UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 2021
☐ 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 001-39272
Delaware
(State or other jurisdiction of incorporation)
9600 Great Hills Trail, Suite 300E
Austin, TX
(address of principal executive offices)
E2open Parent Holdings, Inc.
(Exact name of registrant as specified in its charter)
866-432-6736
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of Act:
86-1874570
(IRS Employer Identification No.)
78759
(zip code)
Title of each class
Class A Common Stock, par value $0.0001 per share
Warrants to purchase one share of Class A Common Stock
at an exercise price of $11.50
Trading Symbol(s)
ETWO
ETWO WT
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 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. Yes ☒ No ☐
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). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued it audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of August 31, 2020, the aggregate market value of the registrant’s Class A ordinary shares held by non-affiliates of the registrant was $425,592,000 based on the closing sale
price of $10.28 as reported on The New York Stock Exchange. The Class A ordinary shares automatically converted into Class A common stock in connection with the
Domestication, as defined herein.
There were 187,051,142 shares of common stock issued and outstanding as of May 14, 2021.
DOCUMENTS INCORPORATED BY REFERENCE: None
E2open Parent Holdings, Inc.
TABLE OF CONTENTS
Glossary of Terms
Forward-Looking Statements
Explanatory Note
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Valuation and Qualifying Accounts
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PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Item 15
Item 16
Schedule II
Signatures
Page
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GLOSSARY OF TERMS
Abbreviation
Term
Class A Common Stock
Class A common stock, par value $0.0001 per share
Class V Common Stock
Class V common stock, par value $0.0001 per share
Common Units
common units representing limited liability company interests of E2open Holdings, LLC, which are non-voting, economic interests
in E2open Holdings, LLC
Domestication
CC Neuberger Principal Holdings I changed its jurisdiction of incorporation from the Cayman Islands to the State of Delaware on
February 4, 2021
Forward Purchase Agreement
agreement dated as of April 28, 2020 by and between CCNB1 and Neuberger Berman Opportunistic Capital Solutions Master
Fund LP
Forward Purchase Shares
20,000,000 Class A ordinary shares purchased pursuant to the Forward Purchase Agreement
Forward Purchase Warrants
5,000,000 redeemable warrants purchased pursuant to the Forward Purchase Agreement
Insight Partners
entities affiliated with Insight Venture Management, LLC, including funds under management; controlling shareholder of E2open
Holdings, LLC holding less than 50% voting interests
LIBOR
London Interbank Offered Rate
Lock-up Period
period commencing on February 4, 2021 and ending on August 4, 2021
PIPE Investment
an aggregate of 69,500,000 shares of Class A Common Stock purchased in connection with the Business Combination at $10.00
per for a total of $695.0 million
RCU
SaaS
SCM
SEC
restricted common units representing Series 1 and Series 2 of E2open Holdings, LLC
software-as-a-service or a software distribution model in which a company hosts applications for customers and makes these
applications available to customers via the internet/cloud technology
supply chain management
U.S. Securities and Exchange Commission
U.S. GAAP
generally accepted accounting principles in the United States
SKU
TAM
NYSE
VWAP
stock-keeping record, a functional application that may be used as a standalone or with other functional applications/SKUs, each of
which belongs to only one product family, and each product family has between four and ten SKUs
total addressable market, which is the estimated potential market size for SCM software in North America and Europe
New York Stock Exchange
daily per share volume-weighted average price of the Class A Common Stock on the NYSE as displayed on the Bloomberg page
under the heading Bloomberg VWAP
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (2021 Form 10-K) contains “forward-looking statements” within the meaning of the federal securities law. These forward-
looking statements give E2open Parent Holdings, Inc.’s (we, our, us, Company or E2open) current expectations and include projections of results of operations or
financial condition or forecasts of future events. Words such as “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,”
“anticipate,” “believe,” “seek,” “target” and similar expressions are used to identify forward-looking statements. Without limiting the generality of the forgoing,
forward-looking statements contained in this document include our expectations regarding our future growth, operational and financial performance and business
prospects and opportunities.
These forward-looking statements are based on information available as of the date of this 2021 Form 10-K and management’s current expectations, forecasts and
assumptions, and involve a number of judgments, known and unknown risks and uncertainties and other factors, many of which are outside our control and our
directors, officers and affiliates. Accordingly, 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, add or to otherwise correct any forward-looking statements contained herein to reflect events or circumstances after the date
they were made, whether as a result of new information, future events, inaccuracies that become apparent after the date hereof or otherwise, except as may be
required under applicable securities laws.
As a result of a number of known and unknown risks and uncertainties, our results or performance may be materially different from those expressed or implied by
these forward-looking statements. Some factors that could cause actual results to differ include:
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the ability to recognize the anticipated benefits of the Business Combination (as defined below), which may be affected by, among other things,
competition, and our ability to grow and manage growth profitably and retain our key employees;
changes in applicable laws or regulations;
the inability to develop and maintain effective internal controls;
the COVID-19 pandemic;
the inability to attract new customers or upsell/cross sell existing customers;
failure to renew existing customer subscriptions on terms favorable to us;
risks associated with our extensive and expanding international operations;
the inability to develop and market new and enhanced solutions;
the failure of the market for cloud-based SCM solutions to develop as quickly as we expect;
inaccuracies in information sourced for our knowledge databases;
failure to compete successfully in a fragmented and competitive SCM market;
the inability to adequately protect key intellectual property rights or proprietary technology;
the diversion of management’s attention and consumption of resources as a result of potential acquisitions of other companies;
risks associates with our past and prospective acquisitions, including the failure to successfully integrate operations, personnel, systems, technologies
and products of the acquired companies, adverse tax consequences of acquisitions, greater than expected liabilities of the acquired companies and
charges to earnings from acquisitions;
failure to maintain adequate operational and financial resources or raise additional capital or generate sufficient cash flows;
cyber-attacks and security vulnerabilities;
our inability to maintain the listing of our Class A Common Stock on the NYSE; and
certain other factors discussed elsewhere in this 2021 Form 10-K.
For a further discussion of these and other factors that could impact our future results and performance, see Part I, Item 1A., Risk Factors.
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The Business Combination
EXPLANATORY NOTE
On February 4, 2021 (Closing Date), CC Neuberger Principal Holdings I (CCNB1) consummated the Business Combination (as defined below), pursuant to which
it acquired E2open Holdings, LLC and its operating subsidiaries (collectively, E2open) (the acquisition is referred to herein as the Business Combination). In
connection with the closing of the Business Combination, pursuant to the Business Combination Agreement, dated as of October 14, 2020, various entities merged
with and into E2open, with E2open surviving the merger as a direct, wholly-owned subsidiary of CCBN1. CCBN1 changed its name to E2open Parent Holdings,
Inc.
The Annual Report on Form 10-K for the year ended December 31, 2020 for CCNB1 was filed with the SEC on May 5, 2021 and contains a description of the
blank check company prior to the consummation of the Business Combination. As a February 28 year end company, this 2021 Form 10-K describes the operations
of E2open and contains the financial results of E2open for the period both before and after the Business Combination through February 28, 2021.
Further information regarding the Business Combination is set forth in (1) our Definitive Proxy statement filed with the SEC on January 12, 2021 (Proxy
Statement) and (2) our Current Report on Form 8-K filed with the SEC on February 10, 2021.
PART I
Item 1. Business
Company Overview
We are a leading provider of 100% cloud-based, end-to-end SCM software. We generate revenue from the sale of software subscriptions and professional services.
Our software combines networks, data and applications to provide a deeply embedded, mission-critical platform that allows customers to optimize their supply
chain by accelerating growth, reducing costs, increasing visibility and driving improved resiliency. Given the mission-critical nature of our solutions, we maintain
long-term relationships with our customers, which is reflected by our high gross retention and average customer tenure. In aggregate, we serve more than 1,200
customers in over 180 countries across a wide range of end-markets, including technology, consumer, industrial and transportation, among others.
We operate in what we believe is an attractive industry with strong secular tailwinds and a TAM of more than $45 billion. This TAM is comprised of significant
whitespace, which we estimate is more than $1 billion. This opportunity within our existing customer base is largely driven by their current technology solution
which is often a combination of legacy point solutions and home-grown applications, many of which are tied together with manual processes and spreadsheets. As
manufacturing has evolved from brands owning the full production lifecycle to orchestrating disparate manufacturing, distribution and selling processes, supply
chains have grown more complex, increasing demand for software solutions like ours and the need to modernize the existing technology landscape with cloud-
based modern solutions. We believe our fully cloud-based, end-to-end software platform offers a differentiated solution for customers that gives them better value
as compared to solutions offered by some of our competitors.
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Our Platform
Our harmonized SaaS platform brings together networks, data and applications to facilitate end-to-end supply chain visibility across planning, execution and
procurement and delivers a strong value proposition.
Network
Our network combines four distinct, but connected, ecosystems: Demand, Supply, Logistics and Global Trade, which we estimate supports more than 220,000
trading partners and captures more than eight billion transaction data points each year.
Our Demand ecosystem represents the global footprint established by retailers, distributors, re-sellers and those who sell goods primarily through online channels.
We estimate that we process over $2 billion in claims every quarter, more than 40 million channel sales transactions every month and over 94 million channel
inventory transactions every month.
Our Supply ecosystem is comprised of companies and other participants for which we source components and materials and/or provide manufacturing capacity for
the production of goods. We estimate that, at any moment in time, we oversee an average of more than 58 million shipments as well as process an average of over
61 million orders and 17 million invoices for our customers and supply and manufacturing network participants based on samples taken over a 12-month period.
Our Logistics ecosystem includes global logistics services that transport components, raw materials and finished goods across all modes. We estimate that we
facilitate over 26% of global ocean container bookings within this ecosystem in addition to tracking the movement of over 46 million containers every month.
Our Global Trade ecosystem allows participants to automate the global movement of goods and facilitate cross-border transactions for businesses, which we
believe is increasingly important given the velocity with which import and export laws change on a global scale. This ecosystem provides our network with data on
trade regulations across more than 180 countries that we estimate supports annual processing of over 12 million export pre-customs entry lines, 15 million free
trade agreement bill of materials qualifications and 92 million restricted party-list screenings, annually.
Our network connects participants across all of these ecosystems, enabling customers to analyze data, identify problems proactively and optimize asset efficiency.
We are a leading provider with a unique network of ecosystems, and do not rely on third party providers for network information.
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Data
Our proprietary algorithms capture the data within our network ecosystems that feed our solutions to deliver compelling value to our customers. Additionally, our
customers can combine internal and external vendor data with our network to drive informed decision-making based on real-time information. We believe our
ability to capture and harmonize data from our customers and their trading partners in any native format demonstrates the strong capabilities of our software
architecture and integrated data model. We believe that our combination of network ecosystems, data and applications providing end-to-end supply chain visibility
and connecting more than 220,000 trading partners is unique.
Applications
Our end-to-end applications provide artificial intelligence and machine learning-based advanced analytics to help customers gain insights for enhanced decision-
making across supply chain planning, execution and procurement functions. Our applications are organized into seven product families: Channel Shaping, Demand
Sensing, Business Planning, Global Trade Management, Transportation and Logistics, Collaborative Manufacturing and Supply Management.
Channel Shaping allows customers to optimize activity across retail, distributor and online channels, which includes capabilities for partner selection, aligning
market incentives, managing on-shelf availability, tracking sell-through and inventory as well as managing performance incentives.
Demand Sensing utilizes artificial intelligence and machine learning to forecast demand based on historical trends, current sell-through dynamics, weather and
other relevant factors.
Business Planning helps ensure optimized global performance through scenario-based planning and execution algorithms balancing supply, demand, inventory and
financial targets.
Global Trade Management automates import and export processes to enable efficient and compliant cross-border trade while optimizing customs duties and
reducing broker fees.
Transportation and Logistics orchestrates the movement of goods by allowing customers to connect with key stakeholders to optimize carriers, simplify tendering,
track shipments and streamline payments.
Collaborative Manufacturing provides comprehensive visibility into internal and external manufacturing activities by monitoring yields, quality, cycle-
times/utilization and other key indicators to track performance, identify deficiencies and facilitate corrective actions.
Supply Management ensures the continuity of supply by orchestrating procurement, capacity, inventory management and drop-ship fulfilment across multiple-tiers
of the manufacturing process.
Competitive Strengths
We believe the following competitive strengths will contribute to our ongoing success.
Attractive Industry Tailwinds and Large TAM
We participate in the growing SCM software industry. We estimate that the TAM is more than $45 billion across North America and Europe, and we anticipate this
market will continue to grow. Several secular trends are increasing the demand for SCM software, including:
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Complexity of Global Supply Chains
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Brand owners have transitioned from being manufacturers to orchestrators that produce little, but manage a vast network of outsourced trading
partners that support their minute-by-minute operations across channel, manufacturing, supply, global trade and logistics.
As supply chains become increasingly global and complex, SCM software is essential to run supply chains efficiently at scale.
•
Need for Integrating Siloed Data to Drive Decision Making
o Manufacturers are increasingly focused on utilizing disparate data to drive more efficient decision making.
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Historically, data to help manufacturers bring their products to market has existed in silos within various departments of the manufacturers, as well
as across their extended partner ecosystems.
Access to timely and comprehensive data is valuable not just to each department within a manufacturer, but also critical for partners of the
manufacturer to run efficient operations on its behalf.
Brand owners are increasingly focused on applying data from different parts of the supply chain to make more informed manufacturing decisions,
such as using retail demand sensing to forecast required manufacturing output.
Brand owners are increasingly focused on a flexible, multi-modal value proposition spanning carriers, shippers and third-party logistics providers.
Regulatory Environment Complexity
o Manufacturers increasingly need to navigate complex frameworks of regional and local taxes, tariffs and regulatory compliance protocols.
o
SCM software solutions help automate these tasks and reduce the regulatory burden for companies, which will continue to be a strategic priority.
Geographic Consolidation
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Shippers and third-party logistics providers operate in a global environment and want to execute within a single technology platform.
o Many SCM technology solutions have historically had stronger capabilities within the region in which they were initially developed. North
America is the most developed, with Europe served by a smaller number of SCM software solutions while Latin America and Asia-Pacific (APAC)
are comparatively underpenetrated.
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Supply Chain Disruption
o
As a result of disruptions related to COVID-19 and recent events like the Suez Canal blockage, it has become increasingly important to diversify
supply chains to mitigate disruption risk resulting from concentration within a supply chain. The complexity that arises from diversifying a supply
chain and increasing the number of trading partners across more geographies and production facilities drives further demand for SCM software.
We believe that the TAM has approximately 85% whitespace for modern SCM solutions. Many companies currently rely on legacy on premise applications or
homegrown and/or spreadsheet-based solutions created over time, each of which require significant manual effort to achieve end-to-end supply chain visibility.
Moreover, these SCM solutions often rely on latent and one-off point-to-point connections with partners for collecting data. These alternatives provide less value
and are significantly more error prone, creating an attractive competitive dynamic within the industry for modern SCM software providers where there is significant
opportunity to grow without the need to replace an incumbent competitor. We believe there is more than $1 billion of whitespace for the solutions we already offer,
which we believe provides very actionable growth opportunities through expanding our existing customer relationships.
Category-Defining End-to-End Provider of Mission-Critical Software
As businesses have transitioned from being owners of the production lifecycle to orchestrators of discrete manufacturing, distribution and selling processes, they
have increasingly looked to software solutions to manage this growing complexity. However, most SCM software has not been designed to address these
challenges comprehensively, and manufacturers often employ multiple point solutions with siloed data and processes that inhibit visibility, resulting in sub-optimal
decision-making based on inaccurate or outdated information. Our approach, which is built around a cloud-based SaaS platform with end-to-end visibility and real-
time, network-powered data, provides best-of-breed functionality across the supply chain and facilitates optimal supply chain performance.
As described above, we operate a software platform that integrates network ecosystems, data and applications across a harmonized and simplified user interface,
driving a compelling value proposition and return on investment for our customers. This has created a mission-critical software solution and long-term relationships
with customers as evidenced by our high gross retention rate. Additionally, we have been widely recognized as a differentiated leader by Gartner, International
Data Corporation, Nucleus and others in the realm of multi-enterprise solutions, which we believe will be the future of SCM software. In May 2021, E2open was
placed by Gartner in the Leaders quadrant with the highest ability to execute and completeness of vision in its 2021 Magic Quadrant for Multienterprise Supply
Chain Business Networks for the second year in a row.
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Strong Network Effects Enhanced by a Flexible and Integrated Data Model
Our core offerings are underpinned by an integrated data model that facilitates the flow and processing of data for participants across several ecosystems and
applications. This model facilitates low latency, “many-to-one-to-many” data exchange across trading partner ecosystems. The combination of our integrated and
flexible data model along with the four network ecosystems powers our customers’ solutions allowing them to efficiently orchestrate their end-to-end supply
chains. This architecture is designed to ensure that each participant and data source within these ecosystems enhances our applications, which in turn improves the
network and the value we deliver to our customers and participants alike.
Our software architecture and ability to harmonize disparate forms of data create a scalable software platform that can efficiently integrate acquisitions and new
product applications seamlessly into a consolidated and holistic SaaS solution. Our software architecture and this ability has been a driving force behind our robust
track-record of successful acquisition integrations, and we believe our scalable platform will allow us to generate substantial value through tuck-in and
transformative acquisitions in the future.
Importantly, we believe there is incremental value we can create by utilizing the data flowing through our network to develop insights that can further help our
customers as well as other target markets. We plan to work to develop a comprehensive strategy to capture this market opportunity and deepen our relationships
with customers, which has the potential to meaningfully accelerate revenue growth.
Long-Term Relationships with Diversified and Blue-Chip Customer Base with Proven Wallet Share Expansion
We deliver solutions for some of the largest brand owners and manufacturers globally, and we estimate more than 125 of our customers have annual revenues of
over $10 billion. We believe we are mission-critical to our customers’ operations, as evidenced by our gross retention. We possess a diverse customer base
consisting of more than 1,200 clients that spans a broad spectrum of industries including the technology, industrial, consumer and transportation sectors, among
others.
Our customers utilize our solutions to orchestrate their supply chains, which we believe enables them to realize significant value and return on investment. For
example, a leading consumer packaged goods company was able to cut forecast errors by 40% and reduce inventory by 35% using our product suite. They are now
able to leverage our platform to forecast every product using artificial intelligence and machine learning technology. Moreover, a leading high-tech company has
utilized our software to realize $300 million in savings over three years. An additional example includes a high-growth, large-scale consumer technology platform,
which utilized our software to reduce its execution time from eight weeks to seven days, creating substantial opportunity to accelerate their revenue growth in
addition to reducing costs.
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In March 2021, the Suez Canal was blocked for six days after the grounding of Ever Given, a container ship. During this crisis, our customers utilized our tools to
monitor and respond to the situation, making real-time adjustments to their supply chains.
Growth Strategies
We intend to profitably grow our business and create shareholder value through the following strategic initiatives:
Expand Within Existing Customers
As described above, we believe there is significant opportunity to drive growth through expansion of our existing customer relationships. We have an opportunity
to more than triple our revenue over time without any new logos, new products or acquisitions given that we believe there is more than a $1 billion of whitespace.
Our acquisition strategy is focused on acquiring complimentary best-of-breed point solutions to incorporate into our integrated end-to-end platform. As a result, we
currently sell just one SKU to many of our customers, as most acquired companies had only one product to offer their customers. We believe this represents a
significant opportunity to cross-sell additional products to these customers, accelerating growth and strengthening relationships with our installed base, especially
as it grows over time with new customer wins. Importantly, we have a strong track record of achieving growth within our existing customer base. From fiscal 2018
to fiscal 2020, we increased the recurring revenue with a leading consumer packaged goods company, a leading industrial manufacturer, a blue-chip technology
firm and a global hardware and software technology provider by 2.7x, 2.0x, 1.9x and 1.6x, respectively.
Win New Customers
As part of our growth strategy, the second growth lever is winning new customers, which we anticipate accelerating by optimizing our sales force through several
measures. First, we plan to invest in our salesforce by hiring account acquisition experts, funded by identified savings projects across various areas. Additionally,
we plan to pursue strategic partnerships and leverage the networks of our new board of directors to elevate conversations with C-level executives at key targets in
our pipeline. We also intend to utilize
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these relationships and networks as well as our own channel reseller and partner network to accelerate growth through the onboarding of new customers.
Continue Strategic Acquisitions
A third lever of our growth strategy is to continue strategic acquisitions. We plan to utilize a disciplined approach to acquisitions, focusing on opportunities that
will create value by strategically broadening our product offering as well as financially through the realization of integration-related synergies. Our key strategic
acquisition criteria include mission-critical solutions in core markets; complementary cloud applications with minimal product overlap; new customer relationships
in vertical or geographic markets; and TAM, proprietary data and/or network expansion. We have a large pipeline of actionable targets, including one large and
transformative opportunity as well as a larger list of tuck-in opportunities identified in accordance with the criteria described above.
We have a demonstrated track record of success in expanding our product offering and accelerating growth through acquisitions. Through our acquisitions of
INTTRA Inc. (INTTRA) and Amber Road, Inc. (Amber Road), we were able to enhance our value proposition to customers through the addition of ocean shipping
logistics solutions as well as global trade management offerings, both of which contributed to our ability to provide end-to-end supply chain visibility. The
acquisition of INTTRA increased the power of our network ecosystems through the integration of 26% of the global ocean freight data, which further strengthened
the network effects of our software platform and business model. Our acquisition of Amber Road enhanced our platform by providing customers with global trade
management solutions to automate their import and export processes and help improve sourcing decisions across more than 180 countries. Importantly, we also
have a track record of efficiently integrating acquired solutions operationally and financially. Across each of our acquisitions since 2015, we have met or exceeded
our integration-related cost savings targets in each case and with 20% cumulative outperformance as a whole.
Additional Organic Growth Building Blocks
We also believe there are several additional building blocks of organic growth acceleration that provide a margin of safety for achieving our annual steady-state
subscription revenue growth target, including price/value maximization, data and analytics, sales force optimization and partnerships/new sales channels.
Intellectual Property
We consider the protection of our intellectual property and proprietary information to be an important facet of our business. We own a number of trademarks,
patents, copyrights and domain names registered in the United States and abroad that, together, are meaningful to our business, including the E2OPEN, Amber
Road and INTTRA marks (among others). From time to time, we have pursued enforcement of our intellectual property rights against third parties and expect to do
so in the future when cost effective. In addition, we enter into customary confidentiality and invention assignment agreements with employees and contractors
involved in the development of our intellectual property.
Government Regulation and Compliance
We are subject to various laws and regulations of the United States and other jurisdictions, including the European Union, by supranational, national and local
government authorities, including with respect to sanctions compliance, privacy laws, labor and employment laws and other laws. In the United States, our global
sanctions compliance is monitored by the Office of Foreign Assets Control of the U.S. Treasury Department (OFAC), and certain of our subsidiaries have received
a license from OFAC permitting certain business, transactions or other activities involving sanctioned countries. We monitor these regulatory requirements,
including the requirements for retaining our OFAC license and our compliance on a regular basis.
Organizational Structure
Following the completion of the Business Combination, our organizational structure is what is commonly referred to as an umbrella partnership C corporation (or
Up-C) structure. This organizational structure will allow certain owners of E2open Holdings to retain their equity ownership in E2open Holdings, an entity that is
classified as a partnership for U.S. federal income tax purposes, in the form of Common Units, Series 1 RCU and Series 2 RCU. Each continuing owner of E2open
Holdings also holds a number of shares of Class V common stock equal to the number of Common Units held by such owner, which has no economic value, but
which entitles the holder thereof to one vote per share at any meeting of our shareholders. Those investors who, prior to the Business Combination, held Class A
ordinary shares or Class B ordinary shares of CCNB1 and certain other investors and vested option holders will, by contrast, hold their equity ownership in the
Company, a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes.
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Significant Agreements
For information related to our significant agreements, see the Notes to the Consolidated Financial Statements contained herein.
Seasonality
Our quarterly operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our
control, including seasonality in our business as a result of customer budget cycles and customary European vacation schedules, with higher sales in the third and
fourth fiscal quarters. As a result, our past results may not be indicative of our future performance and comparing our operating results on a period-to-period basis
may not be meaningful.
Emerging Growth Company
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (Securities Act), as modified by the Jumpstart Our
Business Startups Act of 2012, as amended (JOBS Act), and we may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under
the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the
extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have
elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or
private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of our financial statements with certain other public companies difficult or impossible because of the potential differences in
accounting standards used.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of CCNB1’s
initial public offering (IPO), (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer,
which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter;
and (2) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period. References herein to
“emerging growth company” shall have the meaning associated with it in the JOBS Act.
Human Capital
We believe our success in delivering 100% cloud-based, end-to-end SCM software relies on our culture, values, and the creativity and commitment of our people.
As of February 28, 2021, we had 2,436 full-time employees with 650 in North America, 207 in Europe and 1,579 in Asia-Pacific, respectively. Our core operating
principles are the foundation for our success:
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be prepared;
build relationships on trust and respect;
be direct and transparent;
learn and operate with intensity;
make and meet commitments reliably;
always add value; and
own the results.
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We invest in our people and strive to maintain a healthy, safe and secure work environment where our employees are treated with respect and dignity. In March
2020, as a result of the COVID-19 pandemic, we transitioned to a fully virtual workplace, accommodating school, family and the health needs of our employees.
We also implemented travel restrictions for all non-essential business in a manner consistent with local standards and risks. We endeavor to create an inclusive and
diverse community that inspires collaboration, integrity, engagement and innovation while offering the opportunity for personal and professional growth.
We use a framework called E2-Connect to encourage a continual open and interactive communication between employees and their manager allowing individual
needs to be recognized and met and company goals to be supported. This allows the employee and their manager to establish a professional development plan that
facilitates personal employee growth while advancing our strategy.
We also work to keep our employees updated on our developments, achievements and new product offerings through various All-Hands meetings with our senior
leadership team, as well as all employees. We consistently work to improve the employee experience by addressing feedback collected through the various surveys
throughout the year, including manager interaction, employee benefits and our response to the COVID-19 pandemic.
To ensure our employees’ personal and professional growth, we developed E2open University where employees can participate in various online training classes.
These training classes are continually developed or new classes are added, so that our employees have a full range of classes available. Each year, our employees
receive role-specific training which includes topics, such as our products overview, anti-harassment, insider trading, cyber security awareness, compliance with our
Code of Business Conduct and other compliance and industry-specific subjects.
Financial Information About Industry Segments
We have one reportable segment consisting of cloud-based, end-to-end SCM software. We internally evaluate our software as one industry segment, and,
accordingly, we do not report segment information.
Available Information
Our website address is www.e2open.com. Electronic copies of our SEC filings are available through the Investor Relations tab as soon as practicable after the
reports are filed with the SEC. Additionally, our Code of Ethics, Corporate Governance Guidelines, Whistleblower Policy and the charters of our Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee are located under the Governance tab of the Investor Relations section of our
website.
Item 1A. Risk Factors
Risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this
2021 Form 10-K and other public statements we make are described below. Based on the information currently known to us, we believe that the matters discussed
below identify the material risk factors affecting our business. However, the risks and uncertainties we face are not limited to those described below. Additional
risks and uncertainties not presently known to us or that we currently believe to be immaterial, but that could later become material, may also adversely affect our
business.
Summary of Risk Factors
The following summarizes risks and uncertainties that could materially adversely affect our business, financial condition, results of operations and stock price. You
should read this summary together with the detailed description of each risk factor contained below.
Risks Related to the Global Pandemic
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The ongoing COVID-19 pandemic, including the resulting global economic uncertainty, measures taken in response to the pandemic and changes to the
way our customers are operating their businesses, could materially impact our business and future results of operations and financial condition.
Risks Related to our Business Model
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Our business depends on customers renewing their subscription agreements. Any decline in renewal or net retention rates could harm our future
operating results.
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Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that result in increased cost of sales,
decreased revenue and lower average selling prices and gross margins, all of which could harm our results of operations.
Given many of our key customers are enterprise customers, our sales cycle is longer and more expensive, and we may encounter pricing pressure and
implementation and configuration challenges.
If we are unable to sell products to new customers or to sell additional products or upgrades to our existing customers, it could adversely affect our
revenue growth and operating results.
Because we generally recognize revenue from subscriptions for our services over the term of the subscription, downturns or upturns in new business may
not be immediately reflected in our operating results.
Because our long-term success depends on our ability to operate our business internationally and increase sales of our products to customers located
outside of the United States, our business is susceptible to risks associated with international operations.
• We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth.
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If we fail to maintain adequate operational and financial resources, particularly if we continue to grow rapidly, we may be unable to execute our business
plan or maintain high levels of service and customer satisfaction.
Cyber-attacks and security vulnerabilities could result in serious harm to our reputation, business and financial condition.
If we fail to integrate our products with a variety of operating systems, software applications, platforms and hardware that are developed by others or
ourselves, our products may become less competitive or obsolete and our results of operations would be harmed.
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• We have a significant amount of goodwill and intangible assets on our balance sheet, and our results of operations may be adversely affected if we fail to
realize the full value of our goodwill and intangible assets.
Risks Related to Macroeconomic and Market Conditions
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Adverse or weakened general economic and market conditions may reduce spending on supply chain technology and information, which could harm our
revenue, results of operations and cash flows.
Our success depends in part on our ability to develop and market new and enhanced solutions modules, and we may not be able to do so, or do so
quickly enough to respond to changes in demand. Even if we anticipate changes in demand, it may be difficult for us to transition existing customers to
new versions of our solutions.
The market for cloud-based SCM solutions is still evolving. If this market develops more slowly than we expect, our revenue may fail to grow or
decline, and we may incur additional operating losses.
• We face intense competition, and our failure to compete successfully would make it difficult for us to add and retain customers and would impede the
growth of our business.
Risks Related to Key Third-Party Relationships
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Interruptions or performance problems associated with our products, including disruptions at any third-party data center upon which we rely, may impair
our ability to support our customers.
The information we source from third parties for inclusion in our knowledge databases may not be accurate and complete, our trade experts may make
errors in interpreting legal and other requirements when processing this information and our trade content may not be updated on a timely basis, which
can expose our customers to fines and other substantial claims and penalties.
Interruptions or performance problems associated with our internal infrastructure, and its reliance on technologies from third parties, may adversely
affect our ability to manage our business and meet reporting obligations.
• We leverage third-party software for use with our solution. Performance issues, errors and defects or failure to successfully integrate or license necessary
third-party software could cause delays, errors or failures of our solution, increases in our expenses and reductions in our sales, which could materially
and adversely affect our business and results of operations.
Risks Related to the Business Combination
Our management team has limited experience managing a public company.
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• We will incur increased costs and obligations as a result of being a public company.
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Failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could
impair our ability to produce timely and accurate financial statements or comply with applicable regulations which could have a material adverse effect
on our business.
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• We qualify as an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure
requirements available to emerging growth companies, it could make our securities less attractive to investors and may make it more difficult to compare
our performance to the performance of other public companies.
The reverse merger with CCNB1 increases the potential for shareholder litigation.
Our Sponsor and its affiliates, together with affiliates of Insight Partners, will beneficially own a significant equity interest in us and their interests may
conflict with us or your interests.
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• We are a holding company and our only material asset is our interest in E2open Holdings, and we are accordingly dependent upon distributions made by
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our subsidiaries to pay taxes, make payments under the Tax Receivable Agreement and pay dividends.
Pursuant to the Tax Receivable Agreement, we are required to pay certain sellers 85% of the tax savings that we realize as a result of increases in tax
basis in E2open Holdings. These payments may be substantial, as well as exceed actual tax benefits. The timing of these payments may also be
accelerated.
Risks Related to Acquisitions
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Acquisitions present many risks that could have a material adverse effect on our business and results of operations.
Risks Related to our Indebtedness
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Our substantial level of indebtedness and significant leverage may materially adversely affect our ability to raise additional capital to fund our operations
and limit our ability to react to changes in the economy or our industry.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Our debt agreements contains restrictions that limit our flexibility in operating our business.
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• We may not be able to generate sufficient cash to service all of our indebtedness, and we may be forced to take other actions to satisfy our obligations
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under our indebtedness, which may not be successful.
A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access
to capital.
Risks Related to Legal and Regulatory
Our use of open source software could negatively affect our ability to sell our products and subject us to possible litigation.
• We may not be able to adequately protect our proprietary and intellectual property rights in our data or technology.
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• We may in the future be sued by third parties for various claims including alleged infringement of proprietary intellectual property rights.
• We are subject to sanctions, anti-corruption, anti-bribery and similar laws, and non-compliance with such laws can subject us to criminal penalties or
significant fines and harm our business and reputation.
Changes in tax laws or regulations in the various tax jurisdictions we are subject to that are applied adversely to us or our paying customers could
increase the costs of our products and services and harm our business.
Our ability to use our net operating loss carryforwards may be subject to limitation.
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Risks Related to Ownership of Our Securities
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A significant portion of our Class A Common Stock is restricted from immediate resale, but it may be sold into the market in the future. This could cause
the market price of our Class A Common Stock to drop significantly, even if our business is doing well.
• We may issue additional shares of our Class A Common Stock or other equity securities without your approval, which would dilute your ownership
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interests and may depress the market price of your shares.
If analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations
regarding our Class A Common Stock, then the price and trading volume of our securities could decline.
• We may amend the terms of the warrants in a manner that may be adverse to holders of the public warrants with the approval by the holders of at least
50% of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened
and the number of shares of Class A Common Stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants may have an adverse effect on the market price of our Class A Common Stock.
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General Risks
Changes in existing financial accounting standards or practices may harm our results of operations.
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• We may be subject to liability if we breach our contracts, and our insurance may be inadequate to cover our losses.
• We may be subject to litigation for any of a variety of claims, which could adversely affect our business, results of operations and financial condition.
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Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our platform and
could harm our business.
Risks Related to the Global Pandemic
The ongoing COVID-19 pandemic, including the resulting global economic uncertainty, measures taken in response to the pandemic and changes to the way
our customers are operating their businesses, could materially impact our business and future results of operations and financial condition.
The COVID-19 pandemic has disrupted the global economy and strained governments, health care systems and businesses. It is difficult to predict the continuing
impact on global economic markets, which ultimate impact will depend upon the efficacy and availability of vaccines and the actions taken by governments and
businesses in response to the pandemic. Adverse market conditions resulting from the spread of COVID-19 could materially adversely affect our business through a
decrease in the rate of spending on software products, our customers’ inability or unwillingness to purchase our offerings; reductions in the amount or duration of
customers’ subscription contracts or increased customer attrition rates. The COVID-19 pandemic could also cause our third-party data center hosting facilities and
cloud computing platform providers, which are critical to our infrastructure, to shut down their business, experience security incidents or experience interference
with the supply chain of hardware required by their systems and services, any of which could materially adversely affect our business.
In response to the COVID-19 pandemic, we have temporarily closed our offices, enabled our employees to work remotely and implemented travel restrictions for
all non-essential business in a manner consistent with local standards and risks. If the COVID-19 pandemic worsens, especially in regions where we have offices,
our business activities could be adversely affected. We may take further actions that alter our business operations as may be required by local, state or federal
authorities or that we determine are in the best interests of our employees. Such measures could negatively affect our sales and marketing efforts, sales cycles,
employee productivity or customer retention, any of which could harm our financial condition and business operations.
Almost 50% of our employees reside in India, that is in the midst of a devastating second wave of COVID-19, recording well over 300,000 new infections each day
so far in May. On May 7, 2021, the country recorded a global record 414,188 new cases. In order to protect our valued Indian employees, we may take further
actions that alter our business operations as may be required by local, state or federal authorities or that we determine are in the best interests of our employees.
These measures could negatively affect our sales and marketing efforts, sales cycles, employee productivity or customer retention, any of which could harm our
financial condition and business operations. Due to the complexity of our products and trained nature of our employees in India, a continued worsening of COVID-
19 in India could negatively affect our strategic sales goals or professional services revenue due to our inability to find temporary workers or back-fill employees to
service our sales team or customers.
To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks
described in this Risk Factors section, including, in particular, risks related to our ability to secure customer renewals, the addition of new customers and increased
revenue from existing customers, risks relating to cyber-attacks and security vulnerabilities and global supply chain disruptions.
Risks Related to our Business Model
Our business depends on customers renewing their subscription agreements. Any decline in renewal or net retention rates could harm our future operating
results.
Approximately 85% of our revenue is recurring and consists of subscription revenue. Our subscription products generally have recurring annual subscription
periods. While many of our subscriptions provide for automatic renewal, our customers may opt-out of automatic renewal and customers have no obligation to
renew a subscription after the expiration of the term. Our customers may or may not renew their subscriptions as a result of a number of factors, including the
general economic downturns due to COVID-19, their satisfaction or dissatisfaction with our products and services, our pricing or pricing structure, the pricing or
capabilities of the products and services offered by our competitors, the effects of economic conditions or reductions in our paying customers’ spending levels. In
addition, our customers may renew for fewer subscriptions, renew for shorter contract lengths if they were previously on multi-year contracts or switch to lower
cost offerings of our products and services.
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It is difficult to accurately predict long-term customer retention. Our customers’ subscription retention rates may decline or fluctuate as a result of a number of
factors, including their level of satisfaction with our products, the prices of our products, the prices of products and services offered by our competitors or
reductions in our customers’ spending levels. If our customers do not renew their subscription arrangements, maintenance or other services agreements or if they
renew them on less favorable terms, our revenue may decline. A substantial portion of our quarterly subscription revenue is attributable to agreements entered into
during previous quarters. As a result, if there is a decline in renewed subscription agreements in any one quarter, only a small portion of the decline will be
reflected in our revenue recognized in that quarter and the rest will be reflected in our revenue recognized in the following four quarters or more.
Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that result in increased cost of sales,
decreased revenue and lower average selling prices and gross margins, all of which could harm our results of operations.
Some of our customers have significant bargaining power when negotiating new licenses or subscriptions or renewals of existing agreements, and they have the
ability to buy similar products from other vendors or develop such systems internally. These customers have and may continue to seek advantageous pricing and
other commercial and performance terms that may require us to develop additional features in the products we sell to them or add complexity to our customer
agreements. Currently, as customers become larger, our pricing model recognizes various factors such as number of products purchased and the penetration of
those products within a customer’s operations. As such, when a customer buys more products, their average cost per product can decline even though the total
revenue from them increases, and, to date, we have generally seen sales to customers increase in proportion to or in excess of any reductions in the cost per product.
However, there can be no guarantee that these results will continue in the future. If we are unable to negotiate renewals with our large customers on favorable
terms, our results of operations could be harmed.
Given many of our key customers are enterprise customers, our sales cycle is longer and more expensive, and we may encounter pricing pressure and
implementation and configuration challenges.
Many of our largest customers are enterprise customers, which means we face longer sales cycles, greater competition, more complex customer due diligence, less
favorable contractual terms and less predictability in completing some of our sales.
Consequently, a target customer’s decision to use our services may be an enterprise-wide decision and, if so, these types of sales require us to provide greater levels
of education regarding the use and benefits of our products and services as well as education regarding privacy and data protection laws and regulations to
prospective customers. In addition, larger enterprise customers may demand more configuration, integration services and features. As a result of these factors, these
sales opportunities may require us to devote greater sales support and professional services resources to individual customers, driving up costs and time required to
complete sales, while potentially requiring us to delay revenue recognition on some of these transactions until the technical or implementation requirements have
been met.
If we are unable to sell products to new customers or to sell additional products or upgrades to our existing customers, it could adversely affect our revenue
growth and operating results.
To increase our revenue, we must add new customers (whether through sales or acquisitions) or sell additional products or upgrades to existing customers. Even if
we capture a significant volume of leads from our digital marketing activities, we must be able to convert those leads into sales of our products to new or existing
customers in order to achieve revenue growth.
We primarily rely on our direct sales force to sell our products to new and existing customers and convert qualified leads into sales. Accordingly, our ability to
achieve significant growth in revenue in the future will depend on our ability to recruit, train and retain sufficient numbers of sales personnel, and on the
productivity of those personnel. Our recent and planned personnel additions may not become as productive as we would like or in a timely manner, and we may be
unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do or plan to do business. If we are unable to sell products
to new customers and additional products or upgrades to our existing customers through our direct sales force or through our channel partners, which supplement
our direct sales force by distributing our products and generating sales opportunities, we may be unable to grow our revenue and our operating results could be
adversely affected.
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Because we generally recognize revenue from subscriptions for our services over the term of the subscription, downturns or upturns in new business may not
be immediately reflected in our operating results.
We generally recognize revenue from customers ratably over the terms of their subscription and support agreements, which are typically 36 months. As a result,
most of the revenue we report in each quarter is the result of subscription and support agreements entered into during previous quarters. Consequently, a decline in
new or renewed subscriptions in any one quarter may not be reflected in our revenue results for that quarter. However, any such decline will negatively impact our
revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our services and potential changes in our attrition
rate, may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenue
through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription and support term.
Because our long-term success depends on our ability to operate our business internationally and increase sales of our products to customers located outside of
the United States, our business is susceptible to risks associated with international operations.
We have significant international operations in India, the United Kingdom, Poland, Germany, Belgium, China, Hong Kong and Malaysia as well as international
operations in other countries. We market and sell our products worldwide. We expect to continue to expand our international operations for the foreseeable future.
The continued international expansion of our operations requires significant management attention and financial resources and results in increased administrative
and compliance costs. Our limited experience in operating our business in certain regions outside the United States increases the risk that our expansion efforts into
those regions may not be successful. In particular, our business model may not be successful in particular countries or regions outside the United States for reasons
that we currently are unable to anticipate. We are subject to risks associated with international sales and operations including, but not limited to:
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fluctuations in currency exchange rates;
the complexity of, or changes in, foreign regulatory requirements and the burdens of complying with a wide variety of foreign laws and different legal
standards;
difficulties in managing the staffing of international operations, including compliance with local labor and employment laws and regulations;
potentially adverse tax consequences, including the complexities of foreign value added tax systems, overlapping tax regimes, restrictions on the
repatriation of earnings and changes in tax rates;
dependence on resellers and distributors to increase customer acquisition or drive localization efforts, including in new or evolving markets, which
resellers and distributors may fail to maintain standards consistent with our brand and reputation;
increased financial accounting and reporting burdens and complexities, including treatment of revenue from international sources;
longer sales and payment cycles and difficulties in collecting accounts receivable;
political, social and economic instability, including war, terrorist attacks, civil unrest and security concerns in general;
reduced or varied protection for intellectual property rights in some countries and the risk of potential theft or compromise of our technology, data or
intellectual property in connection with our international operations, whether by state-sponsored malfeasance or other foreign entities or individuals;
laws and policies of the U.S. and other jurisdictions affecting international trade (including import and export control laws, tariffs and trade barriers);
the risk of U.S. regulation of foreign operations; and
other factors beyond our control such as natural disasters and public health crises, including pandemics.
The occurrence of any one of these risks could negatively affect our international business and, consequently, our operating results. We cannot be certain that the
investment and additional resources required to establish, acquire or integrate operations in other countries will produce desired levels of revenue or profitability. If
we are unable to effectively manage our expansion into additional geographic markets, our financial condition and results of operations could be harmed.
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We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth.
We have experienced organic and acquisition-driven growth in recent periods, and revenue growth in future periods may not be consistent with recent history. We
believe our revenue growth depends on a number of factors, including, but not limited to, our ability to:
• attract new customers;
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renew and grow current customer subscriptions;
introduce and grow adoption of our products and services in new markets;
• adequately expand our sales force and otherwise scale our operations as a business;
• expand the features and capabilities of our platform, including through the creation and use of additional integrations;
• maintain the security and reliability of our platform;
• price and package our products and services effectively;
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successfully compete against established companies and new market entrants;
increase awareness of our brand on a global basis; and
• execute on our acquisition strategy.
We may not be able to successfully implement our strategic initiatives in accordance with our expectations or in the timeframe we desire, which may result in an
adverse impact on our business and financial results. We also expect our operating expenses to increase in future periods, and if our revenue growth does not
increase to offset these anticipated increases in our operating expenses, our business, results of operations and financial condition will be harmed, and we may not
be able to achieve or maintain profitability.
If we fail to maintain adequate operational and financial resources, particularly if we continue to grow rapidly, we may be unable to execute our business plan
or maintain high levels of service and customer satisfaction.
We have experienced, and expect to continue to experience, rapid growth, particularly through acquisitions, which has placed, and may continue to place,
significant demands on our management and our operational and financial resources. Our organizational structure is becoming more complex as we scale our
operational, financial and management controls, as well as our reporting systems and procedures, and expand internationally. As we continue to grow, we face
challenges of integrating, developing, training and motivating a rapidly growing employee base in our various offices around the world and navigating a complex
multi-national regulatory landscape. If we fail to manage our anticipated growth and change in a manner that preserves the functionality of our platforms and
solutions, the quality of our products and services may suffer, which could negatively affect our brand and reputation and harm our ability to attract customers.
To manage growth in our operations and personnel, we need to continue to grow and improve our operational, financial and management controls and our reporting
systems and procedures. We will require significant expenditures and the allocation of valuable management resources to grow and change in these areas. Our
expansion has placed, and our expected future growth will continue to place, a significant strain on our management, customer experience, research and
development, sales and marketing, administrative, financial and other resources.
We anticipate that significant additional investments will be required to scale our operations and increase productivity, address the needs of our customers, further
develop and enhance our products and services, expand into new geographic areas and scale with our overall growth. If additional investments are required due to
significant growth, this will increase our cost base, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short
term.
Cyber-attacks and security vulnerabilities could result in serious harm to our reputation, business and financial condition.
Threats to network and data security are constantly evolving and becoming increasingly diverse and sophisticated. Our products and services, servers and computer
systems and those of third parties that we rely on in our operations could be vulnerable to cybersecurity risks. As such, we may be subject to risks inherent to
companies that process client data for client mission critical systems like SCM solutions.
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We are the target of attempts to identify and exploit system vulnerabilities and/or penetrate or bypass our security measures in order to gain unauthorized access to
our systems. To mitigate these risks, we employ multiple methods at different layers of our systems to defend against intrusion and attack. Despite our efforts to
keep our systems secure and remedy identified vulnerabilities, future attacks could be successful and result in contractual liability to clients or loss of client trust
and ultimately client business.
We may experience breaches of our security measures due to human error, system errors or vulnerabilities. In particular, our platform and the other systems or
networks used in our business may experience an increase in attempted cyber-attacks, targeted intrusion, ransomware and phishing campaigns. We maintain errors,
omission and cyber liability insurance policies covering security and privacy damages. However, we cannot be certain that our coverage will be adequate for
liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.
At present, we believe the regulatory and private action risks related to personal data we process as part of our business-to-business supply chain solutions are low.
We process a limited amount of personal data, typically business contact information, supplied by our clients. Regulations surrounding personal data are rapidly
changing and that makes global compliance challenging and unpredictable. Failure to comply with regulations may subject us to regulatory investigations,
reputational harm, contractual liability to clients and potential liability to data subjects.
If we fail to integrate our products with a variety of operating systems, software applications, platforms and hardware that are developed by others or ourselves,
our products may become less competitive or obsolete and our results of operations would be harmed.
Our products must integrate with a variety of network, hardware and software platforms, and we need to continuously modify and enhance our products to adapt to
changes in hardware, software, networking, browser and database technologies. We believe a significant component of our value proposition to customers is the
ability to optimize and configure our products to integrate with our systems and those of third parties. If we are not able to integrate our products in a meaningful
and efficient manner, demand for our products could decrease and our business and results of operations would be harmed.
In addition, we have a large number of solutions, and maintaining and integrating them effectively requires extensive resources. Our continuing efforts to make our
products more interoperative may not be successful. Failure of our products to operate effectively with future infrastructure platforms and technologies could
reduce the demand for our products, resulting in customer dissatisfaction and harm to our business. If we are unable to respond to changes in a cost-effective
manner, our products may become less marketable, less competitive or obsolete, and our business and results of operations may be harmed.
We have a significant amount of goodwill and intangible assets on our balance sheet, and our results of operations may be adversely affected if we fail to
realize the full value of our goodwill and intangible assets.
We have goodwill of $2,628.6 million and $752.8 million and net intangible assets of $824.9 million and $467.6 million as of February 28, 2021 and February 29,
2020, respectively. In accordance with U.S. GAAP, goodwill and intangible assets with an indefinite life are not amortized but are subject to a periodic impairment
evaluation. Goodwill and acquired intangible assets with an indefinite life are tested for impairment at least annually or when events and circumstances indicate
that fair value of a reporting unit may be below their carrying value. Acquired intangible assets with definite lives are amortized on a straight-line basis over the
estimated period over which we expect to realize economic value related to the intangible asset. In addition, we review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying value of an asset might not be recoverable. If indicators of impairment are present, we evaluate the
carrying value in relation to estimates of future undiscounted cash flows. Our ability to realize the value of the goodwill and intangible assets will depend on the
future cash flows of the businesses we have acquired, which in turn depend in part on how well we have integrated these businesses into our own business.
Judgments made by management relate to the expected useful lives of long-lived assets and our ability to realize undiscounted cash flows of the carrying amounts
of such assets. The accuracy of these judgments may be adversely affected by several factors, including significant:
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underperformance relative to historical or projected future operating results;
changes in the manner of our use of acquired assets or the strategy for our overall business;
negative industry or economic trends; or
decline in our market capitalization relative to net book value for a sustained period.
These types of events or indicators and the resulting impairment analysis could result in impairment charges in the future. If we are not able to realize the value of
the goodwill and intangible assets, we may be required to incur material charges relating to the impairment of those assets. Such impairment charges could
materially and adversely affect our business, results of operations and financial condition.
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Risks Related to Macroeconomic and Market Conditions
Adverse or weakened general economic and market conditions may reduce spending on supply chain technology and information, which could harm our
revenue, results of operations and cash flows.
Our revenue, results of operations and cash flows depend on the overall demand for and use of technology and information for global SCM, which depends in part
on the amount of spending allocated by our customers or potential customers on supply chain technology and information. This spending depends on worldwide
economic and geopolitical conditions. The U.S. and other key international economies have experienced cyclical downturns from time to time in which economic
activity was impacted by falling demand for a variety of goods and services; restricted credit; poor liquidity; reduced corporate profitability; volatility in credit,
equity and foreign exchange markets; bankruptcies; pandemics such as COVID-19; and overall economic uncertainty. These economic conditions can arise
suddenly, and the full impact of such conditions often remains uncertain. In addition, geopolitical developments and potential trade wars can increase levels of
political and economic unpredictability globally and increase the volatility of global financial markets. Further actions or inactions of the U.S. or other major
national governments, including the United Kingdom’s 2016 vote in favor of exiting the European Union, may also impact economic conditions, which could result
in financial market disruptions or an economic downturn.
Concerns about the systemic impact of a recession in the United States or globally, energy costs, geopolitical issues or the availability and cost of credit could lead
to increased market volatility, decreased consumer confidence and diminished growth expectations in the U.S. economy and abroad, which in turn could affect the
rate of information technology spending and adversely affect our customers’ ability or willingness to purchase our services, delay prospective customers’
purchasing decisions, reduce the value or duration of their subscription contracts or affect attrition rates, all of which could adversely affect our future sales and
operating results. Prolonged economic slowdowns may result in requests to renegotiate existing contracts on less advantageous terms to us than those currently in
place, payment defaults on existing contracts or non-renewal at the end of a contract term.
Our success depends in part on our ability to develop and market new and enhanced solutions modules, and we may not be able to do so, or do so quickly
enough to respond to changes in demand. Even if we anticipate changes in demand, it may be difficult for us to transition existing customers to new versions of
our solutions.
Our success depends in part on our ability to develop and market new and enhanced solutions modules, and to do so on a timely basis. Successful module
development and marketing depends on numerous factors, including anticipating customer requirements, changes in technology requirements, our ability to
differentiate our solutions from those of our competitors and market acceptance of our solutions. Enterprises are requiring their software application vendors to
provide ever increasing levels of functionality and broader offerings. Moreover, our industry is characterized by rapid evolution and shifts in technology and
customer needs. We may not be able to develop and market new or enhanced modules in a timely or cost-effective manner, or at all. Our solutions also may not
achieve market acceptance or correctly anticipate technological changes or the changing needs of our customers or potential customers.
In addition, even if we correctly anticipate changes in technology or demand, it might be difficult for us to transition existing customers to new versions of our
solutions. Such transitions or upgrades may require considerable professional services effort and expense, and customers may choose to discontinue using our
solutions rather than proceed with a lengthy and expensive upgrade. If customers fail to accept new versions of our solution, if our newest solutions contain errors
or if we expend too many resources supporting multiple versions of our solutions, we may suffer a material adverse effect on our business, financial position,
results of operations and cash flows.
The market for cloud-based SCM solutions is still evolving. If this market develops more slowly than we expect, our revenue may fail to grow or decline, and we
may incur additional operating losses.
We derive, and expect to continue to derive, substantially all of our revenue from providing a cloud-based SCM platform, solutions and related services. The
market for cloud-based SCM solutions is still evolving and it is uncertain whether this platform and solutions will sustain high levels of demand and market
acceptance. Our success will depend on the willingness of companies to accept our cloud-based SCM platform and solutions as an alternative to manual processes,
traditional enterprise resource planning software and internally-developed SCM solutions. Some customers may be reluctant or unwilling to use our cloud-based
SCM platform or solutions for a number of reasons, including data privacy concerns, data and network security concerns and existing investments in SCM
technology.
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Traditional approaches to SCM have required, among other things, purchasing hardware and licensing software. Because these traditional approaches often require
significant initial investments to purchase the necessary technology and to establish systems that comply with customers’ unique requirements, companies may be
unwilling to abandon their current solutions for our cloud-based SCM platform and solutions. Other factors that may limit market acceptance of our platform and
solutions include:
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our ability to maintain high levels of customer satisfaction;
our ability to maintain continuity of service for all users of our solutions;
the price, performance and availability of competing solutions; and
our ability to address companies’ confidentiality concerns about information stored outside of their premises.
If companies do not perceive the benefits of our cloud-based SCM platform or solutions or if companies are unwilling to accept our platform and solutions as an
alternative to traditional approaches, the market for our platform and solutions might not continue to develop or might develop more slowly than we expect, either
of which could significantly adversely affect our revenues and growth prospects.
We face intense competition, and our failure to compete successfully would make it difficult for us to add and retain customers and would impede the growth of
our business.
The SCM market is fragmented, competitive and rapidly evolving. We compete with other cloud-based SCM vendors, traditional enterprise resource planning
vendors such SAP and Oracle and other service providers as well as with solutions developed internally by enterprises seeking to manage their global supply chains
and global trade. Some of our actual and potential competitors may enjoy competitive advantages over us, such as greater name recognition, more varied offerings
and larger marketing budgets as well as greater financial, technical and other resources. Furthermore, some competitors may have best-of-breed solutions to
problems created by the unique trading requirements of particular countries, industries and/or business processes. As a result, our competitors may be able to
respond more quickly than we can to new or changing opportunities, technologies, standards or customer requirements or devote greater resources to the promotion
and sale of their products and services than we can.
The intensity of competition in the SCM market has resulted in pricing pressure as the market has developed, and our competitors very frequently offer substantial
price discounts for their products. We expect the intensity of competition to increase in the future as existing competitors develop their capabilities and as new
companies, which could include one or more large software or trade content providers, enter the market. Increased competition could result in additional pricing
pressure, reduced sales, shorter term lengths for customer contracts, lower margins or the failure of our solutions to achieve or maintain broad market acceptance. If
we are unable to compete effectively, it will be difficult for us to maintain our pricing rates and add or retain customers, and our business, financial condition and
results of operations will be harmed.
Risks Related to Key Third-Party Relationships
Interruptions or performance problems associated with our products, including disruptions at any third-party data center upon which we rely, may impair our
ability to support our customers.
Our continued growth depends in part on the ability of our existing and potential customers to access our websites, software or cloud-based products within an
acceptable amount of time. We have experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety
of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our website
simultaneously, denial of service, fraud or security attacks. In some instances, we may not be able to identify the cause or causes of these website performance
problems within an acceptable period of time. It may become increasingly difficult to maintain and improve our website performance, especially during peak usage
times and as our user traffic increases. If our websites are unavailable or if our customers are unable to access our software or cloud-based products within a
reasonable amount of time, or at all, our business would be negatively affected. Additionally, our data centers and networks and third-party data centers and
networks may experience technical failures and downtime, may fail to distribute appropriate updates or may fail to meet the increased requirements of a growing
customer base.
We provide certain of our solutions through third-party data center hosting facilities located in the United States and other countries. While we control and have
access to our servers and all of the components of our network that are located in such third-party data centers, we do not control the operation of these facilities.
Additionally, some of these data centers could be temporarily or permanently impacted by natural disasters, including wildfires and earthquakes. Following
expiration of the current agreement terms, the owners of the data center facilities have no obligation to renew their agreements with us on commercially reasonable
terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if one of our data center operators is acquired, we may be
required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and possible service interruptions in
connection with doing so.
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The information we source from third parties for inclusion in our knowledge databases may not be accurate and complete, our trade experts may make errors
in interpreting legal and other requirements when processing this information and our trade content may not be updated on a timely basis, which can expose
our customers to fines and other substantial claims and penalties.
Our customers often use our solutions as a system of record and many of our customers are subject to regulation of their products, services and activities. Our
knowledge library includes trade content sourced from government agencies and transportation carriers in numerous countries. It is often sourced from text
documents and includes import and export regulations, shipping documents, preferential duties and taxes, specifications for free trade agreements, transportation
rates, sailing schedules, embargoed country and restricted party lists and harmonized tariff codes. The information in these text documents may not be timely,
accurate or complete. Our team of trade experts transforms these documents into a normalized and propriety knowledgebase which is interpretable by software. Our
trade experts have to interpret the legal and other requirements contained in the source documents, and we can provide no assurances that our trade experts do not
make errors in the interpretation of these requirements. Furthermore, rules and regulations and other trade content used in our solutions change constantly, and we
must continuously update our knowledge library. Maintaining a complete and accurate knowledge library is time-consuming and costly, and we can provide no
assurances that our specialists will always make appropriate updates to the library on a timely basis. Errors or defects in updating the trade content we provide to
our customers and any defects or errors in, or failure of, our software, hardware or systems, can result in an inability to process transactions in a timely manner or
lead to violations that could expose our customers to fines and other substantial claims and penalties and involve criminal liability. In addition, these errors and
delays could damage our reputation with both existing and new customers and result in lost customers and decreased revenue, which could materially and adversely
affect our business, revenue and results of operations.
