, Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines, equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, e- mail messages, recordings, tapes, disks, thumb drives or other removable information storage devices, hard drives, negatives, and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of Executive, whether they were provided to Executive by the Company or any of its business associates or created by Executive in connection with his employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations, and media in Executive’s possession or control.
15.Publicity. Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives and licensees, of Executive’s name, voice, likeness, image, appearance, and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and
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advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes, and all other printed and electronic forms and media throughout the world, at any time during or after the period of his employment by the Company, for all legitimate commercial and business purposes of the Company (“Permitted Uses”) without further consent from or royalty, payment, or other compensation to Executive. Executive hereby forever waives and releases the Company and its directors, officers, employees, and agents from any and all claims, actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by the Company, arising directly or indirectly from the Company’s and its agents’, representatives’, and licensees’ exercise of their rights in connection with any Permitted Uses.
16.Governing Law: Jurisdiction and Venue. This Agreement, for all purposes, shall be construed in accordance with the laws of the State of Louisiana without regard to conflicts of law principles and irrespective of Executive’s work location. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the State of Louisiana, Parish of Lafayette. The parties hereby irrevocably submit to the non-exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
17.Entire Agreement. Unless specifically provided herein, this Agreement contains all of the understandings and representations between Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter, including, for the avoidance of doubt, the offer letter dated May 13, 2020, between Executive and the Company. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement.
18.Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by Executive and by the Board. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
19.Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.
The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or
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all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.
The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
20.Captions. Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.
21.Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
22.Tolling. Should Executive violate any of the terms of the restrictive covenant obligations articulated herein, the obligation at issue will run from the first date on which Executive ceases to be in violation of such obligation.
23.1General Compliance. This Agreement is intended to comply with Section 409A of the Code and the regulations, rules and other guidance promulgated thereunder (“Section 409A”) or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by Executive on account of non- compliance with Section 409A.
23.2Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Executive is determined to be a
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“specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date or, if earlier, on Executive’s death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date and interest on such amounts calculated based on the applicable federal rate published by the Internal Revenue Service for the month in which Executive’s separation from service occurs shall be paid to Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
23.3Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
(a)the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b)any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(c)any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
24.Successors and Assigns. This Agreement is personal to Executive and shall not be assigned by Executive. Any purported assignment by Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.
25.Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):
Attn: Carl Grimstad, Chief Executive Officer
Carl.grimstad@waitrapp.com
If to Executive, to his address most recently on file with the Company.
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26.Representations of Executive. Executive represents and warrants to the Company that:
(a)Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement, or understanding to which he is a party or is otherwise bound; and
(b)Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not violate any non-solicitation, non- competition, or other similar covenant or agreement of a prior employer.
27.Withholding. The Company shall have the right to withhold from any amount payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
28.Survival. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
29.Acknowledgement of Full Understanding. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS AGREEMENT.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
WAITR HOLDINGS INC.
By: /s/ Carl Grimstad
Name: Carl Grimstad
Title: Chief Executive Officer
EXECUTIVE
/s/ David Cronin
David J. Cronin
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Executive Employment Agreement
This Employment Agreement (the “Agreement”) is made and entered into as of May 28, 2020 (the “Effective Date”) by and between Mark D’Ambrosio (“Executive”) and Waitr Holdings Inc., a corporation organized under the laws of the State of Delaware (the “Company”).
WHEREAS, the Company desires to employ Executive on the terms and conditions set forth herein; and
WHEREAS, Executive desires to be employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1.At-Will Employment Basis. Executive’s at-will employment hereunder shall be effective as of the Effective Date and shall continue on an at-will basis until such time as Executive’s employment with the Company terminates pursuant to Section 5 of this Agreement (such period is hereinafter referred to as the “Employment Term”).
2.1Position. During the Employment Term, Executive shall serve as the Chief Sales Officer of the Company, reporting to the chief executive officer, or at the chief executive officer’s option, the Board of Directors of the Company (the “Board”). In such position, Executive shall have such duties, authority, and responsibilities as shall be determined from time to time by the chief executive officer, which duties, authority, and responsibilities are consistent with Executive’s position. Executive shall, if requested, also serve as a member of the Board or as an officer or director of any affiliate of the Company for no additional compensation.