Any of these problems may enable our customers to terminate our agreements, require us to issue credits or refunds and subject us to product liability, breach of
warranty or other contractual claims. We also may be required to indemnify our customers or third parties as a result of any of these problems. Any provisions in
our customer agreements intended to limit liability may not be sufficient to protect us against any such claims. Insurance may not be available on acceptable terms,
or at all. In addition, any insurance we do have may not cover claims related to specific defects, errors, failures or delays; may not cover indirect or consequential
damages; and may be inadequate. Defending a suit, regardless of its merit, could be costly and divert management’s attention. In general, losses from customers
terminating their agreements with us and our cost of defending claims resulting from defects, errors, failures or delays might be substantial and could have a
material adverse effect on our business, financial position, results of operations and cash flows.
Interruptions or performance problems associated with our internal infrastructure, and its reliance on technologies from third parties, may adversely affect our
ability to manage our business and meet reporting obligations.
Currently, we use NetSuite to manage our financial processes and other third-party vendors to manage sales, online marketing and web services. We believe the
availability of these services is essential to the management of our high-volume, transaction-oriented business model. As we expand our operations, we expect to
utilize additional systems and service providers that may also be essential to managing our business. Although the systems and services that we require are typically
available from a number of providers, it is time-consuming and costly to qualify and implement these relationships. Therefore, if one or more of our providers
suffer an interruption in their business; experience delays, disruptions or quality-control problems in their operations; or we have to change or add additional
systems and services, our ability to manage our business and produce timely and accurate financial statements would suffer.
We leverage third-party software for use with our solution. Performance issues, errors and defects or failure to successfully integrate or license necessary
third-party software could cause delays, errors or failures of our solution, increases in our expenses and reductions in our sales, which could materially and
adversely affect our business and results of operations.
We use software licensed from a variety of third parties in connection with the operation of our products. Any performance issues, errors, bugs or defects in third-
party software could result in errors or a failure of our products, which could adversely affect our business and results of operations. In the future, we might need to
license other software to enhance our solution and meet evolving customer demands and requirements. Any limitations in our ability to use third-party software
could significantly increase our expenses and otherwise result in delays, a reduction in functionality or errors or failures of our solution until equivalent technology
or content is either developed by us or, if available, identified, obtained through purchase or license, and integrated into our solution. In addition, third-party
licenses may expose us to increased risks, including risks associated with the integration of new technology, the diversion of resources from the development of our
own proprietary technology and our inability to generate revenues from new technology sufficient to offset associated acquisition and maintenance costs, all of
which may increase our expenses and materially and adversely affect our business and results of operations.
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Risks Related to the Business Combination
Our management team has limited experience managing a public company.
Some members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying
with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a
public company that is subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of
securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their
attention away from the day-to-day management of our business, which could harm our business, results of operations and financial condition.
We will incur increased costs and obligations as a result of being a public company.
As a result of the Business Combination, we are required to comply with certain corporate governance and financial reporting practices and policies required of a
publicly traded company. As a publicly traded company, we will incur significant legal, accounting and other expenses that we were not required to incur in the
recent past. In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd Frank Wall
Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, as well as under the Sarbanes-Oxley Act,
the Jobs Act and the rules and regulations of the SEC and national securities exchanges have increased the costs and the time that the board of directors and
management must devote to complying with these rules and regulations. We expect these rules and regulations to increase our legal and financial compliance costs
and lead to a diversion of management’s time and attention from revenue generating activities.
Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth
strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to
our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a publicly traded company. However, the
measures we take may not be sufficient to satisfy our obligations as a publicly traded company.
Failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could impair our
ability to produce timely and accurate financial statements or comply with applicable regulations which could have a material adverse effect on our business.
As a public company, we have significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective
internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to
expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company, and we are still in
the process of generating a mature system of internal controls and integration across business systems. If we are unable to establish or maintain appropriate internal
financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our
consolidated financial statements and harm our operating results.
Pursuant to Section 404, we are required to furnish a report by our management on the effectiveness of our internal control over financial reporting, including an
attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain an emerging
growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public
accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal
control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage
outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve
control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement
process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be
able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an
adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
In addition to our results determined in accordance with U.S. GAAP, we believe certain non-GAAP measures may be useful in evaluating our operating
performance. We present certain non-GAAP financial measures in this 2021 Form 10-K and intend to continue to present certain non-GAAP financial measures in
future filings with the SEC and other public statements. Any failure to accurately report and present our non-GAAP financial measures could cause investors to
lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A Common Stock.
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Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory
consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules, which may result in a breach of the covenants under existing
or future financing arrangements. There also could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our
financial statements. Confidence in the reliability of our financial statements also could suffer if we or our independent registered public accounting firm continue
to report a material weakness in our internal controls over financial reporting. This could materially adversely affect us and lead to a decline in the market price of
our Class A Common Stock.
We qualify as an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure
requirements available to emerging growth companies, it could make our securities less attractive to investors and may make it more difficult to compare our
performance to the performance of other public companies.
We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we are eligible for and
intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies
for as long as we continue to be an emerging growth company, including (1) the exemption from the auditor attestation requirements with respect to internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (2) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute
voting requirements and (3) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will remain an
emerging growth company until the earliest of (1) the last day of the fiscal year in which the market value of the shares of our common stock that are held by non-
affiliates exceeds $700 million as of June 30 of that fiscal year, (2) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or
more during such fiscal year, (3) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (4) the last day of
the fiscal year following the fifth anniversary of the date of the first sale of common stock.
We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less
attractive as a result, there may be a less of an active trading market for our common shares and our share price may be more volatile.
The reverse merger with CCNB1 increases the potential for shareholder litigation.
We went public via the Business Combination with CCNB1, a special purpose acquisition company (SPAC). The popularity of going public via a reverse merger
with a SPAC has resulted in a corresponding increase in the number of shareholder lawsuits and increased activity at the SEC relating to SPACs. In recent days, the
SEC has opened an inquiry seeking information on how underwriters are managing the risks involved in SPACs, and the SEC’s Division of Corporation Finance
and acting chief accountant have issued two separate public statements on certain accounting, financial reporting and governance issues that should be considered
in connection with SPAC-related mergers. This increase in activity by SEC Staff comes on the heels of nearly two dozen federal securities class action filings,
several SEC investor alerts and earlier guidance from the Division of Corporation Finance. The surge in litigation and regulatory interest is likely to continue and
expand throughout 2021 and beyond.
With the increase in the use of SPACs comes an increase in SPAC shareholder lawsuits filed after announcements of mergers between SPACs and their target
companies. According to data compiled by Stanford University, shareholders have filed 21 securities class actions lawsuits involving SPACs since 2019, with eight
of these filings occurring in 2021. Any claim against us, regardless of its merit, could be costly, divert management’s attention and operational resources and harm
our reputation. As litigation is inherently unpredictable, we cannot assure you that any potential claims or disputes will not have a material adverse effect on our
business, results of operations and financial condition. Any claims or litigation, even if fully indemnified or insured, could make it more difficult to compete
effectively or to obtain adequate insurance in the future.
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Our Sponsor and its affiliates, together with affiliates of Insight Partners, will beneficially own a significant equity interest in us and their interests may
conflict with us or your interests.
Our Sponsor, Insight Partners and their respective affiliates collectively control approximately 53% of our voting equity. As a result, they have significant influence
over our decisions to enter into any corporate transaction. In addition, affiliates of our Sponsor and Insight Partners are each in the business of making investments
in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Our Sponsor, Insight Partners and their respective
affiliates may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available
to us. Our certificate of incorporation provides that certain parties may engage in competitive businesses and renounces any entitlement to certain corporate
opportunities offered to the private placement investors or any of their managers, officers, directors, equity holders, members, principals, affiliates and subsidiaries
(other than us and our subsidiaries) that are not expressly offered to them in their capacities as our directors or officers. The certificate of incorporation also
provides that certain parties or any of their managers, officers, directors, equity holders, members, principals, affiliates and subsidiaries (other than us and our
subsidiaries) do not have any fiduciary duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us or any
of our subsidiaries.
We are a holding company and our only material asset is our interest in E2open Holdings, and we are accordingly dependent upon distributions made by our
subsidiaries to pay taxes, make payments under the Tax Receivable Agreement and pay dividends.
We are a holding company with no material assets other than our ownership of the Common Units and RCUs and our managing member interest in E2open
Holdings. As a result, we have no independent means of generating revenue or cash flow. Our ability to pay taxes, make payments under the Tax Receivable
Agreement and pay dividends will depend on the financial results and cash flows of E2open Holdings and the distributions we receive. Deterioration in the
financial condition, earnings or cash flow of E2open Holdings for any reason could limit or impair E2open Holdings’ ability to pay such distributions. Additionally,
to the extent that we need funds and E2open Holdings is restricted from making such distributions under applicable law or regulation or under the terms of any
financing arrangements, or E2open Holdings is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition.
E2open Holdings is treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income
tax. Instead, taxable income will be allocated to holders of Common Units. Accordingly, we are required to pay income taxes on our allocable share of any net
taxable income of E2open Holdings. Under the terms of the Third Company Agreement, E2open Holdings is obligated to make tax distributions to holders of
Common Units (including us) calculated at certain assumed tax rates. In addition to income taxes, we incur expenses related to our operations, including payment
obligations under the Tax Receivable Agreement, which could be significant, of which some will be reimbursed by E2open Holdings (excluding payment
obligations under the Tax Receivable Agreement). See Tax Receivable Agreement under the caption Significant Agreements in Part I, Item 1., Business. We intend
to cause E2open Holdings to make ordinary distributions on a pro rata basis and tax distributions (which, in certain circumstances, may be made on a non-pro rata
basis to holders of Common Units in amounts sufficient to cover all applicable taxes, relevant operating expenses, payments under the Tax Receivable Agreement
and dividends, if any, declared by us. However, as discussed below, E2open Holdings’ ability to make such distributions may be subject to various limitations and
restrictions including, but not limited to, retention of amounts necessary to satisfy E2open’s obligations and restrictions on distributions that would violate any
applicable restrictions contained in E2open Holdings’ debt agreements, or any applicable law, or that would have the effect of rendering E2open Holdings
insolvent. To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue
interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable
Agreement, and therefore accelerate payments under the Tax Receivable Agreement, which could be substantial.
We anticipate that the distributions received from E2open Holdings may, in certain periods, exceed our actual tax liabilities and obligations to make payments
under the Tax Receivable Agreement. Our board of directors, in its sole discretion, may make any determination from time to time with respect to the use of any
such excess cash so accumulated, which may include, among other uses, to pay dividends on our Class A Common Stock. We have no obligation to distribute such
cash (or other available cash other than any declared dividend) to our stockholders. See Dividends in Part II, Item 5., Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities.
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Dividends on our common stock, if any, will be paid at the discretion of our board of directors, which will consider, among other things, our available cash,
available borrowings and other funds legally available therefor, considering the retention of any amounts necessary to satisfy our obligations that will not be
reimbursed by E2open Holdings, including taxes and amounts payable under the Tax Receivable Agreement and any restrictions in the applicable bank financing
agreements. Financing arrangements may include restrictive covenants that restrict our ability to pay dividends or make other distributions to our stockholders. In
addition, E2open Holdings is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution,
after giving effect to the distribution, liabilities of E2open Holdings (with certain exceptions) exceed the fair value of its assets. E2open Holdings’ subsidiaries are
generally subject to similar legal limitations on their ability to make distributions to E2open Holdings. If E2open does not have sufficient funds to make
distributions, our ability to declare and pay cash dividends may also be restricted or impaired.
Pursuant to the Tax Receivable Agreement, we are required to pay certain sellers 85% of the tax savings that we realize as a result of increases in tax basis in
E2open Holdings. These payments may be substantial, as well as exceed actual tax benefits. The timing of these payments may also be accelerated.
The sellers sold E2open Holdings units for the consideration paid pursuant to the Business Combination Agreement and certain sellers, may in the future exchange
their Common Units for shares of our Class A Common Stock (or cash) pursuant to the Third Company Agreement. These sales, purchases, redemptions and
exchanges are expected to result in increases in our allocable share of the tax basis of the tangible and intangible assets of E2open Holdings, which may increase
(for income tax purposes) depreciation and amortization deductions to which we are entitled. In addition, as a result of certain mergers within the transaction, we
may inherit certain pre-existing tax attributes.
The Tax Receivable Agreement, which generally provides for the payment by us of 85% of certain tax benefits, if any, that we realize (or in certain cases are
deemed to realize) as a result of these increases in tax basis and certain pre-existing tax attributes of the certain sellers and tax benefits related to entering into the
Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. These payments are our obligations and not
E2open Holdings. The actual increase in our allocable share of E2open Holdings’ tax basis in their assets, the availability of pre-existing tax attributes of certain
sellers, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing
of exchanges, the market price of the Class A Common Stock at the time of the exchange, the extent to which such exchanges are taxable and the amount and
timing of the recognition of our income. While many of the factors that will determine the amount of payments that we will make under the Tax Receivable
Agreement are outside of our control, we expect that the payments we will make under the Tax Receivable Agreement will be substantial and could have a material
adverse effect on our financial condition. Any payments we make under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that
might have otherwise been available to us. To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the
unpaid amounts will be deferred and will accrue interest until paid; however, nonpayment for a specified period may constitute a material breach of a material
obligation under the Tax Receivable Agreement, and therefore accelerate payments due under the Tax Receivable Agreement as further described below.
Furthermore, our future obligation to make payments under the Tax Receivable Agreement could make us a less attractive target for an acquisition, particularly in
the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the Tax Receivable Agreement. See Tax Receivable
Agreement under the caption Significant Agreements in Part I, Item 1., Business.
Payments under the Tax Receivable Agreement will be based on our tax reporting positions, and the IRS or another taxing authority may challenge all or any part
of the tax basis increases, the amount or availability of pre-existing tax attributes of certain sellers and other tax positions that we take, and a court may sustain such
a challenge. In the event that any tax benefits we initially claimed are disallowed as a result of such a challenge, the Sellers and the exchanging holders will not be
required to reimburse us for any excess payments that may have been previously made under the Tax Receivable Agreement. Rather, excess payments made to
such holders will be netted against any future cash payments we are required to make, if any, after the determination of such excess. A challenge to any tax benefits
claimed by us may not arise for a number of years following the time payments begin to be made in respect of such benefits or, even if challenged soon thereafter,
such excess cash payment may be greater than the amount of future cash payments that we might otherwise be required to make under the terms of the Tax
Receivable Agreement and, as a result, there might not be sufficient future cash payments against which to net such excess. As a result, in certain circumstances we
could make payments under the Tax Receivable Agreement in excess of our actual income or franchise tax savings, which could materially impair our financial
condition.
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Moreover, the Tax Receivable Agreement provides that, in the event that we exercise our early termination rights, fail to make timely payment or materially breach
the Tax Receivable Agreement or if there is a change of control, our obligations under the Tax Receivable Agreement will accelerate and we will be required to
make a lump-sum cash payment to the sellers and/or other applicable parties equal to the present value of all forecasted future payments that would have otherwise
been made under the Tax Receivable Agreement. The lump-sum payment could be substantial and could exceed the actual tax benefits that we realize subsequent
to such payment, which may cause a material negative effect on our liquidity.
Furthermore, our obligations to make payments under the Tax Receivable Agreement could also have the effect of delaying, deferring or preventing certain
mergers, asset sales, other forms of business combinations or other changes of control.
Risks Related to Acquisitions
Acquisitions present many risks that could have a material adverse effect on our business and results of operations.
To expand our business, we have made numerous acquisitions and expect to continue making similar acquisitions and possibly larger acquisitions as part of our
growth strategy. The success of our growth strategy will depend on our ability to identify, negotiate, complete and integrate acquisitions and, if necessary, to obtain
satisfactory debt or equity financing to fund those acquisitions. Acquisitions are inherently risky, and any acquisitions we complete may not be successful.
Additionally, acquisitions made entirely or partially for cash will reduce our cash reserves or require us to incur additional debt. We may seek to obtain additional
cash to fund an acquisition by selling equity or debt securities. We may be unable to secure the equity or debt funding necessary to finance future acquisitions on
terms that are acceptable to us. If we finance acquisitions by issuing equity or convertible debt securities, our existing stockholders will experience ownership
dilution.
Our past acquisitions and any future mergers and acquisitions involve numerous risks, including, but not limited to, the following:
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difficulties in integrating and managing the operations, personnel, systems, technologies and products of the companies we acquire;
failure to achieve the projected cost savings due to difficulties integrating the acquired business;
failure to uncover liabilities or adverse operating issues, or both, through due diligence or the failure to properly estimate the extent of such liabilities
prior to the acquisition;
our inability to maintain the key business relationships and reputations of the businesses we acquire;
our inability to increase revenue from an acquisition, including our failure to drive demand in our existing customer base for acquired products and our
failure to obtain contract renewals or upgrades and new product sales from customers of the acquired businesses;
unanticipated charges to our operating results based on the timing and size of our acquisitions and the extent of integration activities;
potential negative perceptions of our acquisitions by customers, financial markets or investors;
failure to obtain required approvals from governmental authorities under competition and antitrust laws on a timely basis, if at all, which could, among
other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an
acquisition;
potential increases in our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition;
our inability to apply and maintain our internal standards, controls, procedures and policies to acquired businesses;
potential loss of key employees of the companies we acquire;
difficulties in increasing or maintaining security standards for acquired technology consistent with our other services and related costs;
challenges converting the acquired company’s revenue recognition policies and forecasting the related revenues, including subscription-based revenues,
as well as appropriate allocation of the customer consideration to the individual deliverables; and
inadequate protection of acquired intellectual property rights.
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The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the
case of a larger acquisition or substantially concurrent acquisitions.
Risks Related to our Indebtedness
Our substantial level of indebtedness and significant leverage may materially adversely affect our ability to raise additional capital to fund our operations and
limit our ability to react to changes in the economy or our industry.
We have a substantial amount of indebtedness and are significantly leveraged. As of February 28, 2021, we had outstanding indebtedness in the principal amount of
$525.7 million. In addition, we have an additional $75.0 million available for borrowing under our senior secured revolving credit facility. Our substantial level of
indebtedness increases the possibility that we may be unable to generate sufficient cash to pay the principal, interest or other amounts due in respect of our
indebtedness. Our substantial indebtedness, combined with our other financial obligations and contractual commitments, may have a material adverse impact on us
and our business. For example, it could:
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make it more difficult for us to satisfy obligations with respect to our indebtedness and any repurchase obligations that may arise thereunder;
require us to dedicate a substantial portion of cash flow from operations to payments on our indebtedness, thereby reducing funds available for working
capital, capital expenditures, acquisitions, research and development and other purposes;
increase our vulnerability to adverse economic, market and industry conditions and limit our flexibility in planning for, or reacting to, these conditions;
expose us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;
limit our flexibility to adjust to changing market conditions and our ability to withstand competitive pressures, and we may be more vulnerable to a
downturn in general economic or industry conditions or be unable to carry out capital spending that is necessary or important to our growth strategy;
limit our ability to borrow additional funds or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions,
research and development and other corporate purposes; and
limit our ability to compete with others who are not as highly-leveraged.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
All of the borrowings under the senior secured credit facilities bear interest at variable rates. As a result, an increase in interest rates, whether due to an increase in
market interest rates or an increase in our own cost of borrowing, would increase the cost of servicing our debt even though the amount borrowed remained the
same resulting in our net income and cash flows, including cash available for servicing our indebtedness, to decrease correspondingly. The impact of such an
increase would be more significant than it would be for some other companies because of our substantial debt. In the future, we may enter into interest rate swaps
that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps
with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.
Our debt agreements contains restrictions that limit our flexibility in operating our business.
The senior secured credit facilities contain various covenants that limit our ability to engage in specified types of transactions, including, among other things:
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incur additional indebtedness or issue certain preferred shares;
pay certain dividends or make certain distributions on capital stock or repurchase or redeem capital stock;
make certain loans, investments or other restricted payments, including certain payments with respect to subordinated indebtedness;
transfer or sell certain assets;
enter into certain sale and leaseback transactions;
incur certain liens;
guarantee indebtedness or incur other contingent obligations;
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consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
engage in certain transactions with our affiliates.
In addition, under the senior secured credit facilities, we are required to satisfy specified financial ratios, including a first-lien secured debt leverage ratio. Our
ability to meet those financial ratios can be affected by events beyond our control, and we may not be able to meet those ratios and tests.
A breach of the covenants under our credit agreement could result in an event of default under the applicable indebtedness. Such default may allow the creditors to
accelerate the related debt. In addition, an event of default under the credit agreement would permit the lenders to terminate all commitments to extend further
credit under that agreement. Furthermore, if we were unable to repay the amounts due and payable under the credit agreement, those lenders could proceed against
the collateral granted to them to secure such indebtedness. A significant portion of our indebtedness could become immediately due and payable. We cannot be
certain whether we would have, or would be able to obtain, sufficient funds to make these accelerated payments. If any such indebtedness is accelerated, our assets
may not be sufficient to repay in full such indebtedness and our other indebtedness.
We may not be able to generate sufficient cash to service all of our indebtedness, and we may be forced to take other actions to satisfy our obligations under our
indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which in turn are
subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a
level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forced to
reduce or delay investments and capital expenditures or to sell assets, seek additional capital or restructure or refinance our indebtedness. Our ability to restructure
or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher
interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt
instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding
indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence
of such cash flows and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt
service and other obligations. Our credit facilities restrict E2open Holdings’ and our restricted subsidiaries’ ability to dispose of assets and use the proceeds from
the disposition. We may not be able to complete those dispositions or obtain the proceeds that we could realize from them and these proceeds may not be adequate
to meet any debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our scheduled debt service
obligations.
A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to
capital.
Our debt currently has a non-investment grade rating, and any rating assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s
judgment, future circumstances relating to the basis of the rating, such as adverse changes in our performance under assorted financial metrics and other measures
of financial strength, our business and financial risk, our industry or other factors determined by such rating agency, so warrant. There can be no assurances that our
credit ratings or outlook will not be lowered in the future in response to adverse changes in these metrics and factors caused by our operating results or by actions
that we take, that reduce our profitability, or that require us to incur additional indebtedness for items such as substantial acquisitions, significant increases in costs
and capital spending in security and IT systems, significant costs related to settlements of litigation or regulatory requirements or by returning excess cash to
shareholders through dividends. Consequently, real or anticipated changes in our credit rating will generally affect the market value of our indebtedness.
Additionally, credit ratings may not reflect the potential effect of risks relating to the structure of our indebtedness. Any future lowering of our ratings likely would
make it more difficult or more expensive for us to obtain additional debt financing and may reduce our profitability.
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Risks Related to Legal and Regulatory
We may not be able to adequately protect our proprietary and intellectual property rights in our data or technology.
We may be unsuccessful in adequately protecting our intellectual property. No assurance can be given that confidentiality, non-disclosure or invention assignment
agreements with employees, consultants or other parties will not be breached and will otherwise be effective in controlling access to and distribution of our
platform or solutions, or certain aspects of our platform or solutions and proprietary information. Further, these agreements do not prevent our competitors from
independently developing technologies that are substantially equivalent or superior to our platform or solutions. Additionally, certain unauthorized use of our
intellectual property may go undetected, or we may face legal or practical barriers to enforcing our legal rights even where unauthorized use is detected.
We may be required to spend significant resources to monitor and protect these rights, and we may or may not be able to detect infringement by our clients or third
parties. Litigation has been and may be necessary in the future to enforce our intellectual property rights.
Our use of open source software could negatively affect our ability to sell our products and subject us to possible litigation.
Some of our products incorporate open source software, and we intend to continue to use open source software in the future. Some open source licenses are unclear
and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our solutions. Such a
situation could result in infringement claims and the need to reengineer our solutions, both of which could be costly depending on the specific circumstances. In
addition to license risk, use of open source software may increase security vulnerabilities or infringing or broken code if not properly supported and managed.
We may in the future be sued by third parties for various claims including alleged infringement of proprietary intellectual property rights.
As a supplier of supply chain solutions, we rely on and use software and data that we create as well as those from third-party sources. Often, our clients are
processing data through our solutions that we do not review. While we generally attempt to protect against such risks with contractual obligations and indemnities,
despite our efforts, we may receive claims that we have infringed a third party’s intellectual property rights or breached a contract.
As a result of claims against us regarding suspected infringement, our technologies may be subject to injunction, we may be required to pay damages or we may
have to seek a license to continue certain practices (which may not be available on reasonable terms, if at all), all of which may significantly increase our operating
expenses or may require us to restrict our business activities and limit our ability to deliver our products and services and/or certain features, integrations and
capabilities of our platform. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and
expense and/or cause us to alter our products or services, potentially negatively affecting our business. Further, many of our subscription agreements require us to
indemnify our customers for third-party intellectual property infringement claims, so any alleged infringement by us resulting in claims against such customers
would increase our liability. Additionally, our exposure to risks associated with various claims, including the use of intellectual property, may be increased as a
result of acquisitions of other companies.
We are subject to sanctions, anti-corruption, anti-bribery and similar laws, and non-compliance with such laws can subject us to criminal penalties or
significant fines and harm our business and reputation.
We are subject to requirements under the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), anti-corruption, anti-bribery and similar laws,
such as the U.S. Foreign Corrupt Practices Act of 1977, as amended (FCPA), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act,
the USA PATRIOT Act, the U.K. Bribery Act 2010 and other anti-corruption, anti-bribery and anti-money laundering laws in countries in which we conduct
activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies, their
employees and agents from promising, authorizing, making, offering or providing anything of value to a “foreign official” for the purposes of influencing official
decisions or obtaining or retaining business, or otherwise obtaining favorable treatment. As we increase our international sales and business, our risks under these
laws may increase. In addition, we may use third parties to sell access to our platform and conduct business on our behalf abroad. We can be held liable for the
corrupt or other illegal activities of such future third-party intermediaries, and our employees, representatives, contractors, partners and agents, even if we do not
explicitly authorize such activities. Any violation of economic and trade sanction laws, export and import laws, the FCPA or other applicable anti-corruption laws
or anti-money laundering laws could also result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges or our license issued
by OFAC, severe criminal or civil sanctions, and, in the case of the FCPA, suspension or debarment from U.S. government contracts, any of which could have a
materially adverse effect on our reputation, business, results of operations and prospects.
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Changes in tax laws or regulations in the various tax jurisdictions we are subject to that are applied adversely to us or our paying customers could increase the
costs of our products and services and harm our business.
We are subject to income taxes in the United States and various jurisdictions outside of the United States. Significant judgment is often required in the
determination of our worldwide provision for income taxes. Any changes, ambiguity or uncertainty in taxing jurisdictions’ administrative interpretations, decisions,
policies and positions could materially impact our income tax liabilities. We may also be subject to additional tax liabilities and penalties due to changes in non-
income based taxes resulting from changes in federal, state or international tax laws; changes in taxing jurisdictions’ administrative interpretations, decisions,
policies and positions; results of tax examinations, settlements or judicial decisions; changes in accounting principles; changes to the business operations, including
acquisitions; and the evaluation of new information that results in a change to a tax position taken in a prior period. Any resulting increase in our tax obligation or
cash taxes paid could adversely affect our cash flows and financial results. Additionally, new income, sales, use or other tax laws, statutes, rules, regulations or
ordinances could be enacted at any time. Those enactments could harm our domestic and international business operations, our business, results of operations and
financial condition.
Further, tax regulations could be interpreted, changed, modified or applied adversely to us. These events could require us or our paying customers to pay additional
tax amounts on a prospective or retroactive basis, as well as require us or our paying customers to pay fines and/or penalties and interest for past amounts deemed
to be due. If we raise our prices to offset the costs of these changes, existing and potential future paying customers may elect not to purchase our products and
services.
As a multinational organization, we may be subject to taxation in various jurisdictions around the world with increasingly complex tax laws, the application of
which can be uncertain. Countries, trading regions and local taxing jurisdictions have differing rules and regulations governing sales and use taxes, and these rules
and regulations are subject to varying interpretations that may change over time. We collect and remit U.S. sales and value-added tax (VAT) in several
jurisdictions. However, it is possible that we could face sales tax or VAT audits and that our liability for these taxes could exceed our estimates as tax authorities
could still assert that we are obligated to collect additional tax amounts from our paying customers and remit those taxes to those authorities. We could also be
subject to audits in states and international jurisdictions for which we have not accrued tax liabilities. Further, one or more state or foreign authorities could seek to
impose additional sales, use or other tax collection and record-keeping obligations on us or may determine that such taxes should have, but have not been, paid by
us. Liability for past taxes may also include substantial interest and penalty charges. Any successful action by state, foreign or other authorities to compel us to
collect and remit sales tax, use tax or other taxes, either retroactively, prospectively or both, could harm our business, results of operations and financial condition.
As our business continues to grow and if we become more profitable, we anticipate that our income tax obligations could significantly increase. If our existing tax
credits and net operating loss carryforwards become fully utilized, we may be unable to offset or otherwise mitigate our tax obligations to the same extent as in
prior years. This could have a material impact to our future cash flows or operating results.
Our ability to use our net operating loss carryforwards may be subject to limitation.
Under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable
year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of
stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling
three-year period. Similar rules may apply under state tax laws. The Business Combination resulted in an ownership change with respect to our corporate
subsidiaries, which may limit our ability to utilize pre-existing tax attributes of such corporate subsidiaries. In addition, future issuances of our common stock could
cause an “ownership change.” It is possible that any such ownership change, or any future ownership change, could have a material effect on the use of our net
operating loss carryforwards or other tax attributes, which could have a material adverse effect on our results of operations and profitability.
Risks Related to Ownership of Our Securities
A significant portion of our Class A Common Stock is restricted from immediate resale, but it may be sold into the market in the future. This could cause the
market price of our Class A Common Stock to drop significantly, even if our business is doing well.
The market price of shares of our Class A Common Stock could decline as a result of substantial sales of our Class A Common Stock (particularly by our
significant stockholders), a large number of shares of our Class A Common Stock becoming available for sale or the perception in the market that holders of a large
number of shares intend to sell their shares. Sales of a substantial number of shares of common stock in the public market could occur at any time. As of May 14,
2021, we had 187,051,142 shares of our Class A Common Stock outstanding.
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In connection with the Business Combination, certain parties entered into the Investor Rights Agreement, pursuant to which such stockholders are entitled to,
among other things, certain registration rights, including demand, piggy-back and shelf registration rights. Certain parties to the Investor Rights Agreement,
including Insight Partners and the Sponsor, as well as our directors and officers, have agreed not to sell, transfer, pledge or otherwise dispose of shares of our Class
A Common Stock they hold for a six-month period. However, upon expiration of the six-month period, the sale of shares of our Class A Common Stock or the
perception that such sales may occur, could cause the market price of our securities to drop significantly.
We may issue additional shares of our Class A Common Stock or other equity securities without your approval, which would dilute your ownership interests
and may depress the market price of your shares.
We may issue additional shares of our Class A Common Stock or other equity securities of equal or senior rank in the future in connection with, among other
things, future acquisitions, repayment of outstanding indebtedness or under our 2021 Incentive Plan, without stockholder approval, in a number of circumstances.
Our issuance of additional shares of our Class A Common Stock or other equity securities of equal or senior rank could have the following effects:
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your proportionate ownership interest in us will decrease;
the relative voting strength of each previously outstanding share of common stock may be diminished; or
the market price of your shares of Class A Common Stock may decline.
If analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations
regarding our Class A Common Stock, then the price and trading volume of our securities could decline.
The trading market for our Class A Common Stock and public warrants will be influenced by the research and reports that industry or securities analysts may
publish about us, our business and operations, our market or our competitors. Our current securities and industry analysts may elect to drop their coverage of us,
and others, may never publish research on us. If no securities or industry analysts publish coverage of us, the trading price and trading volume of our securities will
likely be negatively impacted. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable
relative recommendations about our competitors, the price of our securities will likely decline. If any analyst who may cover us were to cease coverage of us or fail
to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our trading price or trading volume of our securities to
decline.
We may amend the terms of the warrants in a manner that may be adverse to holders of the public warrants with the approval by the holders of at least 50% of
the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the
number of shares of Class A Common Stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The
warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective
provision, but an amendment requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects
the interests of the registered holders of the public warrants.
Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants
approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public
warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants
into cash, shorten the exercise period or decrease the number of shares of Class A Common Stock purchasable upon exercise of a warrant.
Our warrants may have an adverse effect on the market price of our Class A Common Stock.
We issued warrants to purchase 13,800,000 of our Class A ordinary shares as part of the units offered in the IPO (of which 13,799,972 are currently outstanding)
and, simultaneously with the closing of the IPO, we issued in a private placement an aggregate of 10,280,000, each exercisable to purchase one Class A ordinary
share at $11.50 per share, each of which entitled the holder to purchase shares of Class A Common Stock upon the Domestication. We also issued 5,000,000
Forward Purchase Warrants pursuant to the Forward Purchase Agreement. The Forward Purchase Warrants, when exercised, will increase the number of issued and
outstanding shares of Class A Common Stock and reduce the value of the Class A Common Stock.
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General Risks
Changes in existing financial accounting standards or practices may harm our results of operations.
We regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and interpretations that are relevant to us.
Changes in existing accounting rules or practices, new accounting pronouncements or varying interpretations of current accounting pronouncements could
negatively impact our results of operations. Further, such changes could potentially affect our reporting of transactions completed before such changes are
effective. U.S. GAAP is subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC and various bodies formed to promulgate and
interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and affect
the reporting of transactions completed before the announcement of a change.
Any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline
and harm investors’ confidence in us.
We may be subject to liability if we breach our contracts, and our insurance may be inadequate to cover our losses.
We are subject to numerous obligations in our contracts with organizations using our products and services, as well as vendors and other companies with which we
do business. We may breach these commitments, whether through a weakness in our procedures, systems and internal controls; negligence; or through the willful
act of an employee or contractor. Our insurance policies, including our errors and omissions insurance, may be inadequate to compensate us for the potentially
significant losses that may result from claims arising from breaches of our contracts, as well as disruptions in our services, failures or disruptions to our
infrastructure, catastrophic events and disasters, or otherwise.
In addition, our insurance may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention.
Further, such insurance may not be available to us in the future on economically reasonable terms, or at all.
We may be subject to litigation for any of a variety of claims, which could adversely affect our business, results of operations and financial condition.
In the ordinary course of business, we may be involved in and subject to litigation for a variety of claims or disputes and receive regulatory inquiries. These claims,
lawsuits and proceedings could include labor and employment, wage and hour, commercial, data privacy, antitrust, alleged securities law violations or other
investor claims and other matters. The number and significance of these potential claims and disputes may increase as our business expands. Any claim against us,
regardless of its merit, could be costly, divert management’s attention and operational resources and harm our reputation. As litigation is inherently unpredictable,
we cannot assure you that any potential claims or disputes will not have a material adverse effect on our business, results of operations and financial condition. Any
claims or litigation, even if fully indemnified or insured, could make it more difficult to compete effectively or to obtain adequate insurance in the future.
In addition, we may be required to spend significant resources to monitor and protect our contractual, property and other rights, including collection of payments
and fees. Litigation has been and may be necessary in the future to enforce such rights. Such litigation could be costly, time consuming and distracting to
management and could result in the impairment or loss of our rights. Furthermore, our efforts to enforce our rights may be met with defenses, counterclaims and
countersuits attacking the validity and enforceability of such rights. Our inability to protect our rights as well as any costly litigation or diversion of our
management’s attention and resources, could have an adverse effect on our business, results of operations and financial condition or injure our reputation.
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Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our platform and could
harm our business.
The future success of our business depends upon the continued use of the internet as a primary medium for commerce, communication and business applications.
Federal, state or foreign governmental bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet
as a commercial medium. The adoption of any laws or regulations that could reduce the growth, popularity or use of the internet, including laws or practices
limiting internet neutrality, could decrease the demand for, or the usage of, our products and services, increase our cost of doing business and harm our results of
operations. Changes in these laws or regulations could require us to modify our platform, or certain aspects of our platform, in order to comply with these changes.
In addition, government agencies or private organizations have imposed and may impose additional taxes, fees or other charges for accessing the internet or
commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally or result in
reductions in the demand for internet-based products such as ours. In addition, the use of the internet as a business tool could be harmed due to delays in the
development or adoption of new standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease-of-use, accessibility and
quality of service. Further, our platform depends on the quality of our users’ access to the internet.
On June 11, 2018, the repeal of the Federal Communications Commission’s (FCC), “net neutrality” rules took effect and returned to a “light-touch” regulatory
framework. The prior rules were designed to ensure that all online content is treated the same by internet service providers and other companies that provide
broadband services. Additionally, on September 30, 2018, California enacted the California Internet Consumer Protection and Net Neutrality Act of 2018, making
California the fourth state to enact a state-level net neutrality law since the FCC repealed its nationwide regulations, mandating that all broadband services in
California must be provided in accordance with state net neutrality requirements. The U.S. Department of Justice has sued to block the law going into effect, and
California has agreed to delay enforcement until the resolution of the FCC’s repeal of the federal rules. A number of other states are considering legislation or
executive actions that would regulate the conduct of broadband providers. We cannot predict whether the FCC order or state initiatives will be modified, overturned
or vacated by legal action of the court, federal legislation or the FCC. With the repeal of net neutrality rules in effect, we could incur greater operating expenses,
which could harm our results of operations. As the internet continues to experience growth in the number of users, frequency of use and amount of data transmitted,
the internet infrastructure that we and our users rely on may be unable to support the demands placed upon it. The failure of the internet infrastructure that we or
our users rely on, even for a short period of time, could undermine our operations and harm our results of operations.
Internet access is frequently provided by companies that have significant market power that could take actions that degrade, disrupt or increase the cost of user
access to our platform, which would negatively impact our business. The performance of the internet and its acceptance as a business tool has been harmed by
“viruses,” “worms” and similar malicious programs, and the internet has experienced a variety of outages and other delays as a result of damage to portions of its
infrastructure. If the use of the internet is adversely affected by these issues, demand for our platform could decline.
We could incur greater operating expenses and our user acquisition and retention could be negatively impacted if network operators:
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implement usage-based pricing;
discount pricing for competitive products;
otherwise materially change their pricing rates or schemes;
charge us to deliver our traffic at certain levels, or at all;
throttle traffic based on its source or type;
implement bandwidth caps or other usage restrictions; or
otherwise try to monetize or control access to their networks.
In addition, national-level “fire walls” can disrupt existing usage of our applications as well as prevent expansion into certain geographies.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
Our corporate headquarters is located at 9600 Great Hills Trail #300E, Austin, Texas 78759. In addition, we lease other corporate office spaces in the following
locations:
U.S. Locations
Rogers, Arkansas
San Jose, California
Atlanta, Georgia
Miramar, Florida
Chicago, Illinois
Davenport, Iowa
Parsippany, New Jersey
Raleigh, North Carolina
Dallas, Texas
McLean, Virginia
International Locations
Antwerp, Belgium
Shenzhen, China
Shanghai, China
Copenhagen, Denmark
Karlsruhe, Germany
Munich, Germany
Kowloon, Hong Kong
Bangalore, India
Hyderabad, India
Pune, India
Kuala Lumpur, Malaysia
Krakow, Poland
Reading, United Kingdom
Our data centers are operated through co-location facilities, where we provide our own equipment to be used in leased space. We utilize and optimize data centers
and public cloud services throughout the world to attain secure application availability, at a minimum, of 99.5% uptime infrastructure. The following table sets
forth our material technology infrastructure, including location and function, for our properties throughout the world (all of which are leased). While the data center
space is leased, we own all the equipment and gear that sits within those data centers.
Location
San Jose, California
Sunnyvale, California
Denver, Colorado
Chicago, Illinois
Jacksonville, Florida
Carlstadt, New Jersey
Beijing, China
Shanghai, China
Hong Kong
Hong Kong
Item 3. Legal Proceedings
Function
Production
Development, Configuration, Staging
Disaster Recovery
Production, Disaster Recovery
Production, Development
Disaster Recovery
Production
Production, Disaster Recovery
Production
Disaster Recovery
From time to time, we are subject to contingencies that arise in the ordinary course of business. We record an accrual for a contingency when it is both probable
that a liability has been incurred and the amount of the loss can be reasonably estimated. We do not currently believe the resolution of any such contingencies will
have a material adverse effect upon our Consolidated Balance Sheets, Statements of Operations or Statements of Cash Flows.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders of Record
Our Class A Common Stock and public warrants are listed on the NYSE under the symbols “ETWO” and “ETWO-WT,” respectively. As of May 14, 2021, there
were 171 and 3 holders of record of our Class A Common Stock and warrants, respectively.
36
Dividends
We do not intend to declare or pay cash dividends in the foreseeable future. Our management anticipates that all earnings and other cash resources, if any, will be
retained for investment in our business.
Warrants
As of February 28, 2021, there were 13,800,000 public warrants, 10,280,000 private placement warrants and 5,000,000 Forward Purchase Warrants outstanding.
Each warrant entitles its holder to purchase one share of our Class A Common Stock at an exercise price of $11.50 per share. The private placement warrants
became exercisable upon the Domestication. The Forward Purchase Warrants became exercisable upon the effectiveness of our Form S-1 which was initially filed
on March 5, 2021 and became effective March 29, 2021. The public warrants became exercisable on April 28, 2021. The private placement warrants, public
warrants and Forward Purchase Warrants expire five years after the Closing Date, or earlier upon redemption or liquidation.
See Note 18, Stockholders’ Equity in the Notes to the Consolidated Financial Statements for additional information about redemption of the warrants.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This item contains a discussion of our business, including a general overview of our properties, results of operations, liquidity and capital resources and quantitative
and qualitative disclosures about market risk.
The following discussion should be read in conjunction with the consolidated financial statements and related notes beginning on page 64. This Item 7 contains
“forward-looking” statements that involve risks and uncertainties. See Forward-Looking Statements at the beginning of this 2021 Form 10-K.
Our fiscal year end is the final day in February. Our fiscal years 2021 and 2020 ended February 28, 2021 and February 29, 2020, respectively, and were each fifty-
two-week periods.
Overview
We are a leading provider of 100% cloud-based, end-to-end SCM software. Our software combines networks, data and applications to provide a deeply embedded,
mission-critical platform that allows customers to optimize their supply chain by accelerating growth, reducing costs, increasing visibility and driving improved
resiliency. Given the mission-critical nature of our solutions, we maintain deep, long-term relationships with our customers, which is reflected by our gross
retention and customer tenure. In aggregate, we serve more than 1,200 customers in over 180 countries across a wide range of end-markets, including technology,
consumer, industrial and transportation, among others.
We operate in what we believe is an attractive industry with strong secular tailwinds and a large TAM of more than $45 billion. This TAM is comprised of
significant whitespace, which we estimate is more than $1 billion. This opportunity within our existing customer base is largely driven by their current technology
solution which is often aa combination of legacy point solutions and home-grown applications, which are tied together with manual processes and spreadsheets. As
manufacturing has evolved from brands owning the full production lifecycle to orchestrating disparate manufacturing, distribution and selling processes, supply
chains have grown more complex, increasing demand for software solutions like ours and the need to modernize the existing technology landscape with cloud-
based modern solutions. We believe our fully cloud-based, end-to-end software platform offers a differentiated solution for customers that gives them significantly
better value as compared to solutions offered by some of our competitors.
37
Our Go-To-Market Strategy
Our go-to-market strategy is focused on both expanding the adoption of our product portfolio with existing customers and the acquisition of new customers. We
primarily focus our selling efforts on large enterprise organizations and sell our software through a direct sales force and channel partners. Additionally, we have a
high-velocity inside sales organization to serve small and medium-sized businesses. Our go-to-market strategy enables our sales force to develop deep, long-term
relationships with existing and potential customers across the relevant functions, from buying managers, IT resources, division leaders and C-level executives.
Importantly, we believe that our go-to-market approach focused on customers is a competitive advantage compared to competitors whose go-to-market approach is
often focused on products. We believe this enables us to sustain our high customer retention and long customer tenure as well as drive maximum spend within each
customer.
Our sales organization is comprised of field sales, inside sales and sales development personnel, and we align these teams based on customer size and industry. We
focus initially on solving a customer’s primary need, usually a specific piece of their supply chain. Once a customer adopts our solution and witnesses the power of
our unique platform, we focus on cross-selling additional products and up-selling additional departments, divisions and geographies with the same solution. We
have found that experience with our SaaS platform is the most effective selling tool.
The Business Combination
On February 4, 2021, E2open Holdings and CCNB1 completed the Business Combination contemplated by the Business Combination Agreement. Pursuant to the
Business Combination Agreement, CCNB1 acquired a majority interest in E2open Holdings through a series of mergers, with E2open Holdings becoming a direct
subsidiary of CCNB1. In connection with the completion of the Business Combination, CCNB1 changed its jurisdiction of incorporation from the Cayman Islands
to the State of Delaware and changed its name to “E2open Parent Holdings, Inc.”
Upon completion of the Business Combination, CCNB1 was deemed the accounting acquirer and E2open the accounting acquiree. Under the acquisition method of
accounting, CCNB1’s assets and liabilities retained their carrying values and the assets and liabilities associated with E2open Holdings were recorded at their fair
values measured as of the acquisition date. The excess of the purchase price over the estimated fair values of the net assets acquired was recorded as goodwill. The
cash consideration in the Business Combination included cash from (1) the Trust Account in the amount of $414.0 million, (2) $525.0 million in proceeds from the
issuance of a new term loan, (3) $695.0 million in proceeds from the PIPE Investment and (4) $200.0 million in proceeds from Forward Purchase Agreement.
These proceeds were used to pay (x) $601.1 million in cash consideration payable to certain equity owners and option holders of E2open Holdings, including
certain non-recurring seller transaction expenses, (y) $978.5 million of existing E2open debt and accrued interest and (z) total non-recurring transaction costs of
$105.2 million. The non-recurring transaction costs included acquisition-related advisory fees in connection with the Business Combination, deferred underwriting
commissions in connection with CCNB1’s IPO and debt issuance costs related to the new credit agreement entered into in connection with the Business
Combination but excluded certain seller costs to be paid by the equity owners of E2open Holdings. The deferred underwriting commissions and costs pertaining to
the reverse merger were treated as a reduction of equity while merger-related costs were expensed in the period in which the Business Combination closed. The
debt issuance costs were capitalized as a reduction to the outstanding debt balances. In addition, certain options to purchase equity interests in E2open Holdings
were accelerated upon the Closing Date, which resulted in a non-recurring expense of approximately $28.2 million in the period from February 4, 2021 through
February 28, 2021. Additionally, unit-based compensation expense of $4.7 million was recognized during the period from February 4, 2021 through February 28,
2021 related to the restricted Series B-1 and B-2 common stock issued in connection with the Business Combination for the accelerated unvested options and
restricted units.
As a result of the Business Combination, our financial results are broken out between the Predecessor period (March 1, 2020 through February 3, 2021) and the
Successor period (February 4, 2021 through February 28, 2021).
Impact of COVID-19
The COVID-19 pandemic has caused business disruptions worldwide beginning in January 2020. The full extent to which the pandemic will impact our business,
operations, cash flows and financial condition will depend on future developments that are difficult to accurately predict. We have experienced modest adverse
impacts as it relates to lengthening of sales cycles and delays in delivering professional services and training to our customers.
Although parts of our business have seemingly returned to pre-pandemic levels, the recent surge in COVID-19, specifically in India. demonstrates that the impact
of the pandemic is not yet complete. The global pandemic continues to evolve, and we are carefully monitoring the situation to understand its impacts on our
business and operations.
38
Key Components of Our Results of Operations
Revenue
Effective March 1, 2019, we adopted Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606), and all the related
amendments, using the modified retrospective method. We adopted the new standard for all customer contracts. See Note 2, Summary of Significant Accounting
Policies to the Notes to the Consolidated Financial Statements for additional information.
We generate revenue from the sale of subscriptions and professional services. We recognize revenue when the customer contract and associated performance
obligations have been identified; the transaction price has been determined and allocated to the performance obligations in the contract; and the performance
obligations have been satisfied.
Subscription Revenue
We offer cloud-based on-demand software solutions, which enable our customers to have constant access to our solutions without the need to manage and support
the software and associated hardware themselves. We house the hardware and software in third-party facilities and provide our customers with access to the
software solutions, along with data security and storage, backup, recovery services and solution support. Our customer contracts typically have a term of three to
five years. We primarily invoice our customers for subscriptions in advance for the annual use of the software solutions. Our payment terms typically require
customers to pay within 30 to 90 days from the invoice date.
We also offer applications which enable our customers to have access to an electronic commerce transaction platform for the international container shipping
industry. We charge either fixed annual subscription fees or volume-based transaction fees based on the volume of transactions booked on the platform for this
product. For subscription-based contracts, we generally invoice annually in advance. Under the previous standard, we limited subscription revenue recognition to
the contractually billable amounts in each year of the subscription. Under the new standard, subscription revenue is recognized ratably over the life of the contract.
The impact of this change was insignificant; therefore, no cumulative adjustment was made to the opening balance sheet for revenue recognition at the adoption of
the new standard. For transactional based contracts, we primarily recognize revenue and invoices for these transactions monthly once incurred. This is unchanged
from the previous standard. Transaction based contracts represented less than 3% of our revenue in the combined Successor and Predecessor periods in the fiscal
year ended February 28, 2021.
Professional Services
Professional services revenue is derived primarily from fees for enabling services, including solution consulting and solution deployment. These services are often
sold in conjunction with the sale of our solutions. We provide professional services primarily on a time and materials basis, but also on a fixed fee basis. Customers
are invoiced for professional services either monthly in arrears or, as with fixed fee arrangements, in advance and upon reaching project milestones. Professional
services revenue is recognized over time. For services that are contracted at a fixed price, progress is generally measured based on labor hours incurred as a
percentage of the total estimated hours required for complete satisfaction of the related performance obligations. For services that are contracted on time and
materials or a prepaid basis, progress is generally based on actual labor hours expended. These input methods (e.g., hours incurred or expended) are considered a
faithful depiction of our efforts to satisfy services contracts as they represent the performance obligation consumed by the customer and performed by us, and
therefore reflect the transfer of services to a customer under contract. The adoption of the new standard did not result in a material change to the revenue
recognition of professional services.
We enter into arrangements with multiple performance obligations comprised of subscriptions and professional services. Arrangements with customers typically do
not provide the customer with the right to take possession of the software supporting the on-demand solutions. We primarily account for subscription and
professional services revenue as separate units of accounting and allocate revenue to each deliverable in an arrangement based on a standalone selling price. We
evaluate the standalone selling price for each element by considering prices we charge for similar offerings, size of the order and historical pricing practices.
39
Total Revenue by Geographic Locations
Revenues by geographical region consisted of the following:
($ in thousands)
Americas
Europe
Asia Pacific
Total revenue
Successor
February 4, 2021
through
February 28, 2021
March 1, 2020
through
February 3, 2021
Predecessor
Fiscal Year
Ended February 29,
2020
Fiscal Year
Ended February 28,
2019
$
$
20,403
463
499
21,365
$
$
295,923
6,226
6,498
308,647
$
$
293,751
6,271
5,080
305,102
$
$
197,245
3,594
368
201,207
Revenues by geography are determined based on the region of our contracting entity, which may be different than the region of the customer. Americas revenue
attributed to the United States was approximately 96%, 96%, 96% and 98% during the periods from February 4, 2021 through February 28, 2021 and March 1,
2020 through February 3, 2021 and fiscal years ended February 29, 2020 and February 28, 2019, respectively. No other country represented more than ten percent
of total revenue during these periods.
Cost of Revenue
Cost of Subscription Revenue
Cost of subscription revenue consists primarily of costs related to delivering our service and providing support to customers, including personnel and related costs,
costs associated with data center capacity, fees paid to third parties to license their technology and depreciation expense directly related to delivering our solutions.
We generally expense our cost of subscription revenue as we incur the costs.
Cost of Professional Services Revenue
Cost of professional services revenue consists primarily of personnel and related travel costs, the costs of contracted third-party vendors and reimbursable expenses.
As our personnel are employed on a full-time basis, our cost of professional services is largely fixed in the short-term, while our professional services revenue may
fluctuate, leading to fluctuations in professional services gross profit. We expense our cost of professional services revenue as we incur the costs.
Operating Expenses
Research and Development
Research and development expenses primarily consist of personnel and related costs of our research and development staff, costs of certain third-party contractors,
depreciation, amortization and other allocated costs. Research and development expenses are expensed as incurred, excluding the capitalization of internally
developed software costs.
Sales and Marketing
Sales and marketing expenses primarily consist of personnel and related costs for our sales and marketing staff. It also includes the costs of promotional events,
corporate communications, online marketing, solution marketing and other brand-building activities, in addition to depreciation, amortization and other allocated
costs. When the initial customer contract is signed and upon any renewal, we capitalize and amortize commission costs under ASC 606, as an expense over the
period in which products are expected to be delivered to customers, where the commission is directly attributable to a contract, including expected renewals, which
is estimated to be four years. If a subscription agreement is terminated, we recognize the unamortized portion of any deferred commission cost as an expense
immediately upon such termination. Certain sales commissions are contingent on future customer billings and are expensed as incurred to sales and marketing
expense.
General and Administrative
General and administrative expenses primarily consist of personnel and related costs for our executive, administrative, finance, information technology, legal,
accounting, investor relations and human resource staff. It also includes professional fees; expenses related to our board of directors; public company costs; other
corporate expenses; depreciation; amortization; and other allocated costs.
40
Interest and Other Expense, Net
Interest and other expense, net, consists primarily of interest income on our cash balances; interest expense on our outstanding debt and capital lease obligations;
foreign currency realized and unrealized gains and losses; and gains and losses on the disposal of fixed assets.
Provision for Income Taxes
The provision for income taxes for the combined Predecessor and Successor periods ended February 28, 2021 consists of a deferred income tax benefit and current
tax expense. The current income taxes primarily result from our profitable operations in foreign subsidiaries, which are subject to corporate income taxes in foreign
jurisdictions, plus a relatively small amount of U.S. federal and state income taxes not offset by net operating loss carryforwards. The deferred income tax benefit is
primarily due to a reduction in overall state deferred liabilities resulting from certain state tax law changes, the impact on our effective state tax rates from changes
in our transfer pricing policies and increase in state net operating losses in certain jurisdictions, offset by valuation allowances and E2open Parent Holdings, Inc.’s
investment in E2open Holdings. The deferred tax assets of certain other U.S corporate tax consolidated groups and non-U.S. jurisdictions remain offset by a
valuation allowance. Realization of these deferred tax assets depends upon future earnings, the timing and amount of which are uncertain. Utilization of our net
operating losses may be subject to annual limitations due to the ownership change rules under the Internal Revenue Code of 1986, as amended (IRS Code), and
similar state provisions. We have analyzed the effect of the IRS Code Section 382 for each of our acquisitions. Based on analysis of acquired net operating losses
and credits, utilization of our net operating losses and research and development credits will be subject to annual limitations. In the event we have future changes in
ownership, the availability of net operating loss carryforwards could be further limited.
41
Results of Operations
The following table is our Consolidated Statements of Operations for the periods indicated:
($ in thousands)
Revenue
Cost of revenue
Total gross profit
Operating Expenses
Research and development
Sales and marketing
General and administrative
Acquisition-related expenses
Amortization of acquired intangible assets
Total operating expenses
(Loss) income from operations
Interest and other expense, net
Loss on extinguishment of debt
Gain from change in fair value of warrant liability
Gain from change in fair value of contingent
consideration
Income (loss) before income taxes
Income tax benefit
Net income (loss)
Less: Net income attributable to noncontrolling
interest
Net income attributable to E2open Parent
Holdings, Inc.
Net income attributable to E2open Parent Holdings,
Inc. Class A common stockholders per share -
diluted
Weighted-average common shares outstanding -
diluted
Successor
February 4, 2021
through
February 28, 2021
March 1, 2020
through
February 3, 2021
Predecessor
Fiscal Year
Ended February 29,
2020
Fiscal Year
Ended February 28,
2019
201,207
(73,560)
127,647
42,523
34,398
28,001
15,577
20,061
140,560
(12,913)
(20,846)
(4,604)
—
—
(38,363)
8,245
(30,118)
$
$
21,365
(16,184)
5,181
308,647 $
(114,989)
193,658
$
305,102
(121,065)
184,037
53,788
46,034
37,355
14,348
31,275
182,800
10,858
(65,469)
—
—
—
(54,611)
6,681
(47,930) $
$
61,882
53,605
51,799
26,709
31,129
225,124
(41,087)
(67,554)
—
—
—
(108,641)
7,271
(101,370) $
10,458
8,788
23,123
4,317
1,249
47,935
(42,754)
(1,928)
—
23,187
33,740
12,245
612
12,857
2,057
10,800
0.06
187,051
$
$
The comparability of our operating results for the periods from February 4, 2021 through February 28, 2021 and March 1, 2020 through February 3, 2021 as
compared to the fiscal year ended February 29, 2020 was impacted by the Business Combination in February 2021 and the acquisition of Amber Road in July 2019.
In the discussion of our results of operations, we may quantitatively disclose the impact of our acquired products and services to the extent they remain
ascertainable. Expense contributions from our acquisition for the respective period comparisons generally were not separately identifiable due to the integration of
these businesses into our existing operations.
42
February 4, 2021 through February 28, 2021 (Successor) and March 1, 2020 through February 3, 2021 (Predecessor) compared to Fiscal year ended
February 29, 2020 (Predecessor)
Revenue
($ in thousands)
Revenue:
Subscription revenue
Professional services revenue
Total revenue
Percentage of revenue:
Subscription revenue
Professional services revenue
Total
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended
February 29,
2020
$ Change (1)
% Change (1)
$
$
14,117
7,248
21,365
$
$
259,707
48,940
308,647
$
$
243,981
61,121
305,102
$
$
29,843
(4,933)
24,910
12%
-8%
8%
66%
34%
100%
84%
16%
100%
80%
20%
100%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Subscription revenue was $273.8 million for the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021, a $29.8
million, or 12%, increase compared to subscription revenue of $244.0 million for the fiscal year ended February 29, 2020. The increase in subscription revenue was
primarily related to the acquisition of Amber Road. The balance of the increase was primarily related to new organic subscription sales in the prior periods,
predominantly driven by increases in products utilized across our customer portfolio.
Professional services revenue was $56.2 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a $4.9
million, or 8%, decrease compared to $61.1 million for the fiscal year ended February 29, 2020. The decrease was primarily due to the impact of the COVID-19
pandemic which delayed the delivery of professional services and training to our customers, mainly due to our customers’ focus on switching to remote operations
during the first half of fiscal 2021, which began on March 1, 2021. Importantly, although the COVID-19 pandemic delayed planned customer engagements, we did
not experience any material cancellations of engagements. Professional services revenue was also impacted by fewer new subscription sales closed in early fiscal
2021 as compared to the fiscal 2020. We attribute this temporary delay in closing new subscription sales to the COVID-19 pandemic as our customers were focused
on the impact of the pandemic on their operations rather than launching new technology projects.
Our subscription revenue as a percentage of total revenue increased to 83% for the combined Predecessor and Successor periods included in the fiscal year ended
February 28, 2021 compared to 80% for the fiscal year ended February 29, 2020 driven primarily by the increase in subscription revenue and decline in
professional services revenue described above.
43
Cost of Revenue, Gross Profit and Gross Margin
($ in thousands)
Cost of revenue:
Subscriptions
Professional services
Amortization of acquired intangible assets
Total cost of revenue
Gross profit:
Subscriptions
Professional services
Total gross profit
Gross margin:
Subscriptions
Professional services
Total gross margin
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended
February 29,
2020
$
$
$
7,823
4,324
4,037
16,184
$
55,602
40,466
18,921
114,989
$
59,113
42,414
19,538
121,065
2,257
2,924
5,181
$
185,184
8,474
193,658
$
165,330
18,707
184,037
$
$ Change (1)
% Change (1)
4,312
2,376
3,420
10,108
22,111
(7,309)
14,802
7%
6%
18%
8%
13%
-39%
8%
16%
40%
24%
71%
17%
63%
68%
31%
60%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Cost of subscriptions was $63.4 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a $4.3 million, or
7%, increase compared to $59.1 million for the fiscal year ended February 29, 2020. This increase is primarily related to the acquisition of Amber Road and $2.5
million of unit-based compensation recognized related to the acceleration of unvested options and restricted units of E2open Holdings in connection with the
Business Combination, partially offset by the realization of acquisition-related cost savings from acquisitions.
Cost of professional services revenue was $44.8 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a
$2.4 million, or 6%, increase compared to $42.4 million for the fiscal year ended February 29, 2020. This increase is primarily related to the acquisition of Amber
Road and $0.7 million unit-based compensation recognized related to the acceleration of unvested options and restricted units of E2open Holdings in connection
with the Business Combination. We have proactively decided to invest in our professional services organization during the COVID-19 pandemic as a means of
providing additional service to and deeper relationships with our customers.
Amortization of acquired intangible assets was $23.0 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28,
2021, a $3.4 million, or 18%, increase compared to $19.5 million for the fiscal year ended February 29, 2020, driven primarily by additional intangibles from the
acquisition of Amber Road and the reevaluation of the intangible assets as part of the Business Combination in February 2021.
Our subscriptions gross margin remained consistent at 68% for the combined Predecessor and Successor periods included in the fiscal years ended February 28,
2021 and the fiscal year ended February 29, 2020. Our professional services gross margin declined to 20% for fiscal 2021 from 31% in the fiscal 2020, primarily
due to lower professional services revenue in the current period as described above.
44
Research and Development
($ in thousands)
Research and development
Percentage of revenue
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended
February 29,
2020
$ Change (1)
% Change (1)
$
10,458
$
53,788
$
61,882
$
2,364
4%
49%
17%
20%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Research and development expenses were $64.2 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a
$2.4 million, or 4%, increase compared to $61.9 million in the prior year. The increase is due to $5.2 million of additional unit-based compensation expense
recognized related to the acceleration of unvested options and restricted units of E2open Holdings in connection with the Business Combination, partially offset by
leveraging the existing E2open operating model and managerial structure resulting in cost savings associated with the acquisition of Amber Road.
Sales and Marketing
($ in thousands)
Sales and marketing
Percentage of revenue
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended
February 29,
2020
$ Change (1)
% Change (1)
$
8,788
$
46,034
$
53,605
$
1,217
2%
41%
15%
18%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Sales and marketing expenses were $54.8 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a $1.2
million, or 2%, increase compared to $53.6 million in the prior year. The increase is primarily related to $5.1 million of additional unit-based compensation
recognized related to the acceleration of unvested options and restricted units of E2open Holdings in connection with the Business Combination and associated
costs of the Amber Road acquisition, partially offset by the realization of acquisition-related cost savings from historical acquisitions.
General and Administrative
($ in thousands)
General and administrative
Percentage of revenue
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended
February 29,
2020
$ Change (1)
% Change (1)
$
23,123
$
37,355
$
51,799
$
8,679
17%
108%
12%
17%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
45
General and administrative expenses were $60.5 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a
$8.7 million, or 17%, increase compared to $51.8 million in the prior year. The increase is driven primarily by $14.7 million of additional unit-based compensation
recognized related to the acceleration of unvested options and restricted units of E2open Holdings in connection with the Business Combination and $4.7 million
unit-based compensation for the restricted Series B-1 and B-2 common stock issued in connection with the Business Combination for the accelerated unvested
options and restricted units during fiscal 2021. These increases were partially offset by the $9.5 million of unit-based compensation attributable to the acceleration
of certain unit-based awards in connection with the Amber Road acquisition during fiscal 2020, as well as the realization of acquisition-related cost savings from
historical acquisitions.
Other Operating Expenses
($ in thousands)
Acquisition and other related expenses
Amortization of acquired intangible assets
Total other operating expenses
Successor
February 4, 2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended February
29, 2020
$ Change (1)
% Change (1)
$
$
4,317
1,249
5,566
$
$
14,348 $
31,275
45,623 $
26,709 $
31,129
57,838 $
(8,044)
1,395
(6,649)
-30%
4%
-11%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Other operating expenses were $51.2 million for combined Predecessor and Successor periods included in the fiscal 2021, a $6.7 million, or 11%, decrease
compared to $57.8 million in the prior year. The decrease is mainly due to the significant transaction related expenses incurred in fiscal 2020 for Amber Road.
Interest and Other Expense, Net
($ in thousands)
Interest and other expense, net
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended
February 29,
2020
$ Change (1)
% Change (1)
$
(1,928)
$
(65,469) $
(67,554) $
157
0%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Interest expense increased to $67.4 million for combined Predecessor and Successor periods included in the fiscal 2021, a $0.2 million decrease compared to $67.6
million in the prior year. This decrease is driven primarily by the incremental debt incurred to finance the acquisition of Amber Road, partially offset by the
reduction in outstanding debt as well as the associated interest rate on the debt refinanced in the Business Combination and other income earned during fiscal 2021.
In connection with the Business Combination, we repaid the full outstanding principal balance of $907.3 million of the Term Loan Due 2024, as defined below,
using proceeds from the Business Combination. Additionally, we entered into a new $525.0 million term loan and a $75.0 million revolver in connection with the
Business Combination. See Debt below for additional details.
Gain from Change in Fair Value of Warrant Liability
We recorded a gain of $23.2 million during the period from February 4, 2021 through February 28, 2021 for the change in fair value on the revaluation of our
warrant liability associated with our public, private placement and forward purchase warrants. We are required to revalue the warrants at the end of each reporting
period and reflect in the Consolidated Statements of Operations a gain or loss from the change in fair value of the warrant liability in the period in which the change
occurred. We did not have outstanding warrants prior to the Business Combination.
46
Gain from Change in Fair Value of Contingent Consideration
We recorded a gain of $33.7 million during the period from February 4, 2021 through February 28, 2021 for the change in fair value on the revaluation of our
contingent consideration associated with our restricted Series B-1 and B-2 common stock and Sponsor Side Letter. We are required to revalue the contingent
consideration at the end of each reporting period and reflect in the Consolidated Statements of Operations a gain or loss from the change in fair value of the
contingent consideration in the period in which the change occurred.
Provision for Income Taxes
($ in thousands)
Income (loss) before income taxes
Income tax benefit
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended
February 29,
2020
$ Change (1)
% Change (1)
$
12,245
612
$
(54,611) $
6,681
(108,641) $
7,271
66,275
22
-61%
0%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Loss before income taxes is $42.4 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a $66.3 million,
or 61%, decrease compared to $108.6 million for the fiscal year ended February 29, 2020. This decrease is related primarily to the acquisition of Amber Road,
stronger operating results, the $9.5 million unit-based compensation recognized in fiscal 2020 attributable to the acceleration of certain unit-based awards related to
the Amber Road acquisition, additional integration-related cost savings realized from historical acquisitions, $23.2 million income for the fair value adjustment as
of February 28, 2021 for the warrant liability and $33.7 million income associated with the fair value adjustment as of February 28, 2021 for the contingent
consideration liability related to the Sponsor Side Letter and restricted Series B-1 and B-2 common stock. The benefits were partially offset by higher interest
expense in fiscal 2020 due to incremental debt incurred to finance the Amber Road acquisition, $28.2 million of unit-based compensation expense related to the
acceleration of unvested options and restricted units of E2open Holdings in connection with the Business Combination and $4.7 million of unit-based compensation
expense for the restricted Series B-1 and B-2 common stock issued in connection with the Business Combination for the accelerated unvested options and restricted
units.
Notwithstanding that the $7.3 million income tax benefit is substantially the same for each period, the effective tax rate is 17.2% for the combined Predecessor and
Successor periods included in the fiscal year ended February 28, 2021, compared 6.2%, for the fiscal year ended February 29, 2020. The overall increase in the
effective tax rate was primarily due to the relative change in state taxes, earnings at affiliate, changes in valuation allowances and changes due to the fair value of
equity compensation related to the Business Combination.
Fiscal year ended February 29, 2020 compared to Fiscal year ended February 28, 2019
Revenue
($ in thousands)
Revenue:
Subscription revenue
Professional services revenue
Total revenue
Percentage of revenue:
Subscription revenue
Professional services revenue
Total
Fiscal Years Ended
February 29, 2020
February 28, 2019
$ Change
% Change
$
$
243,981
61,121
305,102
$
$
153,634
47,573
201,207
$
$
90,347
13,548
103,895
59%
28%
52%
80%
20%
100%
47
76%
24%
100%
Subscription revenue was $244.0 million in fiscal year 2020, a $90.4 million, or 59%, increase compared to $153.6 million in fiscal year 2019. The increase in
subscription revenue was primarily related to the acquisitions of INTTRA and Amber Road. The balance of the increase was primarily related to new organic
subscription sales in the prior periods, predominantly driven by increases in products utilized across our customer portfolio. The impact of changes in price per
product has not been material. As customers become larger, our pricing model recognizes various factors such as number of products purchased and the penetration
of those products within a customer’s operations. As such, when a customer buys more product, their average cost per product may decline even though total
revenue from that customer may increase.
Professional services revenue was $61.1 million in fiscal year 2020, a $13.5 million, or 28%, increase compared to $47.6 million in fiscal year 2019. This increase
was primarily related to the acquisitions of INTTRA and Amber Road. The balance of the increase was primarily related to additional professional services revenue
related to the new organic subscription sales in the prior periods.
Subscription revenue increased to 80% of total revenue for our fiscal year ending February 29, 2020 from 76% in the comparable prior year period. This increase is
primarily related to the acquisitions of INTTRA and Amber Road, which had relatively higher subscription revenue as a percentage of their respective total revenue
bases.
Cost of Revenue, Gross Profit and Gross Margin
($ in thousands)
Cost of revenue:
Subscriptions
Professional services
Amortization of acquired intangible assets
Total cost of revenue
Gross profit:
Subscriptions
Professional services
Total gross profit
Gross margin:
Subscriptions
Professional services
Total gross margin
Fiscal Years Ended
February 29, 2020
February 28, 2019
$ Change
% Change
$
$
$
59,113
42,414
19,538
121,065
$
33,537
31,673
8,350
73,560
165,330
18,707
184,037
$
111,747
15,900
127,647
$
25,576
10,741
11,188
47,505
53,583
2,807
56,390
76%
34%
133%
65%
48%
18%
44%
68%
31%
60%
73%
33%
63%
Cost of subscriptions was $59.1 million in fiscal year 2020, a $25.6 million, or 76%, increase compared to fiscal year 2019. The increase was primarily related to
the acquisitions of INTTRA and Amber Road, partially offset by the realization of integration-related cost savings from historical acquisitions.
Cost of professional services was $42.4 million in fiscal year 2020, a $10.7 million, or 34%, increase compared to fiscal year 2019. This increase was primarily
related to the acquisitions of INTTRA and Amber Road, partially offset by the realization of integration-related cost savings from historical acquisitions.
Amortization of intangible assets increased to $19.5 million in fiscal year 2020 compared to $8.4 million in fiscal year 2019. This increase was primarily due to
additional amortization expense related to intangible assets acquired from INTTRA and Amber Road.
Subscription gross margin declined from 73% in fiscal year 2019 to 68% in fiscal year 2020, primarily related to the acquisitions of INTTRA and Amber Road and
the timing of realizing integration-related cost savings driven by these acquisitions.
48
Research and Development
($ in thousands)
Research and development
Percentage of revenue
Fiscal Years Ended
February 29, 2020
61,882
$
February 28, 2019
42,523
$
$
$ Change
% Change
19,359
46%
20%
21%
Research and development expenses were $61.9 million in fiscal year 2020, a $19.4 million, or 46%, increase compared to fiscal year 2019, related primarily to the
acquisitions of INTTRA and Amber Road as well as organic investments made in incremental research and development headcount.
Sales and Marketing
($ in thousands)
Sales and marketing
Percentage of revenue
Fiscal Years Ended
February 29, 2020
53,605
$
February 28, 2019
34,398
$
$
$ Change
% Change
19,207
56%
18%
17%
Sales and marketing expenses were $53.6 million in fiscal year 2020, a $19.2 million, or 56%, increase compared to $34.4 million in fiscal year 2019, related
primarily to the acquisitions of INTTRA and Amber Road as well as organic investments made in sales and marketing activities.
General and Administrative
($ in thousands)
General and administrative
Percentage of revenue
Fiscal Years Ended
February 29, 2020
51,799
$
February 28, 2019
28,001
$
$
$ Change
% Change
23,798
85%
17%
14%
General and administrative expenses were $51.8 million in fiscal year 2020, a $23.8 million, or 85%, increase compared to $28.0 million in fiscal year 2019. This
increase is primarily related to the acquisitions of INTTRA and Amber Road as well as unit-based compensation expense associated with the Amber Road
acquisition, which is the result of the acceleration of certain employee equity incentives post-closing.
Other Operating Expenses
($ in thousands)
Acquisition and other related expenses
Amortization of acquired intangible assets
Total other operating expenses
Fiscal Years Ended
February 29, 2020 February 28, 2019
$
26,709 $
31,129
57,838 $
$
15,577 $
20,061
35,638 $
$ Change
% Change
11,132
11,068
22,200
71%
55%
62%
Other operating expenses increased to $57.8 million in fiscal year 2020 compared to $35.7 million in fiscal year 2019, primarily related to transaction fees and
expenses, integration costs and intangible assets related to the acquisitions of INTTRA and Amber Road Other operating expense in fiscal 2020 were mainly due to
the acquisition of Amber Road while fiscal 2019 were primarily due to the acquisition of INTTRA.
49
Interest and Other Expense, Net
($ in thousands)
Interest and other expense, net
Loss on extinguishment of debt
Fiscal Years Ended
February 29, 2020 February 28, 2019
$
(67,554) $
—
(20,846) $
(4,604)
$ Change
% Change
(46,708)
4,604
224%
-100%
Interest expense was $67.6 million in fiscal year 2020, a $46.7 million increase compared to $20.8 million in fiscal year 2019, primarily related to incremental debt
incurred with respect to the 2019 acquisition of INTTRA resulting in a full year of interest expense followed by an additional increase in debt for the 2020
acquisition of Amber Road.
In fiscal year 2019, we repaid the full outstanding principal balance of $153.1 million of a term loan and credit facility using proceeds from the Term Loan Due
2024, as defined below. In connection with the repayment, we paid a $3.1 million prepayment fee and wrote off unamortized debt issuance costs of $1.5 million.
Provision for Income Taxes
($ in thousands)
Loss before income taxes
Income tax benefit
Fiscal Years Ended
February 29, 2020 February 28, 2019
$
(108,641) $
7,271
(38,363) $
8,245
$ Change
% Change
(70,278)
(974)
183%
-12%
Loss before income taxes was $108.7 million in fiscal year 2020, a $70.3 million increase compared to a net loss of $38.4 million in fiscal year 2019, related
primarily to one-time expenses related to the acquisitions of INTTRA and Amber Road. The income tax benefit for fiscal year 2020 primarily relates to a reduction
in deferred tax liabilities associated with the amortization of acquired intangible assets. The fiscal year 2019 benefit was driven primarily by an uncertain tax
position release in that year based on the expiration of a statute of limitations.
Non-GAAP Financial Measures
This document includes Non-GAAP revenue, Non-GAAP subscription revenue, Non-GAAP gross profit, Non-GAAP gross margin and Adjusted EBITDA, which
are non-GAAP performance measures that we use to supplement our results presented in accordance with U.S. GAAP. We believe these non-GAAP measures are
useful in evaluating our operating performance, as they are similar to measures reported by our public competitors and are regularly used by security analysts,
institutional investors and other interested parties in analyzing operating performance and prospects. These non-GAAP measures are not intended to be a substitute
for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other
industries or within the same industry.
We calculate and define Non-GAAP revenue as revenue excluding the impact of the deferred revenue fair value adjustment recorded as part of the purchase
accounting associated with the Business Combination on our results of operations and balance sheet. We calculate and define Non-GAAP subscription revenue as
subscription revenue excluding the deferred revenue fair value adjustment. We calculate and define Non-GAAP gross profit as gross profit excluding deferred
revenue fair value adjustment, depreciation and amortization, share-based compensation and certain other non-cash and non-recurring items. We define and
calculate Adjusted EBITDA as net income or losses excluding interest income or expense, income tax expense, depreciation and amortization and further adjusted
for the following items: deferred revenue fair value adjustment, share-based compensation, transaction-related costs and certain other non-cash and non-recurring
items as described in the reconciliation below. We also report Non-GAAP gross profit and Adjusted EBITDA as a percentage of Non-GAAP revenue as additional
measures to evaluate financial performance.
50
We include these non-GAAP financial measures because they are used by management to evaluate our core operating performance and trends and to make strategic
decisions regarding the allocation of capital and new investments. These non-GAAP measures exclude certain expenses that are required in accordance with U.S.
GAAP because they are non-recurring (for example, in the case of transaction-related costs and deferred revenue fair value adjustment), non-cash (for example, in
the case of depreciation, amortization, share-based compensation and deferred revenue fair value adjustment) or are not related to our underlying business
performance (for example, in the case of interest income and expense). There are limitations to non-GAAP financial measures because they exclude charges and
credits that are required to be included in the U.S. GAAP financial presentation. The items excluded from U.S. GAAP financial measures such as net income or
loss to arrive at non-GAAP financial measures are significant components for understanding and assessing our financial performance. As a result, non-GAAP
financial measures should be considered together with, and not alternatives to, financial measures prepared in accordance with U.S. GAAP.
The table below presents our Non-GAAP revenue reconciled to our reported revenue, the closest U.S. GAAP measure, for the periods indicated:
($ in thousands)
Total revenue
Business Combination adjustment (1)
Non-GAAP revenue
Successor
February 4, 2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3, 2021
Fiscal Year
Ended February
29, 2020
Fiscal Year
Ended February
28, 2019
$
$
21,365
7,797
29,162
$
$
308,647 $
305,102 $
—
—
308,647 $
305,102 $
201,207
—
201,207
(1)
Includes the fair value adjustment to the deferred revenue related to the purchase price allocation in the Business Combination.
The table below presents our Non-GAAP subscription revenue reconciled to our reported subscription revenue, the closest U.S. GAAP measure, for the periods
indicated:
($ in thousands)
Subscription revenue
Business Combination adjustment (1)
Non-GAAP subscription revenue
Successor
February 4, 2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3, 2021
Fiscal Year
Ended February
29, 2020
Fiscal Year
Ended February
28, 2019
$
$
14,117
7,797
21,914
$
$
259,707 $
243,981 $
—
—
259,707 $
243,981 $
153,634
—
153,634
(1)
Includes the fair value adjustment to the deferred revenue related to the purchase price allocation in the Business Combination.
The table below presents our Non-GAAP gross profit reconciled to our reported gross profit, the closest U.S. GAAP measure, for the periods indicated:
($ in thousands)
Gross profit
Reported gross profit
Business Combination adjustment (1)
Depreciation and amortization
Non-recurring/non-operating costs (2)
Share-based and unit-based compensation (3)
Non-GAAP gross profit
Gross margin
Non-GAAP gross margin
Successor
February 4, 2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3, 2021
Fiscal Year
Ended February
29, 2020
Fiscal Year
Ended February
28, 2019
$
$
5,181
7,797
4,645
110
3,248
20,981
24.2%
98.2%
193,658
—
25,236
254
624
219,772
$
$
62.7%
71.2%
184,037
—
25,041
27
1,204
210,309
$
$
60.3%
68.9%
127,647
—
11,700
777
429
140,553
63.4%
69.9%
$
$
51
Includes the fair value adjustment to the deferred revenue related to the purchase price allocation in the Business Combination.
(1)
(2) Primarily includes foreign currency exchange gain and losses and other non-recurring expenses such as systems integrations, legal entity simplification,
advisory fees and expenses related to retention of key employees from acquisitions.
(3) Reflects non-cash, long-term unit-based compensation expense, primarily related to senior management. The period from February 4, 2021 through
February 28, 2021, include $3.2 million in share-based compensation related to the acceleration of unvested options and restricted units of E2open
Holdings in connection with the Business Combination.
The table below presents our Adjusted EBITDA reconciled to our net loss, the closest U.S. GAAP measure, for the periods indicated:
($ in thousands)
Net income (loss)
Adjustments:
Interest expense, net
Income tax benefit
Depreciation and amortization
EBITDA
EBITDA Margin
Business Combination adjustment (1)
Non-cash adjustments (2)
Acquisition-related adjustments (3)
Gain from change in fair value of warrant liability (4)
Gain from change in fair value of contingent consideration (5)
Non-recurring/non-operating costs (6)
Share-based and unit-based compensation (7)
Adjusted EBITDA
$
Successor
February 4, 2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3, 2021
Fiscal Year
Ended February
29, 2020
Fiscal Year
Ended February
28, 2019
$
12,857
$
(47,930) $
(101,370) $
(30,118)
1,804
(612)
6,394
20,443
95.7%
7,797
—
4,317
(23,187)
(33,740)
443
33,000
9,073
$
65,340
(6,681)
63,263
73,992
24.0%
—
—
14,348
—
—
3,933
8,118
100,391
$
66,326
(7,271)
60,416
18,101
5.9%
—
—
25,057
—
—
6,212
19,167
68,537
$
21,914
(8,245)
34,348
17,899
8.9%
—
2,358
15,258
—
—
3,520
8,166
47,201
(1)
(2)
Includes the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination.
Includes non-cash loss on debt refinance and (gain) loss on investments.
(3) Primarily includes advisory, consulting, accounting and legal expenses incurred in connection with mergers and acquisitions activities, including related
valuation, negotiation and integration costs and capital-raising activities, including costs related to the acquisition of Amber Road and the Business
Combination.
(4) Represents the fair value adjustment at each balance sheet date of the warrant liability related to the public, private placement and forward purchase
warrants.
(5) Represents the fair value adjustment at each balance sheet date of the contingent consideration liability related to the restricted Series B-1 and B-2
common stock and Sponsor Side Letter.
(6) Primarily includes foreign currency exchange gain and losses and other non-recurring expenses such as systems integrations, legal entity simplification,
advisory fees and expenses related to retention of key employees from acquisitions.
(7) Reflects non-cash, long-term unit-based compensation expense, primarily related to senior management. The period from March 1, 2020 through
February 3, 2021 and fiscal year 2020 unit-based compensation includes a $0.8 million and $9.5 million, respectively, expense attributable to certain
unit-based awards in connection with the Amber Road acquisition. The period from February 4, 2021 through February 28, 2021, include $28.2 million
in share-based compensation related to the acceleration of unvested options and restricted units of E2open Holdings in connection with the Business
Combination and $4.7 million unit-based compensation expense for the restricted Series B-1 and B-2 common stock issued in connection with the
Business Combination for the accelerated unvested options and restricted units.
The comparability of our operating results for the periods from February 4, 2021 through February 28, 2021 (Successor) and March 1, 2020 through February 3,
2021 (Predecessor) as compared to the fiscal year ended February 29, 2020 (Predecessor) was impacted by the Business Combination in February 2021 and the
acquisition of Amber Road in July 2019.
52
February 4, 2021 through February 28, 2021 (Successor) and March 1, 2020 through February 3, 2021 (Predecessor) compared to Fiscal year ended
February 29, 2020 (Predecessor)
Non-GAAP Revenue
($ in thousands)
Non-GAAP revenue
Successor
February 4, 2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3, 2021
Fiscal Year
Ended February
29, 2020
$ Change (1)
% Change (1)
$
29,162
$
308,647 $
305,102 $
32,707
11%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Non-GAAP revenue was $337.8 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a $32.7 million,
or 11%, increase compared to $305.1 million for the fiscal year ended February 29, 2020. The increase in Non-GAAP revenue was mainly due to the increase in
our subscription revenue related to the Amber Road acquisition and new organic sales in prior periods driven by increases in products utilized across our customer
portfolio. The increase was partially offset by the $4.9 million decrease in our professional services revenue due to the delay in delivery of professional services
and training to our customers as a result of the impact the COVID-19 pandemic.
Non-GAAP Subscription Revenue
($ in thousands)
Non-GAAP subscription revenue
Successor
February 4, 2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3, 2021
Fiscal Year
Ended February
29, 2020
$ Change (1)
% Change (1)
$
21,914
$
259,707 $
243,981 $
37,640
15%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Non-GAAP subscription revenue was $281.6 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a
$37.6 million, or 15%, increase compared to $244.0 million for the fiscal year ended February 29, 2020. The increase in Non-GAAP subscription revenue was
mainly due to the Amber Road acquisition and new organic sales in prior periods driven by increases in products utilized across our customer portfolio.
Gross Profit
($ in thousands)
Gross profit
Gross margin
Successor
February 4, 2021
through
February 28,
2021
$
5,181
24.2%
Predecessor
March 1, 2020
through
February 3, 2021
193,658
$
Fiscal Year
Ended February
29, 2020
$ Change (1)
% Change (1)
$
184,037
$
14,802
8%
62.7%
60.3%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Gross profit was $198.8 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a $14.8 million, or 8%,
increase compared to $184.0 million for fiscal year 2020. The increase in gross profit was primarily due to the Amber Road acquisition and the realization of
acquisition related cost savings from historical acquisitions. Gross margin remained consistent between combined fiscal 2021 and fiscal 2020 at 60%.
53
Non-GAAP Gross Profit
($ in thousands)
Non-GAAP gross profit
Non-GAAP gross margin
Successor
February 4, 2021
through
February 28,
2021
$
20,981
98.2%
Predecessor
March 1, 2020
through
February 3, 2021
219,772
$
Fiscal Year
Ended February
29, 2020
$ Change (1)
% Change (1)
$
210,309
$
30,443
14%
71.2%
68.9%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Non-GAAP gross profit was $240.8 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a $30.4
million, or 14%, increase compared to $210.3 million for the fiscal year ended February 29, 2020. The increase in adjusted gross profit was due to the Amber Road
acquisition. The Non-GAAP gross margin increased to 71% for combined fiscal 2021 from 69% for fiscal 2020.
EBITDA
($ in thousands)
EBITDA
EBITDA margin
* Not meaningful
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended
February 29,
2020
$ Change (1)
% Change (1)
$
20,443
$
73,992
$
18,101
$
76,334
nm*
96%
24%
6%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
EBITDA was $94.4 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a $76.3 million increase
compared to $18.1 million for fiscal year ended February 29, 2020. EBITDA margins improved to 29% for combined fiscal 2021 compared to 6% in the prior year.
The increase in EBITDA and EBITDA margin was primarily related to stronger operating results due to organic revenue growth, the acquisition of Amber Road in
fiscal 2021 and the realization of integration-related cost savings from historical acquisitions.
Adjusted EBITDA
($ in thousands)
Adjusted EBITDA
Adjusted EBITDA margin
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended
February 29,
2020
$ Change (1)
% Change (1)
$
9,073
$
100,391
$
68,537
$
40,927
60%
42%
33%
22%
(1) Change represents the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 compared to the fiscal year
ended February 29, 2020.
Adjusted EBITDA was $109.5 million for the combined Predecessor and Successor periods included in the fiscal year ended February 28, 2021, a $40.9 million, or
60%, increase compared to $68.5 million for the fiscal year ended February 29, 2020. Adjusted EBITDA margins increased to 32% for fiscal 2021 compared to
22% for fiscal 2020. This increase in Adjusted EBITDA and Adjusted EBITDA margins were primarily related to the acquisition of Amber Road, stronger
operating results and the realization of integration-related cost savings from historical acquisitions.
54
Fiscal year ended February 29, 2020 compared to Fiscal year ended February 28, 2019
Non-GAAP Revenue
($ in thousands)
Non-GAAP revenue
Fiscal Years Ended
February 29, 2020 February 28, 2019
$
305,102 $
201,207 $
$ Change
% Change
103,895
52%
Non-GAAP revenue was $305.1 million for the fiscal year ended February 29, 2020, a $103.9 million, or 52%, increase compared to $201.2 million for the fiscal
year ended February 28, 2019. The increase in Non-GAAP revenue was mainly due to the increase in our subscription revenue related to the Amber Road and
INTTRA acquisitions and new organic subscription sales in prior periods driven by increases in products utilized across our customer portfolio. We also
experienced a $13.5 million increase in professional services revenue mainly attributable to the Amber Road and INTTRA acquisitions.
Non-GAAP Subscription Revenue
($ in thousands)
Non-GAAP subscription revenue
Fiscal Years Ended
February 29, 2020 February 28, 2019
$
243,981 $
153,634 $
$ Change
% Change
90,347
59%
Non-GAAP subscription revenue was $244.0 million for the fiscal year ended February 29, 2020, a $90.4 million, or 59%, increase compared to $153.6 million for
the fiscal year ended February 28, 2019. The increase in Non-GAAP subscription revenue was mainly due to the Amber Road and INTTRA acquisitions and new
organic subscription sales in prior periods driven by increases in products utilized across our customer portfolio.
Gross Profit
($ in thousands)
Gross profit
Gross margin
Fiscal Years Ended
February 29, 2020
184,037
$
February 28, 2019
127,647
$
$
$ Change
% Change
56,390
44%
60.3%
63.4%
Gross profit was $184.0 million for the fiscal year ended February 29, 2020, a $56.4 million, or 44%, increase compared to $127.6 million for fiscal year 2019. The
increase in gross profit primarily the result of the Amber Road and INTTRA acquisitions. Gross margin decreased to 60% for fiscal 2020 from 63% for fiscal 2019.
Non-GAAP Gross Profit
($ in thousands)
Non-GAAP gross profit
Non-GAAP gross margin
Fiscal Years Ended
February 29, 2020
210,309
$
February 28, 2019
140,553
$
$
$ Change
% Change
69,756
50%
68.9%
69.9%
Non-GAAP gross profit was $210.3 million for the fiscal year ended February 29, 2020, a $69.8 million, or 50%, increase compared to $140.6 million for the fiscal
year ended February 28, 2019. The increase was mainly the result of the Amber Road and INTTRA acquisitions. The Non-GAAP gross margin remained consistent
between periods.
EBITDA
($ in thousands)
EBITDA
EBITDA margin
Fiscal Years Ended
February 29, 2020
18,101
$
February 28, 2019
17,899
$
$
$ Change
% Change
202
1%
6%
9%
55
EBITDA was $18.1 million for fiscal year 2020, a $0.2 million, or 1%, increase compared to $17.9 million for fiscal year 2019. EBITDA margins decreased to 6%
for fiscal 2020 compared to 9% for fiscal 2019. The increase in EBITDA was primarily related to the benefits received from the acquisitions of INTTRA and
Amber Road and organic growth while the decrease in EBITDA margin was primarily related to the higher cost of revenue at INTTRA and Amber Road.
Adjusted EBITDA
($ in thousands)
Adjusted EBITDA
Adjusted EBITDA margin
Fiscal Years Ended
February 29, 2020
68,537
$
February 28, 2019
47,201
$
$
$ Change
% Change
21,336
45%
22%
23%
Adjusted EBITDA was $68.5 million for fiscal year 2020, a $21.3 million, or 45%, increase compared to $47.2 million in the fiscal year 2019. This increase was
primarily related to the acquisitions of Amber Road and INTTRA, stronger operating results and the realization of integration-related cost savings from historical
acquisitions.
Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital, capital expenditure needs,
contractual obligations and other commitments, with cash flows from operations and other sources of funding. Current working capital needs relate mainly to
employee compensation and benefits, as well as interest and debt. Our ability to expand and grow our business will depend on many factors, including working
capital needs and the evolution of our operating cash flows.
We had $194.7 million in cash and cash equivalents and $75.0 million of unused borrowing capacity under our revolving credit facility as of February 28, 2021.
See Note 12, Notes Payable and Capital Lease Obligations to the Notes to the Consolidated Financial Statements. We believe our existing cash and cash
equivalents, cash provided by operating activities and, if necessary, the borrowing capacity under our revolving credit facility will be sufficient to meet our working
capital, debt repayment and capital expenditure requirements for at least the next twelve months.
In the future, we may enter into arrangements to acquire or invest in complementary businesses. To facilitate these acquisitions or investments, we may seek
additional equity or debt financing.
Debt
2021 Term Loan and Revolving Credit Facility
On February 4, 2021, as part of the Business Combination, E2open, LLC entered into a new $525.0 million term loan (2021 Term Loan) and a $75.0 million
revolver (2021 Revolving Credit Facility). The 2021 Term Loan will mature on February 4, 2028 while the revolver will mature on February 4, 2026. The 2021
Term Loan has a variable interest rate which was 3.69% as of February 28, 2021. Principal payments of $1.3 million are due on the last day of each February, May,
August and November commencing August 2021. As of February 28, 2021, the 2021 Term Loan had a principal balance outstanding of $525.0 million and there
were no amounts drawn on the revolver.
Amber Term Loan
In July 2019, E2open Holdings incurred an additional term loan with Silicon Valley Bank (Amber Term Loan) with a maturity date of April 2021. The loan had a
variable interest rate which was 3.25% as of February 29, 2020. As of February 29, 2020, the loan had a principal amount outstanding of $36.6 million. On
February 4, 2021, this debt was paid in full as part of the Business Combination.
Term Loan and Revolving Credit Facility Due 2024
In November 2018, E2open, LLC entered into a credit agreement, including an initial term loan of $400.0 million, delayed draw term loans of up to $80.0 million
(together, Term Loan Due 2024) and a revolving credit facility of up to $30.0 million (Revolving Credit Facility) with a maturity date of November 2024.
Borrowings under the Term Loan Due 2024 during the year ended February 29, 2020 were $441.0 million and were used for the acquisition of Amber Road. There
were $15.0 million outstanding under the
56
Revolving Credit Facility as of February 29, 2020. The interest rate for the Term Loan Due 2024 and Revolving Credit Facility was 7.7% as of February 29, 2020.
On February 4, 2021, all outstanding balances on the Term Loan Due 2024 and Revolving Credit Facility were repaid in full as part of the Business Combination.
Repayment of Credit Facility
In November 2018, we repaid the full outstanding principal balance of $153.1 million of a term loan and credit facility using proceeds from the Term Loan Due
2024. In connection with the repayment, we paid a $3.1 million prepayment fee and wrote off unamortized debt issuance costs of $1.5 million. These charges are
included in loss on extinguishment of debt in the accompanying statements of comprehensive loss.
Cash Flows
The following table presents net cash from operating activities, investing activities and financing activities:
($ in thousands)
Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and
cash equivalents
Net (decrease) increase in cash, cash equivalents
and restricted cash
Cash, cash equivalents and restricted cash at
beginning of period
Cash, cash equivalents and restricted cash at
end of period
Successor
February 4,
2021
through
February 28,
2021
March 1, 2020
through
February 3,
2021
Predecessor
Fiscal Year
Ended
February 29,
2020
Fiscal Year
Ended February
28, 2019
$
5,801
(467,275)
(468)
$
8,654 $
(13,990)
626,449
(55,847) $
(442,962)
467,617
9,883
(235,742)
260,674
41
(98)
232
(112)
(461,901)
621,015
(30,960)
34,703
669,443
48,428
79,388
44,685
$
207,542
$
669,443 $
48,428 $
79,388
February 4, 2021 through February 28, 2021 (Successor) and March 1, 2020 through February 3, 2021 (Predecessor) compared to Fiscal year ended February
29, 2020
As of February 28, 2021, our consolidated cash, cash equivalents and restricted cash was $207.5 million, a $159.1 million increase from our balance of $48.4
million as of February 29, 2020, which as primarily due to the Business Combination.
Net cash provided by operating activities for the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 was $14.5
million compared to a use of cash of $55.8 million for the fiscal year ended February 29, 2020. The $70.3 million difference was largely driven by the increase in
EBITDA for the combined Predecessor and Successor periods in fiscal year 2021 compared to fiscal year 2020.
Net cash used in investing activities was $481.3 million and $443.0 million for the combined Predecessor and Successor periods included within the fiscal year
ended February 28, 2021 and fiscal year ended February 29, 2020, respectively. The use of cash for the combined Predecessor and Successor periods in 2021 was
primarily driven by the Business Combination and acquisition of property and software related to our data centers while the use of cash for the fiscal year ended
February 29, 2020 was primarily driven by the acquisition of Amber Road.
Net cash provided by financing activities for the combined Predecessor and Successor periods included within the fiscal year ended February 28, 2021 was $626.0
million compared to $467.6 million for fiscal year ended February 29, 2020. The increase in cash provided by financing activities was a result of $158.3 million of
cash received from the PIPE Investors above the additional borrowings in 2020 compared to 2021. Additionally, in 2020, we incurred debt issuance costs of $12.9
million. Debt issuance costs were incurred during the period from February 4 through February 28, 2021 as part of the Business Combination.
57
Fiscal year ended February 29, 2020 compared to Fiscal year ended February 28, 2019
For the fiscal year ended February 29, 2020, our consolidated cash and cash equivalents decreased by approximately $31.0 million to $48.4 million as compared to
our balance of $79.4 million on February 28, 2019.
Net cash used by operating activities for fiscal year 2020 was $55.8 million compared to $9.8 million of net cash provided by operating activities for fiscal year
2019. The decrease in cash flows from operating activities was primarily due to an increase in operating loss of $28.2 million and an increase in working capital
related to the acquisition of Amber Road.
Net cash used in investing activities was $443.0 million for fiscal year 2020 compared to net cash used in investing activities of $235.7 million for fiscal year 2019.
The increase in cash used in investing activities was attributed primarily to the acquisition of Amber Road. Capital Expenditures were $11.6 million in fiscal year
2020 compared to $2.7 million in fiscal year 2019.
Net cash provided by financing activities for fiscal year 2020 was $467.6 million compared to $260.7 million in fiscal year 2019. The increase in cash provided by
financing activities was primarily due to additional debt of $492.6 million, net of original issue discount, borrowed to finance the acquisition of Amber Road.
Tax Receivable Agreement
Concurrently with the completion of the Business Combination, we entered into the Tax Receivable Agreement with certain selling equity holders of E2open
Holdings. Pursuant to the Tax Receivable Agreement, we will pay the certain sellers, as applicable, 85% of the tax savings that we realize from increases in the tax
basis in E2open Holdings’ assets as a result of the sale of E2open Holdings’ equity interests, the future exchange of the Common Units for shares of Class A
Common Stock (or cash) pursuant to the Third Company Agreement, certain pre-existing tax attributes of certain sellers and certain other tax benefits related to
entering into the Tax Receivable Agreement including tax benefits attributable to payments under the Tax Receivable Agreement. The term of the Tax Receivable
Agreement will continue until all such tax benefits have been utilized or expired unless we exercise our right to terminate the Tax Receivable Agreement for an
amount representing the present value of anticipated future tax benefits under the Tax Receivable Agreement or certain other acceleration events occur.
Amounts payable under the Tax Receivable Agreement will be contingent upon, among other things, our generation of taxable income over the term of the Tax
Receivable Agreement. If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits
subject to the Tax Receivable Agreement, we would not be required to make the related payments under the Tax Receivable Agreement. Although the amount of
any payments required to be made under the Tax Receivable Agreement may be significant, the timing of these payments will vary and will generally be limited to
one payment per member per year. The amount of such payments is also generally limited to the extent we are unable to utilize the full amount of any tax benefits
subject to the Tax Receivable Agreement in a given period.
We recorded a liability related to the Tax Receivable Agreement of $50.1 million assuming (1) a constant corporate tax rate of 24.11%, (2) no dispositions of
corporate subsidiaries, (3) no material changes in tax law and (4) we do not elect an early termination of the Tax Receivable Agreement. However, due to the
uncertainty of various factors, including: (a) the timing and value of future exchanges, (b) the amount and timing of our future taxable income, (c) changes in our
tax rate, (d) no future dispositions of any corporate stock and (e) changes in the tax law, the likely tax savings we will realize and the resulting amounts we are
likely to pay to the E2open Sellers pursuant to the Tax Receivable Agreement are uncertain.
The liability recorded on the balance sheet does not include an estimate of the amount of payments to be made if certain sellers exchanged their remaining interests
in E2open Holdings for our common stock, as this amount is not readily determinable and is dependent on several future variables, including timing of future
exchanges, stock price at date of exchange, tax attributes of the individual parties to the exchange and changes in future applicable federal and state tax rates.
In addition, if we exercise our right to terminate the Tax Receivable Agreement or certain other acceleration events occur, we will be required to make immediate
cash payments. Such cash payments will be equal to the present value of the assumed future realized tax benefits based on a set of assumptions and using an agreed
upon discount rate, as defined in the Tax Receivable Agreement. The early termination payment may be made significantly in advance of the actual realization, if
any, of those future tax benefits. Such payments will be calculated based on certain assumptions, including that we have sufficient taxable income to utilize the full
amount of any tax benefits subject to the Tax Receivable Agreement over the period specified therein. The payments that we will be required to make will
generally reduce the amount of overall cash flow that might have otherwise been available to us, but we expect the cash tax savings we will realize from the
utilization of the related tax benefits will exceed the amount of any required payments. If we elected to terminate the Tax Receivable Agreement as of February 28,
2021, we estimate our early termination payment would have been approximately $129.3 million in the aggregate under the Tax Receivable Agreement.
58
In accordance with the Third Company Agreement, we will be entitled to receive quarterly tax distributions from E2open Holdings following the Business
Combination, subject to limitations imposed by applicable law and contractual restrictions. The cash received from such tax distributions will first be used by us to
satisfy any tax liability and then to make any payments required under the Tax Receivable Agreement. We expect that such tax distributions will be sufficient to
fund both our tax liability and the required payments under the Tax Receivable Agreement.
Under the Tax Receivable Agreement, we are expecting future gross payments during the fiscal years ending February 2022 of $4.2 million, 2023 of $4.9 million,
2024 of $7.8 million, 2025 of $7.3 million, 2026 of $6.3 million and thereafter of $65.6 million.
Other Commitments
In May 2019, E2open Holdings acquired Averetek, LLC (Averetek), which provides a channel marketing engine enabling customers and their channel partners to
plan and execute marketing campaign tactics. As part of the acquisition of Averetek, we provided $2.0 million of the purchase price as contingent consideration
which will be earned upon successful attainment of earn-out criteria that extends two-years subsequent to closing. If the earn-out criteria is met, the contingent
consideration will be earned in May 2021 and paid in June 2021.
As part of the Amber Road acquisition, equity incentive compensation previously granted to Amber Road employees was converted to deferred cash compensation,
whereby employees may vest in cash payments over periods up to four years from the date of acquisition. Vesting is contingent upon continued employment with
us. Deferred compensation amounts are calculated based on the price we paid for Amber Road’s stock at acquisition, the strike price of the original grant and the
number of former Amber Road shares that would have vested over the period. There was no accrual included in the Consolidated Balance Sheets as of February 28,
2021 for vested, unpaid Amber Road deferred compensation. Unvested future payments that are contingent upon the continuous employment of participating
employees totaled $1.0 million as of February 28, 2021.
Operating Leases
We have non-cancelable operating leases for our office spaces with various expiration dates through August 2027. Under these leases, we are required to make
future minimum lease payments during the fiscal years ending February 2022 of $8.5 million, 2023 of $6.5 million, 2024 of $5.6 million, 2025 of $4.2 million,
2026 of $3.2 million and thereafter of $5.4 million.
Off-Balance Sheet Arrangements
We are responsible for reimbursement of outstanding obligations related to any letters of credit issued under our $15.0 million available letters of credit accessible
under our $75.0 million revolving credit facility. We do not have any other material off-balance sheet arrangements or contingent commitments. There were no
outstanding letters of credit or borrowings under the 2021 Revolving Credit Facility as of February 28, 2021. There was $15.0 million outstanding under the
Revolving Credit Facility as of February 29, 2020.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with U.S. GAAP. Preparation of the financial statements requires management to make
judgments, estimates and assumptions that impact the reported amount of revenue and expenses, assets and liabilities and the disclosure of contingent assets and
liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high
degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements. Our
significant accounting policies are described in Note 2, Summary of Significant Accounting Policies to the Notes to the Consolidated Financial Statements.
Revenue Recognition
Subscription revenue, which primarily consists of fees to provide customers access to our solution, is recognized ratably over the life of the contract. Typically,
amounts that have been invoiced are recorded in accounts receivable and deferred revenue or revenue, depending on whether the revenue recognition criteria have
been met. Transaction-related revenue is recognized as the transactions occur.
Professional services revenue is derived primarily from fees for enabling services, including solution consulting and solution deployment. These services are often
sold in conjunction with the sale of our solutions. We provide professional services primarily on a time and materials basis, but also on a fixed fee basis.
Professional services revenue is recognized as the services are provided. For
59
services that are contracted at a fixed price, progress is generally measured based on labor hours incurred as a percentage of the total estimated hours required for
complete satisfaction of the related performance obligations. For services that are contracted on time and materials or prepaid basis, progress is generally based on
actual labor hours expended. These input methods (e.g., hours incurred or expended) are considered a faithful depiction of our efforts to satisfy services contracts as
they represent the performance obligation consumed by the customer and performed by us, and therefore reflect the transfer of services to a customer under such
contracts.
If our estimate of the total hours required for a performance obligation at a fixed price is inaccurate, then our revenue recognition timing will be impacted as labor
hours as a percentage of total estimated hours will be adjusted at the end of the contract resulting in additional or reduced revenue recognized, as needed, to account
for the change in hours. Any adjustments should not have a material impact to our financial condition and results of operations.
We enter into arrangements with multiple performance obligations, comprising of subscriptions and professional services. Arrangements with customers typically
do not provide the customer with the right to take possession of the software supporting the on-demand solutions. We primarily account for subscription and
professional services revenue as separate units of accounting and allocate revenue to each deliverable in an arrangement based on standalone selling price.
Judgment is required to determine the stand-alone selling price for each distinct performance obligation. We evaluate the standalone selling price for each element
by considering prices we charge for similar offerings, size of the order and historical pricing practices.
Deferred revenue from subscriptions represents amounts collected from, or invoiced to, customers in advance of earning subscription revenue. Typically, we bill
our annual subscription fees in advance of providing the service. Deferred revenue from professional services represents revenue for time and material contracts
where the revenue is recognized when milestones are achieved and accepted by the customer for fixed price contracts.
Share-Based Compensation
We measure and recognize compensation expense for all share-based awards at fair value over the requisite service period. We use the Black-Scholes option
pricing model to determine the weighted average fair value of options. For restricted stock grants and certain performance-based awards, fair value is determined as
the average price of our Class A Common Stock on the date of grant. The determination of fair value of share-based awards on the date of grant using an option-
pricing model is affected by our stock price as well as by assumptions regarding a number of subjective variables. These variables include, but are not limited to,
the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.
The expected terms of the options are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the
U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based on historical and expected
future volatility of our Class A Common Stock. We have not historically issued any dividends and do not expect to in the future.
For performance-based awards where the number of shares includes a relative revenue growth modifier to determine the number of shares earned at the end of the
performance period, the number of shares earned will depend on which range our total revenue growth falls within over the performance period. The fair value of
the performance-based shares with the revenue growth modifier is determined using a Monte Carlo valuation model. In the period it becomes probable that the
minimum threshold specified in the performance-based award will be achieved, we will recognize expense for the proportionate share of the total fair value of the
award related to the vesting period that has already lapsed. The remaining fair value of the award is expensed on a straight-line basis over the balance of the vesting
period. If we determine that it is no longer probable that we will achieve the minimum performance threshold specified in the award, all of the previously
recognized compensation expense will be reversed in the period such determination is made.
We do not estimate forfeitures; therefore, we record compensation costs for all awards and record actual forfeitures as they occur.
If factors change and we employ different assumptions in the determination of the fair value of grants in future periods, the related compensation expense that we
record may differ significantly from what we have recorded in the current periods.
Refer to Note 22, Share-Based and Unit-Based Compensation in the Notes to Consolidated Financial Statements for further discussion of our share-based
compensation plans.
Unit-Based Compensation
The pre-Business Combination unit-based compensation expense associated with awards to employees and directors was measured at the grant date based on the
fair value of the awards that were expected to vest. For time based awards, the expense was recognized on a straight line basis over the requisite service period of
the award, which was generally four years. For performance based awards, the
60
expense was recognized when the performance obligation was probable of occurring. The fair value of options was estimated using the Black-Scholes option-
pricing model, which was impacted by the following assumptions:
•
•
•
•
•
Expected Term — We estimated the expected term, using the simplified method due to limited exercise data, to be the period of time between the date of
grant and the midpoint between option vesting and expiration.
Expected Volatility — As E2open Holdings’ units were not actively traded, the volatility is based on a benchmark of comparable companies within the
SCM software industry.
Expected Dividend Yield — The dividend rate used was zero as we did not pay any cash dividends to unit holders.
Risk-Free Interest Rate — The interest rates used were based on the implied yield available on constant maturity U.S. Treasury securities with a term
equal to the expected term of the options.
Estimating the fair value of the underlying units is not necessary post-Business Combination as our shares are traded on the NYSE under the symbol
“ETWO.”
The pre-Business Combination grant date fair value of our common stock was typically determined by our board of members with the assistance of management
and a third-party valuation specialist. The grant date fair value of our membership units was determined using valuation methodologies which utilized certain
assumptions and weighting of factors, including an income based approach, a market based approach and an assumption for a discount for lack of marketability.
Application of these valuation methodologies involved the use of estimates, judgment and assumptions that are highly complex and subjective, such as those
regarding our expected future revenue, expenses, cash flows, discount rates, market multiples and the selection of comparable companies.
We did not estimate forfeitures. Instead, we accounted for forfeitures as they occurred. Forfeitures were not material the periods from February 4, 2021 through
February 28, 2021 and March 1, 2020 through February 3, 2021 and fiscal years ended February 29, 2020 and February 28, 2019.
Warrant Liability
We have public and private placement warrants as well as warrants available under the Forward Purchase Agreement. We classify as equity any equity-linked
contracts that (1) require physical settlement or net-share settlement or (2) give us a choice of net-cash settlement or settlement in our own shares (physical
settlement or net-share settlement). We classify as assets or liabilities any equity-linked contracts that (1) require net-cash settlement (including a requirement to
net-cash settle the contract if an event occurs and if that event is outside our control) or (2) give the counterparty a choice of net-cash settlement or settlement in
shares (physical settlement or net-share settlement).
For equity-linked contracts that are classified as liabilities, we record the fair value of the equity-linked contract at each balance sheet date and record the change in
the statements of operations as a gain (loss) from change in fair value of warrant liability. Our public warrant liability is valued using the binomial lattice pricing
model. Our private placement warrants are valued using a binomial pricing model when the warrants are subject to the make-whole table, or otherwise are valued
using a Black-Scholes pricing model. Our forward purchase warrants are valued utilizing observable market prices for public shares and warrants, relative to the
present value of contractual cash proceeds. The assumptions used in preparing these models include estimates such as volatility, contractual terms, discount rates,
dividend rate, expiration dates and risk-free rates.
The estimates used to calculate the fair value of our warrant liability changes at each balance sheet date are based on our stock price and other assumptions
described above. If our assumptions change or we experience significant volatility in our stock price or interest rates, the fair value calculated from one balance
sheet period to the next could be materially different.
Contingent Consideration
The contingent consideration liability is due to the issuance of the two tranches of restricted Series B-1 and B-2 common stock and Series 1 RCUs and Series 2
RCUs of E2open Holdings as part of the Business Combination. These shares and units were issued on a proportional basis to each holder of Class A shares in
CCNB1 and Common Units of E2open Holdings. We also have deferred consideration (earn-out) payments that are due upon the successful attainment of revenue
related criteria related to the acquisition of Averetek.
These restricted shares, Common Units and deferred consideration payments are treated as a contingent consideration liability under ASC 805 and valued at fair
market value on the acquisition date and will be remeasured at each reporting date and adjusted if necessary. Our earn-out liabilities and contingent consideration
are valued using a Monte Carlo simulation model. The assumptions used in preparing these models include estimates such as volatility, contractual terms, discount
rates, dividend rates, dividend yield
61
and risk-free interest rates. Any change in the fair value from the remeasurement will be recorded in acquisition-related expenses on the Consolidated Statements of
Operations as a gain (loss) on change in fair value of contingent consideration.
The estimates used to calculate the fair value of our contingent consideration changes at each balance sheet date are based on our stock price, operating results and
other assumptions. If our assumptions change or we experience significant volatility in our stock price or interest rates, the fair value calculated from one balance
sheet period to the next could be materially different.
Provision for Income Taxes
We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences
between the consolidated financial statement carrying amounts and tax bases of assets and liabilities and operating loss and tax credit carryforwards and are
measured using the enacted tax rates that are expected to be in effect when the differences reverse. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in our Consolidated Statements of Operations in the period that includes the enactment date. Valuation allowances are established when
necessary to reduce deferred tax assets to an amount that, in the opinion of management, is more likely than not to be realized.
We account for uncertain tax positions by reporting a liability for unrecognizable tax benefits resulting from uncertain tax positions taken or expected to be taken in
a tax return. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Variations
in the actual outcome of these future tax consequences could materially impact our consolidated financial statements.
Business Combinations
We evaluate acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset
acquisition by first applying a test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group
of similar identifiable assets. If the test is met, the transaction is accounted for as an asset acquisition. If the test is not met, further determination is required as to
whether or not we have acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. Significant judgment is
required in the application of the test to determine whether an acquisition is a business combination or an acquisition of assets.
We use the acquisition method in accounting for acquired businesses. Under the acquisition method, our financial statements reflect the operations of an acquired
business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date
of the acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
Determining estimated fair value requires a significant amount of judgment and estimates. If our assumptions change or errors are determined in our calculations,
the fair value could materially change resulting in a change in our goodwill or identifiable net assets acquired.
Recently Adopted and Issued Accounting Pronouncements
Recently issued and adopted accounting pronouncements are described in Note 2, Summary of Significant Accounting Policies to the Notes to the Consolidated
Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We have in the past and may in the future be exposed to certain market risks, including interest rate, foreign currency exchange and financial instrument risks, in
the ordinary course of our business. Currently, these risks are not material to our financial condition or results of operations, but they may be in the future.
Inflation
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. However, if our costs were to become subject
to significant inflationary pressures, we may not be able to fully offset higher costs through price increases and our inability or failure to do so could potentially
harm our business, financial condition and results of operations.
62
Interest Rate Risk
We have significant debt commitments. As of February 28, 2021, we had $525.0 million outstanding under our 2021 Term Loan with an interest rate of 3.69%. We
did not have any borrowings under our 2021 Revolving Credit Facility. These on-balance sheet financial instruments, to the extent they accrue interest at variable
interest rates, expose us to interest rate risk. A hypothetical increase or decrease in interest rates by 100 basis points would change our future interest expense by
approximately $5.3 million as of February 28, 2021.
Foreign Currency Exchange Rate Risk
The functional currency of our foreign subsidiaries is generally the local currency. Assets and liabilities are translated into U.S. dollars at the exchange rate in effect
as of the consolidated balance sheet date.
Operating accounts are translated at an average rate of exchange for the respective accounting periods.
Translation adjustments resulting from the process of translating foreign currency financial statements into U.S. dollars are reported as a component of accumulated
other comprehensive income (loss). Transaction gains and losses reflected in the functional currencies are charged to income or expense at the time of the
transaction.
Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts
receivable. We deposit cash and cash equivalents with high-quality financial institutions. Accounts receivable are typically unsecured and are derived from sales of
subscriptions and support, as well as professional services, principally to large creditworthy technology, industrial, consumer goods, pharmaceutical and energy
companies. Credit risk is concentrated primarily in North America, Europe and parts of Asia. We have historically experienced insignificant credit losses. We
maintain allowances for estimated credit losses based on management’s assessment of the likelihood of collection.
63
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES:
Schedule II – Valuation and Qualifying Accounts
Page
65
66
67
67
69
70
71
132
All other schedules are omitted because they are either not applicable, not required or the information is included in the Consolidated Financial Statements,
including the notes thereto.
64
Report of Independent Registered Public Accounting Firm
The Stockholders and Board of Directors of E2open Parent Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of E2open Parent Holdings, Inc. (the Company) as of February 28, 2021, and the related
consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the period February 4, 2021 through February 28, 2021
(collectively referred to as “the Successor”) and the consolidated balance sheet as of February 29, 2020 and the related consolidated statement of operations,
comprehensive loss, members’ equity, and cash flows for the period March 1, 2020 through February 3, 2021 and the years ended February 29, 2020 and February
28, 2019 (collectively referred to as “the Predecessor”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at February 28, 2021 and February 29, 2020, and the results of its operations and its cash flows for the Successor period and Predecessor
periods, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
Austin, Texas
May 20, 2021
65
E2OPEN PARENT HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
Successor
Predecessor
February 28, 2021
February 29, 2020
Assets
Current Assets
Cash and cash equivalents
Restricted cash
Accounts receivable - net of allowance of $908 and $1,631, respectively
Prepaid expenses and other current assets
Total current assets
Long-term investments
Goodwill
Intangible assets, net
Property and equipment, net
Other noncurrent assets
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued liabilities
Incentive program payable
Deferred revenue
Acquisition-related obligations
Current portion of notes payable and capital lease obligations
Total current liabilities
Long-term deferred revenue
Notes payable and capital lease obligations
Tax receivable agreement liability
Warrant liability
Contingent consideration
Deferred taxes
Other noncurrent liabilities
Total liabilities
Commitments and Contingencies (Note 25)
Stockholders' Equity
Members' capital
Class A common stock (Successor); $0.0001 par value, 2,500,000,000 shares
authorized; 187,051,142 issued and outstanding as of February 28, 2021
Class V common stock (Successor); $0.0001 par value; 40,000,000 shares
authorized; 35,636,680 issued and outstanding as of February 28, 2021
Series B-1 common stock (Successor); $0.0001 par value; 9,000,000 shares
authorized; 8,120,367 issued and outstanding as of February 28, 2021
Series B-2 common stock (Successor); $0.0001 par value; 4,000,000 shares
authorized; 3,372,184 issued and outstanding as of February 28, 2021
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings (accumulated deficit)
Total stockholders' equity
Noncontrolling interest
Total equity
Total Liabilities and Stockholders' Equity
$
$
$
$
194,717 $
12,825
112,657
12,643
332,842
224
2,628,646
824,851
44,198
7,416
3,838,177 $
70,233 $
12,825
89,691
2,000
9,232
183,981
482
509,388
50,114
68,772
150,808
396,217
1,057
1,360,819
—
19
—
—
—
2,071,206
2,388
10,800
2,084,413
392,945
2,477,358
3,838,177 $
19,494
28,934
118,777
12,602
179,807
179
752,756
467,593
25,232
14,445
1,440,012
58,451
28,934
142,027
3,100
64,902
297,414
2,656
886,806
—
—
—
36,636
1,908
1,225,420
433,992
—
—
—
—
—
(898)
(218,502)
214,592
—
214,592
1,440,012
See notes to consolidated financial statements.