2.2Duties. During the Employment Term, Executive shall devote substantially all of his business time and attention to the performance of Executive’s duties hereunder and will not engage in any other business, profession, or occupation for compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly without the prior written consent of the chief executive officer. Notwithstanding the foregoing, Executive will be permitted to (a) with the prior written consent of the chief executive officer, act or serve as a director, trustee, committee member, or principal of any type of business, civic, or charitable organization as long as such activities are disclosed in writing to the chief executive officer, and (b) purchase or own membership interest or shares in any publicly traded securities of any corporation; provided that, such ownership represents a passive investment and that Executive is not a controlling person of, or a member of a group that controls, such company or publicly traded corporation; provided further that, the activities described in clauses (a) and (b) do not (i)
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result in any breach of Executive’s obligations under Section 7 or Section 8, (ii) interfere with the performance of Executive’s duties and responsibilities to the Company as provided hereunder, including, but not limited to, the obligations set forth in Section 2 hereof, or (iii) conflict or compete in any way with the business of the Company or any of its subsidiaries or affiliates.
3.Place of Performance. The Executive shall work remotely; provided that, Executive may be required to travel on Company business during the Employment Term.
4.1Base Salary. During the Employment Term, the Company shall pay Executive an annual rate of base salary of $320,000 in periodic installments, less applicable deductions and withholdings, in accordance with the Company’s customary payroll practices and applicable wage payment laws, but no less frequently than monthly. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “Base Salary”. The parties acknowledge and agree that a portion of Executive’s Base Salary shall constitute consideration for Executive’s compliance with the restrictions and covenants set forth in Section 8 of this Agreement.
4.2Signing Bonus and Performance Bonus.
(a)Upon execution of this Agreement, the Company will pay you a $50,000 signing bonus.
(b)Executive shall be eligible to receive a performance bonus (the “Performance Bonus”). As of the Effective Date, Executive’s target bonus opportunity shall be equal to 50% of Base Salary (on an annualized basis), based upon the attainment of certain performance metrics established by the chief executive officer, the Board or the compensation committee of the Board. The Performance Bonus will be paid quarterly, commencing with the quarter ending September 30, 2020, with the Executive receiving 100% of the first two quarterly bonuses while performance metrics are established for the third and fourth quarters and beyond. For the period beginning on the Effective Date and ending on the last day of that fiscal quarter, no Performance Bonus will be paid.
(c)The Performance Bonus, if any, will be paid within sixty (60) days after the end of the applicable fiscal quarter.
(d)In order to be eligible to receive a Performance Bonus, Executive must be employed by the Company on the last day of the applicable fiscal quarter to which such Performance Bonus relates.
4.3Equity Award. On or as soon as practicable following the Effective Date, Executive shall receive an award of 333,000 restricted stock units (“RSU Award”) under the Waitr Holdings Inc. 2018 Omnibus Incentive Plan (the “Incentive Plan”), each
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restricted stock unit representing the right, subject to terms and conditions of the Incentive Plan and RSU Award to one share of Company common stock if and when the underlying RSU Award vests. The RSU Award will vest in three (3) equal installments as follows, subject to Executive’s continued employment through each applicable vesting date: (i) 111,000 RSU’s will vest on the first anniversary date of this Agreement; (ii) 111,000 RSU’s will vest on the second anniversary date of this Agreement; and (iii) 111,000 RSU’s will vest on the third anniversary date of this Agreement. The RSU Award will vest in full upon a Change in Control (as defined in the Incentive Plan), subject to Executive’s continued employment through the closing of such Change in Control. The RSU Award shall be subject to the terms and conditions of the Incentive Plan and become effective upon entry into a written award agreement by and between the Company and Executive. All other terms and conditions applicable to the Award shall be determined by the Board.
4.4Fringe Benefits and Perquisites. During the Employment Term, Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company and governing benefit plan requirements (including plan eligibility provisions), and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.
4.5Employee Benefits. During the Employment Term, Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”), to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or terminate any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.
4.6Vacation; Paid Time-Off. Executive shall receive vacation and other paid time- off in accordance with the Company’s policies for executive officers as such policies may exist from time to time.
4.7Business Expenses. Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment, and travel expenses incurred by Executive in connection with the performance of Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.
4.8Indemnification. In the event that Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by Executive or the Company related to any contest or dispute between Executive and the Company or any of its affiliates with respect to this Agreement or Executive’s employment hereunder, by reason of the fact that Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, Executive shall be indemnified and held harmless by the Company to the maximum extent permitted under applicable law and the Company’s
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bylaws from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys’ fees).
4.9Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).
5.Termination of Employment. The Employment Term and Executive’s at-will employment hereunder may be terminated by either the Company or Executive at any time and for any reason. Upon termination of Executive’s employment during the Employment Term, Executive shall not be entitled to any additional compensation and benefits from the Company or any of its affiliates post-Termination Date.
5.1Termination by the Company or Executive.
(a)Executive’s employment hereunder may be terminated by either the Company or the Executive, for any or no reason. Upon termination, Executive shall be entitled to receive:
(i)any accrued but unpaid Base Salary through the Termination Date which shall be paid on the pay date immediately following the Termination Date (as defined below) in accordance with the Company’s customary payroll procedures;
(ii)reimbursement for unreimbursed business expenses properly incurred by Executive through the Termination Date, which shall be subject to and paid in accordance with the Company’s expense reimbursement policy (the amounts described in 5.1(a)(i) and (ii) are collectively referred to as “Accrued Amounts”); and
(iii)such employee benefits, if any, to which Executive may be entitled under the Company’s employee benefit plans as of the Termination Date; provided that, in no event shall Executive be entitled to any payments in the nature of severance or termination payments.
(a)Executive’s employment hereunder shall terminate automatically upon Executive’s death and Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following.
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(ii)any post-employment benefits due under the terms and conditions of the Employee Benefit Plans.
5.3Notice of Termination. Any termination of Executive’s employment hereunder by the Company or by Executive (other than termination pursuant to Section 5.2 on account of Executive’s death) shall be communicated by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with Section 25.
5.4Termination Date. Executive’s “Termination Date” shall be:
(a)if Executive’s employment hereunder terminates on account of Executive’s death, the date of Executive’s death; and
(b)if either the Company terminates Executive’s or Executive terminates his employment upon the date the Notice of Termination is delivered to the respective party.
5.5Resignation of All Other Positions. Upon termination of Executive’s employment hereunder for any reason, Executive agrees to resign, effective on the Termination Date, from all positions that Executive holds as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates.
(a)Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement, or otherwise) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), the Company shall either (i) reduce (but not below zero) such payments or benefits received or to be received by Executive so that the aggregate present value of the payments and benefits received by Executive is $1.00 less than the amount which would otherwise cause Executive to incur an Excise Tax, or (ii) be paid in full, whichever results in the greatest net after-tax payment to Executive.
(b)All calculations and determinations under this Section 5.6 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel”) whose determinations shall be conclusive and binding on the Company and Executive for all purposes. For purposes of making the calculations and determinations required by this Section 5.6, the Tax Counsel
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may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 5.6. The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.
6.Cooperation. The parties agree that certain matters in which Executive will be involved during the Employment Term may necessitate Executive’s cooperation in the future. Accordingly, following the termination of Executive’s employment for any reason, to the extent reasonably requested by the Board, Executive shall cooperate with the Company in connection with matters arising out of Executive’s service to the Company; provided that, the Company shall make reasonable efforts to minimize disruption of Executive’s other activities. The Company shall reimburse Executive for reasonable expenses incurred in connection with such cooperation and, to the extent that Executive is required to spend substantial time on such matters, the Company shall compensate Executive at an hourly rate based on Executive’s Base Salary on the Termination Date.
7.Confidential Information. Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.
7.1Confidential Information Defined.