66
E2OPEN PARENT HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Successor
February 4, 2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3, 2021
Fiscal Year
Ended February
29, 2020
Fiscal Year
Ended February
28, 2019
259,707 $
48,940
308,647
55,602
40,466
18,921
114,989
193,658
53,788
46,034
37,355
14,348
31,275
182,800
10,858
(65,469)
—
—
—
(65,469)
(54,611)
6,681
(47,930) $
243,981 $
61,121
305,102
59,113
42,414
19,538
121,065
184,037
61,882
53,605
51,799
26,709
31,129
225,124
(41,087)
(67,554)
—
—
—
(67,554)
(108,641)
7,271
(101,370) $
153,634
47,573
201,207
33,537
31,673
8,350
73,560
127,647
42,523
34,398
28,001
15,577
20,061
140,560
(12,913)
(20,846)
(4,604)
—
—
(25,450)
(38,363)
8,245
(30,118)
Revenue
Subscription revenue
Professional services
Total revenue
Cost of Revenue
Subscriptions
Professional services and other
Amortization of acquired intangible assets
Total cost of revenue
Gross Profit
Operating Expenses
Research and development
Sales and marketing
General and administrative
Acquisition-related expenses
Amortization of acquired intangible assets
Total operating expenses
(Loss) income from operations
Other (expense) income
Interest and other expense, net
Loss on extinguishment of debt
Gain from change in fair value of warrant liability
Gain from change in fair value of contingent consideration
Total other income (expenses)
Income (loss) before income tax benefit
Income tax benefit
Net income (loss)
Less: Net income attributable to noncontrolling interest
Net income attributable to E2open Parent Holdings, Inc.
Net income attributable to E2open Parent Holdings, Inc.
Class A common stockholders per share:
Basic
Diluted
$
$
$
$
$
$
14,117
7,248
21,365
7,823
4,324
4,037
16,184
5,181
10,458
8,788
23,123
4,317
1,249
47,935
(42,754)
(1,928)
—
23,187
33,740
54,999
12,245
612
12,857
2,057
10,800
0.06
0.06
See notes to consolidated financial statements.
67
E2OPEN PARENT HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Successor
February 4,
2021
through
February 28,
2021
March 1, 2020
through
February 3,
2021
Predecessor
Fiscal Year
Ended
February 29,
2020
(101,370) $
(47,930) $
—
(10)
(10)
(47,940)
(7)
233
226
(101,144)
Fiscal Year
Ended
February 28,
2019
(30,118)
(2,777)
(73)
(2,850)
(32,968)
—
—
—
$
12,857
$
—
2,388
2,388
15,245
2,439
$
12,806
$
(47,940) $
(101,144) $
(32,968)
Net income (loss)
Other comprehensive income (loss), net
Net unrealized loss on investments
Net foreign currency translation gain (loss)
Total other comprehensive income (loss), net
Comprehensive income (loss)
Comprehensive income (loss) attributable to noncontrolling
interest
Comprehensive income (loss) attributable to E2open Parent
Holdings, Inc.
See notes to consolidated financial statements.
68
E2OPEN PARENT HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
E2OPEN HOLDINGS, LLC
MEMBERS’ EQUITY
Predecessor
Member's Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Member's
Equity
Balance, February 28, 2018
Investment by member
Net assets contributed by member
Repurchase of membership units
Unit-based compensation expense
Net loss and comprehensive loss
Balance, February 28, 2019
Adoption of new accounting standard
Adjusted Balance, February 28, 2019
Investment by member
Repurchase of membership units
Unit-based compensation expense
Net loss and comprehensive loss
Balance, February 29, 2020
Investment by member
Unit-based compensation expense
Net loss and comprehensive loss
Balance, February 3, 2021
$
$
$
409,741
$
85
9,394
(1,564)
8,166
—
425,822
—
425,822
63
(115)
8,222
—
$
3,501
7,277
—
$
444,770
433,992
1,726
$
—
—
—
—
(2,850)
(1,124)
—
(1,124)
—
—
—
226
(898) $
—
—
(10)
(908) $
(91,337) $
—
—
—
—
(30,118)
(121,455)
4,323
(117,132)
—
—
—
(101,370)
(218,502) $
—
—
(47,930)
(266,432) $
320,130
85
9,394
(1,564)
8,166
(32,968)
303,243
4,323
307,566
63
(115)
8,222
(101,144)
214,592
3,501
7,277
(47,940)
177,430
E2OPEN PARENT HOLDINGS, INC.
STOCKHOLDERS’ EQUITY
Successor
Balance, February 4, 2021
Share-based compensation expense
Comprehensive income
Net income
Balance, February 28, 2021
Common
Stock
$
$
19
$
—
—
—
$
19
Additional
Paid-In
Capital
2,038,206
$
33,000
—
—
$
2,071,206
Accumulated
Other
Comprehensive
Income
Retained
Earnings
—
$
—
2,388
—
$
2,388
—
$
—
—
10,800
$
10,800
See notes to consolidated financial statements.
69
Total
Stockholders'
Equity
2,038,225
$
33,000
2,388
10,800
$
2,084,413
Noncontrolling
Interest
Total
Equity
390,888 $ 2,429,113
33,000
2,388
12,857
392,945 $ 2,477,358
—
—
2,057
E2OPEN PARENT HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Successor
February 4, 2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3, 2021
Fiscal Year
Ended February
29, 2020
Fiscal Year
Ended February
28, 2019
$
12,857
$
(47,930) $
(101,370) $
(30,118)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization
Amortization of deferred commissions
Amortization of debt issuance costs
Share-based and unit-based compensation
Gain from change in fair value of warrant liability
Gain from change in fair value of earn-out liability
Gain from change in fair value of contingent consideration
Gain on sale of short-term investment
Loss on disposal of property and equipment
Loss on extinguishment of debt
Changes in operating assets and liabilities:
Accounts receivable, net
Prepaid expenses and other current assets
Other noncurrent assets
Accounts payable and accrued liabilities
Incentive program payable
Deferred revenue
Changes in other liabilities
Net cash provided by (used in) operating activities
Cash flows from investing activities
Proceeds withdrawn from Trust Account
Payments for acquisitions - net of cash acquired
Capital expenditures
Proceeds from disposal of property and equipment
Sale of marketable securities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from PIPE Investment
Proceeds from sale of membership units
Repurchase of membership units, net
Proceeds from indebtedness
Repayments of indebtedness
Debt extinguishment costs
Repayments of capital lease obligations
Payments of debt issuance costs
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
Supplemental Information - Cash Paid (Received) for:
Interest
Income taxes
Non-Cash Investing and Financing Activities:
Capital expenditures financed under capital lease obligations
Capital expenditures included in accounts payable and accrued liabilities
Prepaid software, maintenance and insurance under notes payable
Membership units issued in connection with acquisitions
$
$
$
$
See notes to consolidated financial statements.
70
6,394
34
206
33,000
(23,187)
—
(33,740)
—
9
—
11,514
3,622
11,017
(6,648)
1,328
(8,733)
(1,872)
5,801
414,053
(879,907)
(1,470)
49
—
(467,275)
—
—
—
—
—
—
(468)
—
(468)
41
(461,901)
669,443
207,542
194,717
12,825
207,542
1,695
(39)
—
1,199
—
—
$
$
$
$
63,263
3,937
4,007
7,277
—
—
—
—
33
—
(5,395)
(3,611)
(5,410)
12,456
(17,437)
4,808
(7,344)
8,654
—
—
(13,990)
—
—
(13,990)
627,500
3,501
—
23,377
(21,891)
—
(6,038)
—
626,449
(98)
621,015
48,428
669,443 $
657,946 $
11,497
669,443 $
61,728 $
1,660
11,802 $
273
892
—
60,416
2,238
3,519
8,222
—
(146)
—
—
142
—
(49,992)
(1,276)
(9,113)
5,493
(1,581)
36,770
(9,169)
(55,847)
—
(431,399)
(11,563)
—
—
(442,962)
—
63
(115)
492,588
(5,529)
—
(6,449)
(12,941)
467,617
232
(30,960)
79,388
48,428 $
19,494 $
28,934 $
48,428 $
62,159 $
1,825
3,218 $
2,175
—
—
34,348
—
1,296
8,166
—
(77)
—
(2,246)
47
4,604
(7,958)
726
(472)
(6,284)
15,815
1,406
(9,370)
9,883
—
(244,449)
(2,712)
—
11,419
(235,742)
—
85
(1,564)
480,000
(197,979)
(3,085)
(5,245)
(11,538)
260,674
(112)
34,703
44,685
79,388
48,873
30,515
79,388
22,744
1,223
3,612
432
112
9,394
E2OPEN PARENTS HOLDINGS, INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
CC Neuberger Principal Holdings I (CCNB1) was a blank check company incorporated in the Cayman Islands on January 14, 2020. CCNB1 was incorporated for
the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.
CCNB1’s sponsor was CC Neuberger Principal Holdings I Sponsor LLC, a Delaware limited liability company (Sponsor). CCNB1 became a public company on
April 28, 2020 through an initial public offering (IPO) of 41,400,000 units at $10.00 per unit and private placement of 10,280,000 warrants generating gross
proceeds of $424.3 million. Upon the closing of the IPO and private placement, $414.0 million of the proceeds were placed in a trust account (Trust Account) and
invested until the completion of the Business Combination, as described below.
On February 4, 2021 (Closing Date), CCNB1 and E2open Holdings, LLC and its operating subsidiaries (E2open Holdings) completed a business combination
(Business Combination) contemplated by the definitive Business Combination Agreement entered into on October 14, 2020 (Business Combination Agreement). In
connection with the finalization of the Business Combination, CCNB1 changed its name to “E2open Parent Holdings, Inc.” (the Company or E2open) and change
its jurisdiction of incorporation from the Cayman Islands to the State of Delaware (Domestication).
Immediately following the Domestication, various entities merged with and into E2open, with E2open as the surviving company. Additionally, E2open Holdings
became a subsidiary of E2open with the equity interests of E2open Holdings held by E2open and existing owners of E2open Holdings. The existing owners of
E2open Holdings are considered noncontrolling interests in the consolidated financial statements.
E2open contributed, as a capital contribution in exchange for a portion of the equity interests in E2open Holdings it acquired, the amount of cash available after
payment of the merger consideration under the Business Combination Agreement. The merger consideration along with new financing proceeds were used to pay
transaction expenses, repay indebtedness and fund the expense account of the representative of the Company’s equity holders under the Business Combination
Agreement. Additionally, the limited liability company agreement of E2open Holdings was amended and restated to, among other things, reflect the Company
Merger and admit E2open Parent Holdings, Inc. as the managing member of the Company.
As a result of the Business Combination, the Company’s trading symbol on the New York Stock Exchange (NYSE) was changed from “PCPL” to “ETWO”.
See Note 3, Business Combination and Acquisitions and Note 11, Tax Receivable Agreement for additional information.
Description of Business
The Company is headquartered in Austin, Texas. E2open is a leading provider of 100% cloud-based, end-to-end supply chain management software. The
Company’s software combines networks, data and applications to provide a deeply embedded, mission-critical platform that allows customers to optimize their
supply chain by accelerating growth, reducing costs, increasing visibility and driving improved resiliency. Given the business-critical nature of the Company’s
solutions, it maintains deep, long-term relationships with its customers across a wide range of end-markets, including technology, consumer, industrial and
transportation, among others.
The COVID-19 pandemic has caused business disruptions worldwide since January 2020. The full extent to which the pandemic will impact the Company’s
business, operations, cash flows and financial condition will depend on future developments that are difficult to accurately predict. The Company has experienced
modest adverse impacts as it relates to lengthening of sales cycles and delays in delivering professional services and training to customers. The Company has also
experienced modest positive impacts from cost savings in certain operating expenses due to reduced business travel, deferred hiring for some positions and the
cancellation or virtualization of customer events.
As the global pandemic continues to evolve, the Company will continue monitoring the situation to understand its impacts on its business and operations.
71
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
As a result of the Business Combination, for accounting purposes, the Company is the acquirer and E2open Holdings is the acquiree and accounting predecessor.
The financial statement presentation includes the financial statements of E2open Holdings as “Predecessor” for periods prior to the Closing Date and of the
Company as “Successor” for the periods after the Closing Date, including the consolidation of E2open Holdings.
These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The consolidated
financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.
In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation have been included. The
historical financial information is not necessarily indicative of the Company’s future results of operations, financial position and cash flows.
Fiscal Year
The Company’s fiscal year ends on the last day of February each year.
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial
statements and the reported results of operations during the reporting period. Such management estimates include reserves for bad debt, goodwill and other
long‑lived assets, estimates of standalone selling price of performance obligations for revenue contracts with multiple performance obligations, share‑based
compensation, valuation allowances for deferred tax assets and uncertain tax positions, warrants, contingent consideration and the accounting for business
combinations. These estimates are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from
management’s estimates.
Seasonality
Our quarterly operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our
control, including seasonality in our business as a result of customer budget cycles and customary European vacation schedules, with higher sales in the third and
fourth fiscal quarters. As a result, our past results may not be indicative of our future performance and comparing our operating results on a period-to-period basis
may not be meaningful.
Segments
The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is
evaluated regularly by the chief operating decision maker (CODM), which the Company has determined is its chief executive officer. The CODM evaluates the
Company’s financial information and performance on a consolidated basis. The Company operates with centralized functions and delivers most of its products in a
similar way on an integrated cloud-based platform.
Business Combinations
The Company accounts for business combinations in accordance with Accounting Standards Codification (ASC) 805, Business Combinations, and, accordingly, the
assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair
values is recorded as goodwill. Some changes in the estimated fair values of the net assets recorded for acquisitions that qualify as measurement period adjustments
within one year of the date of acquisition will change the amount of the purchase price allocable to goodwill. All acquisition costs are expensed as incurred, and in-
process research and development costs, if any, are recorded at fair value as an indefinite-lived intangible asset and assessed for impairment thereafter until
completion, at which point the asset is amortized over its expected useful life. The results of operations of acquired businesses are included in the consolidated
financial statements beginning on the acquisition date.
72
Software Development Costs
The Company capitalizes certain software development costs incurred during the application development stage. Software development costs include salaries and
other personnel-related costs, including employee benefits, share-based compensation and bonuses attributed to programmers, software engineers and quality
control teams working on the Company’s software solutions. The costs related to software development are included in property and equipment, net in the
Consolidated Balance Sheets. Under this accounting framework, the Company had capitalized software costs of $7.4 million and a nominal amount as of February
28, 2021 and February 29, 2020, respectively. The Company recognized $0.1 million and $0.8 million of amortization of capitalized software development costs
for periods from February 4, 2021 through February 28, 2021 and March 1, 2020 through February 3, 2021, respectively. The Company did not recognize any
amortization of capitalized software development costs for the fiscal years ended February 29, 2020 and February 28, 2019, respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, and
accounts receivable. The Company deposits cash and cash equivalents with high-quality financial institutions. Accounts receivable are typically unsecured and
derived from sales of subscriptions and support, as well as professional services, principally to large creditworthy technology, industrial, consumer goods,
pharmaceutical and energy companies. Credit risk is concentrated primarily in North America, Europe, and parts of Asia. The Company has historically
experienced insignificant credit losses. The Company maintains allowances for estimated credit losses based on management’s assessment of the likelihood of
collection.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are stated
at fair value. The Company’s account balances at one or more institutions periodically exceed the Federal Deposit Insurance Corporation (FDIC) insurance
coverage and, as a result, there could be a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company has not
experienced any losses and believes the risk is not significant.
Restricted Cash
Restricted cash represents customer deposits for the incentive payment program. The Company offers services to administer incentive payments to partners on
behalf of the Company’s customers. The Company’s customers deposit these funds into a restricted cash account with an offset included as a liability in incentive
program payable in the Consolidated Balance Sheets.
Accounts Receivable, Net of Allowance
Accounts receivable are initially recorded upon the sale of solutions to customers. Credit is granted in the normal course of business without collateral. Accounts
receivable are stated net of allowances for doubtful accounts, which represent estimated losses resulting from the inability of certain customers to make the required
payments. When determining the allowances for doubtful accounts, the Company takes several factors into consideration, including the overall composition of the
accounts receivable aging, prior history of accounts receivable write-offs and experience with specific customers. The Company writes off accounts receivable
when they are determined to be uncollectible. Changes in the allowances for doubtful accounts are recorded as bad debt expense and are included in general and
administrative expense in the Consolidated Statements of Operations.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair values of the net tangible and intangible assets of acquired entities. The Company
performs a goodwill impairment test annually during the fourth quarter of the fiscal year and more frequently if an event or circumstance indicates that impairment
may have occurred. Triggering events that may indicate a potential impairment include but are not limited to significant adverse changes in customer demand or
business climate, obsolescence of acquired technology, and related competitive considerations.
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The Company performs the goodwill impairment test in accordance with guidance issued by the Financial Accounting Standards Board (FASB). The guidance
provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less
than its carrying amount. If an entity determines that this is the case, it is required to perform the two-step goodwill impairment test to identify potential goodwill
impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any. If an entity determines that the fair value of a
reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required. The Company has one reporting unit and did not record any
goodwill impairment charges for the periods from February 4, 2021 through February 28, 2021 and March 1, 2020 through February 3, 2021 and the fiscal years
ended February 29, 2020 and February 28, 2019.
Intangible Assets, Net
The Company has intangible assets with both definite and indefinite useful lives. Definite-lived intangible assets are carried at cost less accumulated amortization
and are amortized using the straight-line method over their estimated useful lives. The straight-line method approximates the manner in which cash flows are
generated from the intangible assets. Amortization periods for definite-lived intangible assets are as follows:
Trade names
Noncompete agreements
Customer relationships
Technology
Content library
Backlog
Successor
February 28, 2021
Indefinite
N/A
20 years
7-10 years
10 years
N/A
Predecessor
February 29, 2020
15 years or Indefinite
1-5 years
10-15 years
7 years
10 years
4 years
Trade names are the only indefinite-lived assets that are not subject to amortization. The Company tests these indefinite-lived intangible assets for impairment on
an annual basis during the fourth quarter of the fiscal year or more frequently if an event occurs or circumstances change that indicate that the fair value of an
indefinite-lived intangible asset could be below its carrying amount. The Company first performs a qualitative assessment to determine whether it is more likely
than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If this is the case, a quantitative assessment is performed. The
qualitative impairment test consists of comparing the fair value of the indefinite-lived intangible asset, determined using the relief from royalty method, with its
carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value.
Significant judgment is required in estimating the fair value of intangible assets and in assigning their respective useful lives. The fair value estimates are based on
available historical information and on future expectations and assumptions deemed reasonable by management but are inherently uncertain. Critical estimates in
valuing the intangible assets include, but are not limited to, forecasts of the expected future cash flows attributable to the respective assets, anticipated growth in
revenue from the acquired customer and product base, and the expected use of the acquired assets.
Property and Equipment, Net
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally two to
seven years. Leasehold improvements are amortized using the straight-line method over the remaining lease term or the estimated lives of the assets, if shorter.
Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the Consolidated Balance Sheets, and any resulting gain or loss
is reflected in the Consolidated Statements of Operations. No material gains or losses on disposal of property and equipment were recorded during the periods from
February 4, 2021 through February 28, 2021 and March 1, 2021 through February 3, 2021 and fiscal years ended February 29, 2020 and February 28, 2019.
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Impairment of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets, which consist principally of property and equipment and acquired intangible assets with finite
lives, whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability of an asset is measured by
comparing the carrying amount to the expected future undiscounted cash flows that the asset is expected to generate. If that review indicates that the carrying
amount of the long-lived asset is not recoverable, an impairment charge is recorded for the amount by which the carrying amount of the asset exceeds its fair value.
The Company did not record any long-lived asset impairment charges during the periods from February 4, 2021 through February 28, 2021 and March 1, 2021
through February 3, 2021 and fiscal years ended February 29, 2020 and February 28, 2019.
Fair Value Measurement
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at
the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements).
These tiers include:
•
•
•
Level 1, defined as observable inputs such as quoted prices in an active market;
Level 2, defined as inputs other than the quoted prices in an active market that are observable either directly or indirectly; and
Level 3, defined as unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair
value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Warrant Liability
The Company has public and private placement warrants as well as warrants available under the Forward Purchase Agreement dated as of April 28, 2020 by and
between CCNB1 and Neuberger Berman Opportunistic Capital Solutions Master Fund LP. The Company classifies as equity any equity-linked contracts that (1)
require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in the Company’s own shares (physical
settlement or net-share settlement). The Company classifies as assets or liabilities any equity-linked contracts that (1) require net-cash settlement (including a
requirement to net-cash settle the contract if an event occurs and if that event is outside the Company’s control) or (2) give the counterparty a choice of net-cash
settlement or settlement in shares (physical settlement or net-share settlement).
For equity-linked contracts that are classified as liabilities, the Company records the fair value of the equity-linked contracts at each balance sheet date and records
the change in the statements of operations as a gain (loss) from change in fair value of warrant liability. The Company’s public warrant liability is valued using a
binomial lattice pricing model. The Company’s private placement warrants are valued using a binomial lattice pricing model when the warrants are subject to the
make-whole table, or otherwise are valued using a Black-Scholes pricing model. The Company’s forward purchase warrants are valued utilizing observable market
prices for public shares and warrants, relative to the present value of contractual cash proceeds. The assumptions used in preparing these models include estimates
such as volatility, contractual terms, discount rates, dividend yield, expiration dates and risk-free rates.
The valuation methodologies for the warrants and forward purchase agreement included in warrant liability include certain significant unobservable inputs,
resulting in such valuations classified as Level 3 in the fair value measurement hierarchy. The Company assumes a volatility based on the implied volatility of the
public warrants and the Company's peer group, which includes American Software, Inc. (NasdaqGS: AMSW.A), Generix SA (ENXTPA: GENX), Manhattan
Associates, Inc. (NasdaqGS: MANH), SPS Commerce, Inc. (NasdaqGS: SPSC), Park City Group, Inc. (NasdaqCM: PCYG), GTY Technology Holdings Inc.
(NasdaqCM: GTYH), TrackX Holdings Inc. (TSXV: TKX), Tecsys Inc. (TSX: TCS), and The Descartes Systems Group Inc (TSX: DSG). The Company also
assumed no dividend payout.
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Contingent Consideration
The contingent consideration liability is due to the issuance of the two tranches of restricted Series B-1 and B-2 common stock and Series 1 restricted common
units (RCUs) and Series 2 RCUs of E2open Holdings as part of the Business Combination. These shares and units were issued on a proportional basis to each
holder of Class A shares in CCNB1 and Common Units of E2open Holdings. The Company also has deferred consideration (earn-out) payments that are due upon
the successful attainment of revenue related criteria related to the Averetek, LLC (Averetek) acquisition.
These restricted shares, Common Units and deferred consideration payments are treated as a contingent consideration liability under ASC 805 and valued at fair
market value on the acquisition date and will be remeasured at each reporting date and adjusted if necessary. The Company’s earn-out liabilities and contingent
consideration are valued using a Monte Carlo simulation model. The assumptions used in preparing these models include estimates such as volatility, contractual
terms, discount rates, dividend yield and risk-free interest rates. Any change in the fair value from the remeasurement will be recorded in gain (loss) from change in
contingent consideration on the Consolidated Statements of Operations.
Indemnification
The Company includes service-level commitments to its customers warranting certain levels of uptime reliability and performance and permitting those customers
to receive credits in the event that the Company fails to meet those levels. To date, the Company has not incurred any material costs as a result of such
commitments and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements. The Company has also agreed
to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines, and settlement amounts incurred in any action or
proceeding to which any of those persons is, or is threatened to be, made a party by reason of service as a director or officer. The Company maintains director and
officer insurance coverage that may enable the Company to recover a portion of any future amounts paid. The Company’s arrangements include provisions
indemnifying customers against liabilities if the Company’s products infringe a third-party’s intellectual property rights. The Company has not incurred any costs
as a result of such indemnifications and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements.
Noncontrolling Interests
Noncontrolling interest represents the portion of E2open Holdings that the Company controls and consolidates but does not own. The Company recognizes each
noncontrolling holder’s respective share of the estimated fair value of the net assets at the date of formation or acquisition. Noncontrolling interests are
subsequently adjusted for the noncontrolling holder’s share of additional contributions, distributions and their share of the net earnings or losses of each respective
consolidated entity. The Company allocates net income or loss to noncontrolling interests based on the weighted average ownership interest during the period. The
net income or loss that is not attributable to the Company is reflected in net income (loss) attributable to noncontrolling interests in the Consolidated Statements of
Operations. The Company does not recognize a gain or loss on transactions with a consolidated entity in which it does not own 100% of the equity, but the
Company reflects the difference in cash received or paid from the noncontrolling interests carrying amount as additional paid-in-capital.
Certain limited partnership interests, including common units, are exchangeable into the Company’s Class A common stock. Class A common stock issued upon
exchange of a holder’s noncontrolling interest is accounted for at the carrying value of the surrendered limited partnership interest and the difference between the
carrying value and the fair value of the Class A common stock issued is recorded to additional paid-in-capital.
Advertising Costs
Advertising costs, which include primarily print materials and sponsorship of events, are expensed as incurred and included in sales and marketing expense in the
Consolidated Statements of Operations. Advertising expense has been insignificant to date.
Severance and Exit Costs
Severance expenses consist of severance for employees that have been terminated or identified for termination. Exit costs consist of expenses associated with
vacating certain facility leases prior to the lease term which generally include the remaining payments on an operating lease. Lease termination obligations are
reduced for future sublease income. Severance costs related to workforce reductions are recorded when the Company has committed to a plan of termination and
notified the employees of the terms of the plan.
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Acquisition-Related Expenses
Acquisition-related expenses consist of third-party accounting, legal, investment banking fees, severance, facility exit costs, travel expenses, and other expenses
incurred solely to prepare for and execute the acquisition and integration of a business. These costs are expensed as incurred.
Share-Based Compensation
The Company measures and recognizes compensation expense for all share-based awards at fair value over the requisite service period. The Company uses the
Black-Scholes option pricing model to determine the weighted average fair value of options. For restricted stock grants and certain performance-based awards, fair
value is determined as the average price of the Company’s Class A common stock, par value $0.0001 per share (Class A Common Stock) on the date of grant. The
determination of fair value of share-based awards on the date of grant using an option-pricing model is affected by the stock price as well as by assumptions
regarding a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and
actual and projected employee stock option exercise behaviors.
The expected terms of the options are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the
U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based on the average of historical and
implied volatility of comparable companies from a representative peer group based on industry and market capitalization data. The Company has not historically
issued any dividends and does not expect to in the future.
For performance-based awards where the number of shares includes a relative revenue growth modifier to determine the number of shares earned at the end of the
performance period, the number of shares earned will depend on which range the Company’s total revenue growth falls within over the performance period. The
fair value of the performance-based shares with the revenue growth modifier is determined using a Black-Scholes valuation model. In the period it becomes
probable that the minimum threshold specified in the performance-based award will be achieved, the Company recognizes expense for the proportionate share of
the total fair value of the award related to the vesting period that has already lapsed. The remaining fair value of the award is expensed on a straight-line basis over
the balance of the vesting period. If the Company determines that it is no longer probable that it will achieve the minimum performance threshold specified in the
award, all previously recognized compensation expense will be reversed in the period such determination is made.
The Company does not estimate forfeitures for share-based awards; therefore, it will record compensation costs for all awards and record actual forfeitures as they
occur.
Unit-Based Compensation
The pre-Business Combination unit-based compensation expense associated with awards to employees and directors was measured at the grant date based on the
fair value of the awards that were expected to vest. For time-based awards, the expense was recognized on a straight-line basis over the requisite service period of
the award, which was generally four years. For performance-based awards, the expense was recognized when the performance obligation was probable of
occurring. The fair value of options was estimated using the Black-Scholes option-pricing model. Use of this model requires management to make estimates and
assumptions regarding expected option life, volatility, risk-free interest rate, and dividend yields. The Company did not estimate forfeitures for unit-based awards;
therefore, compensation costs was recorded for all awards and adjusted for forfeitures as they occurred. The Company did not have material forfeitures in any
period.
Foreign Currency Translation
The Company’s reporting currency is the U.S. dollar. The functional currency of most of the Company’s foreign subsidiaries is the applicable local currency,
although the Company has several subsidiaries with functional currencies that differ from their local currencies, of which the most notable exception is the
subsidiary in India, whose functional currency is the U.S. dollar. Assets and liabilities are translated into U.S. dollars at the exchange rate in effect at the
consolidated balance sheet date. Operating accounts are translated at an average rate of exchange for the respective accounting periods. Translation adjustments
resulting from the process of translating foreign currency financial statements into U.S. dollars are reported as a component of accumulated other comprehensive
income (loss). Transaction gains and losses reflected in the functional currencies are charged to income or expense at the time of the transaction.
Net transaction gain (loss) from foreign currency contracts recorded in the Consolidated Statements of Operations were $0.2 million and $0.2 million for the
periods February 4, 2021 through February 28, 2021 and March 1, 2020 through February 3, 2021, respectively, and $0.2 million and $(0.1) million for the fiscal
years ended February 29, 2020 and February 28, 2019, respectively.
77
Comprehensive Income (Loss)
Comprehensive income (loss) includes net loss, as well as other changes in stockholders’ equity that result from transactions and economic events other than those
with stockholders. The Company’s elements of other comprehensive income (loss) are unrealized gains on investments and cumulative foreign currency translation
adjustments.
Deferred Financing Costs
The Company capitalizes underwriting, legal, and other direct costs incurred related to the issuance of debt, which are included in notes payable and capital lease
obligations in the Consolidated Balance Sheets. Deferred financing costs related to notes payable are amortized to interest expense over the terms of the related
debt, using the effective interest method. Upon the extinguishment of the related debt, any unamortized deferred financing costs are immediately recorded to
gain/loss on extinguishment of debt. Deferred financing costs related to capital lease obligations are amortized on a straight line basis.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on
differences between the consolidated financial statement carrying amounts and tax bases of assets and liabilities and operating loss and tax credit carryforwards and
are measured using the enacted tax rates that are expected to be in effect when the differences reverse. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. Valuation allowances are established when
necessary to reduce deferred tax assets to an amount that, in the opinion of management, is more likely than not to be realized.
The Company accounts for uncertain tax positions by reporting a liability for unrecognizable tax benefits resulting from uncertain tax positions taken or expected to
be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Revenue Recognition
Effective March 1, 2019, the Company adopted ASC 606, Revenue from Contracts with Customers (ASC 606), and all the related amendments, using the modified
retrospective method. The Company adopted the new standard for all customer contracts. See Recently Issued or Adopted Authoritative Accounting Guidance
below for related discussion.
The Company generates revenue from the sale of subscriptions and professional services. The Company recognizes revenue when the customer contract and
associated performance obligations have been identified, the transaction price has been determined and allocated to the performance obligations in the contract, and
the performance obligations have been satisfied. The Company recognizes revenue net of any taxes collected from customers, which are subsequently remitted to
governmental authorities.
Subscription Revenue
The Company offers cloud-based on-demand software solutions, which enable its customers to have constant access to its solutions without the need to manage and
support the software and associated hardware themselves. The Company houses the hardware and software in third-party facilities and provides its customers with
access to the software solutions, along with data security and storage, backup, and recovery services, and solution support. The Company’s customer contracts
typically have a term of three to five years. The Company primarily invoices its customers for subscriptions in advance for annual use of the software solutions.
The Company’s payment terms typically require customers to pay within 30 to 90 days from the invoice date.
The Company also offers applications which enable its customers to have access to an electronic commerce transaction platform for the international container
shipping industry. The majority of the Company’s contracts provide for fixed annual subscription fees. Some of the Company’s contracts with customers are
volume-based transaction fees, based on the volume of transactions booked on the platform for two particular products. For subscription-based contracts, the
Company generally invoices annually in advance. Under the previous standard, the Company limited subscription revenue recognition to the contractually billable
amounts in each year of the subscription. Under the new standard, subscription revenue is recognized ratably over the life of the contract. The impact of this change
was insignificant; therefore, no cumulative adjustment was made to the opening balance sheet for revenue recognition at adoption of the new standard. For
transactional based contracts, the Company primarily recognizes revenue and invoices for these transactions once incurred, on a monthly basis. This is unchanged
from the previous standard.
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Professional Services
Professional services revenue is derived primarily from fees for enabling services, including solution consulting and solution deployment. These services are often
sold in conjunction with the sale of the Company’s solutions. The Company provides professional services primarily on a time and materials basis, but also on a
fixed fee basis. Customers are invoiced for professional services either monthly in arrears or, as with fixed fee arrangements, in advance and upon reaching project
milestones. Professional services revenue is recognized over time. For services that are contracted for at a fixed price, progress is generally measured based on
labor hours incurred as a percentage of the total estimated hours required for complete satisfaction of the related performance obligations. For services that are
contracted on at time and materials or prepaid basis, progress is generally based on actual labor hours expended. These input methods (e.g., hours incurred or
expended) are considered a faithful depiction of the Company’s efforts to satisfy services contracts as they represent the performance obligation consumed by the
customer and performed by the Company and therefore reflect the transfer of services to a customer under such contracts. The adoption of the new standard did not
result in a material change to the revenue recognition of professional services.
The Company enters into arrangements with multiple performance obligations, comprising of subscriptions and professional services. Arrangements with
customers typically do not provide the customer with the right to take possession of the software supporting the on-demand solutions. The Company primarily
accounts for subscription and professional services revenue as separate units of accounting and allocates revenue to each deliverable in an arrangement based on
standalone selling price. The Company evaluates the standalone selling price for each element by considering prices the Company charges for similar offerings,
size of the order and historical pricing practices.
Sales Commissions
With the adoption of ASC 606 and ASC 340-40, Other Assets and Deferred Cost-Contracts with Customers, the Company began deferring and amortizing sales
commissions that are incremental and directly related to obtaining customer contracts. Under the previous standard, the Company expensed all sales commissions
as incurred. The Company recognized the cumulative effect of adopting the new standard by capitalizing $4.4 million of sales commissions from prior periods and
recording an adjustment to accumulated deficit, net of tax, as of the adoption date. The Company amortizes sales commissions over the period that products are
expected to be delivered to customers, including expected renewals. The Company determined this period to be four years, beginning when costs are incurred.
Certain sales commissions that would have an amortization period of less than a year are expensed as incurred to sales and marketing expense.
Recent Accounting Guidance
Recently Adopted Accounting Guidance
The Company adopted ASC 606, Revenue from Contracts with Customers effective March 1, 2019 for all customer contracts. ASC 606 superseded the revenue
recognition requirements in ASC 605, Revenue Recognition. ASC 606 requires revenue recognition to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services through a five-step process:
•
•
•
•
•
identification of the contract, or contracts, with a customer;
identification of the performance obligation in the contract;
determination of the transaction price;
allocation of the transaction price to the performance obligation in the contract; and
recognition of revenue as performance obligations are satisfied.
The new standard also included ASC 340, Other Assets and Deferred Costs, subsection 40, Contracts with Customers, which addressed accounting for the cost to
obtain contracts. ASC 340-40 requires that costs to obtain contracts be recognized over the period that products and services are expected to be delivered, including
likely renewals.
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The Company adopted ASC 606 using the modified retrospective transition method. The period ended February 28, 2019, has not been restated and is reported
under the accounting standards in effect for that period. The following table summarizes the cumulative effects of adopting ASC 606 in the Company’s
Consolidated Balance Sheet as of March 1, 2019:
($ in thousands)
Assets
Prepaid expenses and other current assets
Other noncurrent assets
Liabilities and member’s equity
Other noncurrent liabilities
Accumulated deficit
February 28, 2019
$
7,662 $
3,496
18,888
(121,455)
Predecessor
ASC 606
Adoption
Adjustment
March 1, 2019
1,520 $
2,864
61
4,323
9,182
6,360
18,949
(117,132)
Adoption of the new revenue standard impacted the Company’s Consolidated Balance Sheet as of February 29, 2020, as follows:
($ in thousands)
Assets
Prepaid expenses and other current assets
Other noncurrent assets
Liabilities and member’s equity
Deferred revenue
Other noncurrent liabilities
Accumulated deficit
Balances
without ASC
606 Adoption
Impact
Predecessor
ASC 606
Adoption
Adjustment
As Reported
Balances as of
February 29,
2020
$
8,924 $
6,285
3,678 $
8,160
142,673
38,249
(230,691)
(646)
295
12,189
12,602
14,445
142,027
38,544
(218,502)
Adoption of the new revenue standard impacted the Company’s Consolidated Statement of Operations for the fiscal year ended February 29, 2020 as follows:
($ in thousands)
Revenue
Subscription revenue
Operating expenses
Sales and marketing
Income tax benefit
Net (loss) income
Balances
without ASC
606 Adoption
Impact
Predecessor
ASC 606
Adoption
Adjustment
As Reported
Balances as of
February 29,
2020
$
243,335 $
646 $
243,981
61,061
(7,507)
(109,236)
(7,456)
236
7,866
53,605
(7,271)
(101,370)
Below is a summary of the adoption impacts of the new standard:
•
•
•
The Company capitalized $4.4 million of sales commissions on March 1, 2019, with a corresponding adjustment to accumulated deficit, net of tax. The
Company is amortizing sales commissions over a four-year period to sales and marketing expense, beginning when the cost was incurred.
The Company recognized revenue of $0.6 million for the fiscal year ended February 29, 2020, for certain customer contracts that previously would have
been deferred as of February 29, 2020. Revenue on these contracts is being recognized ratably over the contract term.
Sales commissions of $9.7 million were deferred during the fiscal year ended February 29, 2020, and commissions amortization expense of $2.2 million
was recorded to sales and marketing expense for the fiscal year ended February 29, 2020.
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•
The Company recognized an additional $0.1 million deferred tax liability at adoption, and an income tax expense of $0.2 million for the fiscal year
ended February 29, 2020, related to the new standard. The impact to the deferred tax liability is included in other noncurrent liabilities in the
Consolidated Balance Sheets.
In November 2016, the FASB issued Accounting Standards Update (ASU) 2016-18, Restricted Cash, which requires that in the statement of cash flows, amounts
generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period
and end-of period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2018. The Company
adopted this standard for the fiscal year ended February 29, 2020 and it is reflected in the comparable prior period.
Recent Accounting Guidance Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases, which codified ASC 842, Leases. The core principle of ASC 842 is that a lessee should recognize the
assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the
present value of the lease payments, in the balance sheet. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by
class of underlying asset not to recognize lease assets and lease liabilities. The accounting applied by a lessor is largely unchanged from that applied under previous
GAAP. This standard is effective for calendar fiscal years beginning after December 15, 2021. Earlier application is permitted. In transition, lessees and lessors are
required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company believes the
adoption of this standard will result in a material increase to assets and liabilities as right-of-use leased assets and lease liabilities will be recorded in the
Consolidated Balance Sheets.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (ASC 326), which is intended to provide financial statement users with more
useful information about expected credit losses on financial assets held by a reporting entity at each reporting date. This standard replaces the existing incurred loss
impairment methodology with an approach that requires consideration of a broader range of reasonable and supportable forward-looking information to estimate all
expected credit losses. This standard is effective for the Company for the fiscal year beginning after December 15, 2022, and all interim periods within. Early
adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The amendments in this update simplify how an entity is required
to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. This standard is effective for annual periods beginning after December 15,
2021. Earlier application is permitted. The Company does not believe the adoption of this standard will have a material impact on its consolidated financial
statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard provides guidance on accounting for costs of
implementation activities performed in a cloud computing arrangement that is a service contract. ASU 2018-15 aligns the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The amendments
in this standard should be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. The standard is effective for
fiscal years beginning after December 15, 2021, and interim periods within those years. Earlier application is permitted. The Company does not believe the
adoption of this standard will have a material impact on its consolidated financial statements.
In October 2018, the FASB issued ASU 2018-17, Consolidated (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This
standard is intended to improve the accounting when considering indirect interests held through related parties under common control for determining whether fees
paid to decision makers and service providers are variable interests. ASU 2018-17 is effective for fiscal years beginning after December 15, 2020, and interim
periods within those years. All entities are required to apply this standard retrospectively with a cumulative-effect adjustment to retained earnings at the beginning
of the earliest period presented. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Simplifying Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting
standards. The guidance amends certain disclosure requirements that had become redundant, outdated or superseded. Additionally, this guidance amends
accounting for the interim period effects of changes in tax laws or rates and simplifies aspects of the accounting for franchise taxes. ASU 2019-12 is effective for
annual periods beginning after December 15, 2021. Early adoption is permitted. Management is currently evaluating the effect of these provisions on the
Company’s financial position and results of operations.
81
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting to
simplify the accounting for contract modifications made to replace the London Interbank Offered Rate (LIBOR) or other reference rates that are expected to be
discontinued because of the reference rate reform. The guidance provides optional expediates and exceptions for applying U.S. GAAP to contracts, hedging
relationships and other transactions affected by reference rate reform if certain criterion are met. The optional expedients and exceptions can be applied to contract
modification made until December 31, 2022. On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which clarifies that certain
optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting
transition. The amendments in ASU 2021-01 are elective and apply to the Company’s debt instruments that may be modified as a result of the reference rate
reform. The Company is continuing to evaluate these standards, as well as the timing of the transition of various rates in its debt instruments affected by reference
rate reform.
3.
BUSINESS COMBINATION AND ACQUISITIONS
Business Combination
The Business Combination of the Company and E2open Holdings was completed on February 4, 2021. The Business Combination was accounted for as a business
combination under ASC 805, Business Combinations. The acquisition of E2open Holdings constitutes the acquisition of a business for purposes of ASC 805, and
due to the change in control, has been accounted for using the acquisition method with the Company as the accounting acquirer and E2open Holdings as the
accounting acquiree. E2open Parent Holdings, Inc. has been determined to be the accounting acquirer based on evaluation of the following factors:
•
•
•
E2open Parent Holdings, Inc. is the sole managing member of E2open Holdings having full and complete authority over of all the affairs of E2open
while the non-managing member equity holders do not have substantive participating or kick out rights;
The Sponsor and its affiliates had the right to nominate five or six initial members of the Company’s board of directors;
The predecessor controlling shareholder of E2open Holdings, Insight Partners, did not have a controlling interest in E2open Parent Holdings, Inc. or
E2open Holdings as it held less than 50% of the voting interests after the Business Combination.
These factors support the conclusion that E2open Parent Holdings, Inc. acquired a controlling interest in E2open Holdings and is the accounting acquirer. E2open
Parent Holdings, Inc. is the primary beneficiary of E2open Holdings, which is a variable interest entity, since it has the power to direct the activities of E2open
Holdings that most significantly impact E2open Holdings economic performance through its role as the managing member. E2open Parent Holdings, Inc.’s variable
interest in E2open Holdings includes ownership of E2open Holdings, which results in the right and obligation to receive benefits and absorb losses of E2open
Holdings that could potentially be significant to E2open Parent Holdings, Inc. Therefore, the Business Combination represented a change in control and is
accounted for using the acquisition method. Under the acquisition method of accounting, the purchase price is allocated to the tangible and intangible assets
acquired and the liabilities assumed from E2open Holdings based on their estimated acquisition-date fair values.
The cash consideration in the Business Combination included cash from (1) the Trust Account in the amount of $414.0 million which was received in CCNB1’s
IPO, (2) $525.0 million in proceeds from the issuance of a new term loan, (3) $695.0 million in proceeds from the investors purchasing an aggregate of 69.5 million
Class A Common Stock in connection with the Business Combination (PIPE Investment) and (4) $200.0 million in proceeds from the Forward Purchase
Agreement. E2open Holdings received $627.5 million of the PIPE Investment funds prior to the closing of the Business Combination.
The following summarizes the estimated fair value of the Business Combination:
($ in thousands)
Equity consideration paid to existing E2open Holdings ownership, net (1)
Cash consideration to E2open Holdings, net of $15.1 million post business combination expense
Cash repayment of debt
Contingent consideration
Tax receivable agreement payable (2)
Cash paid for seller transaction costs
Estimated fair value of the Business Combination
82
$
$
Fair Value
461,549
585,971
978,521
158,598
49,892
38,135
2,272,666
(1) Equity consideration paid to E2open Holdings equity holders consisted of the following:
(In thousands, except per share data)
Common shares subject to sales restriction
Fair value per share
Equity consideration paid to existing E2open Holdings ownership
Less: Acceleration of Class A and Class B units post business combination expense
Equity consideration paid to existing E2open Holdings ownership, net
Consideration
43,300
10.98
475,434
(13,885)
461,549
$
$
$
(2) Payable for 85% of the tax savings realized during the exchange of E2open Holdings’ common units for shares of common stock, cash or other tax
benefits under the Tax Receivable Agreement, as defined below. See Note 11, Tax Receivable Agreement for additional information.
The Company recorded the preliminary allocation of the purchase price to the Predecessor’s tangible and intangible assets acquired and liabilities assumed based
on their fair values as of February 4, 2021. The preliminary purchase price allocation is as follows:
($ in thousands)
Cash and cash equivalents
Account receivable, net
Other current assets
Property and equipment, net
Intangible assets
Goodwill (1)
Non-current assets
Current liabilities (2)
Notes payable and capital lease obligations
Warrant liability
Noncurrent liabilities (2)
Noncontrolling interest (3)
Total assets acquired and liabilities assumed
$
$
Fair Value
180,115
124,168
23,623
37,924
830,000
2,628,964
4,930
(159,463)
(511,762)
(91,959)
(402,986)
(390,888)
2,272,666
(1) Goodwill that arose from the step-up in tax basis from the Business Combination is tax deductible for the Company; the majority of E2open Holdings’
goodwill is not deductible for tax purposes.
(2) The deferred revenue reflects a $60.7 million reduction in deferred revenues related to the estimated fair values of the acquired deferred revenue. The
adjustment is based on the fair value estimates for deferred revenue, adjusted for costs to fulfill the liabilities assumed, plus a normal profit margin.
(3) Noncontrolling interest represents the 16.0% ownership in E2open Holdings not owned by the Company as of the Closing Date. The fair value of the
noncontrolling interest follows:
(In thousands, except per share data)
Common shares subject to sale restriction
Fair value per share
Noncontrolling interest
Fair Value
35,600
10.98
390,888
$
$
83
The fair value of the intangible assets is as follows:
($ in thousands)
Indefinite-lived
Trademark / trade name (1)
Definite-lived
Customer relationships (2)
Technology (3)
Content library (4)
Total definite-lived
Total intangible assets
Weighted
Average
Useful Lives
Fair Value
Indefinite
$
110,000
20
8.5
10
$
300,000
370,000
50,000
720,000
830,000
(1) The trademark and trade name represent the tradenames that E2open Holdings originated or acquired which were valued using the relief-from-royalty
method.
(2) The customer relationships represent the existing customer relationships of E2open Holdings that was estimated by applying the with-and-without
methodology, a form of the income approach.
(3) The developed technology represents technology acquired and developed by E2open Holdings for the purpose of generating income for E2open
Holdings, which was valued using the multi-period excess earnings method, a form of the income approach considering technology migration.
(4) The content library represents the content contributed by network participants to the E2open Holdings business network, which was valued using the
replacement cost method.
The preliminary allocation of the purchase price is based on preliminary valuations performed to determine the fair value of the net assets as of the Closing Date.
This allocation is subject to revision as the assessment is based on preliminary information subject to refinement.
E2open Holdings incurred $6.5 million of expenses directly related to the Business Combination from March 1, 2020 through February 3, 2021 which were
included in acquisition-related expense in the Consolidated Statements of Operations. From January 14, 2020 (inception) through the date of its last filing for the
year ending December 31, 2020, CCNB1 incurred $3.9 million of transaction related expenses. From January 1, 2021 through February 3, 2021, CCNB1 incurred
$0.8 million of expenses related to the Business Combination. E2open Holdings paid $0.6 million of debt issuance costs on the Closing Date which were
capitalized and recorded as a reduction to the outstanding debt balances. On the Closing Date, the Company paid $14.5 million of deferred underwriting costs
related to CCNB1’s initial public offering. At the closing of the Business Combination, $10.9 million fees related to the PIPE Investment and $20.2 million of debt
issuance costs, including the $0.6 million paid by E2open Holdings, were paid by the Company. Additionally, $31.0 million and $16.9 million of acquisition-
related advisory fees related to the reverse merger were paid by E2open Holdings and CCNB1, respectively, at the closing of the Business Combination and as
these advisory fees were contingent upon the consummation of the Business Combination, they are not recognized in the Consolidated Statements of Operations of
the Predecessor or Successor, and are success fees in nature. The nature of these fees relate to advisory and investment banker fees that were incurred dependent on
the success of the Business Combination. The deferred underwriting commissions and costs pertaining to the reverse merger were treated as a reduction of equity
while merger-related costs were expensed in the period from February 4, 2021 through February 28, 2021. The debt issuance costs were capitalized as a reduction
to the outstanding debt balances.
84
Unaudited Pro Forma Operating Results
The following unaudited pro forma combined financial information presents the results of operations as if the Business Combination with CCNB1 on February 4,
2021 and the acquisition of Amber Road, Inc. had occurred as of March 1, 2019. The unaudited pro forma results may not necessarily reflect actual results of
operations that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma results reflect the step-up
amortization adjustments for the fair value of intangible assets acquired, a reduction in revenues related to the estimated fair value of the acquired deferred revenue,
the elimination of historical interest expense incurred by E2open Holdings on its debt and the incurrence of interest expense related to the issuance of debt in
connection with the Business Combination, transaction expenses, nonrecurring post-combination compensation expense and the related adjustment to the income
tax provision.
($ in thousands)
Total revenue
Net loss
Less: Net loss attributable to noncontrolling interest
Net loss attributable to E2open Parent Holdings, Inc.
Related Agreements
Third Amended and Restated Limited Liability Company Agreement
Fiscal Year Ended
February 28, 2021
$
$
328,378 $
(55,053)
(8,324)
(46,729) $
February 29, 2020
289,467
(161,758)
(30,704)
(131,054)
On February 4, 2021, in connection with the Business Combination, the limited liability agreement of E2open Holdings prior to the Business Combination was
amended and restated in its entirety to become the Third Amended and Restated Limited Liability Company Agreement (Third Company Agreement).
Rights of the Units
Following the closing of the Business Combination, the limited liability company interests of E2open Holdings, LLC (Common Units), which are non-voting,
economic interests in E2open Holdings, LLC, are entitled to share in the profits and losses of E2open Holdings and to receive distributions as and if declared by the
Company, as the managing member of E2open Holdings, and will have no voting rights.
The restricted Common Units (RCUs) will vest and become Common Units based upon the Company’s Class A Common Stock reaching certain dollar thresholds.
If any of the RCUs do not vest on or before the 10-year anniversary of the Closing Date, such units will be canceled for no consideration, and will not be entitled to
receive any Catch-Up Payments. See Note 13, Contingent Consideration for additional details.
The Third Company Agreement contains provisions which require that a one-to-one ratio be maintained between the interests the Company holds in E2open
Holdings and the Company’s outstanding common stock, subject to certain exceptions, including in respect of management equity which has not been settled in the
Company’s common stock. In addition, the Third Company Agreement permits the Company, in its capacity as the managing member, to take actions to maintain
such ratio, including in connection with stock splits, combinations, recapitalizations and exercises of the exchange rights of the parties to the Third Company
Agreement.
The Company, as the managing member of E2open Holdings, has the authority to create new equity interests in E2open Holdings, and establish the rights and
privileges of such interests.
Management
The Company, as the managing member of E2open Holdings following the Closing Date, has the sole authority to manage the business and affairs of E2open
Holdings in accordance with the Third Company Agreement and applicable law. The business, property and affairs of E2open Holdings will be managed solely by
the managing member, and the managing member cannot be removed or replaced except by the incumbent managing member.
85
Tax Receivable Agreement Distributions
The Third Company Agreement provides for quarterly tax distributions to the holders of Common Units on a pro rata basis based upon an agreed upon formula
related to the taxable income of E2open Holdings allocable to holders of Common Units. Generally, these tax distributions will be computed based on the
Company’s estimate of the taxable income of E2open Holdings allocable to each holder of Common Units (based on certain assumptions), multiplied by an
assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for a U.S. corporation organized under
the laws of the State of Delaware, taking into account all jurisdictions in which the Company is required to file income tax returns together with the relevant
apportionment information and the character of E2open Holdings’ income, subject to various adjustments.
Transfer Restrictions
The Third Company Agreement contains restrictions on transfers of units. No member may transfer all or a portion of its units, except for (1) certain transfers to
permitted transferees under certain conditions; (2) exchanges of Common Units for Class A Common Stock after the Lock-up Period pursuant to the Invest Rights
Agreement has expired; and (3) by a member to us or any of our wholly-owned subsidiaries.
Exchange of Common Units for Class A Common Stock
From and after August 4, 2021, the holders of Common Units will, up to once per calendar quarter (or with respect to an affiliate of Insight Partners, up to twice per
calendar quarter), be able to exchange all or any portion of their Common Units, together with the cancellation of an equal number of Class V common stock, par
value $0.0001 (Class V Common Stock), for a number of shares of Class A Common Stock equal to the number of exchanged Common Units by delivering a
written notice to E2open Holdings, with a copy to the Company; provided that (a) if a holder of Common Units holds more than 100,000 Common Units as of the
Closing Date, such holder will not be permitted to exchange a number of Common Units less than the lessor of (1) 100,000 Common Units and (2) all of the
Common Units then held by such holder or (b) if a holder of Common Units holds 100,000 Common Units or less than the lesser of (1) 50% of the Common Units
held by such holder as of the Closing Date and (2) all of the Common Units then held by such holder, subject in each case to the limitations and requirements set
forth in the Third Company Agreement regarding such exchanges. Notwithstanding the foregoing, the Company may, at its sole discretion, in lieu of delivering
shares of Class A Common Stock for any Common Units surrendered for exchange, pay an amount in cash per E2open Holdings Unit equal to the 5-day volume-
weighted average price (VWAP) of the Class A Common Stock ending on the day immediately prior to the date of the giving of the written notice of the exchange.
Exchange Ratio
For each Common Unit exchanged, one share of Class V Common Stock will be canceled and one share of Class A Common Stock will be issued to the
exchanging member (unless the Company elects to pay an amount in cash in lieu thereof). The exchange ratio will be adjusted for any subdivision (split, unit
distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, reorganization, recapitalization or
otherwise) of the Common Units that is not accompanied by an identical subdivision or combination of the Class A Common Stock or, by any such subdivision or
combination of the Common Units. If the Class A Common Stock is converted or changed into another security, securities or other property, on any subsequent
exchange an exchanging holder of Common Units will be entitled to receive such security, securities or other property.
Restrictions on Exchange
The Company may limit the rights of holders of Common Units to exchange their Common Units under the Third Company Agreement if the Company determines
in good faith that such restrictions are necessary so that E2open Holdings will not be classified as a “publicly traded partnership” under applicable tax laws and
regulations.
Expenses
E2open Holdings will reimburse all of the Company’s expenses in connection with the ownership and management of E2open Holdings and its business (other than
certain expenses, such as income taxes and payment obligations under the Tax Receivable Agreement, as defined below).
86
Tax Receivable Agreement
On February 4, 2021, the Company entered into a Tax Receivable Agreement (Tax Receivable Agreement) with certain owners of equity interest in holding Class
A Units or Class A-1 Units of E2open Holdings and the members holding Class B Units of E2open Holdings along with certain holders of options to purchase one
or more Class A Units or Class A-1 Units of E2open Holdings that are issued and outstanding which are vested (Vested Option Holders) or unvested (Unvested
Option Holders) (all collectively, E2open Sellers).
Pursuant to the Tax Receivable Agreement, the Company is required to pay the exchanging holders of Common Units, as applicable, 85% of the tax savings that
we realize as a result of increases in tax basis in E2open Holdings’ assets as a result of the sale of Common Units and the future exchange of Common Units for
shares of Class A Common Stock (or cash) pursuant to the Third Company Agreement and certain pre-existing tax attributes of certain sellers of E2open Holdings,
as well as certain other tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable
Agreement. The term of the Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless E2open Holdings exercises its
right to terminate the Tax Receivable Agreement for an amount representing the present value of anticipated future tax benefits under the Tax Receivable
Agreement or certain other accelerated rights occur.
See Note 11, Tax Receivable Agreement for additional information.
Investor Rights Agreement
On February 4, 2021, the Company entered into the Investor Rights Agreement (IRA).
Director Appointment
Under the Investor Rights Agreement, subject to certain step-down provisions, affiliates of Insight Partners collectively have the right to nominate three board
members (IVP Director) and CC NB Sponsor 1 Holdings LLC (CC Capital), on behalf the Sponsor, has the right to nominate five board members (Sponsor
Director). Two of the three IVP Directors, four of the five Sponsor Directors and the Chief Executive Officer of E2open Holdings, Michael A. Farlekas (CEO
Director), comprise the board of directors.
Voting
For the duration of the Standstill Period (as defined below), the parties to the Investor Rights Agreement (IRA Parties) agreed to vote all of their respective shares
of Class A Common Stock and Class V Common Stock, as applicable, in favor of the nominees recommended by the Company’s board of directors.
Standstill
The IRA Parties agreed that until the date that is the later of (a) one year after the Closing Date and (b) the date of the Company’s 2022 annual meeting of
stockholders (Standstill Period), they will not (1) solicit proxies to vote or seek to advise or influence any person with respect to the voting of any of our securities
in favor of electing any person as a director who is not nominated pursuant to the Investor Rights Agreement or by the board of directors or the Nominating and
Corporate Governance Committee or in opposition of any individual nominated by us pursuant to the Investor Rights Agreement, (2) nominate any person as a
director who is not nominated pursuant to the Investor Rights Agreement or by our board of directors (or the Nominating and Corporate Governance Committee)
(other than by making a non-public proposal or request to our board of directors or the Nominating and Corporate Governance Committee in a manner which
would not require our board of directors or us to make any public disclosure), (3) take certain actions contrary to the Company’s governance structure other than in
accordance with the Investor Rights Agreement, (4) subject to certain exceptions, enter into a voting trust, voting agreement or similar voting arrangement with
respect to any of the Company’s equity securities, (5) form, join or participate in a “group,” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (Exchange Act), in connection with any of the foregoing actions or (6) make any public disclosure inconsistent with the foregoing.
87
Registration Rights
Under the Investor Rights Agreement, within 30 days of the Closing Date, the Company was required to file a registration statement which was filed on Form S-1
on March 5, 2021 which became effective on March 29, 2021 registering the resale of securities held by the parties to the Investor Rights Agreement under the
Securities Act of 1933, as amended (Securities Act). The Form S-1 was filed with the SEC using a “shelf registration” process. Under the shelf registration process,
we and the selling holders may, from time to time, issue, offer and sell, as applicable, any combination of securities described in the Form S-1.
Under the Investor Rights Agreement, the Company agreed to indemnify the security holders and each underwriter and each of their respective controlling persons
against any losses or damages resulting from any untrue statement or omission of a material fact in any registration statement or prospectus pursuant to which they
sell shares of Class A Common Stock, unless such liability arose from their misstatement or omission, and the security holders agree to indemnify the Company
and its officers and directors and controlling persons against all losses caused by their misstatements or omissions in those documents.
Transfers
The IRA Parties will not be able to transfer shares beneficially owned or otherwise held by them prior to the termination of the Lock-up Period, subject to certain
customary exceptions including transfers to certain permitted transferees, such as an affiliate of such person, a member of the person’s immediate family or a trust,
the beneficiary of which is a member of the person’s immediate family or an affiliate of such person.
Termination
The director appointment rights under the Investor Rights Agreement will terminate as to a party when such party, together with its permitted transferees, has less
than certain ownership thresholds (with respect to the affiliates of Insight Partners, the greater of 33% of the economic interests in us that such affiliates of Insight
Partners owned immediately after the Closing Date and 2% of the Company’s voting securities, and with respect to CC Capital (on behalf of the Sponsor), less than
17% of the economic interests in the Company that it owned immediately after the Closing Date). The registration rights in the Investor Rights Agreement will
terminate as to each holder of the Company’s shares of common stock when such holder ceases to hold any of the Company’s common stock or securities
exercisable or exchangeable for the Company’s common stock.
Indemnification Agreements
Concurrently with the Closing Date, the Company entered into indemnification agreements with the Company’s board of directors, executive officers and senior
management, each of whom became or continued as an executive officer, Section 16 officer and/or director as of the Closing Date. Each indemnification agreement
provides that, subject to limited exceptions, the Company will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in
his or her capacity as the Company’s director or officer.
Lock-Up Agreements
On February 4, 2021, the Company entered into lock-up agreements with certain executive officers, senior management and former board of members (collectively,
Lock-up Parties), pursuant to which the Lock-up Parties are not permitted to transfer their shares beneficially owned or otherwise held by them prior to the
termination of the Lock-up Period, subject to certain customary exceptions including (a) transfers to permitted transferees, such as an affiliate of such person, a
member of the person’s immediate family or to a trust, the beneficiary of which is a member of the person’s immediate family; and (b) to a charitable organization,
by the laws of descent and distribution upon death, or pursuant to a qualified domestic relations order.
E2open Holdings Acquisitions
Amber Road, Inc.
In July 2019, E2open Holdings acquired Amber Road, Inc. (Amber Road), a leading provider of cloud-based global trade management software, trade content and
training. E2open Holdings acquired Amber Road for approximately $428.6 million in fixed consideration. The acquisition was funded by proceeds from the Term
Loan Due 2024 and the Amber Term Loan of $35.6 million. See Note 12, Notes Payable and Capital Lease Obligations.
88
The aggregate amount of consideration paid by E2open Holdings was allocated to Amber Road’s net tangible assets and intangible assets based on their estimated
fair values. The excess of the purchase price over the value of the net tangible assets and intangible assets was recorded as goodwill.
The table below presents the allocation of the purchase price to the net assets acquired based on their estimated fair values, as well as the associated estimated
useful lives of the acquired intangible assets.
($ in thousands)
Net assets:
Content library
Customer relationships
Technology
Total identified intangible assets
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Fixed assets
Other non-current assets
Total tangible assets
Goodwill
Total assets
Accounts payable
Accrued expenses and other liabilities
Deferred revenue
Other long-term liabilities
Total liabilities assumed
Net assets acquired
Amounts
Useful Lives
10 years
12 years
7 years
$
$
57,000
103,100
41,000
201,100
6,524
19,191
2,145
3,160
1,261
32,281
263,317
496,698
2,100
6,901
29,872
29,181
68,054
428,644
The goodwill recognized in connection with the acquisition of Amber Road will not be deductible for tax purposes. The weighted-average amortization period for
the acquired intangible assets was 10.4 years.
The operating results of Amber Road have been included in the Company’s consolidated financial statements as of the closing date of the acquisition.
Other Acquisitions
In May 2019, E2open Holdings acquired Averetek, a channel marketing engine enabling customers and their channel partners to plan and execute marketing
campaign tactics. Averetek was acquired for $8.7 million in fixed consideration with $2.0 million in consideration contingent upon successful attainment of earn-
out criteria that extend two years subsequent to closing. The fair value of the contingent consideration was $2.0 million at closing, February 29, 2020 and February
28, 2021.
The fixed consideration was comprised of a cash payment of $7.6 million and a deferred payment of $1.1 million which was paid in May 2020. The deferred
payment was not contingent on performance criteria and was included in acquisition-related obligations in the Consolidated Balance Sheets.
The aggregate amount of consideration paid by E2open Holdings was allocated to Averetek’s net liabilities assumed of $0.6 million and intangible assets of $4.1
million based on their estimated fair values. The excess of the purchase price over the value of the net tangible assets and intangible assets of $7.2 million was
recorded to goodwill. The goodwill recognized in connection with the acquisition of Averetek will be deductible for tax purposes. The weighted-average
amortization period for the acquired intangible assets was 8.3 years.
The operating results of Averetek have been included in the Company’s consolidated financial statements from the closing date of the acquisition.
The Company does not disclose the actual results of acquired companies post acquisition. E2open integrates the operations of acquired companies, therefore
making it impractical to report separate results.
89
4.
LIQUIDITY AND CAPITAL RESOURCES
The Company measures liquidity in terms of its ability to fund the cash requirements of its business operations, including working capital, capital expenditure
needs, contractual obligations and other commitments, with cash flows from operations and other sources of funding. Current working capital needs relate mainly
to employee compensation and benefits, as well interest, debt repayments, capital expenditures, and operating expenses. The Company’s ability to expand and grow
its business will depend on many factors, including working capital needs and the evolution of operating cash flows.
The Company had $194.7 million in cash and cash equivalents as of February 28, 2021. The Company believes its existing cash and cash equivalents, cash
provided by operating activities, and, if necessary, the borrowing capacity of up to $75.0 million available under its revolving credit facility (see Note 12, Notes
Payable and Capital Lease Obligations) will be sufficient to meet its working capital, debt repayment and capital expenditure requirements until for at least the
next twelve months.
In the future, the Company may enter into arrangements to acquire or invest in complementary businesses. To facilitate these acquisitions or investments, the
Company may seek additional equity or debt financing.
5.
RELATED PARTY TRANSACTIONS
In connection with the Amber Road acquisition in 2019, the Company paid $5.3 million and $3.0 million to Insight Partners and another member of the syndicate
of private equity investors in E2open Holdings, respectively, in exchange for their commitment to contribute equity funding for the acquisition if needed. No equity
funding was needed for the acquisition, and therefore the expense was included in acquisition-related expenses in the Consolidated Statements of Operations for the
fiscal year ended February 29, 2020, as these amounts were paid to the two investors for deal related transaction services incurred with the Amber Road
acquisition.
In connection with the Amber Road acquisition, the Company also assumed a $36.6 million term loan that is guaranteed by Insight Partners. This loan was paid in
full as part of the Business Combination. See the Amber Term Loan section in Note 12, Notes Payable and Capital Lease Obligations for further information.
See Note 3, Business Combination and Acquisitions and Note 11, Tax Receivable Agreement for additional related party disclosures.
6.
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
($ in thousands)
Prepaid software and hardware license and maintenance fees
Deferred commissions
Other prepaid expenses and other current assets
Total prepaid expenses and other current assets
Successor
February 28, 2021
Predecessor
February 29, 2020
$
$
5,441
407
6,795
12,643
$
$
3,346
3,678
5,578
12,602
Amortization of software licenses held under capital leases is included in cost of revenue and operating expenses. Prepaid maintenance, services and insurance are
expensed over the term of the underlying agreements.
7.
GOODWILL
The following tables present the changes in goodwill:
($ in thousands)
Balance, February 28, 2019
Acquisitions:
Amber Road
Averetek
Currency translation adjustment
Balance, February 29, 2020
Currency translation adjustment
Balance, February 3, 2021
90
$
$
Predecessor
482,378
263,317
7,191
(130)
752,756
33
752,789
($ in thousands)
Balance, February 4, 2021
Currency translation adjustment
Balance, February 28, 2021
$
$
Successor
2,628,964
(318)
2,628,646
For the year ended February 29, 2020, the change to goodwill was attributable to the acquisitions of Amber Road and Averetek as well as the effect of currency
translation adjustments. The opening balance of goodwill as of February 4, 2021 was due to the Business Combination. See Note 3, Business Combination and
Acquisitions for additional details.
8.
INTANGIBLE ASSETS, NET
Intangible assets, net consisted of the following:
($ in thousands)
Indefinite-lived:
Successor
February 28, 2021
Weighted
Average
Useful Life
Cost
Accumulated
Amortized
Net
Trademark / Trade name
Indefinite
$
109,924 $
— $
Definite-lived:
Customer relationships
Technology
Content library
Total definite-lived
20.0
8.5
10.0
Total intangible assets
$
(1,248)
(3,621)
(417)
(5,286)
(5,286) $
300,107
370,106
50,000
720,213
830,137 $
Predecessor
February 29, 2020
($ in thousands)
Indefinite-lived:
Trade name
Definite-lived:
Trade name
Noncompete agreements
Customer relationships
Technology
Content library
Backlog
Total definite-lived
Weighted
Average
Useful Life
Cost
Accumulated
Amortized
Net
Indefinite
$
11,849 $
— $
15.0
4.2
12.8
6.5
10.0
4.0
20,555
1,919
377,160
113,547
57,000
7,000
577,181
589,030 $
(3,023)
(1,894)
(70,159)
(37,603)
(3,800)
(4,958)
(121,437)
(121,437) $
Total intangible assets
$
The E2open trade name is indefinite-lived. Acquired trade names were definite-lived as over time the Company could rebrand acquired products and services as
E2open.
Amortization of intangible assets is recorded in cost of revenue and operating expenses in the Consolidated Statements of Operations. The Company recorded
amortization expense related to intangible assets of $5.3 million, $50.2 million, $50.7 million and $28.4 million for the periods from February 4, 2021 through
February 28, 2021 and March 1, 2020 through February 3, 2021 and fiscal years ended February 29, 2020 and February 28, 2019, respectively.
The weighted-average remaining amortization period for the definite-lived intangible assets is 13.4 years as of February 28, 2021.
91
109,924
298,859
366,485
49,583
714,927
824,851
11,849
17,532
25
307,001
75,944
53,200
2,042
455,744
467,593
Future amortization of intangibles is as follows for the fiscal years ending:
($ in thousands)
2022
2023
2024
2025
2026
Thereafter
Total future amortization
9.
PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
($ in thousands)
Computer equipment
Software
Furniture and fixtures
Leasehold improvements
Gross property and equipment
Less accumulated depreciation and amortization
Property and equipment, net
Amount
$
$
63,547
63,547
63,547
63,547
63,547
397,192
714,927
Successor
Predecessor
February 28, 2021 February 29, 2020
$
$
14,707 $
21,141
1,828
7,722
45,398
(1,200)
44,198 $
19,962
11,063
5,592
9,708
46,325
(21,093)
25,232
Computer equipment and software include assets held under capital leases. Amortization of assets held under capital leases is included in depreciation expense.
Depreciation expense was $1.1 million, $13.1 million, $9.7 million and $5.9 million for the periods from February 4, 2021 through February 28, 2021 and March 1,
2020 through February 3, 2021 and fiscal years ended February 29, 2020 and February 28, 2019, respectively.
Property and equipment, net by geographic regions consisted of the following:
($ in thousands)
Americans
Europe
Asia Pacific
Property and equipment, net
Successor
February 28, 2021
$
$
41,338
1,664
1,196
44,198
92
$
Predecessor
February 29, 2020
$
22,591
1,593
1,048
25,232
10.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following:
($ in thousands)
Accrued compensation
Accrued severance and retention
Trade accounts payable
Accrued professional services
Restructuring liability
Taxes payable
Interest payable
Other
Total accounts payable and accrued liabilities
11.
TAX RECEIVABLE AGREEMENT
Successor
Predecessor
February 28, 2021
February 29, 2020
$
$
34,298 $
349
17,858
2,938
1,639
1,892
1,293
9,966
70,233 $
25,011
2,613
13,508
3,168
1,117
1,404
309
11,321
58,451
E2open Holdings entered into a Tax Receivable Agreement with the owners of equity interest of certain parties holding Class A Units or Class A-1 Units of E2open
Holdings and the members holding Class B Units of E2open Holdings that requires the Company to pay 85% of the tax savings that are realized as a result of
increases in the tax basis in E2open Holdings’ assets as a result of the sale of E2open Holdings units and exchange of the E2open Holdings units for shares of
common stock and cash, as well as certain other tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments
under the Tax Receivable Agreement. The Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless E2open
Holdings exercises its right to terminate the Tax Receivable Agreement for an amount representing the present value of anticipated future tax benefits under the
Tax Receivable Agreement or certain other accelerated rights occur. The Company will retain the benefit of the remaining 15% of these cash savings.
Significant inputs and assumptions were used to preliminarily estimate the future expected payments including the timing of the realization of the tax benefits and a
tax savings rate of approximately 24.1%. Changes in any of these or other factors are expected to impact the timing and amount of gross payments. The fair value
of the tax receivable agreement obligation recorded by E2open Holdings in the opening balance sheet was $49.9 million, using an imputed interest rate of 7%. The
fair value of these obligations will be accreted to the amount of the gross expected obligation. The tax receivable agreement liability originally recorded has been
increased to $50.1 million as of February 28, 2021. This increase of $0.2 million was recorded as additional interest expense in the Consolidated Statements of
Operations. In addition, if E2open Holdings were to exercise its right to terminate the Tax Receivable Agreement or certain other acceleration events occur, the
Company will be required to make immediate cash payments. Such cash payments will be equal to the present value of the assumed future realized tax benefits
based on a set of assumptions and using an agreed upon discount rate, as defined in the Tax Receivable Agreement. The early termination payment may be made
significantly in advance of the actual realization, if any, of those future tax benefits. Such payments will be calculated based on certain assumptions, including that
the Company has sufficient taxable income to utilize the full amount of any tax benefits subject to the Tax Receivable Agreement over the period specified therein.
The payments that the Company will be required to make will generally reduce the amount of overall cash flow that might have otherwise been available, but the
Company expects the cash tax savings it will realize from the utilization of the related tax benefits will exceed the amount of any required payments. If the
Company elected to terminate the Tax Receivable Agreement as of February 28, 2021, the Company estimates the early termination payment would have been
approximately $129.3 million in the aggregate under the Tax Receivable Agreement.
93
12.
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable and capital lease obligations outstanding were as follows:
($ in thousands)
2021 Term Loan
Term Loan Due 2024
Amber Term Loan
Revolving Credit Facility
Other notes payable
Capital lease obligations
Total notes payable and capital lease obligations
Less unamortized debt issuance costs
Total notes payable and capital lease obligations, net
Less current portion
$
Notes payable and capital lease obligations, less current portion, net
$
Successor
February 28, 2021
Predecessor
February 29, 2020
525,000 $
—
—
—
688
11,415
537,103
(18,483)
518,620
(9,232)
509,388 $
—
914,184
36,588
15,000
376
6,057
972,205
(20,497)
951,708
(64,902)
886,806
2021 Term Loan and Revolving Credit Facility
On February 4, 2021, E2open, LLC, a subsidiary of the Company, entered into a credit agreement (Credit Agreement) that provides for $75.0 million in
commitments for revolving credit loans (2021 Revolving Credit Facility) with a $15.0 million letter of credit sublimit. The 2021 Revolving Credit Facility will
mature on February 4, 2026. E2open, LLC can request increases in the revolving commitments and additional term loan facilities, in minimum amounts of $2.0
million for each facility. The Credit Agreement also provides for $525.0 million in term loans (2021 Term Loan) payable in quarterly installments of $1.3 million
beginning in August 2021 and payable in full on February 4, 2028.
The interest rates applicable to borrowings under the Credit Agreement are, at E2open, LLC’s option, either (1) a base rate, which is equal to the greater of (a) the
Prime rate, (b) the Federal Reserve Bank of New York rate plus 0.5% and (c) the Adjusted LIBO Rate (subject to a floor of 0.50% for term loans, but none for
revolving loans) for a one month interest period plus 1% or (2) the adjusted LIBOR rate (subject to a floor of 0.50% for term loans, but none for revolving loans)
equal to the LIBO rate for the applicable interest period multiplied by the statutory reserve rate, plus in the case of each of clauses (1) and (2), the Applicable Rate.
The Applicable Rate (1) for base rate term loans ranges from 2.25% to 2.50% per annum, (2) for base rate revolving loans ranges from 1.50% to 2.00% per annum,
(3) for Eurodollar term loans ranges from 3.25% to 3.50% per annum and (4) for Eurodollar revolving loans ranges from 2.50% to 3.00% per annum, in each case,
based on the first lien leverage ratio. E2open, LLC will pay a commitment fee during the term of the Credit Agreement ranging from 0.25% to 0.375% per annum
of the average daily undrawn portion of the revolving commitments based on the First Lien Leverage Ratio which represents the ratio of the Company’s secured
consolidated total indebtedness to the Company’s consolidated EBITDA as specified in the Credit Agreement.
Other than a 1.00% premium which is payable if the initial term loan is prepaid on or prior to the date that is six months after the completion of the Business
Combination in connection with a Repricing Transaction and customary breakage costs, any borrowing under the Credit Agreement may be repaid, in whole or in
part, at any time and from time to time without any other premium or penalty, and any amounts repaid under the revolving credit facility may be reborrowed.
Mandatory prepayments are required in connection with (1) certain dispositions of assets or the occurrence of other Casualty Events, in each case, to the extent the
proceeds of such dispositions exceed certain individual and aggregate thresholds and are not reinvested, (2) unpermitted debt transactions and (3) excess cash flow
in excess of $10.0 million.
The Credit Agreement is guaranteed by E2open Intermediate, LLC, a subsidiary of the Company, and certain wholly owned subsidiaries of E2open, LLC, as
guarantors, and is supported by a security interest in substantially all of the guarantors’ personal property and assets.
Borrowings under the Credit Agreements may be used for working capital and other general corporate purposes, including capital expenditures, permitted
acquisitions and other investments, restricted payments and the refinancing of indebtedness, and any other use not prohibited by the Loan Documents.
94
The Credit Agreement contains certain customary events of default, which include failure to make payments when due, the material inaccuracy of representations
or warranties, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, certain judgments, certain Employment
Retirement Income Security Act (ERISA)-related events, failure of any security lien to be valid and perfected, failure of any material guarantee to be in full force
and effect and a change of control.
The Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants, including certain restrictions on the
ability of E2open, LLC and its subsidiaries to incur any additional indebtedness or guarantee indebtedness of others, to create liens on properties or assets, to make
certain investments, loans, advances and guarantees, to sell assets, to make certain restricted payments, to enter into certain sale and leaseback transactions, to enter
into certain affiliate transactions, to enter into certain restrictive agreements and to enter into certain asset and share-based transactions. In addition, E2open, LLC
must maintain a certain First Lien Leverage Ratio.
As of February 28, 2021, there were $525.0 million outstanding under the 2021 Term Loan at an interest rate of 3.69% and no outstanding borrowings under the
2021 Revolving Credit Facility. The Company was in compliance with the First Lien Leverage Ratio for the Credit Agreement as of February 28, 2021.
Amber Term Loan
In connection with the acquisition of Amber Road, Inc. (Amber Road), E2open Holdings assumed a term loan that is guaranteed by Insight Partners (Amber Term
Loan). As of February 29, 2020, the loan had a principal balance of $36.6 million, respectively, which is payable at maturity in April 2021. Interest is paid monthly.
The loan has a variable interest rate of prime less 1% which was 3.25% as of February 29, 2020. There are no premiums or penalties on voluntary prepayment of
the Amber Term Loan. The Amber Term Loan was paid in full as part of the Business Combination.
Term Loan and Revolving Credit Facility Due 2024
In November 2018, E2open, LLC entered into a credit agreement, including an initial term loan of $400.0 million, delayed draw term loans of up to $80.0 million
(together, Term Loan Due 2024) and a revolving credit facility of up to $30.0 million (Revolving Credit Facility). In connection with the Amber Road acquisition
in July 2019, E2open, LLC borrowed an additional $441.0 million.
The Term Loan Due 2024 and Revolving Credit Facility are fully and unconditionally guaranteed, jointly and severally, by the E2open, LLC and its wholly owned
subsidiaries and secured by all their tangible and intangible property.
The Term Loan Due 2024 matures in November 2024 and will amortize in quarterly installments beginning February 2019, with the balance payable on the final
maturity date. E2open, LLC may make voluntary prepayments on the Term Loan Due 2024, in whole or in part, without premium or penalty, except in the instance
of refinancing with new indebtedness or a change in control, where prepayment premiums will apply. Additionally, the agreement requires E2open, LLC to make
early principal payments on an annual basis beginning February 2020, if cash flows for the year, as defined in the agreement, exceed certain levels specified in the
agreement. No early principal payments have been required as of January 2021.
Upon the acquisition of Amber Road, the Term Loan Due 2024 and Revolving Credit Facility were amended, and interest rates were increased by 0.75%. Interest
incurred under the Term Loan Due 2024 and Revolving Credit Facility were amended to be at the borrower’s option at either (a) a LIBOR rate plus an applicable
margin of 5.75% or (b) a base rate, plus an applicable margin of 4.75%. The interest rate for the Term Loan Due 2024 and Revolving Credit Facility was 7.7% as of
February 29, 2020.
The Term Loan Due 2024 and Revolving Credit Facility agreement contain a number of covenants that, among other things and subject to certain exceptions,
restrict E2open, LLC and its subsidiaries’ ability: (a) to incur additional indebtedness; (b) issue preferred equity interests; (c) incur liens; (d) consolidate, merge;
liquidate or dissolve; (e) make investments, loans and acquisitions; (f) sell, transfer, lease or dispose of assets, including equity of its subsidiaries; (g) engage in
sale-leaseback transactions; (h) make restricted payments; (i) engage in transactions with its affiliates; and (j) enter into restrictive agreements.
The credit agreement governing the Term Loan Due 2024 and Revolving Credit Facility requires E2open, LLC to maintain a Total Leverage Ratio, as defined in
the agreement, under a stated maximum threshold. The Term Loan Due 2024 and Revolving Credit Facility also contains certain customary representations and
warranties, affirmative covenants and provisions relating to events of default. The Company was in compliance with the covenants of the Term Loan Due 2024 and
Revolving Credit Facility until it was paid in full in February 2021 as part of the Business Combination.
95
During the periods from February 4, 2021 through February 28, 2021 and March 1, 2020 through February 3, 2021 and the years ended February 29, 2020 and
February 28, 2019, the Company recognized $1.5 million, $64.5 million, $64.9 million and $21.5 million, respectively, of interest expense related to its outstanding
debt in the Consolidated Statements of Operations including the amortization of deferred financing fees.
The Company has purchased equipment under non-cancelable capital lease arrangements. The current and long-term portions of these capital lease obligations were
$4.8 million and $6.6 million, respectively as of February 28, 2021, and $3.9 million and $2.2 million, respectively, as of February 29, 2020.
The following table sets forth future principal payment obligations of the Company’s notes payable and capital lease obligations for the fiscal years ending:
($ in thousands)
2022
2023
2024
2025
2026
Thereafter
Total minimum payments
Less current portion
Notes payable and capital lease obligations, less current portion
13. CONTINGENT CONSIDERATION
Business Combination
Amount
$
$
9,696
9,094
7,750
5,250
5,250
500,063
537,103
(9,232)
527,871
The contingent consideration liability is due to the issuance of the two tranches of restricted Series B-1 and B-2 common stock and Series 1 restricted common
units (RCUs) and Series 2 RCUs of E2open Holdings as part of the Business Combination. These shares and units were issued on a proportional basis to each
holder of Class A shares in CCNB1 and Common Units of E2open Holdings. These restricted shares and Common Units are treated as a contingent consideration
liability under ASC 805 and valued at fair market value. The contingent consideration liability was recorded at a fair value of $158.6 million on the acquisition date
and will be remeasured at each reporting date and adjusted if necessary. The contingent consideration liability was remeasured at fair value as of February 28, 2021
in the amount of $129.4 million resulting in a gain of $29.2 million which was recognized in gain from change in fair value of contingent consideration on the
Consolidated Statements of Operations as a nonoperating income as the change in fair value is not a core operating activity of the Company.
There are 8,120,367 shares of Series B-1 common stock, including the Sponsor Side Letter shares noted below, and 3,372,184 shares of Series B-2 common stock
outstanding as of February 28, 2021. Except as required by law, holders of the Class B common stock are not entitled to any voting rights with respect to such Class
B common stock. Dividends and other distributions will be declared simultaneously with any dividend on shares of Class A Common Stock and ratably for the
holders of Class B common stock, provided that no such dividends will be paid on any share of Class B common stock until the conversion of such share into Class
A Common Stock, if any, at which time all accrued dividends will be paid.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company’s affairs, the holders of Class B common stock are not entitled
to receive any assets of the Company (other than to the extent such liquidation, dissolution or winding up constitutes a conversion event (as defined in the Sponsor
Side Letter Agreement), in which case such Class B common stock shall, in accordance with the certificate of incorporation, automatically convert to Class A
Common Stock and the holders of such resulting Class A Common Stock shall be treated as a holder of Class A Common Stock).
The Series B-1 common stock automatically converts into the Company’s Class A Common Stock on a one-to-one basis upon the occurrence of the first day on
which the 5-day volume-weighted average price (VWAP) of the Company’s Class A Common Stock is equal to at least $13.50 per share; provided, however, that
the reference to $13.50 per share shall be decreased by the aggregate per share amount of dividends actually paid in respect of a share of Class A Common Stock
following the closing of the Business Combination.
96
The Series B-2 common stock automatically converts into the Company’s Class A Common Stock on a one-to-one basis upon the occurrence of the first day on
which the 20-day VWAP is equal to at least $15.00 per share; provided, however, that the reference to $15.00 per share shall be decreased by the aggregate per
share amount of dividends actually paid in respect of a share of Class A Common Stock following the closing of the Business Combination.
The RCUs will vest and become Common Units of E2open Holdings as follows: (a) the Series 1 RCUs will vest at such time as the 5-day VWAP of the Class A
Common Stock is at least $13.50 per share; however, the $13.50 per share threshold will be decreased by the aggregate amount of dividends per share paid by the
Company following the closing of the Business Combination, (b) the Series 2 RCUs will vest at such time as the 20-day VWAP of the Class A Common Stock is at
least $15.00 per share; however, the $15.00 per share threshold will be decreased by the aggregate amount of dividends per share paid by the Company following
the closing of the Business Combination, (c) any then-unvested RCUs will vest upon the consummation of a qualifying change of control of the Company or
Sponsor and (d) any then-unvested RCUs, to the extent the liquidation value of the Common Units, taking into account the vesting of such RCUs and payment of
any relevant Catch-Up Payment (as defined in the Third Amended and Restated Limited Liability Company Agreement), would meet the VWAP-based vesting
threshold set forth in clause (a) and/or (b) above with respect to any such RCUs, will vest upon such qualifying liquidation. Upon the conversion of an RCU, the
holder of such RCU will be entitled to receive a payment equal to the amount of ordinary distributions paid on an E2open Holdings unit from the Closing Date
through (but not including) the date such RCU converts into an E2open Holdings unit. If any of the RCUs do not vest on or before the 10-year anniversary of the
Closing Date, such units will be canceled for no consideration, and will not be entitled to receive any Catch-Up Payments.
The Company has not paid any dividends to date and does not expect to in the future.
See Note 3, Business Combination and Acquisitions for additional information.
Sponsor Side Letter
In connection with the execution of the Business Combination Agreement, the Sponsor, certain investors and CCNB1’s Independent Directors entered into the
Sponsor Side Letter Agreement with CCNB1. Under the Sponsor Side Letter Agreement, 2,500,000 Class B ordinary shares of CCNB1 held by the Sponsor and
CCNB1’s Independent Directors were automatically converted into 2,500,000 shares of Series B-1 Common Stock, which, collectively, are referred to as the
Restricted Sponsor Shares. The vesting conditions of the shares of Series B-1 Common Stock mirror the Series 1 RCUs. Upon conversion of the Restricted Sponsor
Shares, the holder of each such Restricted Sponsor Share will be entitled to receive a payment equal to the amount of dividends declared on a share of Class A
Common Stock beginning at the closing of the Business Combination and ending on the day before the date such Restricted Sponsor Share converts into a share of
Class A Common Stock. If any of the Restricted Sponsor Shares do not convert prior to the ten-year anniversary of the Closing Date, such Restricted Sponsor
Shares will be canceled for no consideration and will not be entitled to receive any Catch-Up Payment, as defined in the Third Company Agreement, in respect of
such Restricted Sponsor Shares.
These restricted shares are treated as a contingent consideration liability under ASC 805 and valued at fair market value. The contingent consideration liability was
recorded at a fair value of $26.0 million on the acquisition date and will be remeasured at each reporting date and adjusted if necessary. The contingent
consideration liability was remeasured at fair value as of February 28, 2021 in the amount of $21.4 million. The change in fair value of $4.6 million was recognized
as a gain from change in fair value of contingent consideration on the Consolidated Statements of Operations as a nonoperating income as the change in fair value
is not a core operating activity of the Company.
Averetek
The purchase agreement for Averetek (see Note 3, Business Combination and Acquisitions) includes contingent payments of up to $2.0 million in consideration
contingent upon successful attainment of revenue related criteria that extends up to two years subsequent to closing, as well as a deferred consideration payment of
$1.1 million that extended one year subsequent to the closing of Averetek. The deferred consideration and earn-out liabilities were recorded on the acquisition date
in acquisition-related obligations on the Consolidated Balance Sheets. The earn-out liability is remeasured at each reporting date and adjusted if necessary. At the
acquisition date, the fair value of the contingent consideration was $2.0 million. The Company determined there was no change in fair value of the contingent
consideration as of February 28, 2021 and February 29, 2020. The deferred consideration will be earned in May 2021 and paid in June 2021.
97
14.
FAIR VALUE MEASUREMENT
The Company’s financial instruments include cash and cash equivalents; investments; accounts receivable, net; accounts payable; acquisition-related obligations;
notes payable; and capital lease obligations. Accounts receivable, net; accounts payable; and acquisition-related obligations are stated at their carrying value, which
approximates fair value, due to their short maturity. The Company measures its cash equivalents and investments at fair value, based on an exchange or exit price
which represents the amount that would be received for an asset sale or an exit price, or paid to transfer a liability in an orderly transaction between knowledgeable
and willing market participants. The Company estimates the fair value for notes payable and capital lease obligations by discounting the future cash flows of the
related note and lease payments. As of February 28, 2021 and February 29, 2020, the fair value of the cash and cash equivalents, restricted cash, notes payable and
capital lease obligations approximates their recorded values.
The following tables set forth details about the Company’s investments:
($ in thousands)
February 28, 2021 (Successor)
Asset-backed securities
February 29, 2020 (Predecessor)
Asset-backed securities
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
162 $
62 $
— $
224
162 $
17 $
— $
179
$
$
Observable inputs are based on market data obtained from independent sources. Unobservable inputs reflect the Company’s assessment of the assumptions market
participants would use to value certain financial instruments. This hierarchy requires the Company to use observable market data, when available, and to minimize
the use of unobservable inputs when determining fair value.
The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy are summarized as follows:
($ in thousands)
Assets:
Cash equivalents:
Money market
Total cash equivalents
Investments:
Asset-backed securities
Total investments
Total assets
Liabilities:
Earn-out liability
Warrant liability
Contingent consideration
Total liabilities
Successor
February 28, 2021
Level 1
Level 2
Level 3
Total
4 $
4
—
—
4 $
—
—
—
— $
— $
—
224
224
224 $
—
—
—
— $
— $
—
—
—
— $
4
4
224
224
228
2,000
68,772
150,808
221,580 $
2,000
68,772
150,808
221,580
$
$
$
98
($ in thousands)
Assets:
Cash equivalents:
Money market
Total cash equivalents
Investments:
Asset-backed securities
Total investments
Total assets
Liabilities:
Earn-out liability
Total liabilities
Contingent Consideration
Predecessor
February 29, 2020
Level 1
Level 2
Level 3
Total
$
$
$
4 $
4
—
—
4 $
—
— $
— $
—
179
179
179 $
— $
—
—
—
— $
4
4
179
179
183
—
— $
2,000
2,000 $
2,000
2,000
A reconciliation of the beginning and ending balances of acquisition related accrued earn-outs and contingent consideration using significant unobservable inputs
(Level 3) is summarized below:
($ in thousands)
Beginning of period
Acquisition date fair value of contingent consideration
Cash payments
Gain from fair value of contingent consideration
Foreign exchange
End of period
Successor
Predecessor
February 28, 2021
February 29, 2020
$
$
2,000 $
184,548
—
(33,740)
—
152,808 $
620
2,000
(464)
(146)
(10)
2,000
The change in the fair value of the earn-out is recorded in acquisition-related expenses while the change in the fair value of the contingent consideration is recorded
in gain (loss) from change in fair value of contingent consideration in the Consolidated Statements of Operations.
The Company’s warrant liability is measured at fair value on a recurring basis using significant unobservable inputs (Level 3). A reconciliation of the warrant
liability from February 4, 2021 through February 28, 2021 is summarized below:
($ in thousands)
Beginning of period
Gain from fair value of warrant liability
End of period
Successor
February 28, 2021
$
$
91,959
(23,187)
68,772
The change in the fair value of the warrant liability is recorded in gain (loss) from change in fair value of warrant liability in the Consolidated Statements of
Operations.
The fair values of the Company’s Level 1 financial instruments, which are traded in active markets, are based on quoted market prices for identical instruments.
The fair values of the Company’s Level 2 financial instruments are based on quoted market prices for comparable instruments or model-driven valuations using
observable market data or inputs corroborated by observable market data.
The Company’s earn-out liabilities and contingent consideration are valued using a Monte Carlo simulation model. The assumptions used in preparing these
models include estimates such as volatility, contractual terms, discount rates, dividend yield and risk-free interest rates. These valuation models use unobservable
market input, and therefore the liabilities are classified as Level 3.
99
The Company’s public warrant liability is valued using the binomial lattice pricing model. The private placement warrants are valued using a binomial pricing
model when the warrants are subject to the make-whole table, or otherwise are valued using a Black-Scholes pricing model. The forward purchase warrants are
valued utilizing observable market prices for public shares and warrants, relative to the present value of contractual cash proceeds. The assumptions used in
preparing these models include estimates such as volatility, contractual terms, discount rates, dividend yield, expiration dates and risk-free interest rates. This
valuation model uses unobservable market input, and therefore the liability is classified as Level 3.
15.
REVENUE
The Company generates revenue from the sale of subscriptions and professional services. The Company recognizes revenue when the customer contract and
associated performance obligations have been identified, transaction price has been determined and allocated to the performance obligations in the contract and
performance obligations have been satisfied. The Company recognizes revenue net of any taxes collected from customers, which are subsequently remitted to
governmental authorities.
Subscription Revenue
The Company offers cloud-based, on-demand software solutions, which enable its customers to have constant access to its solutions without the need to manage
and support the software and associated hardware themselves. The Company houses the hardware and software in third party facilities and provides its customers
with access to the software solutions, along with data security and storage, backup, recovery services and solution support. The Company’s customer contracts
typically have a term of three to five years. The Company primarily invoices its customers for subscriptions in advance for annual use of the software solutions.
The Company’s payment terms typically require customers to pay within 30 to 90 days from the invoice date.
Professional Services
Professional services revenue is derived primarily from fees for enabling services, including solution consulting and solution deployment. These services are often
sold in conjunction with the sale of the Company’s solutions. The Company provides professional services primarily on a time and materials basis, but also on a
fixed fee basis. Customers are invoiced for professional services either monthly in arrears or, as with fixed fee arrangements, in advance and upon reaching project
milestones. Professional services revenue is recognized over time. For services that are contracted at a fixed price, progress is generally measured based on labor
hours incurred as a percentage of the total estimated hours required for complete satisfaction of the related performance obligations. For services that are contracted
on time and materials or a prepaid basis, progress is generally based on actual labor hours expended. These input methods (e.g., hours incurred or expended) are
considered a faithful depiction of the Company’s efforts to satisfy these service contracts as they represent the performance obligation consumed by the customer
and performed by the Company, and therefore reflect the transfer of services to a customer under such contracts.
The Company enters into arrangements with multiple performance obligations, comprised of subscriptions and professional services. Arrangements with customers
typically do not provide the customer with the right to take possession of the software supporting the on-demand solutions. The Company primarily accounts for
subscription and professional services revenue as separate units of accounting and allocates revenue to each deliverable in an arrangement based on standalone
selling price. The Company evaluates the standalone selling price for each element by considering prices the Company charges for similar offerings, size of the
order and historical pricing practices.
Total Revenue by Geographic Locations
Revenue by geographic regions consisted of the following:
($ in thousands)
Americas
Europe
Asia Pacific
Total revenue
Successor
February 4,
2021
through
February 28,
2021
March 1, 2020
through
February 3,
2021
Predecessor
Fiscal Year
Ended
February 29,
2020
Fiscal Year
Ended
February 28,
2019
20,403
463
499
21,365
$
$
295,923 $
6,226
6,498
308,647 $
293,751 $
6,271
5,080
305,102 $
197,245
3,594
368
201,207
$
$
100
Revenues by geography are determined based on the region of the Company’s contracting entity, which may be different than the region of the customer. Americas
revenue attributed to the United States was 96% during the periods from February 4, 2021 through February 28, 2021 and March 1, 2020 through February 3, 2021
and fiscal year ended February 29, 2020 and 98% for the fiscal year ended February 28, 2019. No other country represented more than 10% of total revenue during
these periods.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially
unsatisfied. It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods and does not include contracts where the
customer is not committed. The customer is not considered committed when they are able to terminate for convenience without payment of a substantive penalty
under the contract. Additionally, as a practical expedient of ASC 606, the Company has not disclosed the value of unsatisfied performance obligations for contracts
with an original expected length of one year or less. As of February 28, 2021 and February 29, 2020, approximately $555.7 million and $566.8 million of revenue
was expected to be recognized from remaining performance obligations, respectively. These amounts are expected to be recognized over the next five years.
Contract Assets and Liabilities
Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract
assets were $13.4 million and $2.4 million as of February 28, 2021 and February 29, 2020, respectively. Contract liabilities consist of deferred revenue which
includes billings in excess of revenue recognized related to subscription contracts and professional services. Deferred revenue is recognized as revenue when the
Company performs under the contract. Deferred revenue was $90.2 million and $144.7 million as of February 28, 2021 and February 29, 2020, respectively. The
balance as of February 28, 2021 includes a fair value adjustment recorded as part of the Business Combination that reduced deferred revenue by $60.7 million. See
Note 3, Business Combinations and Acquisitions. Revenue recognized during the fiscal year ended February 28, 2021, included in deferred revenue on the
Consolidated Balance Sheets as of February 29, 2020, was $135.9 million.
Sales Commissions
With the adoption of ASC 606 and ASC 340-40, Contracts with Customers as of March 1, 2019, the Company began deferring and amortizing sales commissions
that are incremental and directly related to obtaining customer contracts. Amortization expense of less than $0.1 million, $3.9 million and $2.2 million was
recorded in sales and marketing expense in the Consolidated Statements of Operations for the periods from February 4, 2021 through February 28, 2021 and March
1, 2020 through February 3, 2021 and fiscal year ended February 29, 2020, respectively. Certain sales commissions that would have an amortization period of less
than a year are expensed as incurred in sales and marketing expense. As of February 28, 2021 and February 29, 2020, the Company had $1.6 million and $11.8
million of capitalized sales commissions included in other noncurrent assets in the Consolidated Balance Sheets, respectively. In conjunction with the purchase
accounting associated with the Business Combination, sales commissions deferred by the Predecessor were determined to have no fair value and were written off.
Prior to March 1, 2019, The Company expensed all sales commissions as incurred.
16.
SEVERANCE AND EXIT COSTS
In connection with the acquisitions discussed in Note 3, Business Combination and Acquisitions, the Company conducted Company-wide post-acquisition related
operational reviews to reallocate resources to strategic areas of its business. The operational reviews resulted in workforce reductions, lease obligations related to
properties that were vacated and other expenses. Severance and exit costs included in acquisition-related expenses in the Consolidated Statements of Operations are
as follows:
($ in thousands)
Severance
Lease exits
Total severance and exit costs
Successor
February 4, 2021
through
February 28,
2021
March 1, 2020
through
February 3,
2021
Predecessor
Fiscal Year
Ended
February 29,
2020
Fiscal Year
Ended
February 28,
2019
10
45
55
$
$
1,971 $
2,695
4,666 $
7,195 $
1,132
8,327 $
6,113
2,194
8,307
$
$
101
Included in accounts payable and accrued liabilities as of February 28, 2021 and February 29, 2020 is a restructuring liability balance of $1.6 million and $1.1
million, respectively, that primarily consists of lease related obligations, and a restructuring severance liability of $0.3 million and $2.6 million, respectively. The
Company expects these amounts to be substantially paid within the next 12 months.
The following table reflects the changes in the severance and exit costs accruals:
($ in thousands)
Beginning of period
Payments
Expenses
End of period
17. WARRANTS
Successor
Predecessor
February 28, 2021
February 29, 2020
$
$
$
3,730
(6,463)
4,721
1,988
$
$
$
4,509
(9,106)
8,327
3,730
As of February 28, 2021, there were 13,800,000 public warrants, 10,280,000 private placement warrants and 5,000,000 forward purchase warrants outstanding.
Each warrant entitles its holders to purchase one share of Class A Common Stock at an exercise price of $11.50 per share. The private placement warrants became
exercisable with the Domestication. The forward purchase warrants became exercisable upon effectiveness of The Company’s Form S-1 which was initially filed
on March 5, 2021 and deemed effective on March 29, 2021. The public warrants became exercisable on April 28, 2021. The public warrants, private placement
warrants and forward purchase warrants will expire five years after the Closing Date, or earlier upon redemption or liquidation. Once the warrants become
exercisable, the Company may redeem the outstanding warrants when various conditions are met, such as specific stock prices, as detailed in the specific warrant
agreements. However, the private placement warrants are nonredeemable so long as they are held by the Company’s Sponsor or its permitted transferees. The
warrants are recorded as a liability in warrant liability on the Consolidated Balance Sheets. See Note 26, Subsequent Events for additional information
18.
STOCKHOLDERS’ EQUITY
Class A Common Stock
The Company is authorized to issue 2,500,000,000 Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A Common
Stock are entitled to one vote for each share. As of February 28, 2021, there were 187,051,142 shares of Class A Common Stock issued and outstanding. See Note
26, Subsequent Events for additional information regarding the Form S-1 registration statement and effectiveness.
Class V Common Stock
The Company is authorized to issue 40,000,000 Class V common stock with a par value of $0.0001 per share. These shares have no economic value but entitle the
holder to one vote per share. As of February 28, 2021, there were 35,636,680 shares of Class V Common Stock issued and outstanding and 4,363,320 shares of
Class V Common Stock held by the Company in treasury.
The following table reflects the changes in the Company’s outstanding stock:
Balance, February 4, 2021
Balance, February 28, 2021
Class A
187,051,142
—
187,051,142
Series B-1
Series B-2
Class V
35,636,680
—
8,120,367
—
35,636,680
8,120,367
3,372,184
—
3,372,184
As reflected in the table above, there was no stock activity during the period from February 4, 2021 through February 28, 2021.
102
Membership Units
Prior to the Business Combination, E2open Holdings had three classes of units: Class A, Class A-1 and Class B. Class A units were the only units with voting
rights. Holders of Class A and Class A-1 units were entitled to priority distributions until each unit received $1.00 per unit. Remaining distributions, if any, were
made pro rata to all units. Class B units were incentive, profit-interest units issued to management, which participated as long as E2open Holdings made
distributions to any Class A units equal to the participation level of the applicable Class B units.
Issued and outstanding Class A and Class A-1 units were 349.6 million and 7.2 million, respectively, as of February 3, 2021, and 349.0 million and 6.1 million,
respectively, as of February 29, 2020. During the period from March 1, 2020 through February 3, 2021 and the fiscal years ended February 29, 2020 and February
28, 2019, the Company received $3.5 million, $0.1 million and $0.1 million proceeds from the sale of membership units, respectively.
19.
NONCONTROLLING INTERESTS
Noncontrolling interest represents the portion of E2open Holdings that the Company controls and consolidates but does not own. As of February 28, 2021, the
noncontrolling interest represents a 16.0% ownership in E2open Holdings.
Generally, common units of E2open Holdings participate in net income or loss allocations and distributions and entitle their holder to the right, subject to the terms
set forth in the Third Company Agreement, to require E2open Holdings to redeem all or a portion of the common units held by such participant. At the Company’s
option, it may satisfy this redemption with cash or by exchanging Class V Common Stock for the Company’s Class A Common Stock on a one-for-one basis.
As of February 28, 2021, there were a total of 35.6 million common units held by participants of E2open Holdings. There were no changes in the numbers of
common units held by participants during the period from February 4, 2021 through February 28, 2021.
The Company follows the guidance issued by the FASB regarding the classification and measurement of redeemable securities. Accordingly, the Company has
determined that the common units meet the requirements to be classified as permanent equity. The Company did not redeem any common units during the period
from February 4, 2021 through February 28, 2021.
20.
OTHER COMPREHENSIVE INCOME (LOSS)
During the fiscal year ended February 28, 2019, the Company reclassed $2.2 million from accumulated other comprehensive loss to interest and other expense, net
on the Consolidated Statements Operations related short-term investments resulting in a gain on the sale of the short-term investments. There were no reclasses to
the Consolidated Statements of Operations from accumulated other comprehensive income during the periods from February 4, 2021 through February 28, 2021
and March 1, 2020 through February 3, 2021 and the year ended February 29, 2020.
Accumulated other comprehensive income (loss) in the equity section of the Company Consolidated Balance Sheets includes:
($ in thousands)
Foreign currency translation adjustment
Unrealized gain on investments
Accumulated other comprehensive income (loss)
The unrealized gain on investment was eliminated as part of the Business Combination.
103
Successor
Predecessor
February 28, 2021
February 29, 2020
$
$
2,388
—
2,388
$
$
(925)
27
(898)
21.
RETIREMENT PLANS
The E2open 401(k) Plan allows eligible employees to either make pre-tax 401(k) contributes or after-tax Roth 401(k) contributions. These defined contribution
plans are sponsored by the Company and provide a variety of investment options. The Company matches 50% of the first 6% an employee contributes to these
plans. For an employee to be eligible for the matching contribution, the employee has to be actively employed on December 31 to receive the matching contribution
for the year. The Company made matching contributions of $2.2 million, $1.8 million and $1.1 million during the period from February 4, 2021 through February
28, 2021 and fiscal years ended February 29, 2020, February 28, 2019, respectively. There were no matching contributions made during the period from March 1,
2020 through February 3, 2021. The Company has no other post-retirement benefits. During the periods from February 4, 2021 through February 28, 2021 and
March 1, 2020 through February 3, 2021 and fiscal years ended February 29, 2020 and February 28, 2019, expense related to the defined contribution plans was
$0.2 million, $2.3 million, $2.2 million and $1.2 million, respectively.
22.
SHARE-BASED AND UNIT-BASED COMPENSATION
2021 Incentive Plan
The E2open Parent Holdings, Inc. 2021 Omnibus Incentive Plan (2021 Incentive Plan) became effective on the Closing Date with the approval of CCNB1’s
shareholders and the board of directors. The 2021 Incentive Plan allows the Company to make equity and equity-based incentive awards to officers, employees,
directors and consultants. There are 15,000,000 shares of Class A Common Stock reserved for issuance under the 2021 Incentive Plan which can be grated as stock
options, restricted stock awards, restricted stock units, performance stock awards, cash awards and other equity-based awards. No award may vest earlier than the
first anniversary of the date of grant, expect under limited conditions. The 2021 Incentive Plan replaced the 2015 Plan and 2015 Restricted Plan, as defined below.
See Note 26, Subsequent Events for a description of awards granted after February 28, 2021 under the 2021 Incentive Plan.
Prior to the Business Combination, the Company had unit-based compensation plans that authorized (a) the discretionary granting of unit options and (b) the
discretionary issuance of non-vested restricted units.
Unit Options
In 2015, E2open Holdings adopted the 2015 Unit Option Plan (2015 Plan). Under the 2015 Plan, E2open Holdings issued Series A unit options to certain
employees eligible to participate in E2open Holdings unit option plan. The options issued under the 2015 Plan were subject to certain transfer restrictions and were
initially deemed unvested. With respect to options issued to certain employees, options either vested 25% in the first year, and quarterly thereafter over a four-year
period (Time-Based Units) or based upon an exit event (Exit-Based Units). The vesting of both the Time-Based Units and Exit-Based Units were subject to the
employee’s continued employment with the E2open Holdings.
Fair value of the unit options was determined on the date of grant using a pricing model affected by E2open Holdings’ unit price, as well as by certain assumptions
including E2open Holdings’ expected equity price volatility over the term of the awards, actual and projected employee option exercise behavior, risk-free interest
rates and expected dividends. E2open Holdings did not grant any new options during the periods from March 1, 2020 through February 3, 2021. The estimated
grant-date fair values of the unit options granted the period from March 1, 2019 through February 29, 2020 were calculated using the Black-Scholes option-pricing
valuation model, based on the following assumptions:
Expected term (in years)
Expected equity price volatility
Risk-free interest rate
Expected dividend yield
6
23% - 55%
1.9% - 2.8%
0%
104
The expected term represented the period that the unit options were expected to be outstanding, giving consideration to the contractual terms of the awards, vesting
schedules and expectations of future employee behavior as influenced by changes to the terms of E2open Holdings unit options. E2open Holdings estimated the
expected term, using the simplified method due to limited exercise data, to be the period of time between the date of grant and the midpoint between option vesting
and expiration. E2open Holdings estimated the expected volatility of its unit options based on the average of historical and implied volatility of comparable
companies from a representative peer group based on industry and market capitalization data. The risk-free interest rate represented the yield on a constant maturity
U.S. Treasury security with a term equal to the expected term of the options. Expected dividend yield was set at zero because E2open Holdings did not expect to
pay dividends during the term of the unit options and historically had not paid any dividends to its equity holders. Management made an estimate of expected
forfeitures and recognized compensation costs only for those options expected to vest. E2open Holdings was authorized to issue 46.0 million unit options under the
2015 Plan. As of February 3, 2021 and February 29, 2020, outstanding unit options were 19.9 million and 22.0 million, respectively. Unit options available for
grant were 2.7 million as of February 3, 2021; however, the 2015 Plan was terminated as part of the Business Combination.
Activity under E2open Holdings’ unit option plan is as follows:
Balance, February 28, 2019
Granted
Exercised
Canceled and forfeited
Balance, February 29, 2020
Exercised
Forfeited
Balance, February 3, 2021
Number of Units
(in thousands)
Predecessor
Weighted Average
Exercise Price Per
Unit
Weighted Average
Term (in years)
18,617
5,713
(37)
(2,292)
22,001
(1,425)
(721)
19,855
$
$
1.34
2.04
1.61
1.51
1.51
1.45
1.65
1.51
2.3
1.9
1.1
The weighted-average grant date fair value per unit of options granted during the fiscal year ended February 29, 2020 was $0.45. As of February 3, 2021, there was
$2.4 million of unrecognized compensation cost, excluding estimated forfeitures, related to unvested options, which was expected to be recognized over a
weighted-average period of 1.1 year. The weighted-average contractual life of options outstanding was 6.7 years and the weighted-average contractual life of
options exercisable was 6.4 years as of February 3, 2021.
The Company did not recognize any compensation expense for Exit-Based units for the period from March 1, 2020 through February 3, 2021 and the fiscal years
ended February 29, 2020 and February 28, 2019, as these awards were not probable of vesting during these time periods.
On January 24, 2021, the board of managers accelerated the vesting of all unvested unit options outstanding under the 2015 Plan as of the completion of the
Business Combination on February 4, 2021 which resulted in $12.8 million of accelerated compensation recognized in the period from February 4, 2021 through
February 28, 2021.
Restricted Equity Plan
In 2015, E2open Holdings established the 2015 Restricted Equity Plan (2015 Restricted Plan) that was adopted for certain officers eligible to participate in the 2015
Restricted Plan. The units issued under the 2015 Restricted Plan were subject to certain transfer restrictions and were initially deemed unvested. With respect to
units issued to certain officers, Class B units either vested 25% annually over a four-year period (Time-Based Units) or based upon an exit event (Exit-Based
Units). The vesting of both the Time-Based Units and Exit-Based Units were subject to the employee’s continued employment with E2open Holdings. E2open
Holdings authorized 32.0 million units under the 2015 Restricted Plan. As of February 3, 2021 and February 29, 2020, outstanding restricted units were 22.0
million. No restricted units were available for grant as of February 3, 2021. The 2015 Restricted Plan was terminated as part of the Business Combination.
105
Activity under E2open Holdings’ 2015 Restricted Plan was as follows:
($ in thousands)
Awards not vested, February 28, 2019
Granted
Released
Awards not vested, February 29, 2020
Released
Awards not vested, February 3, 2021
Number of Units
(in thousands)
Predecessor
Weighted Average
Grant Date Fair
Value Per Unit
Weighted Average
Remaining Term
(in years)
12,651
500
(4,196)
8,955
(3,523)
5,432
$
$
1.41
1.65
1.47
1.40
1.48
1.35
2.1
1.5
0.3
The aggregate fair value of units vested during the period from March 1, 2020 through February 3, 2021 and fiscal year ended February 29, 2020 was $5.2 million
and $6.2 million, respectively. Unrecognized compensation expense related to the Class B units was $5.4 million as of the February 3, 2021, which was expected to
be recognized over a weighted-average period of approximately one year. E2open Holdings did not recognize any compensation expense for Exit-Based Units for
the period from March 1, 2020 through February 3, 2021 and fiscal years ended February 29, 2020 and February 28, 2019.
On January 24, 2021, the board of managers accelerated the vesting of all unvested unit options outstanding under the 2015 Restricted Plan as of the completion of
the Business Combination on February 4, 2021 which resulted in $15.4 million of accelerated compensation recognized in the period from February 4, 2021
through February 28, 2021.
The table below sets forth the functional classification in the Consolidated Statements of Operations of equity-based compensation expense:
($ in thousands)
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total share-based and unit-based compensation
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended February
29, 2020
Fiscal Year
Ended February
28, 2019
$
$
3,248
5,224
5,134
19,394
33,000
$
$
396
499
659
5,723
7,277
$
$
423
151
1,316
6,332
8,222
$
$
429
440
1,033
6,264
8,166
As discussed in Note 3, Business Combinations and Acquisitions, the outstanding unit options were converted into cash of $26.2 million and $16.1 million of the
Company’s Class A Common Stock, and the Class B units were converted into cash of $24.2 million and $25.9 million of the Company’s Class A Common Stock
in connection with the Business Combination. Also, $4.7 million of unit-based compensation expense was recognized during the period from February 4, 2021
through February 28, 2021 for the restricted Series B-1 and B-2 common stock issued in connection with the Business Combination for the accelerated unvested
options and restricted units.
As discussed in Note 3, Business Combination and Acquisitions, upon purchasing Amber Road, equity incentive compensation previously granted to Amber Road
employees was converted to deferred cash compensation. During the fiscal year ended February 29, 2020, $10.9 million of expense was recorded for the Amber
Road deferred compensation in the Consolidated Statements of Operations, including $9.5 million related to accelerated deferred compensation payments
negotiated in exit agreements with certain former Amber Road executives. During the period from March 1, 2020 through February 3, 2021, the Company
recognized $0.8 million of deferred compensation expense related to Amber Road. There was no deferred compensation expense recognized during the period from
February 4, 2021 through February 28, 2021. See Note 25, Commitments and Contingencies for additional information.
106
23.
EARNINGS PER SHARE
Basic earnings per share is calculated as net income divided by the average number of shares of common stock outstanding. Diluted earnings per share assumes,
when dilutive, the issuance of the net incremental shares from options and restricted shares. The following is a reconciliation of the denominators of the basic and
diluted per share computations for net income:
(in thousands, except share and per share data)
Net income (loss) per share:
Numerator - basic:
Net income
Less: Net income attributable to noncontrolling interests
Net income attributable to E2open Parent Holdings, Inc. - basic
Numerator - diluted:
Net income attributable to E2open Parent Holdings, Inc. - basic
Add: Net income and tax effect attributable to noncontrolling interests
Net income attributable to E2open Parent Holdings, Inc. - diluted
Numerator - basic:
Weighted average shares outstanding - basic
Net income per share - basic
Numerator - diluted:
Weighted average shares outstanding - basic
Weighted average effect of dilutive securities
Weighted average shares outstanding - diluted
Diluted net income per common share
Successor
February 4, 2021
through
February 28, 2021
$
$
$
$
$
$
12,857
2,057
10,800
10,800
1,561
12,361
187,051
0.06
187,051
35,637
222,688
0.06
(1) The warrants include the public warrants, private placement warrants and forward purchase warrants.
Potential common shares issuable to employee or directors upon exercise or conversion of shares under the Company’s share-based compensation plans and upon
exercise of warrants are excluded from the computation of diluted earnings per common share when the effect would be anti-dilutive. All potential common shares
are anti-dilutive in periods of net loss available to common stockholders.
The following table summarizes the weighted-average potential common shares excluded from diluted loss per common share as their effect would be anti-dilutive:
Restricted Sponsor Shares related to Series B-1 common stock
Shares related to Series B-1 common stock
Shares related to Series B-2 common stock
Shares related to restricted common units Series 1
Shares related to restricted common units Series 2
Shares related to warrants (1)
Units/Shares excluded from the dilution computation
(1) The warrants include the public warrants, private placement warrants and forward purchase warrants.