For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or to and information that is used, developed or obtained by the Company or any of its affiliates (collectively, the “Company Group”) in connection with its business, including, but not limited to, information, observations and data obtained by Executive during Executive’s employment with the Company concerning: business affairs, business processes, practices, products, methods, policies, plans, publications, documents, research, operations, services, fees, pricing structures, analyses, photographs, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, computer programs, computer software, applications, operating systems, software design, web design, work-in-process, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product
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plans, designs, styles, models, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, restaurant partner list of the Company Group or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company Group in confidence.
Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.
Executive understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if the Company furnished the same Confidential Information to Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to Executive; provided that, such disclosure is through no direct or indirect fault of Executive or person(s) acting on Executive’s behalf.
(b)Company Creation and Use of Confidential Information.
Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money, and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the field of restaurant delivery services. Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.
(c)Disclosure and Use Restrictions.
Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed, published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises or control of the Company, except as required in the performance of Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then,
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such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. Executive shall promptly provide written notice of any such order to the Board.
(d)Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”). Notwithstanding any other provision of this Agreement:
(i)Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that:
(A)is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or
(B)is made in a complaint or other document filed under seal in a lawsuit or other proceeding.
(ii)If Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive:
(A)files any document containing trade secrets under seal; and
(B)does not disclose trade secrets, except pursuant to court order.
Executive understands and acknowledges that his obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon Executive first having access to such Confidential Information (whether before or after he begins employment by the Company) and
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shall continue during and after his employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of Executive’s breach of this Agreement or breach by those acting in concert with Executive or on Executive’s behalf.
8.1Acknowledgement. Executive understands that the nature of Executive’s position gives him access to and knowledge of Confidential Information and places him in a position of trust and confidence with the Company. Executive understands and acknowledges that the intellectual services he provides to the Company are unique, special, or extraordinary. Executive further understands and acknowledges that the Company’s ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by Executive is likely to result in unfair or unlawful competitive activity.
8.2Non-Competition. Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to Executive, during the Employment Term and for the twelve (12) month period beginning on the last day of Executive’s employment with the Company, Executive agrees and covenants not to engage in Prohibited Activity within any state or jurisdiction in which the Company or its subsidiaries then operate, have operated at any time during the Employment Term or demonstrably propose or intend to operate (the “Restricted Territory”).
For purposes of this Section 8, “Prohibited Activity” is activity in which Executive contributes his knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, stockholder, officer, volunteer, intern, or any other similar capacity to an entity engaged in the same or similar business as the Company, including those engaged in the business of food delivery. Prohibited Activity also includes activity that may require or inevitably requires disclosure of trade secrets, proprietary information, or Confidential Information.
The Company regards the following as its primary, but not exclusive, competitors engaged in the business of food delivery: Ubereats, Postmates, GrubHub and DoorDash.
Nothing herein shall prohibit Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that Executive is not a controlling person of, or a member of a group that controls, such corporation.
This Section 8 does not, in any way, restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of
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competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. Executive shall promptly provide written notice of any such order to the Board.
8.3Non-Solicitation of Employees. Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company during the Employment Term and a twenty- four (24) month period beginning on the last day of Executive’s employment with the Company.
8.4Non-Solicitation of Customers. Executive understands and acknowledges that because of Executive’s experience with and relationship to the Company, he will have access to and learn about much or all of the Company’s customer information. “Customer information” includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information, and other information identifying facts and circumstances specific to the customer and relevant to sales and services.
Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm to the Company.
Executive agrees and covenants, during the Employment Term and the twenty-four (24) month period beginning on the last day of Executive’s employment with the Company, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact, or meet with the Company’s current customers located in the Restricted Territory for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company.
9.Non-Disparagement. Executive agrees and covenants that he will not at any time, directly or indirectly, make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Company or its businesses, or any of its employees, officers, shareholders, members or advisors, or any member of the Board.
This Section 9 does not, in any way, restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. Executive shall promptly provide written notice of any such order to the Board.
The Company agrees and covenants that it shall cause its officers and directors to refrain from making any defamatory or disparaging remarks, comments, or statements concerning Executive to any third parties.