107
Successor
February 4, 2021
through
February 28, 2021
2,500,000
5,620,367
3,372,184
4,379,557
2,627,724
29,079,972
47,579,804
24.
INCOME TAXES
For financial reporting purposes, the components of income (loss) before income tax benefit were as follows:
($ in thousands)
Domestic
Foreign
Income (loss) before income tax benefit
The income tax benefit consisted of the following:
($ in thousands)
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Total income tax benefit
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended February
29, 2020
Fiscal Year
Ended February
28, 2019
$
$
5,284 $
6,961
12,245 $
(62,012) $
7,401
(54,611) $
(110,937) $
2,296
(108,641) $
(40,627)
2,264
(38,363)
Successor
February 4,
2021
through
February 28,
2021
Predecessor
March 1, 2020
through
February 3,
2021
Fiscal Year
Ended February
29, 2020
Fiscal Year
Ended February
28, 2019
$
$
(376) $
(62)
(578)
(1,016)
1,382
303
(57)
1,628
612 $
(273) $
(170)
(1,214)
(1,657)
(1,258)
10,117
(521)
8,338
6,681 $
(125) $
31
(1,265)
(1,359)
6,850
1,666
114
8,630
7,271 $
7,631
(34)
(1,860)
5,737
505
1,728
275
2,508
8,245
As a result of the Business Combination, the Company acquired a controlling interest in E2open Holdings, which is treated as a partnership for U.S. federal and
most applicable state and local income tax purposes. As a partnership, E2open Holdings is not itself subject to U.S. federal and certain state and local income taxes.
Any taxable income or loss generated by E2open Holdings is passed through to and included in the taxable income or loss of its partners, including the Company
following the Business Combination, on a pro rata basis. The Company’s U.S. federal and state income tax benefits relate to the Company’s wholly owned U.S.
corporate subsidiaries that are consolidated for U.S. GAAP purposes but separately taxed for U.S. federal and state income tax purposes as corporations as well as
the Company’s allocable share of any taxable income of E2open Holdings following the Business Combination. Additionally, the Company owns foreign
subsidiaries that file and pay income taxes in their local jurisdiction. The Company has elected to record Global Intangible Low-Taxed Income (GILTI) tax as a
period cost.
108
The Company’s income tax provision differs from the amounts computed by applying the US federal income tax rate of 21% to pretax income (loss) as a result of
the following:
($ in thousands)
U.S. federal tax (expense) benefit at statutory rate
State tax, net of federal benefit
Foreign rate differential
Effect of foreign operations
Tax credit carryforwards
Acquisition related adjustment
Earnings taxes at affiliate
Global intangible low-taxes income inclusion
Nonqualified stock options
Change in fair value of contingent consideration
Change in fair value of warrant liability
Net impact of foreign operations (net of noncontrolling
interest) on partnership outside basis)
Compensation deducted for book in post-acquisition period
and deducted for tax in pre-acquisition period
Uncertain tax positions
Other
Change in valuation allowance
Total income tax benefit
Successor
February 4,
2021
through
February 28,
2021
March 1, 2020
through
February 3,
2021
Predecessor
Fiscal Year
Ended
February 29,
2020
Fiscal Year
Ended February
28, 2019
$
$
(2,572) $
835
(346)
(139)
16
—
(783)
(126)
270
6,526
4,869
11,461 $
14,915
(216)
(481)
119
—
(9,494)
(1,708)
—
—
—
22,815 $
1,713
(670)
—
91
(8)
(15,961)
(197)
—
—
—
1,381
—
—
(6,091)
(5)
200
(3,423)
612 $
—
(387)
(39)
(7,489)
6,681 $
—
23
1,074
(1,609)
7,271 $
8,056
1,637
(1,110)
—
73
(1)
(6,914)
(563)
—
—
—
—
—
8,017
(104)
(846)
8,245
As of each of the periods presented above, the Company did not provide deferred income taxes on the outside book-tax differences of its foreign subsidiaries or any
undistributed retained earnings which are indefinitely reinvested, including those earnings previously subject to income taxes in the U.S. The reversal of these
temporary differences or distributions could result in additional tax; however, it is not practicable to estimate the amount of any unrecognized deferred income tax
liabilities at this time.
The types of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are set forth below:
($ in thousands)
Deferred tax assets:
Net operating loss carryforwards
Tax credits
Property and equipment
Disallowed interest carryforward
Other deferred tax asset
Accruals and reserves
Deferred revenue
Total deferred tax assets
Deferred tax liabilities:
Intangibles
Investment in partnership
Other deferred tax liability
Total deferred tax liabilities
Valuation allowance
Net deferred tax liabilities
Successor
Predecessor
February 28, 2021
February 29, 2020
$
$
80,171 $
1,803
324
18,398
3,772
2,039
150
106,657
50,528
419,577
5,322
475,427
(27,030)
(395,800) $
78,738
1,575
796
—
4,010
1,416
2,018
88,553
100,020
—
754
100,774
(22,855)
(35,076)
109
ASC 740, Income Taxes, provides for the recognition of deferred tax assets, if realization of such assets is more likely than not. Realization of deferred tax assets is
dependent upon generating sufficient taxable income, carryback of losses, offsetting deferred tax liabilities and availability of tax planning strategies. As of
February 29, 2020, the Company assessed that certain of its deferred tax assets were not more likely than not to be realized. Therefore, the Company recorded a
valuation allowance to reduce the carrying value of the deferred tax assets to the amount that is more likely than not to be recognized. During the fiscal year ended
February 28, 2021, the valuation allowance increased by approximately $4.1 million, comprised of a net deferred tax expense of $9.7 million recorded in the
Consolidated Statements of Operations and a decrease of approximately $5.6 million recorded through goodwill as part of the Business Combination.
As of February 28, 2021, the Company has net operating loss (NOL) carryforwards for federal, state and foreign income tax purposes of approximately $478.2
million, $123.3 million (post apportionment pre-tax) and $23.9 million, respectively. Some of the U.S. federal net operating loss carryforwards begin to expire in
fiscal year 2022. The foreign net operating loss carryforwards are derived from multiple tax jurisdictions and will begin to expire during the fiscal year 2022. As of
February 28, 2021, the Company had research and development tax credits and foreign tax credits of approximately $5.3 million and $1.1 million, respectively, to
reduce future federal income taxes. Federal credit carryforwards expire beginning in 2028.
Internal Revenue Code (IRC) Section 382 imposes limitations on a corporation’s ability to utilize its NOLs if the corporation experiences an ownership change, as
defined in Section 382. Based upon an analysis performed, utilization of the U.S. Federal NOLs, research and development credits and foreign tax credits in future
periods will be subject to an annual limitation under IRC Section 382. As noted above, as of February 28, 2021, federal and state NOL carryforwards, research and
development credits and foreign tax credits before any Section 382 limitation were approximately $478.2 million, $5.3 million and $1.1 million, respectively. Of
these amounts, approximately $161.5 million, $3.4 million and $0.9 million will expire unused due to Section 382. Accordingly, the Company has reduced the
deferred tax assets based upon the anticipated federal and state NOLs that are expected to expire unutilized due to the annual limitation.
As of February 28, 2021 and February 29, 2020, total gross unrecognized tax benefits were $2.7 million and $1.5 million respectively. Approximately $0.6 million
of the unrecognized tax benefits as of February 28, 2021, if recognized, would have an impact on the Company’s effective tax rate. The Company recognizes
interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of February 28, 2021 and February 29, 2020, the total amount
of gross interest and penalties accrued was $0.3 million and $0.2 million, respectively, which is classified as other noncurrent liabilities in the Consolidated Balance
Sheets.
A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
($ in thousands)
Beginning of period
Gross increases:
Prior year tax positions
Gross decreases:
Prior year tax positions
Prior year tax positions due to statute lapse
End of period
Successor
Predecessor
February 28, 2021
February 29, 2020
$
1,535 $
1,223
(70)
—
2,688 $
$
1,570
—
(12)
(23)
1,535
Management believes that it has adequately provided for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be
predicted with certainty. Should any issues addressed in the tax audits be resolved in a manner not consistent with management’s expectations, the Company could
be required to adjust the provision for income tax in the period such resolution occurs. Although timing of the resolution and/or closure of audits is highly
uncertain, the Company does not believe it is reasonably possible that the unrecognized tax benefits would materially change in the next 12 months.
The Company is subject to taxation in the U.S., various states, and foreign jurisdictions. The Company has several individual filing groups in the U.S, some of
which have NOLs dating back to 2015 and earlier. Fiscal years 2017 through 2021 generally remain open to examination by the taxing jurisdictions to which the
Company is subject, although carry forward attributes that were generated in tax years prior to fiscal year 2017 may be adjusted upon examination by the tax
authorities if they have been, or will be, used in a future period.
110
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. Under ASC 740,
the effects of changes in tax rates and laws are recognized in the period in which the new legislation is enacted. The CARES Act made various tax law changes
including, among other things, (1) increased the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest (2) enacted a
technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k) (3) made modifications to the federal net
operating loss rules including permitting federal net operating losses incurred in 2018, 2019 and 2020 to be carried back to the five preceding taxable years in order
to generate a refund of previously paid income taxes and (4) enhanced recoverability of alternative minimum tax credit carryforwards. The income tax provisions
of the CARES Act had limited applicability to the Company and did not have a material impact on the Company’s consolidated financial statements.
25.
COMMITMENTS AND CONTINGENCIES
Acquisition-Related Obligations
Upon purchasing Amber Road (see Note 3, Business Combination and Acquisitions), equity incentive compensation previously granted to Amber Road employees
was converted to deferred cash compensation, whereby employees may vest in cash payments over periods up to four years from the date of acquisition. Vesting is
contingent upon continued employment with the Company. Deferred compensation amounts are calculated based on the price the Company paid for Amber Road’s
stock at acquisition, the strike price of the original grant, and the number of former Amber Road shares that would have vested over the period. For the fiscal year
ended February 29, 2020, the Company recorded $10.9 million of expense for Amber Road deferred compensation in the Consolidated Statements of Operations,
including $9.5 million related to accelerated deferred compensation payments negotiated in exit agreements with certain former Amber Road executives. During
the period from March 1, 2020 through February 3, 2021, the Company recognized $0.8 million of deferred compensation expense related to Amber Road. There
was no deferred compensation expense recognized during the period from February 4, 2021 through February 28, 2021. An accrual of $0.8 million was included in
the Consolidated Balance Sheets as of February 29, 2020 for vested, unpaid Amber Road deferred compensation. There was no such accrual as of February 28,
2021. Unvested future payments that are contingent upon the continuous employment of participating employees totaled $1.0 million as of February 28, 2021.
Operating Leases
The Company leases its primary office space under non-cancelable operating leases with various expiration dates through August 2027. Rent expense for the
periods from February 4, 2021 through February 28, 2021 and March 1, 2020 through February 3, 2021 and fiscal years ended February 29, 2020 and February 28,
2019 was $0.6 million, $7.2 million, $8.4 million and $4.4 million, respectively. Future minimum lease payments under non-cancelable operating leases as of
February 28, 2021, are as follows for the fiscal years ended:
($ in thousands)
2022
2023
2024
2025
2026
Thereafter
Total minimum lease payments
$
$
Amount
8,507
6,540
5,555
4,204
3,218
5,434
33,458
Several of the operating lease agreements require the Company to provide security deposits. As of February 28, 2021, and February 29, 2020, lease deposits totaled
approximately $2.9 million and $3.3 million, respectively. The deposits are generally refundable at the expiration of the lease, assuming all of the Company’s
obligations under the lease agreement have been met. Deposits are included in prepaid and other current assets and other noncurrent assets in the Consolidated
Balance Sheets.
Contingencies
From time to time, the Company is subject to contingencies that arise in the ordinary course of business. The Company records an accrual for a contingency when it
is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company does not currently believe the resolution of
any such contingencies will have a material adverse effect upon the Company’s Consolidated Balance Sheets, Statements of Operations or Statements of Cash
Flows.
111
26.
SUBSEQUENT EVENTS
On March 1, 2021, the Company’s board of directors granted 2,380,902 options to the Company’s executive officers with an exercise price of $9.77. On May 3,
2021, the Chief Executive Officer, pursuant to the authority delegated to him by the board of directors, granted an aggregate of 202,418 options to certain senior
management with an exercise price of $10.86. All the options are performance based and are measured based on obtaining an organic growth target over a one-year
period with a quarter of the options vesting at the end of the performance period and the remaining options vesting equally over the following three years.
The Company initially filed a Form S-1 on March 5, 2021 which was deemed effective on March 29, 2021. The S-1 registered 215,045,300 shares of Class A
Common Stock currently held by the selling holders in the Business Combination and 15,280,000 warrants to purchase Class A Common Stock. The 15,280,000
warrants represent the 10,280,000 private placement warrants and 5,000,000 forward purchase warrants.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On February 4, 2021, the Audit Committee of our board of directors approved the appointment of Ernst & Young LLP (EY) as our independent registered public
accounting firm to audit our consolidated financial statements for the year ended February 28, 2021. EY served as the independent registered public accounting
firm of E2open Holdings prior to the Business Combination. Accordingly, WithumSmith+Brown, PC (Withum), the independent registered public accounting firm
of CCNB1, the name of the Company prior to the Business Combination, was informed on February 5, 2021 that it would be replaced by EY as our independent
registered public accounting firm following the completion of CCNB1’s audit of the year ended December 31, 2020, which consist only of the accounts of CCNB1
prior to the Business Combination. On May 5, 2021, when CCNB1 filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 with the
SEC, Withum completed the audit and our retention of Withum as our independent registered public accounting firm with respect to the audit of our consolidated
financial statements ended as of that date.
The report of Withum on CCNB1’s balance sheet as of December 31, 2020 and the statements of operations, changes in shareholders’ equity and cash flows for the
period from January 14, 2020 (inception) through December 31, 2020, did not contain an adverse opinion or disclaimer of opinion, and were not qualified or
modified as to uncertainties, audit scope or accounting principles.
During the period from January 14, 2020 (inception) through December 31, 2020 and the subsequent interim period through the date of Withum’s dismissal, there
were no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K under the Exchange Act) between us and Withum on any matter of accounting
principles or practices, financial disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Withum, would have caused it
to make reference to the subject matter of the disagreements in its reports on our financial statements for such periods.
During the period from January 14, 2020 (inception) through December 31, 2020 and the subsequent interim period through the date of Withum’s dismissal, there
were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act).
During the period from January 14, 2020 (inception) through December 31, 2020 and the subsequent interim period through the date of Withum’s dismissal,
CCNB1 and we did not consult with EY regarding either (1) the application of accounting principles to a specified transaction, either completed or proposed; or the
type of audit opinion that might be rendered on the financial statements of CCNB1 or the Company, and no written report or oral advice was provided that EY
concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue; or (2) any matter that was
either the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K under the Exchange Act) or a “reportable event” (as defined in Item
304(a)(1)(v) of Regulation S-K under the Exchange Act).
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We have disclosure controls and procedures in place to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These controls and procedures are accumulated and
communicated to management, including our President and Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required
disclosure.
112
As required by Rules 13a-15(b) and 13a-15(e) under the Exchange Act, our President and Chief Executive Officer and our Chief Financial Officer evaluated the
effectiveness of the disclosure controls and procedures as of February 28, 2021. Based upon that evaluation, our President and Chief Executive Officer and our
Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective, as of the end of the period covered by this Report,
because of the existence of the material weakness in internal control over financial reporting as described below (which the Company views as an integral part of
the Company’s disclosure controls and procedures).
Changes in Internal Control over Financial Reporting
As previously disclosed, in connection with our financial statement close process for the year ended December 31, 2020, we identified a material weakness in our
internal control over financial reporting related to the accounting for warrants issued in connection with our initial public offering. A material weakness is a
deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our
annual or interim financial statements will not be prevented or detected on a timely basis. Our controls to evaluate the accounting for complex financial
instruments, such as the warrants, did not operate effectively to appropriately apply the provisions of ASC 815-40.
Based on our assessment, management concludes that, as of February 28, 2021, its internal control over financial reporting was not effective.
To remediate the material weakness in our internal control over financial reporting, we expanded and improved and will continue to expand and improve our
review process for complex securities and related accounting standards to remediate this material weakness. We plan to further improve this process through
identification of third party professionals with whom to consult regarding complex accounting applications, and consideration of additional staff with the requisite
experience and training to supplement existing accounting professionals.
Our remediation plan has been implemented. However, the material weakness cannot be considered remediated until the controls operate for a sufficient period and
management has concluded, through testing, that its internal controls are operating effectively. While management believes that the remedial efforts will resolve the
identified material weakness, there is no assurance that management’s remedial efforts conducted to date will be sufficient or that additional remedial actions will
not be necessary.
This 2021 Form 10-K does not include an attestation report of our registered public accounting firm as provided under the rules for an emerging growth company.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for designing, implementing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-
15(f) or 15d-15(f) under the Exchange Act. Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of
changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
As discussed in this Annual Report on Form 10-K, we completed the Business Combination on February 4, 2021. Prior to the Business Combination, the Company
was a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or other similar business combination with one or more target businesses. As a result, previously existing internal controls are no longer applicable or
comprehensive enough as of the assessment date as the Company’s operations prior to the Business Combination were insignificant compared to those of the Post-
Combination Company.
Based on an initial assessment, we concluded that our internal control over financial reporting was not effective as of December 31, 2020 because of the material
weakness described above for the special purpose acquisition company. A material weakness is a deficiency, or combination of deficiencies, in internal control over
financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis.
113
Additionally, the pre-combination company, E2open, was not required to design or maintain controls in accordance with Rules 13a-15 and 15d-15 under the
Exchange Act. The design and implementation of internal control over financial reporting for the Company post-Business Combination has required and will
continue to require, significant time and resources from management and other personnel. Because of this, the design and development of our framework for
implementation and evaluation of internal control over financial reporting is ongoing. As a result, management was unable, without incurring unreasonable effort or
expense, to conduct an assessment of our internal control over financial reporting as of February 28, 2021. Accordingly, this Annual Report on Form 10-K does not
include a report of management’s assessment regarding internal control over financial reporting as allowed pursuant to Section 215.02 of the SEC Division of
Corporation Finance’s Regulation S-K Compliance & Disclosure Interpretations.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Our business and affairs are managed under the direction of our board of directors. Our board of directors consists of seven directors, six of whom are independent
within the meaning of the listing standards of the NYSE. The charter provides for a classified board of directors, with three directors in Class I (Eva F. Huston,
Keith W. Abell and Stephen C. Daffron), two directors in Class II (Ryan M. Hinkle and Timothy I. Maudlin) and two directors in Class III (Chinh E. Chu and
Michael A. Farlekas). Each class will serve for a staggered three year term. The Class I directors’ terms will expire at the annual meeting of stockholders in 2022,
the Class II directors’ terms will expire at the annual meeting of stockholders in 2023 and the Class III directors’ terms will expire at the annual meeting of
stockholders in 2024.
The following sets forth certain information with respect to our directors:
Name
Chinh E. Chu
Keith W. Abell
Dr. Stephen C. Daffron
Ryan M Hinkle
Eva F. Huston
Timothy I. Maudlin
Michael A. Farlekas
Age
54
64
65
39
50
70
55
Chairman of the Board of Directors; Independent
Office
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
President, Chief Executive Officer and Director
Chinh E. Chu has served as the Chairman of our board of directors since February 2021 and has served on our board of directors since January 15, 2020. Mr. Chu
served as our Chief Executive Officer prior to the Business Combination. Mr. Chu currently serves on the board of directors of CC Neuberger Principal Holdings
III (NYSE: PRPC), CC Neuberger Principles Holdings II (NYSE: PRPB) and Dun & Bradstreet Holdings, Inc. (NYSE: DNB) (Dun & Bradstreet). Mr. Chu has
served as a member of Dun & Bradstreet’s board of directors since the transaction to take Dun & Bradstreet private in February 2019. Mr. Chu has over 25 years of
investment and acquisition experience. Mr. Chu is the Founder and Managing Partner at CC Capital, a private investment firm which he founded in 2015. Before
founding CC Capital, Mr. Chu worked at Blackstone for 1990 to 2015. Mr. Chu was a Senior Managing Director at Blackstone since 2000, and previously served
as Co-Chair of Blackstone’s Private Equity Executive Committee and was a member of Blackstone’s Executive Committee. Mr. Chu served as Co-Chairman of
FGL Holdings from April 2016 until June 2020 when it was acquired. Mr. Chu is also a director of Collier Creek Holdings, a special purpose acquisition company
he co-founded in April 2018 which announced its business combination on June 5, 2020, and NCR Corporation. Mr. Chu previously served as a director of Kronos
Incorporated, SunGard Data Systems, Inc., Stiefel Laboratories, Freescale Semiconductor, Ltd. Biomet, Inc., Alliant, Celanese Corporation, Nalco Company, DJO
Global, Inc., HealthMarkets, Inc., Nycomed, Alliant Insurance Services, Inc., the London International Financial Futures and Options Exchange, Graham
Packaging and AlliedBarton Security Services. Before joining Blackstone in 1990, Mr. Chu worked at Salomon Brothers in the Mergers & Acquisitions
Department.
114
Keith W. Abell has served on our board of directors since April 2021. Mr. Abell currently serves on the board of directors of CC Neuberger Principal Holdings III
(NYSE: PRPC). In 2010, Mr. Abell co-founded Sungate Properties, LLC, a real estate investment company, after managing private investments during 2007 to
2009. From 1994 to 2007, Mr. Abell was a co-founder of, and served in a variety of senior management roles at, GSC Group (and its predecessor, Greenwich Street
Capital Partners, L.P.), an alternative asset manager. Prior to that, Mr. Abell was a Managing Director at Blackstone until 1994 where he, among other things,
founded the firm’s first Hong Kong office. Prior to Blackstone, Mr. Abell served as a Vice President at Goldman, Sachs & Co., where he worked in the global
finance, corporate finance and mergers and acquisitions departments. Mr. Abell serves as the treasurer and as a director of the National Committee on United
States-China Relations. Mr. Abell has formerly served as a director of numerous public and private companies and non-profit organizations.
Dr. Stephen C. Daffron has served on our board of directors since February 2021. Dr. Daffron is currently the President of Dun & Bradstreet. He also serves as a
member of the board of directors of Motive Capital Corp. (NYSE: MOTV). Dr. Daffron is a Co-Founder and Industry Partner of Motive Partners, a private equity
firm focused on technology-enabled companies that power the financial services industry founded in January 2016. Prior to joining Motive Partners, Dr. Daffron
served as President and Chief Executive Officer of Interactive Data Holdings Corporation from September 2013 until its acquisition by Intercontinental Exchange,
Inc. in January 2016. Prior to that, Dr. Daffron served as Global Head of Operations and Technology for Morgan Stanley & Co. LLC. Prior to that role, Dr. Daffron
spent more than two decades on Wall Street holding senior leadership positions at Renaissance Technologies Corp., Citigroup Inc. and Goldman, Sachs & Co. Prior
to his career in finance, Dr. Daffron served as an Associate Professor at the United States Military Academy at West Point, and in various command and staff
positions in the U.S. Army around the world.
Ryan M. Hinkle has served on our board of directors since February 2021. Mr. Hinkle has served as a member of the board of managers of E2open Holdings from
March 2015 to February 2021. Mr. Hinkle is a Managing Director of Insight Partners, a venture capital and private equity firm where he has worked since 2003.
Mr. Hinkle currently serves on the board of Pluralsight, Inc., an online technology skills platform, as well as numerous private companies. Mr. Hinkle holds a
Bachelor of Science in Engineering degree in electrical engineering from the University of Pennsylvania and a Bachelor of Science degree in finance from the
University of Pennsylvania.
Eva F. Huston has served on our board of directors since April 2020. Ms. Huston is currently the Chief Strategy Officer of Duck Creek Technologies (NASDAQ:
DCT), a leading SaaS software company serving the property and casualty insurance industry, where she spearheads development and execution of corporate
strategy, since August 2020. Previously, Ms. Huston was the Senior Vice President and Chief Financial Officer at Verisk Analytics (NASDAQ: VRSK), a data
analytics and risk assessment firm. Prior to joining Verisk Analytics in 2009, Ms. Huston was a Managing Director in telecom, media and technology investment
banking at JP Morgan Chase & Co. (JP Morgan) (NYSE: JPM), where she was responsible for the marketing and information services practice. Ms. Huston’s client
base included companies providing data and analytics to a variety of industry verticals, such as consumer and media, financial services, insurance and automotive.
At JP Morgan, Ms. Huston advised clients on equity and debt financing transactions, as well as significant sector acquisitions.
Timothy I. Maudlin has served on our board of directors since February 2021. From January 1989 to December 2007, Mr. Maudlin served as the Managing General
partner of Medical Innovation Partners, a venture capital firm. Mr. Maudlin also served as a Principal and the Chief Financial Officer of Venturi Group, LLC, an
incubator and venture capital firm, from 1999 to October 2001. Mr. Maudlin currently serves on the board Alteryx, Inc., an analytic process automation platform as
well as several private companies. Mr. Maudlin served on the board of Pluralsight, Inc., an online technology skills platform, until April 2021 when he resigned as
a director at the closing of the take private transaction. Mr. Maudlin previously served on the boards of ExactTarget, Inc. from May 2008 to July 2013, MediaMind
Technologies, Inc. from August 2008 to June 2011, Sucampo Pharmaceuticals, Inc. from September 2006 to February 2013 and Web.com Group, Inc. from
February 2002 to October 2018. Mr. Maudlin holds a Master of Management degree with a concentration in Accounting, Finance and Management from the
Kellogg School of Management at Northwestern University and a Bachelor of Arts degree in economics from St. Olaf College, and is trained as a Certified Public
Accountant (inactive).
Michael A. Farlekas serves as our President and Chief Executive Officer, having served in this role at E2opn Holdings since May 2015, and has served on our
board of directors since February 2021. Mr. Farlekas also previously served as a member of the board of managers of E2open Holdings from October 2015 to
February 2021. Prior to joining E2open, Mr. Farlekas served as Vice President and General Manager of Roadnet Technologies (now known as Omnitracs) from
2012 through 2014. Prior to that, Mr. Farlekas spent 11 years at RedPrairie (now known as Blue Yonder Software) in various roles including Senior Vice President
and General Manager, Industrial Business Unit and Vice President, Industrial Sales. Previously, Mr. Farlekas held leadership roles at GATX Terminal Corp. (now
Kinder Morgan) and, before that, CSX Transportation. Mr. Farlekas holds a Master of Business Administration with a concentration in International Business from
Jacksonville University and a Bachelor of Science degree in mechanical engineering from Fairleigh Dickinson University.
115
Our Non-Director Executive Officers
The following sets forth certain information with respect to our non-director executive officers which, together with Michael A. Farlekas, we refer to as our
“executive officers” or “named executive officers”:
Name
Peter R. Hantman
Jarett J. Janik
Age
53
52
Chief Operating Officer and Executive Vice President, Global Business Units
Chief Financial Officer
Office
Peter R. Hantman serves as our Chief Operating Officer and Executive Vice President, Global Business Units, having served in this role at E2open Holdings since
March 2018. Previously, Mr. Hantman served as Chief Financial Officer of E2open Holdings from March 2016 to February 2018, as Senior Vice President, Global
Customer Solution of E2open Holdings from January 2014 to February 2016, and as Vice President, General Manager of E2open Holdings from January 2010 to
December 2014. Prior to joining E2open Holdings, Mr. Hantman served as Senior Vice President of Global Service Delivery at IQNavigator, Inc. from July 2009
to December 2010. Prior to that, Mr. Hantman served as Chief Executive Officer of Bankers Title and Chief Operating Officer of Alpine Access, Inc. and has held
senior financial and operational management positions at Ryder Truck Rental, Budget Truck Group and Harima USA. Mr. Hantman holds a Master of Business
Administration with honors from Harvard Business School and a Bachelor of Science degree in corporate finance from the University of Colorado Boulder.
Jarett J. Janik serves as our Chief Financial Officer, having served in this role at E2open Holdings since April 2018. Prior to joining E2open Holdings, Mr. Janik
served as Interim Chief Operating Officer and Interim Chief Financial Officer of One Network from October 2017 through March 2018. Prior to that, Mr. Janik
served as the Chief Financial Officer of Forterro from May 2014 through June 2016 before taking a sabbatical from July 2016 through September 2017. Previously,
Mr. Janik served as Chief Financial Officer of Allegro and held various executive and senior finance positions for Infor, Certegy and Netzee, Inc. Mr. Janik holds a
Master of Business Administration with a concentration in finance from the University of Denver and a Bachelor of Science degree in business administration and
tourism management from the University of Denver.
Code of Ethics
Our board of directors adopted a Code of Ethics that applies to all of our directors and officers which is available on our website, www.e2open.com under the
Governance tab in the Investor Relations section. The code addresses, among other things, honest and ethical conduct, conflicts of interest, compliance with laws,
regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on insider information and reporting of
violations of the code. However, we cannot assure you that these policies or provisions of law will always be successful in eliminating or minimizing the influence
of such conflicts of interest, and if they are not successful, decisions could be made that might fail to reflect fully our interests or the interests of stockholders. For a
discussion of our related person transactions, see Item 13., Certain Relationships and Related Transactions and Director Independence. Under our bylaws, our
directors and officers may have business interests and engage in business activities similar to, in addition to or in competition with those of or relating to our
business. Our Code of Ethics is a “code of ethics,” as defined in Item 406(b) of Regulation S-K. We will make any legally required disclosures regarding
amendments to, or waivers of, provisions of our code of ethics on our website.
INFORMATION REGARDING OUR BOARD OF DIRECTORS AND CORPORATE GOVERANCE
Board of Directors and Corporate Governance
Our board of directors is responsible for overseeing our affairs. Our board of directors may conduct business through meetings and actions taken by written consent
in lieu of meetings. Our board of directors’ policy, as set forth in the corporate governance guidelines, is to encourage and promote the attendance by each director
at all scheduled meetings of the board of directors and stockholders.
Board Determination of Independence
Under the rules of the NYSE, independent directors must comprise a majority of a listed company’s board of directors. In addition, the rules of the NYSE require
that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be
independent. Under the rules of the NYSE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that
person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Audit
committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Exchange Act and the rules of the NYSE.
Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1 under the Exchange Act and the rules of the
NYSE.
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In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act and under the rules of the NYSE, a member of an audit committee of a
listed company may not, other than in his or her capacity as a member of the committee, the board of directors or any other board committee: (1) accept, directly or
indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed
company or any of its subsidiaries.
To be considered independent for purposes of Rule 10C-1 under the Exchange Act and under the rules of the NYSE, the board of directors must affirmatively
determine that the member of the compensation committee is independent, including a consideration of all factors specifically relevant to determining whether the
director has a relationship to the company which is material to that director’s ability to be independent from management in connection with the duties of a
compensation committee member, including, but not limited to: (1) the source of compensation of such director, including any consulting, advisory or other
compensatory fee paid by the company to such director; and (2) whether such director is affiliated with the company, a subsidiary of the company or an affiliate of
a subsidiary of the company.
The board of directors has undertaken a review of the independence of each director and considered whether each our directors has a material relationship with us
that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, Messrs. Chu, Abell,
Hinkle and Maudlin, Dr. Daffron and Ms. Huston have been determined to be “independent directors” as defined under the listing requirements and rules of the
NYSE and the applicable rules of the Exchange Act.
Family Relationships
There are no family relationships among any of our executive officers and directors.
Committees of Our Board of Directors
Our board of directors has three standing committees: Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each
of these committees has a written charter approved by our board of directors. A copy of each charter can be found on our website.
Audit Committee
Messrs. Abell and Maudlin and Ms. Huston serve as members of our Audit Committee. Under the NYSE listing standards and applicable SEC rules, all the
directors on the Audit Committee must be independent; our board of directors has determined that Messrs. Abell, Maudlin and Ms. Huston are independent under
the NYSE listing standards and applicable SEC rules. Mr. Maudlin serves as the Chairman of the Audit Committee. Each member of the Audit Committee is
financially literate, and our board of directors has determined that Messrs. Abell and Maudlin and Ms. Huston each qualify as an “audit committee financial expert”
as defined in applicable SEC rules. Our Audit Committee is responsible for, among other things:
•
•
•
•
•
•
•
selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;
helping to ensure the independence and performance of the independent registered public accounting firm;
discussing the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and the
independent registered public accounting firm, our interim and year-end financial statements;
developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
reviewing and overseeing our policies on risk assessment and risk management, including enterprise risk management;
reviewing the adequacy and effectiveness of internal control policies and procedures and our disclosure controls and procedures; and
approving or, as required, pre-approving all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by
the independent registered public accounting firm.
Compensation Committee
Messrs. Chu and Hinkle and Ms. Huston serve as members of our Compensation Committee. Under the NYSE listing standards, we are required to have a
Compensation Committee composed entirely of independent directors; our board of directors has determined that Messrs. Chu and Hinkle and Ms. Huston are
independent. Mr. Chu serves as Chairman of the Compensation Committee. Our Compensation Committee is responsible for, among other things:
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•
•
•
•
•
reviewing, approving and determining the compensation of our named executive officers;
reviewing, approving and determining compensation and benefits, including equity awards, to directors for service on our board of directors or any
committee thereof;
administering our equity compensation plans;
reviewing, approving and making recommendations to our board of directors regarding incentive compensation and equity compensation plans; and
establishing and reviewing general policies relating to compensation and benefits of our employees.
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serves, and in the past year has not served, as a member of the Compensation Committee of any entity that has one or more
executive officers serving on our board of directors.
Nominating and Corporate Governance Committee
Dr. Daffron and Messrs. Hinkle and Maudlin serve as members of our Nominating and Corporate Governance Committee. Under the NYSE listing standards, we
are required to have a nominating and corporate governance committee composed entirely of independent directors; our board of directors has determined that Dr.
Daffron and Messrs. Hinkle and Maudlin are independent. Dr. Daffron serves as Chairman of the Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee is responsible for, among other things:
•
•
•
•
•
•
•
identifying, evaluating and selecting, or making recommendation to our board of directors regarding, nominees for election to our board of directors or
its committees;
evaluating the performance of our board of directors and of individual directors;
considering, and making recommendation to our board of directors regarding the compensation of our board of directors and its committees;
reviewing developments in corporate governance practices;
evaluating the adequacy of the corporate governance practices and reporting;
reviewing related party transactions; and
developing, and making recommendation to our board of directors regarding, corporate governance guidelines and matters.
Item 11. Executive Compensation
Compensation Discussion and Analysis
The following sets forth information regarding the compensation paid to or accrued by our principal executive officers and our two other most highly compensated
persons serving as executive officers as of February 28, 2021 for services rendered for the fiscal years ended February 28, 2021 and February 29, 2020. As an
emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies” as such term is
defined in the rules promulgated under the Securities Act, which require compensation disclosure for its principal executive officer and its two other most highly
compensated executive officers. These three officers are referred to herein as our “named executive officers.”
The compensation reported in the summary compensation table below is not indicative of how we will compensate our named executive officers in the future. The
board of directors and Compensation Committee recently reviewed, evaluated and modified it compensation framework as a publicly traded company. Our
compensation program following the Business Combination, will vary from our historical practices. See Key Compensation Actions for Fiscal Year 2022 below.
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Summary Compensation Table
Name and Principal Position
Michael A. Farlekas
President and Chief Executive Officer
Jarett J. Janik
Chief Financial Officer
Peter R. Hantman
Chief Operating Officer and Executive
Vice President, Global Business Units
Fiscal
Year
(1)
2021
2020
2021
2020
2021
Salary ($)
(2)
Option
Awards ($)
(3)
Non-Equity
Incentive Plan
Compensation
($) (4)
$ 421,714 $ 7,239,303 $
— $
398,713
300,000
290,000
350,000
—
1,326,949
825,000
1,995,018
380,000
—
240,000
—
All Other
Compensation
($) (5)
Total
($)
8,400 $ 7,669,417
786,963
8,250
1,635,349
8,400
1,360,632
5,632
2,353,418
8,400
2020
332,000
—
325,000
8,250
665,250
(1) Our fiscal year ends on the last day of February.
(2) Effective September 1, 2019, each of Messrs. Farlekas’, Janik’s and Hantman’s base salary was increased from $334,000, $280,000 and $314,000,
respectively, to $380,000, $300,000 and $350,000, respectively. In fiscal 2020, Mr. Farlekas’ base salary included an incremental payment of $41,713 to
account for his increased expenses for frequent travel on our behalf. We pay Mr. Farlekas this additional amount in regular installments in accordance
with our regular payroll practices and do not require that it be used towards any particular expense, or that Mr. Farlekas provide any documentation as to
how the proceeds are used. In fiscal 2021, this amount was $41,714.
(3) The amounts reported in this column for fiscal year ended February 28, 2021 represent the unit-based compensation expense computed in accordance
with ASC 718 as a result of the accelerated vesting and modification of the Class B units granted to each of our named executive officers prior to the
occurrence of the Business Combination. For accounting purposes, the Class B Units were modified because the vesting of certain awards that would not
have otherwise vested was accelerated upon closing of the Business Combination. The amounts reflect the unit-based compensation expense for these
grants and do not represent the actual economic value that may be realized by each named executive officer. There can be no assurance that these
amounts will ever be realized. In connection with the Business Combination, the Class B Units were exchanged in part for cash and in part for equity
consideration comprised of Common Units of E2open Holdings, together with a corresponding number of shares of our Class V Common Stock, Series
1 RCUs and Series 2 RCUs based on the equity consideration valuation at the closing of the Business Combination. Of the amounts reported in this
column in respect of each named executive officer’s unvested awards that were accelerated, for each of Messrs. Farlekas, Janik and Hantman,
$3,493,365, $641,457 and $963,115 was delivered in cash, respectively, and the remainder was delivered in equity.
(4) The amounts reported as earned in this column represent the bonuses earned by each named executive officer pursuant to the Executive Bonus Plan. For
fiscal 2021 and 2020, these amounts were paid in May 2021 and 2020, respectively. For additional information, see Executive Bonus Plan below.
(5) The amounts listed in the “All Other Compensation” column represent matching contributions paid on behalf of each of executive officer under our
401(k) plan.
Narrative to Summary Compensation Table
Executive Employment Agreements
Certain of the compensation paid to our named executive officers reflected in the summary compensation table was provided pursuant to employment agreements,
which are summarized below. Except as described below under Severance Benefits, each named executive officer is employed on an at-will basis. The agreements
that covered employment in fiscal 2021 were superseded by new employment letter agreements discussed in more detail below under Key Compensation Actions
for Fiscal Year 2022.
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Each of Messrs. Farlekas, Janik and Hantman were a party to an employment agreement memorializing the terms of the executive’s employment with us. Effective
September 1, 2019, each of Messrs. Farlekas’, Janik’s and Hantman’s base salary was set at $380,000, $300,000 and $350,000, respectively. Mr. Farlekas also
receives an annual payment, currently $41,713 in fiscal 2021, to account for his expenses for frequent travel on our behalf. We pay Mr. Farlekas this additional
payment in regular installments in accordance with our regular payroll practices, and do not require that it be used towards any particular expense, or that Mr.
Farlekas provide any documentation as to how the proceeds are used. In addition, each of Messrs. Farlekas, Janik and Hantman were eligible to earn a target annual
bonus of $380,000, $240,000 and $325,000, respectively, subject to the executive’s continued employment through the applicable payment date. Each executive
was also a party to our standard Proprietary Information Agreement, which subjected him to an indefinite confidentiality provision, an inventions assignment
provision and a 12-month post-termination non-solicit of our employees and, for Messrs. Farlekas and Janik, customers. Mr. Farlekas was also subject to a nine-
month post-termination non-compete agreement.
Executive Bonus Plan
Bonuses payable to our named executive officers in respect of service during fiscal 2020 were paid in May 2020 and determined based on the achievement of the
following performance criteria: our recurring revenue, gross margin percentage, EBITDA and individual performance objectives, each, as established by the board
of managers of E2open Holdings and given a weighting of 45%, 10%, 25% and 20%, respectively. For fiscal 2020, based on the actual level of achievement of our
operating and personal performance objectives, the bonus for each executive was funded at 100%, resulting in a payout to each of Messrs. Farlekas, Janik and
Hantman of $380,000, $240,000, and $325,000, respectively.
Bonuses payable to our named executive officers in respect of service during fiscal 2021 are expected to be paid in May 2021 and will be determined based on the
achievement of the following performance criteria: total company revenue which includes both subscription and professional services revenue, net annual recurring
revenue, gross margin percentage, EBITDA and individual performance objectives, each, as established by the board of managers of E2open Holdings and given a
weighting of 25%, 40%, 25% and 10%, respectively. The Compensation Committee reviewed performance against the preset goals and determined that payout for
fiscal 2021 would be 83% of target. As such, annual bonus payout for each of Messrs. Farlekas, Janik and Hantman were $315,400, $199,200 and $269,750,
respectively.
Class B Units
Prior to the Business Combination, E2open Holdings had a unit-based compensation program that authorized, at the discretion of the board of managers of E2open
Holdings or a committee thereof, the issuance of non-vested restricted Class B Units. In connection with the Business Combination, all Class B Units were
exchanged in part for cash and in part for equity consideration comprised of Common Units of E2open Holdings, together with a corresponding number of shares
of our Class V Common Stock, Series 1 RCUs and Series 2 RCUs based on the equity consideration valuation at the closing of the Business Combination. All time
and performance based vesting conditions in respect of the Class B Units were deemed to have been satisfied as of the closing of the Business Combination.
Health and Welfare Plans
Our named executive officers are eligible to participate in the E2open Holdings employee benefit plans, including the medical, dental, vision, life, disability, health
and dependent care flexible spending accounts, health savings account and accidental death and dismemberment benefit plans, in each case on the same basis as all
of the other employees.
Retirement Plan
E2open Holdings sponsors a retirement plan intended to qualify for favorable tax treatment under Section 401(a) of the IRS Code, containing a cash or deferred
feature that is intended to meet the requirements of Section 401(k) of the IRS Code, for the benefit of its employees, including our named executive officers. No
minimum benefit is provided under the plan. An employee is 100% vested in his or her pre-tax deferrals when contributed. E2open Holdings will match 50% of the
first 6% of compensation contributed to the 401(k) plan during each calendar year. The matching contribution is made in February of the year following the year to
which the match relates, and each participant is immediately vested in the matching contribution. Participants must be employed with E2open Holdings on
December 31st of the applicable plan year to receive the matching contribution.
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Severance Benefits
Other than as set forth below, E2open Holdings did not offer or have in place for its named executive officers any severance or similar compensation programs
providing for additional benefits or payments in connection with a termination of employment, change in job responsibility or change in control as of February 28,
2021.
Michael A. Farlekas
Pursuant to Mr. Farlekas’ employment agreement, if Mr. Farlekas’ employment was terminated by E2open Holdings (other than for cause as defined in his
employment agreement or because of his death or permanent disability), subject to Mr. Farlekas’ execution and non-revocation of a general release of claims in
favor of E2open Holdings, Mr. Farlekas was entitled to (a) continued payment of his base salary for nine months and (b) an additional monthly amount equal to
$1,900 for healthcare expenses for six months following the date of such termination, provided that the healthcare stipend would cease earlier if Mr. Farlekas
became eligible to receive healthcare coverage from a subsequent employer.
Jarett J. Janik.
Pursuant to Mr. Janik’s employment agreement, if Mr. Janik’s employment was terminated by E2open Holdings (other than for cause as defined in his employment
agreement or because of his death or permanent disability), subject to Mr. Janik’s execution and non-revocation of a general release of claims in favor of E2open
Holdings, Mr. Janik was entitled to continued payment of his base salary for six months following such date of termination.
Peter R. Hantman
Pursuant to Mr. Hantman’s employment agreement, if Mr. Hantman’s employment was terminated by E2open Holdings (other than for cause as defined in his
employment agreement or because of his death or permanent disability), subject to Mr. Hantman’s execution and non-revocation of a general release of claims in
favor of E2open Holdings, Mr. Hantman was entitled to the sum of (a) 50% of his then-current base salary and (b) 50% of his target annual bonus for the fiscal year
in which the termination occurred, paid in equal installments over six months following such date of termination.
In connection with the Business Combination, these severance benefits were terminated and replaced by the E2open Parent Holdings, Inc. Executive Severance
Plan. See Key Compensation Actions for Fiscal Year 2022 below.
Outstanding Equity-Based Awards at Fiscal Year-End
The named executive officers did not have any outstanding equity awards as of February 28, 2021.
Key Compensation Actions for Fiscal Year 2022
As part of the review of E2open Holdings’ compensation framework as a publicly traded company following the Business Combination, the Compensation
Committee met on February 24, 2021 to review the compensation of our named executive officers and directors for fiscal year 2022 which commenced March 1,
2021. The below material compensation decisions were recommended to the board of directors and ultimately approved for fiscal year 2022.
Employment Terms and Letter Agreements
The board of directors approved the entry into employment letter agreements with the named executive officers that set forth the terms of their continued
employment with us. The form of letter agreement is the same for each executive and provides for the provision of base salary, an annual cash incentive
opportunity and a long-term equity opportunity. The agreement also provides for participation in the various health, insurance, retirement, paid time off and other
benefits provided our other officers in accordance with the benefit plans, programs and policies in effect from time to time. Except as provided for in the Executive
Severance Plan that each executive is eligible to participate in, the named executive officers are employed on an at-will basis.
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Michael A. Farlekas, President and Chief Executive Officer
•
•
•
Base salary — $500,000
Executive Annual Incentive Plan — Target bonus set at $750,000
2021 Incentive Plan — Initial equity grant with an aggregate grant date fair value equal to $4.5 million, with 33% awarded in the form of stock options
subject to performance and service based vesting criteria and the remaining grant awarded in the form of restricted stock units, 50% of which will be
subject to performance and service based vesting criteria and 50% of which will be subject solely to service based vesting criteria. All grants will be
subject to the terms and conditions of the 2021 Incentive Plan and the forms of award agreement previously filed. Mr. Farlekas will be eligible for long-
term incentive grants each fiscal year beginning with fiscal year 2023, with the target value of such grants expected to be not less than $4.5 million. See
2021 Omnibus Incentive Plan below for additional details.
Jarett J. Janik, Chief Financial Officer
•
•
•
Base salary — $350,000
Executive Annual Incentive Plan — Target bonus set at $400,000
2021 Incentive Plan — Initial equity grant with an aggregate grant date fair value equal to $2.0 million, with 33% awarded in the form of stock options
subject to performance and service based vesting criteria and the remaining grant awarded in the form of restricted stock units, 50% of which will be
subject to performance and service based vesting criteria and 50% of which will be subject solely to service based vesting criteria. All grants will be
subject to the terms and conditions of the 2021 Incentive Plan and the forms of award agreement previously filed. Mr. Janik will be eligible for long-
term incentive grants each fiscal year beginning with fiscal year 2023, with the target value of such grants expected to be not less than $2.0 million. See
2021 Omnibus Incentive Plan below for additional details.
Peter R. Hantman, Chief Operating Officer
•
•
•
Base salary — $375,000
Executive Annual Incentive Plan — Target bonus set at $500,000
2021 Incentive Plan — Initial equity grant with an aggregate grant date fair value equal to $2.0 million, with 33% awarded in the form of stock options
subject to performance and service based vesting criteria and the remaining grant awarded in the form of restricted stock units, 50% of which will be
subject to performance and service based vesting criteria and 50% of which will be subject solely to service based vesting criteria. All grants will be
subject to the terms and conditions of the 2021 Incentive Plan and the forms of award agreement previously filed. Mr. Hantman will be eligible for long-
term incentive grants each fiscal year beginning with fiscal year 2023, with the target value of such grants expected to be not less than $2.0 million. See
2021 Omnibus Incentive Plan below for additional details.
Executive Annual Incentive Program
The board of directors approved the adoption of an executive annual incentive program, which provides for a cash bonus to our executive team, including our
named executive officers, upon achievement of specific performance milestones. The objective of the executive annual incentive program is to reward achievement
of annual financial performance goals, and to establish appropriate company performance expectations to ensure executives are accountable for our continued
growth and financial performance.
Performance measures and goals for determining named executive officers’ fiscal year 2022 annual incentive awards are based on our achievement of financial
performance goals, including organic revenue growth, net bookings and adjusted EBITDA. For each performance measure, 100% of the bonus opportunity will be
paid with respect to such metric if target performance is achieved. Payout begins at 25% of target for both net bookings and adjusted EBITDA while payout begins
at 50% of target for organic revenue growth. All payouts max out at 200% of target. No bonus will be allocated to a performance measure if minimum threshold
results are not achieved.
The executive annual incentive program will be administered by the Compensation Committee.
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Executive Severance Plan
On February 4, 2021 we adopted an Executive Severance Plan for the benefit of our Chief Executive Officer and each of his direct reports. Pursuant to the
severance plan, upon a qualifying termination of employment (which includes a termination of employment by us without “cause” or following a resignation for
“good reason” (each, as defined in the plan)), subject to the execution of a release of claims against us and our affiliates, the participant would be eligible to receive
severance equal to (1) a lump sum payment equal to one-times the participant’s base salary and target bonus opportunity, (2) a pro-rata bonus for the year in which
the termination occurs, determined based on actual performance following the end of the applicable performance period and paid at such time as all other bonus
participants and (3) reimbursement for a portion of the participant’s COBRA continuation coverage premiums for a period of up to 18 months. If the qualifying
termination occurs following a change in control, the severance payments will be equal to (1) a lump sum payment equal to two-times the participant’s base salary
and target bonus opportunity, (2) a pro-rata bonus for the year in which the termination occurs, determined based on actual performance following the end of the
applicable performance period and paid at such time as all other bonus participants and (3) reimbursement for a portion of the participant’s COBRA continuation
coverage premiums for a period of up to 18 months. Payment of the severance benefits is generally subject to the participant’s agreement to be subject to a
covenant not to compete with us or solicit our employees and customers for a period of 12 months following a termination of employment.
Director Compensation
We adopted a new board of directors’ compensation program which is designed to provide competitive compensation necessary to attract and retain quality non-
employee directors and to encourage ownership of Class A Common Stock to further align their interests with those of our stockholders. The new program,
effective March 1, 2021, offers the following compensation for non-employee directors:
•
•
•
an annual cash retainer of $75,000;
an annual cash retainer of $100,000 for the chair of the board of directors, $20,000 for the chair of the audit committee, $15,000 for the chair of the
compensation committee and $10,000 for the chair of the nominating and corporate governance committee; and
an equity retainer with a value of $175,000, payable in the form of restricted stock units that vest on the one-year anniversary of the date of grant. For
fiscal year 2022, the grant was fixed as of March 1st at a stock price of $9.77, resulting in 17,912 restricted stock units. The actual grant will occur as
soon as our Form S-8 is filed in May 2021, with the one-year vesting requirement commencing at such time.
All cash retainers will be paid quarterly in arrears.
The following table provides information concerning compensation of each member of our board of directors for fiscal 2021.
Name
Timothy I. Maudlin
All Other
Compensation ($) (1)
75,000
$
$
Total ($)
75,000
(1) Represents the grant date fair value of 6,830 shares of Class A Common Stock granted to Mr. Maudlin on February 4, 2021, which were awarded
pursuant to a consulting agreement. See Narrative to Director Compensation Table below.
Narrative to Director Compensation Table
Maudlin Consulting Agreement
On September 17, 2020, Mr. Maudlin entered into a consulting agreement with E2open, LLC and its parent E2open Holdings, LLC (formerly known as Eagle
Parent Holdings, LLC) whereby Mr. Maudlin would provide consulting services on behalf of E2open Holdings, LLC in connection with its negotiation regarding
the transaction that ultimately culminated in the Business Combination. In consideration for the consulting services and upon the successful completion of the
Business Combination, Mr. Maudlin was entitled to a grant of fully vested common stock in the ultimate parent with a grant date fair value of $75,000. Such grant
was made on February 4, 2021 based on a closing stock price of $10.98 resulting in the issuance of 6,830 shares of fully vested Class A Common Stock.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the ownership of our common stock as of May 14, 2021, by:
•
•
•
each person who is the beneficial owner of more than 5% of the outstanding shares of our common stock;
each of our named executive officers and directors; and
all of our executive officers and directors as a group.
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it
possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.
Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed below has sole
voting and investment power with respect to such shares.
The beneficial ownership of shares of our common stock is based on the following: (a) an aggregate of 187,051,142 shares of Class A Common Stock issued and
outstanding and (ii) 35,636,680 shares of Class V Common Stock issued and outstanding; provided that, the information below excludes (a) the shares of Class A
Common Stock reserved for future awards under the 2021 Incentive Plan, (b) 13,799,972 shares of Class A Common Stock subject to our outstanding public
warrants, (c) non-voting shares of Series B-1 Common Stock and Series B-2 Common Stock and (d) the 4,363,320 shares of Class V Common Stock held by in
treasury.
Unless otherwise indicated, we believe all persons named in the table below have sole voting and investment power with respect to all shares of voting stock
beneficially owned by them. Except as otherwise noted, the address of the entities or individuals below is c/o E2open Parent Holdings, Inc., 9600 Great Hills Trail,
Suite 300E, Austin, TX 78759.
Name and Address of Beneficial Owner (1)
CC Neuberger Principal Holdings I Sponsor LLC (1)
Neuberger Berman Opportunistic Capital Solutions
Master Fund LP (2)
Insight Partners (3)
Elliott Investment Management L.P. (4)
Luxor Capital Partners, LP (5)
The WindAcre Partnership Master Fund LP (6)
Michael A. Farlekas
Peter R. Hantman
Jarett J. Janik
Keith W. Abell
Chinh E. Chu (7)
Dr. Stephen C Daffron
Eva F. Huston
Ryan M. Hinkle (8)
Timothy I. Maudlin
All directors and named executive officers as a
group (nine individuals)
* Less than 1%.
Class A Stock
Class V Stock
Beneficial Ownership Table
Number of
Shares
23,046,286
37,923,143
18,114,619
25,171,131
11,300,000
16,250,000
—
—
—
41,857
12,473,143
—
41,857
—
6,830
%
Number of
Shares
12.3%
20.3%
9.7%
13.5%
6.0%
8.7%
—
—
—
*
6.7%
—
*
—
*
—
—
26,566,466
—
—
—
1,223,957
472,994
178,318
—
—
—
—
—
154,134
% of
Total
Voting
Power
%
—
—
74.5%
—
—
—
3.4%
1.3%
*
—
—
—
—
—
*
2,575,571
1.4%
2,029,403
5.7%
10.3%
17.0%
20.1%
11.3%
5.1%
7.3%
*
*
*
*
5.6%
—
*
—
*
2.1%
124
(1) Consists of 12,766,286 shares of Class A Common Stock and 10,280,000 private placement warrants exercisable for shares of Class A Common Stock.
The Sponsor has a board of two managers, CC Capital, which is controlled by Chinh E. Chu, and Neuberger Berman Opportunistic Capital Solutions
Master Fund LP (NBOKS), for which Neuberger Berman Investment Advisers LLC, an indirect subsidiary of Neuberger Berman Group LLC, serves as
investment adviser, and, in such capacity, exercises voting or investment power over the shares held directly by NBOKS for which Charles Kantor is a
portfolio manager. The securities owned by the Sponsor are beneficially owned, in equal parts, by NBOKS and by CC Capital; each of CC Capital and
NBOKS disclaim beneficial ownership of the securities owned by the Sponsor except to the extent of their respective pecuniary interest therein. The
business address of the Sponsor is 200 Park Avenue, 58th Floor, New York, New York 10166.
(2) Consists of 870,000 shares of Class A Common Stock owned by NBOKS Co-Invest Fund I LP (NBOKS Co-Invest), and (a) 530,000 shares of Class A
Common Stock and 5,000,000 Forward Purchase Warrants exercisable for shares of Class A Common Stock owned of record by NBOKS and (b)
6,383,143 shares of Class A Common Stock and 5,140,000 public warrants exercisable for shares of Class A Common Stock owned on record by the
Sponsor over which NBOKS is a co-control person. Neuberger Berman Investment Advisers LLC, an indirect subsidiary of Neuberger Berman Group
LLC, serves as investment adviser to each of NBOKS and NBOKS Co-Invest and, in such capacity, exercises voting or investment power over the
shares held directly and controlled by NBOKS, for which Charles Kantor is a portfolio manager, and NBOKS Co-Invest. Does not include any securities
indirectly owned by this individual as a result of his or her interest in the sponsor or its affiliates.
(3) Consists of 7,524,415 shares of Class A Common Stock owned by Insight Venture Partners (Cayman) IX, L.P., 1,604,446 shares of Class A Common
Stock owned by Insight Venture (Delaware) IX, L.P., 4,681,293 shares of Class A Common Stock owned by Insight Venture Partners Growth-Buyout
Coinvestment Fund (Cayman), L.P., 4,304,465 shares of Class A Common Stock owned by Insight Venture Partners Growth-Buyout Coinvestment Fund
(Delaware), L.P. and 26,566,466 shares of Class V Common Stock owned by Insight E2open Aggregator, LLC (collectively, Insight Shareholders).
Insight E2open Aggregator, LLC is managed by Insight Venture Partners IX, L.P. The general partner of each of Insight Venture Partners IX, L.P.,
Insight Venture Partners (Cayman) IX, L.P. and Insight Venture Partners (Delaware) IX, L.P. is Insight Venture Associates IX, L.P., and the general
partner of Insight Venture Associates IX, L.P. is Insight Venture Associates IX, Ltd. The general partner of each of Insight Venture Partners Growth-
Buyout Coinvestment Fund (Cayman), L.P. and Insight Venture Partners Growth-Buyout Coinvestment Fund (Delaware), L.P. is Insight Venture
Associates Growth-Buyout Coinvestment, L.P., and the general partner of Insight Venture Associates Growth-Buyout Coinvestment, L.P. is Insight
Venture Associates Growth-Buyout Coinvestment, Ltd. The sole shareholder of each of Insight Venture Associates IX, Ltd. and Insight Venture
Associates Growth-Buyout Coinvestment, Ltd. is Insight Holdings Group, LLC (Insight Holdings). Each of Jeffrey Horing, Deven Parekh, Peter
Sobiloff, Jeffrey Lieberman and Michael Triplett is a member of the board of managers of Insight Holdings and may be deemed to hold voting and
dispositive power over the shares held of record by the Insight Shareholders. Each of the members of the board of managers of Insight Holdings
disclaims beneficial ownership of such shares except to the extent of their respective pecuniary interest therein, and the foregoing is not an admission
that any of Insight Venture Partners IX, L.P., Insight Venture Associates IX, L.P., Insight Venture Associates IX, Ltd., Insight Venture Associates
Growth-Buyout Coinvestment, L.P., Insight Venture Associates Growth-Buyout Coinvestment, Ltd. or Insight Holdings is the beneficial owner of any
shares held by the Insight Shareholders. The principal business address of each of the Insight Shareholders is 1114 Avenue of the Americas, 36th Floor,
New York, New York 10036.
(4) Consists of: (a) 7,551,339 shares of Class A Common Stock to be beneficially held by Helios Associates, LLC (Helios) and (b) 17,619,793 shares of
Class A Common Stock to be beneficially held by Sesame Investments, LP (Sesame). Helios is a wholly-owned subsidiary of Elliott Associates, L.P.
(Elliott) and Sesame is a wholly-owned subsidiary of Elliott International, L.P. (Elliott International). Elliott Advisors GP LLC, which is controlled by
Paul E. Singer (Singer), Elliott Capital Advisors, L.P., which is controlled by Singer, and Elliott Special GP LLC, which is controlled by Singer, are the
general partners of Elliott. Hambledon, Inc., which is also controlled by Singer, is the sole general partner of Elliott International. Elliott Investment
Management L.P. (EIM) is the investment manager of Elliott and Elliott International. EIM, as the investment manager of Elliott and Elliott International
may be deemed to beneficially own the shares of Class A Common Stock beneficially held by Helios and Sesame. EIM expressly disclaims equitable
ownership of and pecuniary interest in any shares of Class A Common Stock. The principal business address of each of Helios, Sesame, Elliott, Elliott
International and EIM is c/o Elliott Investment Management L.P., Phillips Point, East Tower, 777 South Flagler Drive, Suite 1000, West Palm Beach,
Florida 33401.
125
(5) Consists of 2,596,000 shares of Class A Common Stock owned by Luxor Capital Partners, LP (Onshore Fund), 1,792,000 shares of Class A Common
Stock owned by Luxor Capital Partners Offshore Master Fund, LP (Offshore Master Fund), 5,553,000 shares of Class A Common Stock owned by
Lugard Road Capital Master Fund, LP (Lugard Master Fund) and 1,359,000 shares of Class A Common Stock owned by Luxor Wavefront, LP
(Wavefront Fund). The principal business address of each of the Onshore Fund and Wavefront Fund is 1114 Avenue of the Americas, 28th Floor, New
York, New York 10036. The principal business address of each of the Offshore Master Fund and Lugard Master Fund is c/o Maples Corporate Services
Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
(6) Consists of shares of Class A Common Stock purchased by The WindAcre Partnership Master Fund LP, an exempted limited partnership established in
the Cayman Islands (Master Fund) in the PIPE Investment. The WindAcre Partnership LLC, a Delaware limited liability company, (WindAcre) serves as
the investment manager of the Master Fund. Snehal Rajnikant Amin is the principal beneficial owner of WindAcre and the only beneficial owner holding
more than 5% (Mr. Amin). Mr. Amin is the managing member of WindAcre and therefore might be deemed to have beneficial ownership of the shares
of Class A Common Stock to be purchased by the Master Fund. The principal business address of this shareholder is Elian Fiduciary Services (Cayman)
LTD, 190 Elgin Avenue, George Town, Grand Cayman KY1-9007, Cayman Islands.
(7) Consists of (a) 6,383,143 shares of Class A Common Stock and 5,140,000 public warrants to purchase Class A Common Stock owned of record by the
Sponsor and (b) 950,000 shares of Class A Common Stock owned by CC Capital, for which Mr. Chu is deemed to have beneficial ownership.
(8) Mr. Hinkle is a Managing Director of Insight Partners, an affiliate of the Insight Shareholders described in footnote 3. Mr. Hinkle does not hold voting or
dispositive power over the shares held of record by the Insight Shareholders. See footnote 3 for more information regarding the Insight Shareholders.
Securities Authorized for Issuance Under Equity Compensation Plans
We currently have one equity incentive plan, the 2021 Omnibus Incentive Plan, which was approved by our shareholders prior to the completion of the Business
Combination. The following table sets forth certain information regarding shares of common stock that may be issued under our equity incentive plans approve by
shareholders and plans not approved by shareholders (if any) as of February 28, 2021:
Plan Category
Equity compensation plans approved by stockholders
Equity compensation plans not approved by stockholders
Total
(a) Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Rights
— (1)
6,830 (2)
6,830
(b) Weighted-
Average Exercise
Price of
Outstanding
Rights
N/A
N/A
N/A
(2)
(c) Number of
Securities
Remaining
Available for
Future
Issuance Under
Equity
Compensation
Plans
15,000,000 (1)
—
15,000,000
(1) For more information about the 2021 Incentive Plan, see the captions 2021 Omnibus Incentive Plan included in Item 11., Executive Compensation. As of
February 28, 2021, we did not have any outstanding awards under the 2021 Incentive Plan. On March 1, 2021, our board of directors granted an
aggregate of 2,380,902 options to our executive officers with an exercise price of $9.77. On May 3, 2021, our board of directors granted an aggregate of
458,333 options to certain of our senior management with an exercise price of $10.86. All the options are performance based measured on obtaining an
organic growth target over a one-year period with a quarter of the options vesting at the end of the performance period and the remaining options vesting
equally over the following three years.
(2) Represents the grant date fair value of 6,830 shares of Class A Common Stock granted to Mr. Maudlin on February 4, 2021, pursuant to a consulting
agreement. The shares were fully vested on the date of issuance. See the caption Narrative to Director Compensation Table under Director
Compensation included in Item 10., Directors, Executive Officers and Corporate Governance.
126
Item 13. Certain Relationships and Related Transactions and Director Independence
Related Party Transactions
We have adopted a formal written policy that applies to our executive officers, directors, nominees for directors, holders of more than five percent of any class of
our voting securities and any member of the immediate family of, and any entity affiliated with, any of the foregoing persons. Such persons will not be permitted to
enter into a related-party transaction with us without the prior consent of our Audit Committee, subject to exceptions for certain pre-approved related party
transactions. Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of their immediate family members or
affiliates must first be presented to our Audit Committee for review, consideration and approval. In approving or rejecting any such proposal, our Audit Committee
will consider the relevant facts and circumstances available and deemed relevant to our Audit Committee, including, but not limited to, whether the transaction will
be on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related-
party’s interest in the transaction.
E2open Holdings Transactions
Put Premium
In July 2019, in connection with the Amber Road acquisition, E2open Holdings paid $5.3 million and $3.0 million to Insight Partners and another member of the
syndicate of private equity investors in E2open Holdings, respectively. These amounts were paid as a premium in exchange for a right granted by each investor to
E2open Holdings to put and sell to such investor equity securities of E2open Holdings with a value equal to the aggregate amount paid by such investor pursuant to
a commitment to provide equity financing to E2open, LLC for the Amber Road acquisition. This put right was not exercised by E2open Holdings.
Amber Term Loan
In July 2019, E2open Holdings assumed a $36.6 million term loan guaranteed by with Insight Partners. This loan was paid in full as part of the Business
Combination.
Maudlin Consulting Agreement
In September 2020, E2open Holdings entered into a consulting agreement with Timothy Maudlin (Maudlin Consulting Agreement), pursuant to which, upon the
successful completion of the Business Combination, Mr. Maudlin was entitled to an equity grant with a grant date fair value of $75,000. If the Business
Combination was not consummated, Mr. Maudlin was entitled to a one-time cash payment of $40,000. Pursuant to the Maudlin Consulting Agreement, Mr.
Maudlin was also given an opportunity to make an equity investment of $1.5 million in E2open Holdings. The investment was made on October 10, 2020 in
exchange for Class A Units of E2open Holdings.
CCNB1 Agreements or Transactions
Related Party Loans
On January 16, 2020, our Sponsor agreed to loan us up to $300,000 to be used for the payment of costs related to the IPO pursuant to a promissory note (the Note).
The Note was non-interest bearing, unsecured and due upon the closing of the IPO. We borrowed approximately $125,000 under the Note. On May 29, 2020, we
repaid the Note to the Sponsor in full.
In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers
and directors may, but were not obligated to, loan us funds as may be required (Working Capital Loans). If we completed the Business Combination, we would
repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds
held outside the Trust Account. In the event that a Business Combination did not close, a portion of proceeds held outside the Trust Account would be used to repay
the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of
such Working Capital Loans, if any, were not determined and no written agreements exists with respect to such loans. The Working Capital Loans would either be
repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $2.5 million of such Working Capital Loans could be
convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement
Warrants. There were no borrowings outstanding under the Working Capital Loans when the Business Combination was completed.
127
Forward Purchase Agreement and Forward Purchase Agreement Side Letter
In connection with the IPO, we entered into the Forward Purchase Agreement with Neuberger Berman Opportunistic Capital Solutions Master Fund LP (NBOKS),
a member of our Sponsor, which provided for the purchase of Forward Purchase Shares and Forward Purchase Warrants in the aggregate amount of $200.0 million
in a private placement that closed concurrently with the closing of the Business Combination. In connection with the Business Combination Agreement, NBOKS
and CCNB1 entered into an agreement whereby NBOKS confirmed the agreement to purchase the $200.0 million of Forward Purchase Shares and Forward
Purchase Warrants in connection with the Business Combination. The obligations under the Forward Purchase Agreement did not depend on whether any
redemptions of common shares of CCNB1 were made. The Forward Purchase Shares and Forward Purchase Warrants were only issued in connection with the
closing of the Business Combination. The proceeds from the sale of the Forward Purchase Shares and Forward Purchase Warrants were part of the consideration
payable under the Business Combination Agreement.
Backstop Agreement
Concurrently with the execution of the Business Combination Agreement, CCNB1 entered into the Backstop Agreement with NBOKS, pursuant to which NBOKS
agreed to, subject to the availability of capital it has committed to all SPACs sponsored by CC Capital and NBOKS on a first come first serve basis, allocate up to
an aggregate of $300.0 million to subscribe for shares of Class A Common Stock at $10.00 per share in connection with the Business Combination, which
subscription amount would not exceed the number of shares of CCNB1 subject to redemption. Under the Backstop Agreement, CCNB1 and NBOKS made
customary representations and warranties for transactions of this type regarding themselves, which terminated upon the closing of the Business Combination. No
portion of the Backstop was funded in connection with the closing of the Business Combination.
Subscription Agreements
Concurrently with the execution of the Business Combination Agreement, CCNB1 entered into a Subscription Agreement with CC Capital, an entity in which
Chinh E. Chu has a controlling interest, pursuant to which CC Capital received 2,450,000 shares of Class A Common Stock at the completion of the Business
Combination. In addition, concurrently with the execution of the Business Combination Agreement, CCNB1 entered into a Subscription Agreement with NBOKS
and NBOKS Co-Invest Fund I LP, entities that Charles Kantor, Director of CCNB1 is the portfolio manager of, pursuant to which NBOKS and NBOKS Co-Invest
Fund I, LP collectively 2,400,000 shares of Class A Common Stock at the closing of the Business Combination.
Post-Business Combination Agreements
Tax Receivable Agreement
On February 4, 2021, in connection with the closing of the Business Combination, we entered into the Tax Receivable Agreement with certain of the E2open
Sellers whereby we are required to pay to the exchanging holders of Common Units, as applicable, 85% of the tax savings that we realize in accordance with the
Tax Receivable Agreement. See the caption Tax Receivable Agreement under Significant Agreements in Part I, Item 1., Business for additional information.
Investor Rights Agreement
On February 4, 2021, in connection with the closing of the Business Combination, we entered into the Investor Rights Agreement which provides affiliates of
Insight Partners and CC Capital the right to nominate members of our board of directors, requires parties to vote in favor of director nominees recommended by our
board of directors, require us to register securities within 30 days of the Closing Date and limit transfers of beneficially owned shares of our common stock prior to
the termination of the Lock-up Period, among others. See the caption Investor Rights Agreement under Significant Agreements in Part I, Item 1., Business for
additional information.
128
Sponsor Side Letter Agreement
In connection with the execution of the Business Combination Agreement, the Sponsor, certain investors and CCNB1’s Independent Directors entered into the
Sponsor Side Letter Agreement with CCNB1. Under the Sponsor Side Letter Agreement, 2,500,000 Class B Ordinary Shares of CCNB1 held by the Sponsor and
CCNB1’s Independent Directors were automatically converted into 2,500,000 shares of Series B-1 Common Stock, which, collectively, are referred to as the
Restricted Sponsor Shares. The vesting conditions of the shares of Series B-1 Common Stock mirror the Series 1 RCUs. Upon conversion of the Restricted Sponsor
Shares, the holder of each such Restricted Sponsor Share will be entitled to receive a payment equal to the amount of dividends declared on a share of Class A
Common Stock beginning at the closing of the Business Combination and ending on the day before the date such Restricted Sponsor Share converts into a share of
Class A Common Stock. If any of the Restricted Sponsor Shares do not convert prior to the ten-year anniversary of the Closing Date, such Restricted Sponsor
Shares will be canceled for no consideration and will not be entitled to receive any Catch-Up Payment, as defined in the Third Company Agreement, in respect of
such Restricted Sponsor Shares.
Indemnification Agreements
Concurrently with the Business Combination, we entered into indemnification agreements with certain executive officers, Section 16 officers and/or directors. See
the caption Indemnification Agreements under Significant Agreements in Part I, Item 1., Business for additional information.
Lock-Up Agreements
Concurrently with the Business Combination, we entered into lock-up agreements with Messrs. Farlekas, Hantman and Janik. See the caption Lock-Up Agreements
under Significant Agreements in Part I, Item 1., Business for additional information.
Board Determination of Independence
For information related to our board of directors’ determination of independence, see the caption Board Determination of Independence in Item 10., Directors,
Executive Officers and Corporate Governance.
Item 14. Principal Accounting Fees and Services
Principal Accountant Fees and Services
On February 4, 2021, our Audit Committee approved the appointment of EY as our independent registered public accounting firm to audit our financial statements
for the year ended February 28, 2021. EY served as the independent registered public accounting firm of E2open Holdings prior to the Business Combination.
Accordingly, Withum, the independent registered public accounting firm of CCNB1 will serve as the independent registered public accounting firm for the pre-
Business Combination special purpose acquisition company from January 14, 2020 (inception) through December 31, 2020 in order to complete the year ended
December 31, 2020 audit. The following table represents the total amount of fees billed to CCNB1 by Withum in such capacity:
(In thousands)
Audit fees
Total
The following table represents the total amount of fees billed to us by EY in such capacity:
January 1, 2021
through February
3, 2021
January 14, 2020
(inception) through
December 31, 2020
$
$
30
30
$
$
85
85
(In thousands)
Audit fees
Audit related fees
Total
Successor
February 4, 2021
through
February 28, 2021
Predecessor
March 1, 2020
through
February 3, 2021
February 29, 2020
—
—
—
$
$
3,483 $
357
3,840 $
997
339
1,336
$
$
129
Audit Fees
Audit fees consist of the aggregate fees, including expenses, billed in connection with the audits of our annual financial statements and quarterly financial reviews,
IPO and services that are normally provided by the independent registered public accounting firm. Between March 1, 2021 and the filing date, EY invoiced $1.3
million for audit fees not included in the table above.
Audit-Related Fees
Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our year-end
financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultation
concerning financial accounting and reporting standards. We include such items as the System and Organization Controls (SOC) audit work.
Tax Fees
Tax fees consist of fees billed for professional services relating to tax compliance, tax planning and tax advice.
All Other Fees
All other fees consist of fees billed for all other services.
Pre-Approval Policy and Procedures
The fees described above were incurred before our Business Combination and were not approved under any pre-approval policy. Our Audit Committee charter,
adopted in connection with our Business Combination, requires that our Audit Committee pre-approve all audit and permitted non-audit and tax services that may
be provided by our independent auditor, and establish policies and procedures for the Audit Committee’s pre-approval of permitted services in compliance with
applicable SEC rules and review such pre-approval policies at least quarterly.
PART IV
Item 15. Exhibits, Financial Statement Schedules
1.
Financial Statements
See Index to Consolidated Financial Statements on page 64 of this Form 10-K.
2.
Financial Statements Schedules
See Index to Consolidated Financial Statements on page 64 of this Form 10-K.
3.
Exhibits
Exhibit Number
2.1 †
Description
— Business Combination Agreement, dated as of October 14, 2020, by and among CC Neuberger Principal Holdings I, E2open Holdings,
LLC and the other parties thereto. (incorporated by reference to Exhibit 2.1 of CCNB1’s Form 8-K/A (File No. 001-39272), filed with the
SEC on October 15, 2020).
2.2 †
Amendment No. 1 to the Business Combination Agreement, dated January 28, 2021 (incorporated by reference to Exhibit 2.1 of CCNB1’s
3.1
3.2
3.3
4.1
4.2
Form 8-K (File No. 001-39272), filed with the SEC on January 29, 2021).
— Certificate of Domestication of the CC Neuberger Principal Holdings I (incorporated by reference to Exhibit 3.1 of E2open Parent
Holdings, Inc.’s Form 8-K (File No. 001-39272), filed with the SEC on February 10, 2021).
— Certificate of Incorporation of the E2open Parent Holdings, Inc. (incorporated by reference to Exhibit 3.2 of E2open Parent Holdings,
Inc.’s Form 8-K (File No. 001-39272), filed with the SEC on February 10, 2021).
— Bylaws of the E2open Parent Holdings, Inc. (incorporated by reference to Exhibit 3.3 of E2open Parent Holdings, Inc.’s Form 8-K (File
No. 001-39272), filed with the SEC on February 10, 2021).
— Form of Warrant Certificate of CC Neuberger Principal Holdings I (incorporated by reference to Exhibit 4.3 of CCBN1’s Form S-1/A (File
No. 333-236974), filed with the SEC on April 17, 2020).
— Warrant Agreement, dated April 28, 2020, between Continental Stock Transfer & Trust Company and CC Neuberger Principal Holdings I
(incorporated by reference to Exhibit 4.1 of CCNB1’s Form 8-K (File No. 001-39272), filed with the SEC on April 28, 2020).
130
Exhibit Number
4.3*
10.1
Description
Description of the Registrant’s Securities Registered under Section 12 of the Exchange Act
— Third Amended and Restated Limited Liability Company Agreement of E2open Holdings, LLC, dated as of February 4, 2021, by and
10.2 †
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10 +
10.11 +
10.12 +
10.13 +
10.14 +
10.15 +*
21.1*
31.1*
31.2*
32.1*
32.2*
101.INS
101.SCH
101.CAL
among E2open Parent Holdings, Inc. and each other person who is or at any time becomes a member of E2open Holdings, LLC
(incorporated by reference to Exhibit 10.1 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272), filed with the SEC on
February 10, 2021).
— Tax Receivable Agreement, dated of February 4, 2021, by and among E2open Parent Holdings, Inc., Insight E2open Aggregator, LLC as
the Tax Receivable Agreement party representative and each other person who is or at any time becomes a party thereto (incorporated by
reference to Exhibit 10.2 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272), filed with the SEC on February 10, 2021).
— Investor Rights Agreement, dated as of February 4, 2021, by and among E2open Parent Holdings, Inc., the Equity holders, CC Neuberger
Principal Holdings I Sponsor LLC, CC NB Sponsor 1 Holdings LLC, Neuberger Berman Opportunistic Capital Solutions Master Fund LP,
Eva F. Huston and Keith W. Abell (incorporated by reference to Exhibit 10.3 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-
39272), filed with the SEC on February 10, 2021).
— Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 of CCNB1’s Form 8-K/A (File No. 001-39272), filed with the
SEC on October 15, 2020).
Form of Forward Purchase Agreement between CC Neuberger Principal Holdings I and the investor named therein (incorporated by
reference to Exhibit 10.9 of CCNB1’s Form S-1 (File No. 333-236974), filed with the SEC on April 21, 2020).
Letter Agreement re: Forward Purchase by and between CC Neuberger Principal Holdings I and Neuberger Berman Opportunistic Capital
Solutions Master Fund L.P., dated as of October 14, 2020 (incorporated by reference to Exhibit 10.2 of CCNB1’s Form 8-K/A (File No.
001-39272), filed with the SEC on October 15, 2020).
Backstop Facility Agreement by and between CC Neuberger Principal Holdings I and Neuberger Berman Opportunistic Capital Solutions
Master Fund L.P., dated as of October 14, 2020 (incorporated by reference to Exhibit 10.3 of CCNB1’s Form 8-K/A (File No. 001-39272),
filed with the SEC on October 15, 2020).
Sponsor Side Letter by and among Sponsor, Eva F. Huston, Keith W. Abell, CC NB Sponsor I Holdings LLC, a Delaware limited liability
company, Neuberger Berman Opportunistic Capital Solutions Master Fund LP, a Cayman Islands exempted company and CC Neuberger
Principal Holdings I (incorporated by reference to Exhibit 10.4 of CCNB1’s Form 8-K/A (File No. 001-39272), filed with the SEC on
October 15, 2020).
— Credit Agreement, dated as of February 4, 2021, by and among E2open, LLC, the lenders party thereto and Goldman Sachs Bank USA, as
administrative agent and collateral agent (incorporated by reference to Exhibit 10.6 of E2open Parent Holdings, Inc.’s Form 8-K (File No.
001-39272), filed with the SEC on February 10, 2021).
E2open Parent Holdings, Inc. 2021 Omnibus Incentive Plan and forms of award agreements thereunder (incorporated by reference to
Exhibit 10.8 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272), filed with the SEC on February 10, 2021).
E2open Parent Holdings, Inc. Annual Incentive Plan and form of award agreement thereunder (incorporated by reference to Exhibit 10.2 of
E2open Parent Holdings Inc.’s Form 8-K (File No. 001-39272), filed with the SEC on March 1, 2021).
Terms of Employment, dated March 1, 2021, between the Company, E2open, LLC and the executive named therein (incorporated by
reference to Exhibit 10.1 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272), filed with the SEC on March 1, 2021).
Form of Indemnification Agreement, dated as of February 4, 2021, by and among E2open Parent Holdings, Inc. and the director or officer
named therein (incorporated by reference to Exhibit 10.4 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272), filed with the
SEC on February 10, 2021).
Stock Award Grant Notice (2021 Omnibus Incentive Plan), dated as of February 4, 2021, by and among E2open Parent Holdings, Inc. and
Tim Maudlin (incorporated by reference to Exhibit 10.9 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272), filed with the
SEC on February 10, 2021).
Executive Severance Plan, dated as of February 4, 2021, by and among E2open Parent Holdings, Inc. and the executive named therein
List of Subsidiaries of the Company
Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
— XBRL Instance Document.
— XBRL Taxonomy Extension Schema Document.
— XBRL Taxonomy Extension Valuation Linkbase Document.
131
Exhibit Number
101.DEF
101.LAB
101.PRE
* Filed herewith
Description
— XBRL Taxonomy Extension Definition Linkbase Document.
— XBRL Taxonomy Extension Label Linkbase Document.
— XBRL Taxonomy Extension Presentation Linkbase Document.
+ Indicates a management or compensatory plan.
† Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Registration S-K. The Registrant hereby agrees to furnish a copy of any omitted
schedules to the Commission upon request
Item 16. Form 10-K Summary
None.
E2OPEN PARENT HOLDINGS, INC.
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at
Beginning of
Period
Additions
Charged to
Operations
Additions Charged
to Goodwill
Net
Deductions
Balance at End
of Period
$
1,012 $
308 $
— $
412 (a)
$
908
1,945
13,469
1,631
101
2,622
4,424
—
—
—
14,402 (a)
2,308 (a)
2,894 (a)
1,012
1,945
1,631
$
30,345
$
3,581
$
—
$
6,896 (b)
$
27,030
22,855
13,063
—
5,573 (b)
16,705
15,304
3,076
1,519
4,283
428
1,209 (b)
546 (b)
30,345
22,855
16,705
($ in thousands)
Allowance for Doubtful Accounts
Successor:
February 4, 2021 through
February 28, 2021
Predecessor:
March 1, 2020 through
February 3, 2021
For fiscal year ended:
February 29, 2020
February 28, 2019
Deferred Tax Asset Valuation
Allowance
Successor:
February 4, 2021 through
February 28, 2021
Predecessor:
March 1, 2020 through
February 3, 2021
For fiscal year ended
February 29, 2020
February 28, 2019
(a) Represents write-offs of accounts receivable, net of recoveries.
(b) Represents current year releases credited to expense and current year reductions due to decreases in net deferred tax assets.
132
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
SIGNATURE
May 20, 2021
E2open Parent Holdings, Inc.
(Registrant)
/s/ Michael A. Farlekas
Michael A. Farlekas
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and as of the date indicated.
Signature
/s/ Michael A. Farlekas
Michael A. Farlekas
/s/ Jarett J. Janik
Jarett J. Janik
/s/ Deepa L. Kurian
Deepa L. Kurian
/s/ Chinh E. Chu
Chinh E. Chu
/s/ Keith W. Abell
Keith W. Abell
/s/ Dr. Stephen C. Daffron
Dr. Stephen C. Daffron
/s/ Ryan M Hinkle
Ryan M. Hinkle
/s/ Eva F. Huston
Eva F. Huston
/s/ Timothy I Maudlin
Timothy I. Maudlin
Capacity
Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Chairman of the Board of Directors
Director
Director
Director
Director
Director
133
Date
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT
Exhibit 4.3
The following description sets forth certain material terms and provisions of the securities of E2open Parent Holdings, Inc. (“we,” “us” or “our”) that
are registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The following summary of the material terms of our
securities is not intended to be a complete summary of the rights and preferences of such securities and is qualified in its entirety by our second amended and
restated certificate of incorporation and amended and restated bylaws. The full text of our certificate of incorporation and amended and restated bylaws are filed as
exhibits to the registration statement of which this prospectus is a part. For a complete description of the rights and preferences of our securities, we urge you to
read our second amended and restated certificate of incorporation, amended and restated bylaws and the applicable provisions of Delaware law.
As of February 28, 2021, we had two classes of securities registered under Section 12 of the Securities Exchange Act of 1934: our Class A-1 common stock and our
warrants.
Authorized and Outstanding Stock
Our certificate of incorporation authorizes the issuance of 2,554,000,000 shares, consisting of:
•
•
•
•
•
1,000,000 shares of preferred stock, par value $0.0001 per share;
2,500,000,000 shares of Class A Common Stock, par value $0.0001 per share;
9,000,000 shares of Series B-1 common stock, par value $0.0001 per share;
4,000,000 shares of Series B-2 common stock, par value $0.0001 per share; and
40,000,000 shares of Class V Common Stock, par value $0.0001 per share.
Class A Common Stock
As of May 14, 2021, there are 187,051,152 shares of Class A Common Stock outstanding. All shares of Class A Common Stock are fully paid and non-assessable.
In connection with the Business Combination, the Class B ordinary shares held by the Sponsor converted into shares of Class A Common Stock of the Company
other than 2,500,000 Class B ordinary shares which automatically converted into Series B-1 common stock in accordance with the Sponsor Side Letter Agreement
and the certificate of incorporation.
Voting rights. Each holder of Class A Common Stock is entitled to one vote for each share of Class A Common Stock held of record by such holder
on all matters on which stockholders generally are entitled to vote. Holders of Class A Common Stock vote together with holders of Class V Common Stock as a
single class on all matters presented to the Company’s stockholders for their vote or approval. Generally, all matters to be voted on by stockholders must be
approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all stockholders present in person or represented by
proxy, voting together as a single class. Notwithstanding the foregoing, to the fullest extent permitted by law, holders of Class A Common Stock, as such, have no
voting power with respect to, and are not entitled to vote on, any amendment to the certificate of incorporation (including any certificate of designations relating to
any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled,
either separately or together with the holders of one or more other such series, to vote thereon pursuant to the certificate of incorporation (including any certificate
of designations relating to any series of Preferred Stock) or pursuant to the DGCL.
Dividend rights. Subject to preferences that may be applicable to any outstanding Preferred Stock, the holders of shares of Class A Common Stock
are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board out of funds legally available therefor.
Rights upon liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company’s affairs, the holders of
Class A Common Stock are entitled to share ratably in all assets
remaining after payment of the Company’s debts and other liabilities, subject to prior distribution rights of Preferred Stock or any class or series of stock having a
preference over the Class A Common Stock, then outstanding, if any.
Other rights. The holders of Class A Common Stock have no preemptive or conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Class A Common Stock. The rights, preferences and privileges of holders of the Class A Common Stock will be subject to
those of the holders of any shares of the Preferred Stock the Company may issue in the future.
Warrants
Public Shareholders’ and Forward Purchase Warrants
Each whole Warrant entitles the registered holder to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment as
discussed below, at any time commencing on the later of one year from the closing of the IPO or 30 days after the completion of the Business Combination,
provided in each case that we have an effective registration statement under the Securities Act covering the Class A Common Stock issuable upon exercise of the
Warrants and a current prospectus relating to them is available (or we permit holders to exercise their Warrants on a cashless basis under the circumstances
specified in the warrant agreement) and such shares are registered, qualified or exempt from registration under the securities, or blue sky laws of the state of
residence of the holder. Pursuant to the warrant agreement, a warrant holder may exercise its Warrants only for a whole number of shares of Class A Common
Stock. This means only a whole Warrant may be exercised at a given time by a warrant holder. No fractional Warrants will be issued upon separation of the units
and only Whole warrants will trade. The warrants will expire five years after the Closing Date, at 5:00 p.m., New York City time on February 4, 2026, or earlier
upon redemption or liquidation.
We will not be obligated to deliver any Class A Common Stock pursuant to the exercise of a Warrant and will have no obligation to settle such warrant exercise
unless a registration statement under the Securities Act with respect to the Class A Common Stock underlying the Warrants is then effective and a prospectus
relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No Warrant will be exercisable and we will not be
obligated to issue a Class A Common Stock upon exercise of a Warrant unless the Class A Common Stock issuable upon such Warrant exercise has been
registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Warrants. In the event that the
conditions in the two immediately preceding sentences are not satisfied with respect to a Warrant, the holder of such Warrant will not be entitled to exercise such
Warrant and such Warrant may have no value and expire worthless. In no event will we be required to net cash settle any Warrant. In the event that a registration
statement is not effective for the exercised Warrants, the purchaser of a unit containing such Warrant will have paid the full purchase price for the unit solely for the
Class A Common Stock underlying such unit.
We have agreed that as soon as practicable, but in no event later than 20 business days after the closing of the Business Combination, we will use commercially
reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A Common Stock issuable upon exercise
of the Warrants. We will use commercially reasonable efforts to cause the same to become effective and to maintain the effectiveness of such registration
statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement. If a registration
statement covering the Class A Common Stock issuable upon exercise of the Warrants is not effective by the 60th day after the closing of the initial business
combination, warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an
effective registration statement, exercise Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Notwithstanding the above, if our Class A Common Stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that they
satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Public Warrants who exercise
their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or
maintain in effect a registration statement, and in the event we do not so elect, we will use commercially reasonable efforts to register or qualify the shares under
applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants for Cash
Once the Warrants become exercisable, we may call the Warrants for redemption:
•
•
•
•
in whole and not in part;
at a price of $0.01 per Warrant;
upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each Warrant holder; and
if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations,
reorganizations, recapitalizations and the like) on each of 20 trading days within a 30-trading day period ending on the third business day before we send to
the notice of redemption to the Warrant holders.
If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for
sale under all applicable state securities laws.
We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to
the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the Warrants, each Warrant holder will be entitled to
exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the Class A Common Stock may fall below the $18.00 redemption
trigger price (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations, and the like) as well as the $11.50 (for whole shares) Warrant
exercise price after the redemption notice is issued.
Redemption of Warrants for Class A Common Stock
Commencing ninety days after the Warrants become exercisable, we may redeem the outstanding Warrants (except as described herein with respect to the Private
Placement Warrants):
•
•
•
•
in whole and not in part;
for a number of shares of Class A Common Stock to be determined by reference to the table below, based on the redemption date and the “fair market value”
(as defined below) of our Class A Common Stock except as otherwise described below;
upon a minimum of 30 days’ prior written notice of redemption; and
if, and only if, the last sale price of our Class A Common Stock equals or exceeds $10.00 per share (as adjusted per share splits, share dividends,
reorganizations, reclassifications, recapitalizations and the like) on the trading day prior to the date on which we send the notice of redemption to the Warrant
holders.
The numbers in the table below represent the “redemption prices,” or the number of Class A Common Stock that a Warrant holder will receive upon redemption by
us pursuant to this redemption feature, based on the “fair market value” of our Class A Common Stock on the corresponding redemption date, determined based on
the average of the last reported sales price for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the
holders of Warrants, and the number of months that the corresponding redemption date precedes the expiration date of the Warrants, each as set forth in the table
below.
The stock prices set forth in the column headings of the table below will be adjusted as of any date on which the number of shares issuable upon exercise of a
Warrant is adjusted as set forth in the first three paragraphs under the heading “— Anti-dilution Adjustments” below. The adjusted share prices in the column
headings will equal the share prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the number of shares deliverable upon
exercise of a Warrant immediately prior to such adjustment and the denominator of which is the number of shares deliverable upon exercise of a Warrant as so
adjusted. The number of shares in the table below shall be adjusted in the same manner and at the same time as the number of shares issuable upon exercise of a
Warrant.
Redemption Date Fair Market Value of Class A Common Stock
Redemption Date
(period to expiration of warrants)
$10.00
$11.00
$12.00
$13.00
$14.00
$15.00
$16.00
$17.00
$18.00
Fair Market Value of Class A Common Stock
57 months
54 months
51 months
48 months
45 months
42 months
39 months
36 months
33 months
30 months
0.257
0.277
0.294
0.310
0.324
0.337
0.348
0.358
0.365
0.252
0.272
0.291
0.307
0.322
0.335
0.347
0.357
0.365
0.246
0.268
0.287
0.304
0.320
0.333
0.346
0.357
0.365
0.241
0.263
0.283
0.301
0.317
0.332
0.344
0.356
0.365
0.235
0.258
0.279
0.298
0.315
0.330
0.343
0.356
0.365
0.228
0.252
0.274
0.294
0.312
0.328
0.342
0.355
0.364
0.221
0.246
0.269
0.290
0.309
0.325
0.340
0.354
0.364
0.213
0.239
0.263
0.285
0.305
0.323
0.339
0.353
0.364
0.205
0.232
0.257
0.280
0.301
0.320
0.337
0.352
0.364
0.196
0.224
0.250
0.274
0.297
0.316
0.335
0.351
0.364
27 months
24 months
21 months
18 months
15 months
12 months
9 months
6 months
3 months
0 months
0.185
0.214
0.242
0.268
0.291
0.313
0.332
0.350
0.364
0.173
0.204
0.233
0.260
0.285
0.308
0.329
0.348
0.364
0.161
0.193
0.223
0.252
0.279
0.304
0.326
0.347
0.364
0.146
0.179
0.211
0.242
0.271
0.298
0.322
0.345
0.363
0.130
0.164
0.197
0.230
0.262
0.291
0.317
0.342
0.363
0.111
0.146
0.181
0.216
0.250
0.282
0.312
0.339
0.363
0.090
0.125
0.162
0.199
0.237
0.272
0.305
0.336
0.362
0.065
0.099
0.137
0.178
0.219
0.259
0.296
0.331
0.362
0.034
0.065
0.104
0.150
0.197
0.243
0.286
0.326
0.361
—
—
0.042
0.115
0.179
0.233
0.281
0.323
0.361
The “fair market value” of our Class A Common Stock shall mean the average last reported sale price of our Class A Common Stock for the 10 trading days ending
on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants.
The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or
the redemption date is between two redemption dates in the table, the number of shares of Class A Common Stock to be issued for each Warrant redeemed will be
determined by a straight-line interpolation between the number of shares set forth for the higher and lower fair market values and the earlier and later redemption
dates, as applicable, based on a 365- or 366-day year, as applicable. For example, if the average last reported sale price of our Class A Common Stock for the 10
trading days ending on the third trading date prior to the date on which the notice of redemption is sent to the holders of the warrants is $11 per share, and at such
time there are 57 months until the expiration of the Warrants, we may choose to, pursuant to this redemption feature, redeem the Warrants at a “redemption price”
of 0.277 shares of Class A Common Stock for each whole Warrant. For an example where the exact fair market value and redemption date are not as set forth in the
table above, if the average last reported sale price of our Class A Common Stock for the 10 trading days ending on the third trading date prior to the date on which
the notice of redemption is sent to the holders of the Warrants is $13.50 per share, and at such time there are 38 months until the expiration of the Warrants, we
may choose to, pursuant to this redemption feature, redeem the Warrants at a “redemption price” of 0.298 Class A Common Stock for each whole Warrant. In no
event will the Warrants be exercisable in connection with this redemption feature for more than 0.365 Class A Common Stock per Warrant (subject to adjustment).
Finally, as reflected in the table above, if the Warrants are out of the money and about to expire, they cannot be exercised on a cashless basis in connection with a
redemption by us pursuant to this redemption feature, since they will not be exercisable for any Class A Common Stock.
This redemption feature differs from the typical Warrant redemption features used in other offerings by special purpose acquisition companies, which typically
only provide for a redemption of warrants for cash (other than the private placement warrants) when the trading price for the Class A Common Stock exceeds
$18.00 per share for a specified period of time. This redemption feature is structured to allow for all of the outstanding Warrants (other than the Private Placement
Warrants) be redeemed when the Class A Common Stock are trading at or above $10.00 per share, which may be at a time when the trading price of our Class A
Common Stock is below the exercise price of the Warrants. We have established this redemption feature to provide us with the flexibility to redeem the Warrants
for Class A Common Stock, instead of cash, for “fair value” without the Warrants having to reach the $18.00 per share threshold set forth above under “—
Redemption of Warrants for Cash.” Holders of the Warrants will, in effect, receive a number of shares representing fair value for their Warrants based on the
“redemption price” as determined pursuant to the above table. We have calculated the “redemption prices” as set forth in the table above to reflect a premium in
value as compared to the expected trading price that the Warrants would be expected to trade. This redemption right provides us not only with an additional
mechanism by which to redeem all of the outstanding Warrants, in this case, for Class A Common Stock, and therefore have certainty as to (i) our capital structure
as the Warrants would no longer be outstanding and would have been exercised or redeemed and (ii) to the amount of cash provided by the exercise of the Warrants
and available to us, and also provides a ceiling to the theoretical value of the Warrants as it locks in the “redemption prices” we would pay to Warrant holders if we
chose to redeem warrants in this manner. While we will effectively be required to pay a “premium” to Warrant holders if we choose to exercise this redemption
right, it will allow us to quickly proceed with a redemption of the Warrants for Class A Common Stock if we determine it is in our best interest to do so. As such,
we would redeem the Warrants in this manner when we believe it is in our best interest to update our capital structure to remove the Warrants and pay the premium
to the Warrant holders. In particular, it would allow us to quickly redeem the warrants for Class A Common Stock, without having to negotiate a redemption price
with the Warrant holders, which in some situations, may allow us to more quickly and easily close a business combination. And for this right, we are effectively
agreeing to pay a premium to the Warrant holders. In addition, the Warrant holders will have the ability to exercise the warrants prior to redemption if they should
choose to do so.
As stated above, we can redeem the Warrants when the Class A Common Stock are trading at a price starting at $10.00, which is below the exercise price of
$11.50, because it will provide certainty with respect to our capital structure and cash position while providing Warrant holders with a premium (in the form of
Class A Common Stock). If we choose to redeem the Warrants when the Class A Common Stock are trading at a price below the exercise price of the Warrants,
this could result in the warrant holders receiving fewer Class A Common Stock than
they would have received if they had chosen to wait to exercise their Warrants for Class A Common Stock if and when such Class A Common Stock were trading
at a price higher than the exercise price of $11.50.
No fractional shares of Class A Common Stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a
share, we will round down to the nearest whole number of the number of shares of Class A Common Stock to be issued to the holder.
Redemption Procedures and Cashless Exercise
If we call the Warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise his, her or its Warrant
to do so on a “cashless basis.” In determining whether to require all holders to exercise their Warrants on a “cashless basis,” our management will consider, among
other factors, our cash position, the number of Warrants that are outstanding and the dilutive effect on our shareholders of issuing the maximum number of Class A
Common Stock issuable upon the exercise of our Warrants. If our management takes advantage of this option, all holders of Warrants would pay the exercise price
by surrendering their Warrants for that number of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of Class A
Common Stock underlying the Warrants, multiplied by the excess of the “fair market value” of our Class A Common Stock (defined below) over the exercise
prices of the Warrants by (y) the fair market value. The “fair market value” will mean the average last reported sale price of the Class A Common Stock for the 10
trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants. If our management takes
advantage of this option, the notice of redemption will contain the information necessary to calculate the number of Class A Common Stock to be received upon
exercise of the Warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued
and thereby lessen the dilutive effect of a Warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of
the Warrants . If we call our Warrants for redemption and our management does not take advantage of this option, the holders of the Private Placement Warrants
and their permitted transferees would still be entitled to exercise their Private Placement Warrants for cash or on a cashless basis using the same formula described
above that other Warrant holders would have been required to use had all warrant holders been required to exercise their Warrants on a cashless basis, as described
in more detail below.
A holder of a Warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such Warrant,
to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would
beneficially own in excess of 4.9% or 9.8% (as specified by the holder) of the Class A Common Stock outstanding immediately after giving effect to such exercise.
Anti-dilution Adjustments
If the number of outstanding Class A Common Stock is increased by a share capitalization payable in Class A Common Stock, or by a split-up of common stock or
other similar event, then, on the effective date of such share capitalization, split-up or similar event, the number of Class A Common Stock issuable on exercise of
each Warrant will be increased in proportion to such increase in the outstanding common stock. A rights offering to holders of common stock entitling holders to
purchase Class A Common Stock at a price less than the fair market value will be deemed a share capitalization of a number of Class A Common Stock equal to the
product of (i) the number of Class A Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering
that are convertible into or exercisable for Class A Common Stock) and (ii) the quotient of (x) the price per Class A ordinary share paid in such rights offering and
(y) the fair market value. For these purposes, (i) if the rights offering is for securities convertible into or exercisable for Class A Common Stock, in determining the
price payable for Class A Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable
upon exercise or conversion and (ii) fair market value means the volume weighted average price of Class A Common Stock as reported during the ten (10) trading
day period ending on the trading day prior to the first date on which the Class A Common Stock trade on the applicable exchange or in the applicable market,
regular way, without the right to receive such rights.
In addition, if we, at any time while the Warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the
holders of Class A Common Stock on account of such Class A Common Stock(or other securities into which the warrants are convertible), other than (a) as
described above, or (b) certain ordinary cash dividends up to $0.50 per share per annum, then the warrant exercise price will be decreased, effective immediately
after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each Class A ordinary stock in
respect of such event.
If the number of outstanding Class A Common Stock is decreased by a consolidation, combination, reverse share split or reclassification of Class A Common Stock
or other similar event, then, on the effective date of such consolidation, combination, reverse share split, reclassification or similar event, the number of Class A
Common Stock issuable on exercise of each Warrant will be decreased in proportion to such decrease in outstanding Class A Common Stock.
Whenever the number of Class A Common Stock purchasable upon the exercise of the Warrants is adjusted, as described above, the Warrant exercise price will be
adjusted by multiplying the Warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of Class A
Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment and (y) the denominator of which will be the number of Class
A Common Stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding Class A Common Stock (other than those described above or that solely affects the par value of
such Class A Common Stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which
we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding Class A Common Stock), or in the case of any
sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are
dissolved, the holders of the Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the
Warrants and in lieu of the Class A Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the
kind and amount of Class A Common Stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or
consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Warrants would have received if such holder had exercised their
Warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of Class A Common Stock in such a transaction is
payable in the form of Class A Common Stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-
the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the Warrant properly exercises the
Warrant within thirty days following public disclosure of such transaction, the Warrant exercise price will be reduced as specified in the warrant agreement based
on the Black-Scholes Warrant Value (as defined in the warrant agreement) of the Warrant. The purpose of such exercise price reduction is to provide additional
value to holders of the Warrants when an extraordinary transaction occurs during the exercise period of the Warrants pursuant to which the holders of the Warrants
otherwise do not receive the full potential value of the Warrants.
The Warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The
warrant agreement provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective
provision, but requires the approval by the holders of at least 50% of the then outstanding Public Warrants to make any change that adversely affects the interests of
the registered holders of the Public Warrants and, solely with respect to any amendment to the terms of the Private Placement Warrants or any provision of the
warrant agreement with respect to the Private Placement Warrants, 50% of the then outstanding private placement warrants. You should review a copy of the
warrant agreement, which is filed as an exhibit to the registration statement of which this prospectus forms a part , for a complete description of the terms and
conditions applicable to the Warrants.
The Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form
on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if
applicable), by
certified or official bank check payable to us, for the number of warrants being exercised. The Warrant holders do not have the rights or privileges of holders of
common stock and any voting rights until they exercise their Warrants and receive Class A Common Stock. After the issuance of Class A Common Stock upon
exercise of the Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by shareholders.
No fractional shares will be issued upon exercise of the Warrants. If. upon exercise of the Warrants, a holder would be entitled to receive a fractional interest in a
share, we will, upon exercise, round down to the nearest whole number the number of Class A Common Stock to be issued to the Warrant holder.
Private Placement Warrants
The Private Placement Warrants (including the Class A Common Stock issuable upon exercise of the Private Placement Warrants) are not be redeemable by us so
long as they are held by the Sponsor or its permitted transferees. The Sponsor, or its permitted transferees, has the option to exercise the Private Placement
Warrants on a cashless basis. Except as described below, the Private Placement Warrants have terms and provisions that are identical to those of the Public
Warrants. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be
redeemable by us and exercisable by the holders on the same basis as the Public Warrants.
If holders of the Private Placement Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its Warrants
for that number of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of Class A Common Stock underlying the
warrants, multiplied by the excess of the “fair market value” (as defined below) of our Class A Common Stock over the exercise price of the Warrants by (y) the
fair market value. The “fair market value” will mean the average reported last sale price of the Class A Common Stock for the 10 trading days ending on the third
trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that CCNB1 agreed that these Warrants will be
exercisable on a cashless basis so long as they are held by the Sponsor and permitted transferees is because it was not known at the time of issuance whether the
Sponsor and its permitted transferees would be affiliated with us following a business combination. Given they remain affiliated with us, their ability to sell our
securities in the open market is significantly limited. We have an insider trading policy in place that prohibit insiders from selling our securities except during
specific periods of time. Even during such periods of time when insiders are permitted to sell our securities, an insider cannot trade in our securities if he or she is
in possession of material non-public information. Accordingly, unlike public shareholders who could exercise their Warrants and sell the Class A Common Stock
received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders are significantly restricted from selling such
securities. As a result, CCNB1 believed that allowing the holders to exercise such Warrants on a cashless basis is appropriate.
Dividends
We did not declare any dividend in the past and the Board will consider whether or not to institute a divided policy in the future. The payment of future dividends
on the shares of Class A Common Stock will depend on the financial condition of the Company after the completion of the Business Combination subject to the
discretion of the Board.
Upon completion of the Business Combination, the Company is a holding company with no material assets other than its interest in E2open. We intend to cause
E2open to make distributions to holders of Common Units in amounts sufficient to cover applicable taxes and other obligations under the Tax Receivable
Agreement as well as any cash dividends declared by us.
The Third Amended and Restated Limited Liability Company Agreement provides that pro rata cash distributions be made to holders of Common Units (including
the Company) at certain assumed tax rates, which we refer to as “tax distributions.” See the section entitled “The Business Combination — Related Agreements —
Third Amended and Restated Limited Liability Company Agreement.” The Company anticipates that the distributions it will receive from E2open may, in certain
periods, exceed the Company’s actual tax liabilities and obligations to make payments under the Tax Receivable Agreement. The Board, in its sole discretion, will
make any determination from time to time with respect to the use of any such excess cash so accumulated, which may include, among other uses, to pay
dividends on the Company’s Class A Common Stock. The Company will have no obligation to distribute such cash (or other available cash other than any declared
dividend) to its stockholders. We also expect, if necessary, to undertake ameliorative actions, which may include pro rata or non-pro rata reclassifications,
combinations, subdivisions or adjustments of outstanding Common Units, to maintain one-for-one parity between Common Units held by the Company and shares
of Class A Common Stock of the Company. See the risk factor entitled “Risk Factors — Risks Related to Our Business — The Company is a holding company and
its only material asset after completion of the Business Combination is its interest in E2open, and it is accordingly dependent upon distributions made by its
subsidiaries to pay taxes, make payments under the Tax Receivable Agreement or pay dividends.”
Anti-Takeover Effects of the Certificate of Incorporation, the Bylaws and Provisions of Delaware Law
The certificate of incorporation, the Bylaws and the DGCL contain provisions, which are summarized in the following paragraphs, which are intended to enhance
the likelihood of continuity and stability in the composition of the Board and to discourage certain types of transactions that may involve an actual or threatened
acquisition of the Company. These provisions are intended to avoid costly takeover battles, reduce the Company’s vulnerability to a hostile change of control or
other unsolicited acquisition proposal, and enhance the ability of the Board to maximize stockholder value in connection with any unsolicited offer to acquire the
Company. However, these provisions may have the effect of delaying, deterring or preventing a merger or acquisition of the Company by means of a tender offer, a
proxy contest or other takeover attempt that a stockholder might consider in its best interest, including attempts that might result in a premium over the prevailing
market price for the shares of Class A Common Stock. The certificate of incorporation will provide that any action required or permitted to be taken by the
Company’s stockholders must be effected at a duly called annual or Shareholders Meeting of such stockholders and may not be effected by any consent in writing
by such holders unless such action is recommended or approved by all directors of the Board then in office, except that holders of Class V Common Stock or one or
more series of Preferred Stock, if such series are expressly permitted to do so by the certificate of designation relating to such series, may take any action by written
consent if such action permitted to be taken by such holders and the written consent is signed by the holders of outstanding shares of the relevant class or series
having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting.
Authorized but Unissued Capital Stock
Delaware law does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of NYSE, which would apply if and
so long as the Class A Common Stock remains listed on NYSE, require stockholder approval of certain issuances equal to or exceeding 20% of the then
outstanding voting power or then outstanding number of shares of Class A Common Stock. Additional shares that may be issued in the future may be used for a
variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.
One of the effects of the existence of unissued and unreserved common stock may be to enable the Board to issue shares to persons friendly to current management,
which issuance could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or
otherwise and thereby protect the continuity of management and possibly deprive stockholders of opportunities to sell their shares of Class A Common Stock at
prices higher than prevailing market prices.
Election of Directors and Vacancies
The certificate of incorporation provides that the Board will determine the number of directors who will serve on the board, subject to the rights set forth in the
Investor Rights Agreement. Upon adoption of the certificate of incorporation, the Board will be divided into three classes designated as Class I, Class II and Class
III. Class I directors will initially serve for a term expiring at the first annual meeting of stockholders following the Closing Date. Class II and Class III directors
will initially serve for a term expiring at the second and third annual meeting of stockholders following the Closing Date, respectively. At each succeeding annual
meeting of stockholders, directors will be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting of the
stockholders. There will be no limit on the number of terms a director may serve on the Board.
In addition, the certificate of incorporation provides that any vacancy on the Board, including a vacancy that results from an increase in the number of directors or a
vacancy that results from the removal of a director with cause, may be filled only by a majority of the directors then in office, subject to the provisions of the
Investor Rights Agreement and any rights of the holders of Preferred Stock. For more information on the Investor Rights Agreement, see the section entitled “The
Business Combination — Related Agreements — Investor Rights Agreement.”
Notwithstanding the foregoing provisions of this section, each director will serve until his successor is duly elected and qualified or until his earlier death,
resignation, retirement, disqualification or removal. No decrease in the number of directors constituting the Board will shorten the term of any incumbent director.
Business Combinations
The Company has elected not to be governed by Section 203 of the DGCL. Notwithstanding the foregoing, the certificate of incorporation provides that the
Company will not engage in any “business combinations” (as defined in the certificate of incorporation), at any point in time at which the Company’s Common
Stock is registered under Section 12(b) or 12(g) of the Exchange Act, with any “interested stockholder” (as defined in the certificate of incorporation) for a three-
year period after the time that such person became an interested stockholder unless:
•
•
•
prior to such time, the Board approved either the business combination or the transaction which resulted in the stockholder becoming an interested
stockholder;
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of
the voting stock of the Company outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but
not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are directors and also officers and (ii) employee
stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or
at or subsequent to such time, the business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock of the Company which is not owned by the interested stockholder.
Under the certificate of incorporation, a “business combination” is defined to generally include a merger, asset or stock sale, or other transaction resulting in a
financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to
the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting stock. The certificate of incorporation will expressly
exclude certain of the Company’s stockholders with whom the Company will enter into the Investor Rights Agreement, certain of their respective transferees and
their respective successors and affiliates from the definition of “interested stockholder” irrespective of the percentage ownership of the total voting power
beneficially owned by them. Under certain circumstances, such provisions in the certificate of incorporation make it more difficult for a person who would be an
“interested stockholder” to effect various business combinations with a corporation for a three-year period. Accordingly, such provisions in the certificate of
incorporation could have an anti-takeover effect with respect to certain transactions which the Board does not approve in advance. Such provisions may encourage
companies interested in acquiring the Company to negotiate in advance with the Board because the stockholder approval requirement would be avoided if the
Board approves either the business combination or the transaction that results in the stockholder becoming an interested stockholder. However, such provisions also
could discourage attempts that might result in a premium over the market price for the shares held by stockholders. These provisions also may make it more
difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
Quorum
The Bylaws provide that at any meeting of the Board a majority of the total number of directors then in office constitutes a quorum for all purposes.
No Cumulative Voting
Under Delaware law, the right to vote cumulatively does not exist unless the certificate of incorporation expressly authorizes cumulative voting. The certificate of
incorporation does not authorize cumulative voting.
General Stockholder Meetings
The certificate of incorporation provides that special meetings of stockholders may be called only by or at the direction of the Board, the Chairman of the Board or
the Chief Executive Officer.
Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals
The Bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than
nominations made by or at the direction of the Board or a committee of the Board. For any matter to be “properly brought” before a meeting, a stockholder will
have to comply with advance notice requirements and provide the Company with certain information. Generally, to be timely, a stockholder’s notice must be
received at the Company’s principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the immediately preceding
annual meeting of stockholders (for the purposes of the first annual meeting of the stockholders of the Company following the adoption of the Bylaws, the date of
the preceding annual meeting will be deemed to be February 2 of the preceding calendar year). The Bylaws also specify requirements as to the form and content of
a stockholder’s notice. These provisions will not apply to the Stockholder Parties (as defined in the Bylaws) so long as the Investor Rights Agreement remains in
effect. The Bylaws allow the presiding officer at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect
of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a
potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to influence or obtain control of the
Company.
Supermajority Provisions
The certificate of incorporation and the Bylaws provide that the Board is expressly authorized to make, alter, amend, change, add to, rescind or repeal, in whole or
in part, the Bylaws without a stockholder vote in any matter not inconsistent with the laws of the State of Delaware or the certificate of incorporation. Any
amendment, alteration, rescission or repeal of the Bylaws by the Company’s stockholders requires the affirmative vote of the holders of at least 66-2/3%, in case of
provisions in Article I. Article II and Article IV of the Bylaws, and a majority, in case of any other provisions, in voting power of all the then outstanding shares of
the Company’s stock entitled to vote thereon, voting together as a single class.
The DGCL provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote thereon, voting together as a single class, is required
to amend a corporation’s certificate of incorporation, unless the certificate of incorporation requires a greater percentage. The certificate of incorporation will
provide that Article X therein, including the provisions therein regarding competition and corporate opportunities, may be amended, altered, repealed or rescinded
only by the affirmative vote of the holders of at least 80% in voting power of all the then outstanding shares of the Company’s stock entitled to vote thereon, voting
together as a single class. The certificate of incorporation will provide that Article V, Article VI, Article VII, Article VIII, Article IX, Article XII and Article XIII
therein, including the following provisions therein may be amended, altered, repealed or rescinded only by the affirmative vote of the holders of at least 66-2/3% in
voting power of all the then outstanding shares of the Company’s stock entitled to vote thereon, voting together as a single class:
•
•
•
•
•
the provision requiring a 66-2/3% supermajority vote, in case of provisions in Article I, Article II and Article IV of the Bylaws, and a majority vote, in case
of any other provisions, for stockholders to amend the Bylaws;
the provisions providing for a classified Board (the election and term of directors);
the provisions regarding filling vacancies on the Board and newly created directorships;
the provisions regarding resignation and removal of directors;
the provisions regarding calling special meetings of stockholders;
•
•
•
•
•
the provisions regarding stockholder action by written consent;
the provisions eliminating monetary damages for breaches of fiduciary duty by a director;
the provisions regarding the election not to be governed by Section 203 of the DGCL;
the provisions regarding the selection of forum (see “— Exclusive Forum”); and
the amendment provision requiring that the above provisions be amended only with an 66-2/3% supermajority vote.
These provisions may have the effect of deterring hostile takeovers or delaying or preventing changes in control of the Company or its management, such as a
merger, reorganization or tender offer. These provisions are intended to enhance the likelihood of continued stability in the composition of the Board and its
policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of the Company. These provisions are designed to
reduce the Company’s vulnerability to an unsolicited acquisition proposal. The provisions are also intended to discourage certain tactics that may be used in proxy
fights. However, such provisions could have the effect of discouraging others from making tender offers for the Company’s shares and, as a consequence, may
inhibit fluctuations in the market price of the Company’s shares that could result from actual or rumored takeover attempts. Such provisions may also have the
effect of preventing changes in management.
Exclusive Forum
The certificate of incorporation provides that, unless the Company consents in writing to the selection of an alternative forum, (i) any derivative action or
proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other
employee, agent or stockholder of the Company to the Company or the Company’s stockholders, or any claim for aiding and abetting such alleged breach, (iii) any
action asserting a claim against the Company or any current or former director, officer, other employee, agent or stockholder of the Company (a) arising pursuant to
any provision of the DGCL, the certificate of incorporation (as it may be amended or restated) or the Bylaws or (b) as to which the DGCL confers jurisdiction on
the Delaware Court of Chancery or (iv) any action asserting a claim against the Company or any current or former director, officer, other employee, agent or
stockholder of the Company governed by the internal affairs doctrine of the law of the State of Delaware shall, as to any action in the foregoing clauses (i) through
(iv), to the fullest extent permitted by law. be solely and exclusively brought in the Delaware Court of Chancery; provided, however, that the foregoing shall not
apply to any claim (a) as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Delaware
Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such
determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or (c) arising under federal
securities laws, including the Securities Act of 1933, as amended, as to which the federal district courts of the United States of America shall, to the fullest extent
permitted by law, be the sole and exclusive forum. Notwithstanding the foregoing, the provisions of Article XII of the certificate of incorporation will not apply to
suits brought to enforce any liability or duty created by the Exchange Act, or any other claim for which the federal district courts of the United States of America
shall be the sole and exclusive forum. While Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to
enforce any duty or liability created by the Securities Act or the rules and regulations thereunder, Section 27 of the Exchange Act creates exclusive federal
jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Any person or entity
purchasing or otherwise acquiring any interest in any shares of the Company’s capital stock shall be deemed to have notice of and to have consented to the forum
provisions in the certificate of incorporation. If any action the subject matter of which is within the scope of the forum provisions is filed in a court other than a
court located within the State of Delaware (a “foreign action”) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the
personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the
forum provisions (an “enforcement action”); and (y) having service of process made upon such stockholder in any such enforcement action by service upon such
stockholder’s counsel in the foreign action as agent for such stockholder. This choice-of-forum provision may limit a stockholder’s ability to bring a claim in a
judicial forum that it finds favorable for disputes with the Company or its directors, officers, stockholders, agents or other employees, which may discourage such
lawsuits. We note that there
is uncertainty as to whether a court would enforce this provision, and the enforceability of similar choice of forum provisions in other companies’ charter
documents has been challenged in legal proceedings. Further, investors cannot waive compliance with the federal securities laws and the rules and regulations
thereunder. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find this provision of the
certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, the Company may incur
additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect the Company’s business, financial
condition and results of operations and result in a diversion of the time and resources of the Company’s management and board of directors.