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10.Acknowledgement. Executive acknowledges and agrees that the services to be rendered by him to the Company are of a special and unique character; that Executive will obtain knowledge and skill relevant to the Company’s industry, methods of doing business and marketing strategies by virtue of Executive’s employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company.
Executive further acknowledges that the amount of his compensation reflects, in part, his obligations and the Company’s rights under Section 7, Section 8, and Section 9 of this Agreement; that he has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; and that he will not be subject to undue hardship by reason of his full compliance with the terms and conditions of Section 7, Section 8, and Section 9 of this Agreement or the Company’s enforcement thereof.
11.Remedies. In the event of a breach or threatened breach by Executive of Section 7, Section 8, or Section 9 of this Agreement, Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages, or other available forms of relief.
12.Arbitration. Any dispute, controversy, or claim arising out of or related to this Agreement, except for disputes arising under Section 7, Section 8, or Section 9 of this Agreement (including, without limitation, any claim for injunctive relief), or its interpretation, application, implementation, breach or enforcement which the parties hereto are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in Lafayette, Louisiana (unless the parties hereto agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the parties hereto agree to provide all discovery deemed necessary by the arbitrator. The arbitration shall be a documents-only proceeding. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The prevailing party in such arbitration shall be entitled to reimbursement from the non-prevailing party for the totality of the arbitrator’s, administrative, and reasonable legal fees and costs. Upon the request of any of the parties hereto, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association.
13.1Work Product. Executive acknowledges and agrees that all right, title, and interest in and to all writings, works of authorship, technology, inventions, discoveries,
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processes, techniques, methods, ideas, concepts, research, proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived, or reduced to practice by Executive individually or jointly with others during the period of his employment by the Company and relate in any way to the business or contemplated business, products, activities, research, or development of the Company or result from any work performed by Executive for the Company (in each case, regardless of when or where prepared or whose equipment or other resources is used in preparing the same), all rights and claims related to the foregoing, and all printed, physical and electronic copies, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to US and foreign (a) patents, patent disclosures and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including computer programs), and rights in data and databases, (d) trade secrets, know-how, and other confidential information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any part of the world (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of the Company.
For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, computer programs, computer applications, software design, web design, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information, and sales information.
13.2Work Made for Hire; Assignment. Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, Executive hereby irrevocably assigns to the Company, for no additional consideration, Executive’s entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.
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13.3Further Assurances; Power of Attorney. During and after his employment, Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments, and other documents and instruments as shall be requested by the Company. Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on Executive’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by Executive’s subsequent incapacity.
13.4No License. Executive understands that this Agreement does not, and shall not be construed to, grant Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software, or other tools made available to him by the Company.
14.1Security and Access. Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication technologies (“Facilities and Information Technology Resources”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of Executive’s employment by the Company, whether termination is voluntary or involuntary. Executive agrees to notify the Company promptly in the event he learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction, or reverse engineering of, or tampering with any Facilities and Information Technology Resources or other Company property or materials by others.
14.2Exit Obligations. Upon (a) voluntary or involuntary termination of Executive’s employment or (b) the Company’s request at any time during Executive’s employment, Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines, equipment, speakers, webcams, manuals, reports, files,
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books, compilations, work product, e- mail messages, recordings, tapes, disks, thumb drives or other removable information storage devices, hard drives, negatives, and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of Executive, whether they were provided to Executive by the Company or any of its business associates or created by Executive in connection with his employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations, and media in Executive’s possession or control.
15.Publicity. Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives and licensees, of Executive’s name, voice, likeness, image, appearance, and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes, and all other printed and electronic forms and media throughout the world, at any time during or after the period of his employment by the Company, for all legitimate commercial and business purposes of the Company (“Permitted Uses”) without further consent from or royalty, payment, or other compensation to Executive. Executive hereby forever waives and releases the Company and its directors, officers, employees, and agents from any and all claims, actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by the Company, arising directly or indirectly from the Company’s and its agents’, representatives’, and licensees’ exercise of their rights in connection with any Permitted Uses.
16.Governing Law: Jurisdiction and Venue. This Agreement, for all purposes, shall be construed in accordance with the laws of the State of Louisiana without regard to conflicts of law principles and irrespective of Executive’s work location. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the State of Louisiana, Parish of Lafayette. The parties hereby irrevocably submit to the non-exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
17.Entire Agreement. Unless specifically provided herein, this Agreement contains all of the understandings and representations between Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter, including, for the avoidance of doubt, the offer letter dated May 13, 2020, between Executive and the Company. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement.
18.Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by Executive and by the Board. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed
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a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
19.Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.
The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.
The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
20.Captions. Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.
21.Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
22.Tolling. Should Executive violate any of the terms of the restrictive covenant obligations articulated herein, the obligation at issue will run from the first date on which Executive ceases to be in violation of such obligation.
23.1General Compliance. This Agreement is intended to comply with Section 409A of the Code and the regulations, rules and other guidance promulgated thereunder (“Section 409A”) or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this
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Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by Executive on account of non- compliance with Section 409A.
23.2Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date or, if earlier, on Executive’s death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date and interest on such amounts calculated based on the applicable federal rate published by the Internal Revenue Service for the month in which Executive’s separation from service occurs shall be paid to Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
23.3Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
(a)the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b)any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(c)any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
24.Successors and Assigns. This Agreement is personal to Executive and shall not be assigned by Executive. Any purported assignment by Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.
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25.Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):
Attn: Carl Grimstad, Chief Executive Officer
Carl.grimstad@waitrapp.com
If to Executive, to his address most recently on file with the Company.
26.Representations of Executive. Executive represents and warrants to the Company that:
(a)Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement, or understanding to which he is a party or is otherwise bound; and
(b)Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not violate any non-solicitation, non- competition, or other similar covenant or agreement of a prior employer.
27.Withholding. The Company shall have the right to withhold from any amount payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
28.Survival. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
29.Acknowledgement of Full Understanding. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS AGREEMENT.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
WAITR HOLDINGS INC.
By: /s/ Carl Grimstad
Name: Carl Grimstad
Title: Chief Executive Officer
EXECUTIVE
/s/ Mark D’Ambrosio
Mark D’Ambrosio
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Exhibit 21.1
Subsidiaries of Waitr Holdings Inc.
|
Entity |
|
Jurisdiction |
|
Waitr Intermediate Holdings, LLC |
|
Delaware |
|
Waitr Inc. |
|
Louisiana |
|
BiteSquad.com, LLC |
|
Minnesota |
|
KASA Delivery, LLC |
|
Minnesota |
|
KASA Delivery Corporation |
|
Minnesota |
|
CDMX Holdings, LLC |
|
Minnesota |
|
Catering on Demand LLC |
|
Minnesota |
|
Delivery Logistics, LLC |
|
Minnesota |
|
Dude Delivery, LLC |
|
Delaware |
|
Dude Cannabis, LLC |
|
Delaware |
|
DDIT LLC |
|
Florida |
|
Have Fun, LLC |
|
Florida |
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Carl A. Grimstad, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Waitr Holdings Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: |
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May 6, 2021 |
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By: |
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/s/ Carl A. Grimstad |
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Carl A. Grimstad |
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Chief Executive Officer and Chairman of the Board |
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(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Leo Bogdanov, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Waitr Holdings Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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By: |
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/s/ Leo Bogdanov |
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Leo Bogdanov |
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Chief Financial Officer |
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(Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TOSECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Waitr Holdings Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carl A. Grimstad, certify, as of the date hereof and solely for purposes of and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
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1. |
The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates set forth and for the periods presented in the Report. |
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By: |
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/s/ Carl A. Grimstad |
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Carl A. Grimstad |
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Chief Executive Officer and Chairman of the Board |
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(Principal Executive Officer) |
Date: May 6, 2021
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TOSECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Waitr Holdings Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leo Bogdanov, certify, as of the date hereof and solely for purposes of and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
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1. |
The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates set forth and for the periods presented in the Report. |
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By: |
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/s/ Leo Bogdanov |
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Leo Bogdanov |
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Chief Financial Officer |
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(Principal Financial Officer) |
Date: May 6, 2021