Conflicts of Interest
Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its
officers, directors or stockholders. The certificate of incorporation, to the maximum extent permitted from time to time by Delaware law, renounces any interest or
expectancy that the Company has in, or right to be offered an opportunity to participate in, specified business opportunities that are from time to time presented to
the Company’s officers, directors or stockholders or their respective affiliates, other than those officers, directors, stockholders or affiliates who are employees of
the Company or its subsidiaries. The certificate of incorporation provides that, to the fullest extent permitted by law, none of the non-employee directors or his or
her affiliates will have any duty to refrain from (i) engaging in a corporate opportunity in the same or similar lines of business in which the Company or its
affiliates now engage or propose to engage or (ii) otherwise competing with the Company or its affiliates. In addition, to the fullest extent permitted by law, in the
event that any non-employee director or any of his or her affiliates acquires knowledge of a potential transaction or other business opportunity which may be a
corporate opportunity for itself or himself or herself or its or his or her affiliates or for the Company or its affiliates, such person will have no duty to communicate
or offer such transaction or business opportunity to the Company or any of its affiliates and they may take any such opportunity for themselves or offer it to another
person or entity. The certificate of incorporation does not renounce the Company’s interest in any business opportunity that is expressly offered to, or acquired or
developed by a non-employee director solely in his or her capacity as a director or officer of the Company. To the fullest extent permitted by law, a corporate
opportunity shall not be deemed to be a potential corporate opportunity for the Company if it is a business opportunity that (i) the Company is neither financially or
legally able, nor contractually permitted to undertake, (ii) from its nature, is not in the line of the Company’s business or is of no practical advantage to the
Company, (iii) is one in which the Company has no interest or reasonable expectancy, or (iv) is one presented to any account for the benefit of a member of the
Board or such member’s affiliate over which such member of the Board has no direct or indirect influence or control, including, but not limited to, a blind trust.
Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches
of directors’ fiduciary duties, subject to certain exceptions. The certificate of incorporation includes a provision that eliminates, to the fullest extent permitted by
law, the personal liability of directors for monetary damages for any breach of fiduciary duty as a director. The effect of these provisions is to eliminate the rights
of the Company and its stockholders, through stockholders’ derivative suits on the Company’s behalf, to recover monetary damages from a director for breach of
fiduciary duty as a director, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has
acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her actions as
a director.
The Bylaws provide that the Company must indemnify and advance expenses to directors and officers to the fullest extent permitted by Delaware law. The
Company is also expressly authorized to carry directors’ and officers’ liability insurance providing indemnification for directors, officers and certain employees for
some liabilities. The Company believes that these indemnification and advancement provisions and insurance are useful to attract and retain qualified directors and
executive officers.
The limitation of liability, indemnification and advancement provisions in the certificate of incorporation and the Bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if successful, might otherwise benefit the Company and its stockholders. In addition, your investment
may be adversely affected to the extent the Company pays the costs of settlement and damage awards against directors and officers pursuant to these
indemnification provisions. The Company believes that these provisions, liability insurance and the indemnity agreements are necessary to attract and retain
talented and experienced directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the Company’s directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Stockholder Registration Rights
At the Closing, the Company entered into the Investor Rights Agreement, pursuant to which, among other things, the Sponsor, the Blocker Sellers, the Insight
Member and the independent directors of CCNB1 have specified rights to require the Company to register all or a portion of their shares under the Securities Act.
The defined term Registrable Securities therein includes the shares of Class A Common Stock and warrants to purchase Class A Common Stock issued pursuant to
the Domestication. See the section entitled “The Business Combination — Related Agreements — Investor Rights Agreement.”
Listing
The Company has applied to list the Class A Common Stock and the Public Warrants on NYSE under the symbol “ETWO” and “ETWO WT,” respectively.
Exhibit 10.15
E2OPEN PARENT HOLDINGS, INC.
EXECUTIVE
SEVERANCE PLAN
Effective February 4, 2021
E2OPEN PARENT HOLDINGS, INC.
EXECUTIVE SEVERANCE PLAN
ARTICLE I
DEFINITIONS
1.1
“Affiliate” means a parent or subsidiary corporation of the Company, as defined in Section 424 of the Code
(substituting “Company” for “employer corporation”), any other entity that is a parent or subsidiary of the Company, including a
parent or subsidiary which becomes such after the Effective Date of the Plan.
1.2
“Annual Compensation Amount” means the sum of an Eligible Employee’s Base Salary and Bonus Amount,
in each case, as in effect immediately prior to the Termination Date and determined without giving effect to any reduction which is
alleged to constitute Good Reason.
1.3
“Annual Target Compensation” means the sum of an Eligible Employee’s (a) Base Salary, (b) Bonus
Amount and (c) LTI Amount.
1.4
“Base Salary” means an Employee’s annual base salary and does not include any other compensation
including but not limited to incentive bonuses, car allowances or any other type of perquisites or benefits.
1.5
1.6
“Board” means the Board of Directors of the Company.
“Bonus Amount” means an Eligible Employee’s target annual cash bonus.
1.7
“Cause” means (a) the Employee’s plea of nolo contendere to, conviction of or indictment for, any crime
(whether or not involving any member of the Company Group) (i) constituting a felony or (ii) that has, or could reasonably be
expected to result in, an adverse impact on the performance of the Employee’s duties to any member of the Company Group, or
otherwise has, or could reasonably be expected to result in, an adverse impact on the business or reputation of any member of the
Company Group, (b) conduct of the Employee, in connection with his or her employment or service, that has resulted, or could
reasonably be expected to result, in injury to the business or reputation of any member of the Company Group, (c) any material
violation of the policies of any member of the Company Group, including, but not limited to, those relating to sexual harassment,
ethics, discrimination, or the disclosure or misuse of confidential information, or those set forth in the manuals or statements of
policy of any member of the Company Group; (d) the Employee’s act(s) of negligence or willful misconduct in the course of his or
her employment or service with any member of the Company Group; (e) misappropriation by the Employee of any assets or business
opportunities of any member of the Company Group; (f) embezzlement or fraud committed by the Employee, at the Employee’s
direction, or with the Employee’s prior actual knowledge; or (g) willful neglect in the performance of the Employee’s duties for any
member of the Company Group or willful or repeated failure or refusal to perform such duties, in each case, except where the
Employee has a good faith basis to refuse to perform a directive of the Board where such action would be illegal or in violation of
Company policy. If, subsequent to the Termination of an Employee for any reason other than by a member of the Company Group
for Cause, it is discovered that the Employee’s employment or service could have
1
been terminated for Cause, such Employee’s employment or service shall, at the discretion of the Compensation Committee, be
deemed to have been terminated by the Company Group for Cause for all purposes under the Plan, and the Employee shall be
required to repay or return to the Company all severance benefits received by him or her as set forth in Article III.
1.8
“Change in Control” means any of the following:
(1)
a change in ownership or control of the Company effected
through a transaction or series of transactions (other than an offering of Stock to the general public through a registration
statement filed with the U.S. Securities and Exchange Commission or similar non-U.S. regulatory agency or pursuant to a
Non-Control Transaction) whereby any “person” (as defined in Section 3(a)(9) of the Exchange Act) or any two or more
persons deemed to be one “person” (as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than a member
of the Company Group, an employee benefit plan sponsored or maintained by a member of the Company Group (or its
related trust), or any underwriter temporarily holding securities pursuant to an offering of such securities, directly or
indirectly acquire “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities
eligible to vote in the election of the Board (the “Company Voting Securities”);
(2)
the date, within any consecutive twenty-four (24)-month period
commencing on or after the Effective Date, upon which individuals who constitute the Board as of the Effective Date (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any
individual who becomes a director subsequent to the Effective Date whose nomination for election by the Company’s
stockholders or appointment was approved by a vote of at least a majority of the directors then constituting the Incumbent
Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual is named
as a nominee for director, without objection to such nomination) shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest (including, but not limited to, a consent solicitation) with
respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on
behalf of a person other than the Board; or
(3)
the consummation of a merger, consolidation, share exchange, or
similar form of corporate transaction involving the Company or any of its Affiliates that requires the approval of the
Company’s stockholders (whether for such transaction, the issuance of securities in the transaction or otherwise) (a
“Reorganization”), unless immediately following such Reorganization (i) more than fifty percent (50%) of the total voting
power of (A) the company or the companies resulting from such Reorganization (the “Surviving Company”) or (B) if
applicable, the ultimate parent corporation that has, directly or indirectly, beneficial ownership of one hundred percent
(100%) of the voting securities of the Surviving Company (the “Parent Company”), is represented by Company Voting
Securities that were outstanding immediately prior to such Reorganization (or, if applicable, is represented by shares into
which such Company Voting Securities were
2
converted pursuant to such Reorganization), and such voting power among the holders thereof is in substantially the same
proportion as the voting power of such Company Voting Securities among holders thereof immediately prior to such
Reorganization, (ii) no person, other than an employee benefit plan sponsored or maintained by the Surviving Company or
the Parent Company (or its related trust), is or becomes the beneficial owner, directly or indirectly, of fifty percent (50%)
or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Company, or
if there is no Parent Company, the Surviving Company , and (iii) at least a majority of the members of the board of
directors of the Parent Company, or if there is no Parent Company, the Surviving Company, following the consummation
of such Reorganization are members of the Incumbent Board at the time of the Board’s approval of the execution of the
initial agreement providing for such Reorganization (any Reorganization which satisfies all of the criteria specified in
clauses (i), (ii) and (iii) above shall be a “Non-Control Transaction”); or
(4)
the sale or disposition, in one or a series of related transactions, of
all or substantially all of the assets of the Company to any “person” (as defined in Section 3(a)(9) of the Exchange Act) or
to any two or more persons deemed to be one “person” (as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
other than the Company’s Affiliates.
Notwithstanding the foregoing, (x) a Change in Control shall not be deemed to occur solely because any person acquires beneficial
ownership of fifty percent (50%) or more of the Company Voting Securities as a result of an acquisition of Company Voting
Securities by the Company that reduces the number of Company Voting Securities outstanding; provided that if after such
acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the
percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control shall then be deemed
to occur, and (y) with respect to the payment of any amount that constitutes a deferral of compensation subject to Section 409A of
the Code payable upon a Change in Control, a Change in Control shall not be deemed to have occurred, unless the Change in Control
constitutes a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of
the Company under Section 409A(a)(2)(A)(v) of the Code.
1.9
“Change in Control Period” means the period commencing on the effective date of a Change in Control and
ending two (2) years after the effective date of a Change in Control.
1.10
“Change in Control Termination” means any termination of employment of an Eligible Employee (a) either
(i) by a member of the Company Group (other than for Cause and other than due to such Eligible Employee’s death or Disability), or
(ii) by an Eligible Employee for Good Reason or (b) at the request of an acquirer or potential acquirer in connection with, or prior to,
a Change in Control, provided, that, any termination of the employment of an Eligible Employee will not be considered a Change in
Control Termination if the Eligible Employee is offered Comparable Employment by any member of the Company Group, or any of
their respective successors, regardless of whether the Eligible Employee accepts such offer of employment.
3
1.11
1.12
1.13
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” means E2open Parent Holdings Inc.
“Company Group” means the Company and its Affiliates.
1.14 “Comparable Employment” means employment on terms which provide (a) the same or greater rate of Annual
Target Compensation as in effect immediately prior to such offer, (b) substantially the same, equivalent or higher job title and level
of responsibility as the Eligible Employee had prior to the offer, disregarding any adjustment to the Eligible Employee’s job title or
level of responsibility to reflect the Eligible Employee’s placement within the overall organizational hierarchy due to the Company
becoming a business unit of the Company’s successor or an acquirer in a Change in Control, and (c) a principal work location that is
both (i) no more than fifty (50) miles from the Eligible Employee’s then-current office location and (ii) does not materially increase
such Eligible Employee’s travel time from his or her then-current residence (other than in connection with any teleworking or other
arrangement related to a public health or safety emergency).
1.15
“Disability” means that the Eligible Employee is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months. The determination of whether an individual has a
Disability shall be determined under procedures established by the Plan Administrator. The Plan Administrator may rely on any
determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company
Group in which the Employee participates.
1.16
“Effective Date” means February 4, 2021.
1.17
“Eligible Employee” means the Chief Executive Officer and each of his or her direct reports. In addition, the
Plan Administrator, in its sole discretion, may select additional Employees of the Company to participate in the Plan via written
agreement. Any determination of whether an individual is an Eligible Employee shall be made by the Plan Administrator, in its sole
discretion.
1.18
“Employee” means any individual who is employed full-time by the Company and who is regularly scheduled
to work at least 37-1/2 hours per week for the Company.
1.19
1.20
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
1.21
“Good Reason” means the occurrence of any one or more of the following without the Eligible Employee’s
written consent: (a) a ten-percent (10%) or greater reduction in the Eligible Employee’s then-current Annual Compensation Amount
or a fifteen-percent (15%) or greater reduction in the Eligible Employee’s then-current Annual Target Compensation (other than (i) a
reduction in the Eligible Employee’s then-current Annual Compensation Amount or Annual
4
Target Compensation in connection with an across-the-board reduction for all Eligible Employees, (ii) a temporary reduction in the
Eligible Employee’s then-current Annual Target Compensation due to reasonably unforeseeable circumstances that materially impact
the Company’s business or operations or (iii) a reduction in the Eligible Employee’s Annual Target Compensation in a particular
fiscal year due to the expiration of a special, one-time increase in the Eligible Employee’s Annual Target Compensation applicable to
the immediately prior fiscal year); (b) a material diminution in the Eligible Employee’s authorities, duties, or responsibilities (other
than as a result of the Company ceasing to be a publicly traded company), or the assignment to the Eligible Employee of duties
inconsistent with the Eligible Employee’s then-current authorities, duties or responsibilities; (c) the Company’s requiring the Eligible
Employee to be based at an office location that is at least fifty (50) miles from his or her then-current office location and that
materially increases such Eligible Employee’s travel time from his or her then-current residence (other than in connection with any
teleworking or other arrangement related to a public health or safety emergency); or (d) failure of any successor of the Company to
assume the Plan; provided, that the Eligible Employee may not rely on any particular action or event as a basis for terminating his or
her employment due to Good Reason unless he or she delivers a notice based on that action or event within thirty (30) days after its
occurrence and the Company has failed to correct the circumstances cited by the Eligible Employee as constituting Good Reason
within thirty (30) days of receiving such notice, and the Eligible Employee terminates employment within ten (10) days following
the Company’s failure to correct. However, no event shall be considered to constitute Good Reason if the Eligible Employee is
offered Comparable Employment with respect to his or her position, determined without giving effect to the events allegedly
constituting Good Reason, by the Company Group, regardless of whether the Eligible Employee accepts such offer of employment.
1.22
“LTI Amount” means an Eligible Employee’s target annual long-term equity incentive compensation
opportunity as established by the Compensation Committee and, as applicable, reported in the Compensation Discussion & Analysis
(CD&A) section of the Company’s annual proxy statement.
1.23
“Non-Change in Control Termination” means any termination of employment of an Eligible Employee (a)
either (i) by a member of the Company (other than for Cause and other than due to such Eligible Employee’s death), (ii) by an
Eligible Employee for Good Reason, in each case outside of the Change in Control Period, or (iii) due to the Eligible Employee’s
Disability, provided, that, any termination of the employment of an Eligible Employee will not be considered a Non-Change in
Control Termination if the Eligible Employee is offered Comparable Employment by any member of the Company Group, or any of
their respective successors, regardless of whether the Eligible Employee accepts such offer of employment.
1.24
1.25
1.26
“Person” means an individual, entity or group (within the meaning of Section 13(d)(3) of the Exchange Act).
“Plan” means this E2open Parent Holdings, Inc. Executive Severance Plan, as amended from time to time.
“Plan Administrator” means the Compensation Committee of the Board (the “Compensation Committee”),
unless and until the Board designates another committee of the
5
Board to serve in such capacity. The Compensation Committee may delegate any or all of its powers and responsibilities as Plan
Administrator to an individual, a committee, or both.
1.27
“Section 409A” refers to Section 409A of the Code.
1.28
“Termination Date” means the date on which a Change in Control Termination or Non-Change in Control
Termination occurs. For the avoidance of doubt, the determination of the Termination Date shall be made consistent with the
definition of “separation from service” under Section 409A.
ARTICLE II
GENERAL SEVERANCE BENEFIT
2.1
Severance Benefit. The Company shall provide the severance benefits as set forth in Article III (the
“Severance Benefits”) to Eligible Employees, pursuant to the terms, conditions and limitations set forth in the Plan and subject to the
execution and non-revocation of a Release and Non-Competition Agreement by the Eligible Employee in accordance with Section
3.5. After the Effective Date of the Plan, the Plan supersedes all prior practices, policies, procedures, plans or agreements relating to
severance benefits from the Company Group or any member or predecessor entities thereof that would result in any duplication of
benefits.
ARTICLE III SEVERANCE BENEFITS
3.1
Severance Benefits. Except as otherwise provided herein, an Eligible Employee shall be entitled to the
following Severance Benefits under the Plan if such Eligible Employee experiences a Change in Control Termination or Non-
Change in Control Termination (each, a “Qualifying Termination”), in each case, payable in cash in a single lump sum in accordance
with Section 3.7 of the Plan, subject to any applicable withholding taxes (as applicable, the “Cash Severance Amount”).
Qualifying Termination
Cash Severance Amount
Non-Change in Control Termination
1.0x Annual Compensation Amount
Change in Control Termination
2.0x Annual Compensation Amount
The Plan Administrator, in its sole discretion, shall determine the amount of Severance Benefits, if any, for an Eligible Employee
who is selected to participate in the Plan after the Effective Date.
3.2
Annual Bonus. If an Eligible Employee experiences a Non-Change in Control Termination or Change in
Control Termination and on the Termination Date was a participant in a performance based annual cash bonus plan or other similar
agreement or arrangement with the Company in respect of the fiscal year in which the Termination Date occurs, the Eligible
Employee
6
shall receive a payment equal to the annual target bonus, calculated based on actual performance during the applicable performance
period as though such Eligible Employee continued in the employment of the Company. Such payment shall be prorated based on
the number of days during the applicable performance period that the Eligible Employee was employed by the Company, and paid at
such time that annual bonuses are paid to active employees of the Company.
3.3
Welfare Benefits. After the Termination Date, subject to the Eligible Employee’s timely election of
continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), coverage
under the Company medical, vision, dental and prescription benefits will continue to be available to the Eligible Employee and
his/her covered dependents by the Company for a period until the earlier of (i) eighteen (18) months following the Termination Date
and (ii) the first day the Eligible Employee becomes eligible for comparable benefits under the welfare benefit plans of a subsequent
employer (such date, the “COBRA Subsidy Cessation Date”), during which period the Eligible Employee will be responsible for the
payment of the same amount of premiums for such coverage as would be paid by a similarly situated full-time employee of the
Company, and the Company will pay all additional premium amounts; provided, that, the Eligible Employee is eligible and remains
eligible for COBRA coverage; provided, further, that the Company may modify the continuation coverage contemplated by this
Section 3.3 of the Plan to the extent reasonably necessary to avoid the imposition of any excise taxes on the Company for failure to
comply with the nondiscrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and/or the
Health Care and Education Reconciliation Act of 2010, as amended (to the extent applicable). Following the COBRA Subsidy
Cessation Date and for the remainder of the eighteen (18) month period described above, if any, the Eligible Employee will be
responsible for the full cost of any premiums associated with such coverage, in such amount as determined by the Plan
Administrator. The Plan Administrator has the right to modify or terminate such benefits or to increase the associated costs of such
benefits if such benefits are modified or terminated or the costs are increased with respect to similarly situated employees employed
by the Company. Nothing in the Plan shall be construed to limit the right of any Eligible Employee to any benefits under COBRA.
Except as set forth above, after the Termination Date, the Eligible Employee will not be entitled to participate in any other health or
welfare benefits, or insurance plans, maintained by the Company.
3.4
Release and Other Agreements. Notwithstanding any other provision in the Plan to the contrary, as
consideration for receiving any Severance Benefits under the Plan, an Eligible Employee who is otherwise entitled to receive benefits
under the Plan must (a) execute and not revoke a release of claims attached hereto as Annex A (the “Release and Non-Competition
Agreement”), including any restrictive covenants contained therein, and such other documents and agreements as reasonably
required by the Plan Administrator, in the form and pursuant to the procedures reasonably established by the Plan Administrator, and
(b) return to the Company all confidential information of the Company, Company property, Company assets, written, recorded or
computer-readable information or materials (including copies thereof) regarding the Company, Company equipment (including
computer hardware or software and/or any memory storage devices), keys, credit cards and identification. If an Eligible Employee
fails to properly execute such Release and Non-Competition Agreement and other documents or agreements within 45 days
following receipt thereof, the Eligible Employee shall not be entitled to any payments or benefits under the Plan.
7
3.5
Voluntary Termination/Employee’s Death or Disability. An Eligible Employee who voluntarily terminates
employment with the Company shall receive no payments or benefits under the Plan except as otherwise specifically provided in this
Plan or by the Plan Administrator. An Employee will not be considered to have voluntarily terminated employment if such employee
terminates employment due to Good Reason whether during or outside a Change in Control Period. Further, no benefits will be paid
under this Plan if the Eligible Employee’s termination of employment occurs following such Eligible Employee’s death or during
such Eligible Employee’s Disability.
3.6
Termination for Cause. The Plan Administrator shall have absolute discretion to determine whether an
Eligible Employee has been terminated for Cause. If the Plan Administrator determines that an otherwise Eligible Employee has
been terminated for Cause, such Eligible Employee shall receive no payments or benefits under the Plan. If after termination it is
determined that an Employee that is receiving severance benefits under this Plan could have been terminated for Cause, the Plan
Administrator shall have absolute discretion and right to terminate the Release and Non-Competition Agreement with that Employee,
cease making any remaining severance payments due under the Plan and/or recover from such Employee any previously made
severance payments made under the Plan.
3.7
Form of Benefit. Provided a Release and Non-Competition Agreement has been delivered by the Eligible
Employee and not revoked in accordance with the terms of such Release and Non-Competition Agreement, and subject to Section
5.13 of the Plan and continued compliance with the restrictive covenants set forth in the Release and Non-Competition Agreement,
the Severance Benefits hereunder shall commence, and the applicable Cash Severance Amount under Section 3.1 of the Plan shall be
paid, on the first day of the payroll period immediately following both (a) the Termination Date and (b) the date on which the
Release and Non-Competition Agreement becomes effective and non-revocable (the “Payment
Commencement Date”), provided, that if the consideration and revocation periods set forth in the Release and Non-Competition
Agreement begin in one calendar year and end in a second calendar year, then such Payment Commencement Date shall not occur
before the first day in the second of such two calendar years.
3.8
No Other Benefits. An Employee who receives Severance Benefits will not be eligible to continue
participation as an active employee in the qualified retirement plans maintained by the Company and no service will be counted with
respect to vesting under any other Company plan including without limitation any bonus and/or equity incentive plans. However, all
amounts previously deferred or accrued to the benefit of the Eligible Employee under any nonqualified deferred compensation plan
sponsored by the Company (including, without limitation, any vested amounts deferred under incentive plans) together with any
accrued earnings thereon, shall be paid in accordance with the terms of such plan.
ARTICLE IV
LIMITATION ON PAYMENTS
4.1
Excess Parachute Payments. Notwithstanding any other provision of the Plan, in the event that an Eligible
Employee becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the
monetary value of any non-cash benefits and
8
the accelerated vesting of stock awards) under the Plan or under any other plan, agreement or arrangement with any member of the
Company Group, or with any person whose actions result in a Change in Control or an affiliate of such person whose actions result
in a Change in Control (collectively, the “Payments”) that may separately or in the aggregate constitute “parachute payments” within
the meaning of Section 280G of the Code and it is determined that, but for this Section 4.1, any of the Payments will be subject to
any excise tax pursuant to Section 4999 of the Code or any similar or successor provision or any comparable state or local law
provision (the “Excise Tax”), the Company shall pay to the Eligible Employee either (i) the full amount of the Payments or (ii) an
amount equal to the Payments reduced by the minimum amount necessary to prevent any portion of the Payments from being an
“excess parachute payment” (within the meaning of Section 280G of the Code) (the “Capped Payments”), whichever of the
foregoing amounts results in the receipt by the Eligible Employee, on an after-tax basis (with consideration of all taxes incurred in
connection with the Payments, including the Excise Tax), of the greatest amount of Payments, notwithstanding that all or some
portion of the Payments may be subject to the Excise Tax. For purposes of determining whether the Eligible Employee would
receive a greater after-tax benefit from receipt of the Capped Payments than from receipt of the full amount of the Payments and for
purposes of Section 4.3 (if applicable), the Eligible Employee shall be deemed to pay federal, state and local taxes at the highest
marginal rate of taxation for the applicable calendar year.
4.2
Calculation of Payments. All computations and determinations called for by Section 4.1 shall be made and
reported in writing to the Company and the Eligible Employee by a third-party service provider selected by the Plan Administrator
(the “Tax Advisor”), and all such computations and determinations shall be conclusive and binding on the Company and the Eligible
Employee. For purposes of such calculations and determinations, the Tax Advisor may rely on reasonable, good faith interpretations
concerning the application of Section 280G and Section 4999 of the Code. The Plan Administrator and the Eligible Employee shall
furnish to the Tax Advisor such information and documents as the Tax Advisor may reasonably request in order to make their
required calculations and determinations. The Company shall bear all fees and expenses charged by the Tax Advisor in connection
with its services.
4.3
Order of Reduction of Payments. In the event that Section 4.1 applies and a reduction is required to be
applied to the Payments thereunder, the Payments shall be reduced by the Company in the following order: (a) payments and benefits
due under Article III (if necessary, to zero) in such order with amounts that are payable last reduced first; provided, however, that, in
all events such payments which are not subject to Section 409A shall be reduced first; (b) payments and benefits due in respect of
any options to purchase shares of common stock of the Company shall be reduced second; (c) payments and benefits due in respect
of any fully valued equity (i.e., restricted shares of common stock, performance share units, or restricted stock units of the Company)
for which an election under Section 83(b) of the Code has not been made shall be reduced third, and (d) payments and benefits due in
respect of any fully valued equity (i.e., restricted shares of common stock or restricted stock units of the Company) for which an
election under Section 83(b) of the Code has been made shall be reduced fourth. Notwithstanding anything to the contrary herein,
any such reduction shall be structured in a manner intended to comply with Section 409A.
9
ARTICLE V
GENERAL PROVISIONS
5.1
Funding and Cost of Plan. The benefits provided herein shall be unfunded and shall be provided from the
Company’s general assets.
5.2
Named Fiduciary. The Plan Administrator shall be the named fiduciary for purposes of ERISA.
5.3
Administration. The Plan Administrator shall be responsible for the management and control of the operation
and the administration of the Plan, including without limitation, interpretation of the Plan, decisions pertaining to eligibility to
participate in the Plan, computation of Plan benefits, granting or denial of benefit claims, and review of claims denials. The Plan
Administrator has absolute discretion in the exercise of its powers and responsibilities; provided, however, that following a Change
in Control, the Plan Administrator shall be required to exercise its powers and responsibilities in good faith and in a reasonable
manner, and shall be subject to a de novo standard of review in any litigation proceeding with respect to the exercise of its powers or
in the execution of its duties and responsibilities. The Plan Administrator may delegate any or all of its powers and responsibilities as
Plan Administrator to an individual, a committee, or both. To the extent the Compensation Committee delegates its responsibilities
and powers as Plan Administrator, the Company shall, without limiting any rights that the delegate may have under the Company’s
charter or bylaws, applicable law or otherwise, indemnify and hold harmless each such delegate (and any other individual acting on
such delegate’s behalf) against any and all expenses and liabilities arising out of such Person’s administrative functions or fiduciary
responsibilities, excepting only expenses and liabilities arising out of the Person’s own gross negligence or willful misconduct;
expenses against which such Person shall be indemnified hereunder include without limitation the amounts of any settlement,
judgment, attorneys’ fees, costs of court, and any other related charges reasonably incurred in connection with a claim, proceeding,
settlement, or other action under the Plan.
5.4
Plan Year. The plan shall be administered on a fiscal year basis. Accordingly, the plan year shall be the
twelve-consecutive-month period commencing March 1 of each year.
5.5
Amendment and Termination; Successors.
(a)
Amendment; Termination. The Plan may be amended, terminated or
discontinued in whole or in part, at any time and from time to time at the discretion of the Company; provided, however, that for a
period of two (2) years following a Change in Control (the “Change in Control Amendment Protection Period”), the Plan may not be
amended, terminated or discontinued in a manner adverse to any Eligible Employee who is receiving Severance Benefits on the date
of such amendment, termination or discontinuation (any such amendment, termination or discontinuation, an “Adverse Plan
Change”), except with the written consent of such Eligible Employee. Notwithstanding the foregoing, the Plan (i) may be amended
with respect to its administrative provisions if such amendment is considered by counsel to be required pursuant to applicable law
and (ii) shall expire and terminate on the second (2nd) anniversary of a Change in Control.
10
(b)
Successors. The Plan shall inure to the benefit of and be binding upon the Company and its
successors. The Company shall require any corporation, entity, individual or other Person who is the successor (whether direct or
indirect by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all the business and/or assets of the
Company to expressly assume and agree to perform, by a written agreement in form and in substance satisfactory to the Company,
all of the obligations of the Company under the Plan. As used in the Plan, the term “Company” shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform the Plan by
operation of law, written agreement or otherwise. It is a condition of the Plan, and all rights of each Person eligible to receive
benefits under the Plan shall be subject hereto, that no right or interest of any such Person in the Plan shall be assignable or
transferable in whole or in part, except by operation of law, including, but not by way of limitation, lawful execution, levy,
garnishment, attachment, pledge, bankruptcy, alimony, child support or qualified domestic relations order.
5.6
Claims Procedure and Review. In the event that any Eligible Employee or other individual believes he or she
is entitled to a benefit under the Plan which has not been paid, the Eligible Employee or other individual must bring a claim for
benefits under this Section 5.6. Claims for benefits under the Plan shall be made in writing to the Plan Administrator. If a claim for
benefits is wholly or partially denied, the Plan Administrator shall, within a reasonable period of time but no later than ninety days
after receipt of the claim (or 180 days after receipt of the claim if special circumstances require an extension of time for processing
the claim), notify the claimant of the denial. Such notice shall (i) be in writing, (ii) be written in a manner calculated to be understood
by the claimant, (iii) contain the specific reason or reasons for denial of the claim, (iv) refer specifically to the pertinent Plan
provisions upon which the denial is based, (v) describe any additional material or information necessary for the claimant to perfect
the claim (and explain why such material or information is necessary), (vi) explain the Plan’s claim review procedure including steps
to be taken if the claimant wishes to appeal the denial of the claim, and (vii) include a statement of the claimant’s right to bring a
civil action under ERISA upon completion of the Plan’s claim review procedure. Within sixty (60) days of the receipt by the
claimant of this notice, the claimant may file a written appeal with the Plan Administrator. In connection with the appeal, the
claimant may review plan documents and may submit written issues and comments. The Plan Administrator shall deliver to the
claimant a written decision on the appeal promptly, but not later than sixty days after the receipt of the claimant’s appeal (or one
hundred twenty (120) days after receipt of the claimant’s appeal if there are special circumstances which require an extension of time
for processing). Such decision shall (i) be written in a manner calculated to be understood by the claimant, (ii) include specific
reasons for the decision, (iii) refer specifically to the Plan provisions upon which the decision is based, (iv) include a statement of the
claimant’s right to bring a civil action under ERISA upon completion of the Plan’s claim review procedure, and (v) include a
statement of the claimant’s right to access and receive copies, upon request and free of charge, of all documents and other
information relevant to such claim for benefits. If a claimants claim is denied, in whole or in part, the claimant (or any individual
authorized by such claimant) will be provided, upon request and free of charge, reasonable access to, and copies of, all documents,
records and other information relevant (within the meaning of 29 C.F.R. § 2560.503l(m)(8)) to his or her claim. Likewise, a claimant
(or any individual authorized by such claimant) who submits a written request to appeal a denied claim shall have the right to submit
any comments, documents, records or other information relating to the claim that he or she wished to provide. If special
circumstances require an extension for the Plan Administrator to reach a
11
decision, up to one hundred eighty (180) or one hundred twenty (120) days, whichever applies, the Plan Administrator shall send
written notice of the extension. This notice shall indicate the special circumstances requiring the extension and state when the Plan
Administrator expects to render the decision.
5.7
Notice. For the purpose of the Plan, notices and all other communications provided for in the Plan shall be in
writing and shall be deemed to have been duly given when actually delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the Company’s General Counsel at the Company’s corporate headquarters address,
and to the Eligible Employee (at the last address of the Eligible Employee on the Company’s books and records).
5.8
Payment of Legal Fees. To the extent permitted by law, the Company shall reimburse all reasonable legal fees,
costs of litigation or arbitration, prejudgment or pre-award interest, and other expenses incurred in good faith by an Employee as a
result of seeking benefits under the Plan with respect to any termination of employment with the Company during the Change in
Control Period, but only if such Employee prevails on at least one substantive claim for benefits made in such litigation or
arbitration. For the avoidance of doubt, to the extent that any reimbursements for fees, costs, interest and other expenses described in
the immediately preceding sentence (or any other provision of the Plan) are subject to Section 409A, then (i) any reimbursements
shall be payable by the Company on or before the last day of the Employee’s taxable year following the taxable year in which the
fees, costs, interest and other expenses were incurred; (ii) the fees, costs, interest and other expenses paid by the Company during
any taxable year of the Employee will not affect the fees, costs, interest and other expenses paid by the Company in another taxable
year; and (iii) the right to reimbursement shall not be subject to liquidation or exchange for another benefit.
5.9
Not Contract of Employment. The adoption and maintenance of the Plan shall not be deemed to be a contract
of employment between the Company and any Person, to be consideration for the employment of any Person, or to have any effect
whatsoever on the at-will employment relationship. Nothing in the Plan shall be deemed to give any Person the right to be retained in
the employ of the Company or to restrict the right of the Company to discharge any Person at any time. Nothing in the Plan shall be
deemed to give the Company the right to require any Person to remain in the employ of such Company or to restrict any Person’s
right to terminate employment at any time.
5.10
preempted by federal law.
Governing Law. This Plan shall be interpreted under the laws of the State of Texas, except to the extent
5.11
Gender; Number. Wherever appropriate herein, the masculine, neuter, and feminine genders shall be deemed
to include each other, and the plural shall be deemed to include the singular and vice versa.
5.12
Independent Contractors. Notwithstanding any provision of the Plan to the contrary, no individual who is
designated, compensated, or otherwise classified as an independent contractor shall be eligible for benefits under the Plan.
12
5.13
Section 409A.
(a)
It is intended that the Plan and its applicable provisions be in compliance with or exempt from Section
409A of the Code and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and that the Plan shall be
administered and interpreted to maintain such compliance or exemption. Notwithstanding anything in the Plan to the contrary, if any
Plan provision or benefits under the Plan would result in the imposition of an additional tax under Section 409A, that Plan provision
or benefit will be reformed (without the consent of any Eligible Employee) to avoid imposition of the applicable tax and no action to
comply with Section 409A shall be deemed to adversely affect the Eligible Employee’s right to benefits; provided, that, such
reformation of the Plan shall to the extent practicable endeavor to maintain the original intent and economics of the Plan.
(b)
Each of the payments of severance, continued medical and welfare benefits and outplacement benefits
stated above are designated as separate payments for purposes of Section 409A of the Code and Treasury Regulation Section
1.409A-2(b)(2)(iii) and for purposes of the short-term deferral rules under Treasury Regulation Section 1.409A-l(b)(4)(i)(F), the
exemption for involuntary terminations under separation pay plans under Treasury Regulation Section 1 409A-1 (b)(9)(iii), the
exemption for medical expense reimbursements under Treasury Regulation Section 1.409A- l(b)(9)(v)(B) and the exemption for in-
kind benefits under Treasury Regulation Section 1.409A-l(b)(9)(v)(C). As a result, (i) payments that are made on or before the 15th
day of the third month of the calendar year following the applicable year of the Termination Date, and (ii) any additional payments
that are made on or before the last day of the second calendar year following the year of the Termination Date and do not exceed the
lesser of two times the Eligible Employee’s base salary in the year prior to his or her termination or two times the limit under Section
401(a)(17) then in effect, are exempt from the requirements of Section 409A.
(c)
Notwithstanding any provision in the Plan to the contrary, severance benefits, in excess of those
described in the preceding paragraph or that are otherwise subject to the six (6)-month payment delay requirements of Section 409A,
to an Eligible Employee who is a specified employee within the meaning of Treasury Regulation Section 1.409A-l(i) (a “Specified
Employee”), shall not commence until at least six (6) months after the Termination Date. To the extent the payments to be made
during the first six (6)-month period following a Specified Employee’s Termination Date exceed such exempt amounts described in
Section 5.13(b) or are otherwise subject to the six (6)-month payment delay requirements of Section 409A, those payments shall be
withheld and the amount of the payments withheld will be paid in a lump sum, without interest, on the first business day following
the expiration of such 6-month period (or within 30 days following the death of the Eligible Employee, if earlier).
5.14
Overpayment. If, due to mistake or any other reason, a Person receives benefits under this Plan in excess of
what the Plan provides, that Person shall repay the overpayment to the Company in a lump sum within thirty (30) days of notice of
the amount of overpayment. If that Person fails to so repay the overpayment, then without limiting any other remedies available to
the Company, the Company may deduct the amount of the overpayment from any other benefits which become payable to that
Person under the Plan.
13
5.15
Headings. The headings of the Articles and Sections are included solely for convenience. If the headings and
the text of the Plan conflict, the text shall control. All references to Articles and Sections are to the Plan unless otherwise indicated.
5.16
Severability. If any provision of the Plan is held to be illegal or invalid for any reason, that holding shall not
affect the remaining provisions of the Plan. Instead, the Plan shall be construed and enforced as if such illegal or invalid provision
had not been contained herein.
5.17
Mitigation. An Eligible Employee will not be required to mitigate the amount of any payment required
hereunder, and no reduction of payment shall occur as a result of any future employment or as a result of any claims made by the
Company for amounts owed to the Company by an Eligible Employee except as set forth in this Plan.
5.18
Withholding. The Company may withhold from any amounts payable under the Plan any federal, state or
local taxes that Company is required to withhold pursuant to any law or government regulation or ruling.
[Signature Page Follows]
14
Parent Holdings, Inc. Executive Severance Plan effective as of the Effective Date.
IN WITNESS WHEREOF, E2Open Parent Holdings Inc. has approved this E2open
E2open Parent Holdings, Inc.
By:
Name:
Title:
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Annex A
Release and Non-Competition Agreement
This Release and Non-Competition Agreement (“Agreement”), is entered into by and between E2open Parent Holdings,
Inc. and its Affiliates and their subsidiaries (collectively, the “Company”) and (“Executive”). The Company and Executive will be
jointly referred to as the “Parties.” Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such
terms in the E2open Parent Holdings, Inc. Executive Severance Plan (the “Plan”).
WHEREAS, the Plan Administrator of the Plan has determined that Executive is an Eligible Employee under the terms of
the Plan;
WHEREAS, the Plan requires Executive to sign and not revoke this Agreement in order to be eligible for the benefits
under the Plan; and
WHEREAS, Executive has carefully read and fully understands all of the provisions and effects of this Agreement, which
includes a general release and post-employment restrictions on Executive.
NOW, THEREFORE, Executive and the Company, for the good and sufficient consideration set forth below and
intending to be legally bound, agree as follows:
1.
Separation from Employment. Executive agrees that Executive’s employment with the Company terminates or
has been terminated effective _______________, 20__ (the “Separation Date”). Regardless of whether Executive signs this
Agreement, Executive will be paid for all of Executive’s accrued but unused paid time off through the Separation Date. The
Company will also pay Executive for all properly reported and reimbursable expenses incurred prior to the Separation Date.
Following the Separation Date, Executive shall not be, or represent that Executive is, an employee, agent, or representative of the
Company, any of the other Releasees (as defined below), or any of their respective funds or portfolio companies and Executive shall
take any actions required by the Company to effectuate the foregoing. Further, Executive will immediately and without the need for
any additional action be deemed to have resigned from all directorships, committee memberships, officer positions and any other
positions that Executive holds with the Company Group (as defined below), and agrees to take any actions as may be reasonably
required to effectuate the foregoing. Executive’s execution of this Agreement will be deemed the grant by Executive to the officers
of the Company of a limited power of attorney to sign in Executive’s name and on Executive’s behalf any such documentation as
may be required to be executed solely for the limited purposes of effectuating such resignations.
2.
Severance Benefits. As of the Effective Date of this Agreement set forth below, and subject to Executive’s
continued compliance with the provisions of this Agreement, Executive will receive the benefits set forth in Article III of the Plan, as
applicable, in accordance with the terms of the Plan including but not limited to the Limitation on Payments in Article IV and the
Section 409A provisions in Section 5.13 thereof.
3.
No Consideration Absent Execution of this Agreement. Executive understands and agrees that Executive
would not receive the consideration specified in Section 2, except for
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Executive’s execution and non-revocation of this Agreement and the fulfillment of the promises contained herein.
4.
General Release of Claims.
(a) In exchange for the consideration provided to Executive pursuant to this Agreement, Executive, on behalf of
Executive and all of Executive’s spouse, heirs, executors, administrators, successors, and assigns (collectively, “Releasors”), hereby
knowingly and voluntarily releases and forever waives and discharges the Company and/or its current and former parents, affiliates,
subsidiaries, divisions, predecessor companies, related companies, their successors and assigns, their affiliated and predecessor
companies and the current and former employees, attorneys, representatives, insurers, equityholders, owners, members, officers,
general partners, limited partners, directors and agents thereof, and the current and former trustees or administrators of any pension
or other benefit plan applicable to Executive or any other current or former executives of the Company, and investment funds or
other investment vehicles managed by any of the foregoing and/or for which they perform services (collectively, with the Company,
the “Company Group” and each a “Company Group Member”), and each Company Group Member’s respective current and former
directors, members, trustees, controlling shareholders, subsidiaries, general partners, limited partners, affiliates, related companies,
divisions, officers, employees, agents, insurers, representatives, and attorneys (collectively with the Company Group, referred to
throughout the remainder of this Agreement as “Releasees,” and each a “Releasee”), of and from any and all claims, including
statutory claims, regulatory claims and claims under this Agreement, demands, debts, obligations, promises, controversies,
compensatory damages, liquidated damages, punitive or exemplary damages, any other damages, claims for costs and attorneys’
fees, rights, actions and causes of action, losses or liabilities of any nature whatsoever in law and in equity and any other claims,
liabilities or matters, known or unknown, suspected or unsuspected, foreseen or unforeseen, whether accrued or contingent, which
Executive or any of the other Releasors had, has or may have against the Releasees, or any of them, from the beginning of time
through the date of execution of this Agreement, including, but not limited to, by reason of, arising out of, connected with, or
concerning Executive’s employment or service with the Company and/or separation from the Company, except claims that the law
does not permit Executive or any of the Releasors to waive (collectively, the “Released Claims”). Executive acknowledges that the
Released Claims specifically include, but are not limited to, any and all claims for fraud, breach of express or implied contract,
breach of the implied covenant of good faith and fair dealing, interference with contractual rights, violation of public policy, invasion
of privacy, intentional or negligent infliction of emotional distress, whistleblowing laws, intentional or negligent misrepresentation,
defamation, libel, slander, or breach of privacy; claims for failure to pay wages, benefits, deferred compensation, commissions,
bonuses, vacation / PTO pay, expenses, severance pay, pay in lieu of notice, attorneys’ fees, or other compensation of any sort;
claims related to equity or equity-based awards or costs, or other grants, awards, or warrants; claims related to any tangible or
intangible property of Employee that remains with the Company; claims for retaliation, harassment or discrimination on the basis of
race, color, sex, sexual orientation, national origin, ancestry, religion, age, disability, medical condition, marital status, gender
identity, gender expression, or any other characteristic or criteria protected by law; any claim under Title VII of the Civil Rights Act
of 1964 (Title VII, as amended), 42 U.S.C. §§ 2000e, et seq., the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Family
and Medical Leave Act (“FMLA”), 29 U.S.C. §§ 2601, et seq., the Age Discrimination in Employment Act (“ADEA”),
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29 U.S.C. §§ 621 et seq., the Older Workers Benefit Protection Act, the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et
seq., the Equal Pay Act, 29 U.S.C. §206(a), the Americans with Disabilities Act (“ADA”), 42 U.S.C. §§ 12101, et seq., the
Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”), the Occupational Safety and Health Act (“OSHA”), the
Uniformed Services Employment and Reemployment Rights Act (“USERRA”), 38 U.S.C. §§ 4301-4333, the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), 29 U.S.C. §§ 301, et seq., the Vietnam Era Veterans Readjustment Act of
1974, the Immigration Reform and Control Act of 1986, 8 U.S.C. §§ 1101, et seq., the Equal Pay Act, the Labor Management
Relations Act, the National Labor Relations Act, the Internal Revenue Code of 1986, as amended, the Worker Adjustment and
Retraining Notification Act (“WARN”), 29 U.S.C. §§ 2101 et seq., the Genetic Information Nondiscrimination Act of 2008
(“GINA”) 42 U.S.C. §§ 2000ff, et seq., the Patient Protection and Affordable Care Act (“ACA”) 42 U.S.C. §§ 18001, et seq., all
claims arising under the Sarbanes-Oxley Act of 2002 (Public Law 107-204), including whistleblowing claims under 18 U.S.C.§§
1513(e) and 1514A, and any and all other foreign, federal, state, or local laws, common law, or case law, including but not limited to
all statutes, regulations, common law, and any other applicable law, as such laws are amended from time to time.
(b) This release is intended to be a general release and excludes only those claims under any statute or common
law that Executive is legally barred from releasing, including (i) claims for workers’ compensation or unemployment benefits and
vested retirement or welfare benefits, if any, under any Company sponsored plans; (ii) any right to enforce any term of this
Agreement; (iii) any claims based on acts or events occurring after Executive signs this Agreement, except for claims arising from
Executive’s employment or separation of employment with Company, which are being released by this Agreement; (iv) the right to
file a charge or complaint with, or provide testimony, assistance or participation in, any investigation, proceeding or hearing
conducted by any federal, state or local governmental agency, including but not limited to the EEOC; or (v) the right to report
violations of any law administered by the Occupational Safety and Health Administration (“OSHA”), the Securities and Exchange
Commission (“SEC”),
or make other disclosures protected under the whistleblower provisions of state or federal
law. Notwithstanding the foregoing, if an administrative agency or court assumes jurisdiction over any charge or complaint
involving claims that are released by Section 4(a), Executive hereby agrees not to accept, recover, or receive any resulting money
damages or other relief that otherwise would be due; provided that Executive may receive financial awards from OSHA, SEC, or any
other federal agency for reporting possible violations of federal law or regulation in cases where the law prohibits Executives from
waiving their rights to receive such payments.
5.
Consult With an Attorney. The Company hereby advises Executive to consult with an attorney of Executive’s
choice (and at Executive’s expense) before Executive signs this Agreement.
6.
Affirmations. Executive represents and agrees by signing below that, other than the Severance Benefits set forth
in Section 2 above, Executive (a) has not been denied any leave or benefit requested, and has received all compensation for all hours
worked for the Company; (b) is not entitled to any compensation or benefits under any other severance policy or plan maintained or
followed by the Company; (c) has no known workplace injuries or occupational diseases; (d) is not aware of any alleged violations
of the law or the Company’s agreements or policies by
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Executive or any other employee or other party that have not been reported in writing to the Company’s Chief Executive Officer or
Chairperson of the Board of Directors; and (e) is not aware of wrongdoing by the Company or its officers, including any alleged
corporate fraud that should be reported to authorities.
7.
Confidentiality. The parties hereto agree that this Agreement and all matters relating to the terms and
negotiation of this Agreement are Confidential Information and shall not be disclosed to any other person except as may be mutually
agreed to in writing by the parties, as may be compelled by a valid order of a court of competent jurisdiction, or as may be
reasonably necessary to comply with the requirements of federal, state, or local authorities or codes, or as related and strictly limited
to statements made as part of Executive’s testimony, assistance or participation in an administrative investigation described in
Section 4(b) above. The Parties hereto agree that the terms of this Agreement may be disclosed to Executive’s immediate family and
each of the Parties’ accounting, payroll, legal, financial, and tax professionals and the appropriate members of the Company’s
management or ownership.
8.
Return of Company Property and Company Information. Executive agrees to return, on or before the
Separation Date, or earlier if directed by the Company, any and all of Company’s property in Executive’s possession, as well as any
and all records, files, correspondence, reports and computer disks relating to the Company’s operations, products and potential
products, marketing, research and development, production and general business plans, customer information, accounting and
financial information, distribution, sales, and confidential cost and price characteristics and policies in his possession (including on
any personal computer).
9.
Non-Disclosure of Confidential Information.
(a) The term “Confidential Information,” as used in this Agreement, shall mean any and all information (in
whatever form and whether or not expressly designated as confidential) relating directly or indirectly to the respective businesses,
operations, financial affairs, assets or technology of the Company, including, but not limited to, marketing and financial information,
personnel, sales and statistical data, plans for future development, computer programs, information and knowledge pertaining to the
products and services offered, inventions, innovations, designs, ideas, recipes, formulas, manufacturing processes, trade secrets,
technical data, computer source codes, software, proprietary information, construction, advertising, manufacturing, distribution and
sales methods and systems, pricing, sales and profit figures, customer and client lists, and relationships with customers, clients,
suppliers, distributors and others who have business dealings with the Company and information with respect to various ingredients,
formulas, manufacturing processes, techniques, procedures, processes and methods. Confidential Information also includes
information received by Executive from third parties in connection with Executive’s employment by the Company subject to an
obligation to maintain the confidentiality of such information. Confidential Information does not include information which (i)
becomes generally known to and available for use by the public other than as a result of Executive’s violation of this Agreement; (ii)
is or becomes generally available within the relevant business or industry other than as a result of Executive’s violation of this
Agreement; or (iii) is or becomes available to Executive on a nonconfidential basis from a source other than the Company, which
source is not known by Executive, after reasonable inquiry, to be subject to a contractual or fiduciary obligation of secrecy to the
Company.
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(b) Executive acknowledges and agrees that all Confidential Information
known or obtained by Executive, whether before or after the Separation Date and regardless of whether Executive participated in the
discovery or development of such Confidential Information, is the property of the Company. Except as expressly authorized in
writing by the Company or as necessary to perform Executive’s services while an employee of the Company, Executive agrees that
Executive will not, at any time, for any reason, directly or indirectly, duplicate, use, make available, sell, misappropriate, exploit,
remove, copy or disclose to any Person Confidential Information, unless such information is required to be produced by Executive
under order of a court of competent jurisdiction or a valid administrative or congressional subpoena; provided, however, that upon
receipt of any such order or subpoena, Executive shall promptly notify the Company and shall provide the Company with an
opportunity at its cost and expense to contest the propriety of such order or subpoena or restrict or condition the disclosure of such
Confidential Information or to arrange for appropriate safeguards against any further disclosure by the court or administrative or
other body seeking to compel disclosure of such Confidential Information.
10.
Whistleblower Protection. Nothing in this Agreement is intended to conflict with the whistleblower provisions
of any United States federal, state or local law or regulation, including but not limited to Rule 21F-17 of the Securities Exchange Act
of 1934 or § 1833(b) of the Defend Trade Secrets Act of 2016. Accordingly, notwithstanding anything to the contrary herein, nothing
in this Agreement shall prohibit Executive from reporting possible violations of United States federal, state or local law or regulation
to any United States federal, state or local governmental agency or entity, including but not limited to the Department of Justice, the
Securities and Exchange Commission, the Congress, and any agency Inspector General, or to an attorney, or from making other
disclosures that are protected under the whistleblower provisions of federal law or regulation, or from disclosing trade secrets and
other confidential information in the course of such reporting; provided, that Executive uses Executive’s reasonable efforts to (a)
disclose only information that is reasonably related to such possible violations or that is requested by such agency or entity and (b)
requests that such agency or entity treat such information as confidential. Executive does not need the prior authorization from the
Company to make any such reports or disclosures and is not required to notify the Company that it has made such reports or
disclosures. In addition, Executive has the right to disclose trade secrets and other confidential information in a document filed in a
lawsuit or other proceeding; provided, that the filing is made under seal and protected from public disclosure.
11.
Restrictive Covenants. Executive agrees that during Executive’s employment, Executive has had access to the
Company’s Confidential Information. Such access and knowledge would put the Company at an unfair competitive disadvantage
were Executive to use it on behalf of another person or entity. Therefore, during the twelve (12) month period following the
Termination Date (the “Restriction Period”), Executive agrees that Executive shall not, directly or indirectly, for Executive’s own
account, or on behalf of, or together with, any other Person (other than on behalf of the Company):
(a)
own, manage, operate, control, finance or participate in the ownership, management, operation,
control or financing of, render financial assistance to, be connected as an officer, director, stockholder, employee, partner, member,
manager, principal, agent, representative, consultant or otherwise with, use or permit Executive’s name to be used in connection
with, or develop products or services for, any Competing Business anywhere in any
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state of the United States or any other jurisdiction in which the Company conducts business. “Competing Business” means any
business and operations that are the same or similar to those performed by the Company Group for which Executive provides
services or about which Executive obtains confidential information during Executive’s employment or service with the Company
Group; notwithstanding the foregoing, it shall not be a breach of this Section 11(a) for Executive to own a passive investment of less
than one percent (1%) of a class of stock of a publicly held company that is traded on a national securities exchange or in the over the
counter market;
(b)
contact, solicit, induce or attempt to contact, solicit or induce any Person who is or was, within the
one-year period prior to termination of Executive’s employment with the Company, a customer, supplier or agent of the Company or
with which the Company or Executive had contact during Executive’s employment with the Company, to terminate their relationship
with the Company, or do any act which may interfere with or result in the impairment of the relationship, including any reduction in
sales or purchases, between the Company and such customers, suppliers or agents; or
(c)
hire any Person who is or was, within the one-year period prior to termination of Executive’s
employment with the Company, an employee of the Company; or contact, solicit, induce or attempt to contact, solicit or induce any
Person who is or was, within the one-year period prior to termination of Executive’s employment with the Company, an employee of
the Company for the purpose of seeking to have such employee terminate his or her employment with the Company.
(d)
Subject to Section 10, Executive will not, at any time during Executive’s employment with the
Company or at any time thereafter, make any statement that is intended to disparage the Company Group or any of its businesses,
products, services, directors or officers. The Board shall direct the Company’s senior officers and directors, at all times during
Executive’s employment with the Company and again in connection with their termination of employment with the Company, not to
make any statement that is intended to disparage the Executive. The foregoing shall not be violated by truthful statements in response
to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation,
depositions in connection with such proceedings), and the foregoing limitation on Executive and the Board shall not be violated by
statements that they in good faith believe are necessary or appropriate to make in connection with performing their duties and
obligations to the Board or the Company.
(e)
In the event of a breach or threatened breach of this Section 11, the Company may, in addition to other
rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or temporary or
permanent injunctive or other equitable relief in order to enforce, or prevent any violations of, the provisions hereof (without posting
a bond or other security), without the necessity of showing any actual damages or that money damages would not afford an adequate
remedy. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other
available forms of relief. In addition to any other relief, the prevailing party in any such action shall be entitled to recover its costs
and attorneys’ fees. If a court holds that the duration, scope, or area restrictions stated herein are unreasonable, the parties agree that
the court shall be allowed and directed to revise the restrictions to cover the maximum reasonable period, scope and area permitted
by law.
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12.
Acknowledgments. Executive acknowledges and agrees that: (a) Executive has occupied a position of trust and
confidence with the Company and has become familiar with Confidential Information; (b) the Confidential Information is of unique,
very substantial and immeasurable value to the Company; (c) the Company has required that Executive make the covenants set forth
in Sections 7 through 11 herein as a condition to the execution by the Company of this Agreement; (d) the provisions of Sections 7
through 11 are reasonable with respect to duration, geographic area and scope and necessary to protect and preserve the goodwill and
ongoing business value of the Company, and will not, individually or in the aggregate, prevent Executive from obtaining other
suitable employment during the period in which Executive is bound by such provisions; (e) the scope of the business of the Company
is independent of location (such that it is not practical to limit the restrictions contained in Sections 7 through 11 to a specified
county, city or part thereof); (f) the Company would be irreparably damaged if Executive were to breach the covenants set forth in
Sections 7 through 11; and (g) the potential benefits to Executive available under this Agreement are sufficient to compensate
Executive fully and adequately for agreeing to the terms and restrictions of this Agreement.
13.
Termination of Benefits for Violating this Agreement. In the event Executive breaches or fails to abide by
the terms of this Agreement, then in addition to any other remedies which the Company may have pursuant to this Agreement or in
equity or at law, the Company has the right to permanently discontinue the Severance Benefits described in Section 2 above and
obtain restitution of any benefits provided to, or on behalf of, Executive pursuant to this Agreement.
14.
Governing Law, Jurisdiction and Costs. The law of the State of Texas shall govern (a) all claims or matters
related to or arising from this Agreement (including any tort or non-contractual claims) and (b) any questions concerning the
construction, interpretation, validity and enforcement of this Agreement, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the Law of any
jurisdiction other than the State of Texas. Executive hereby agrees to submit to personal jurisdiction of said courts, and waives any
right to challenge venue or claim that it is an inconvenient forum. Executive will reimburse the Company for all court costs and
reasonable attorneys’ fees incurred in connection with any action the Company brings for a breach or threatened breach by Executive
of any covenants contained in this Agreement if (i) Executive challenges the reasonableness or enforceability of such covenants or
(ii) the Company is the prevailing party in such action.
15.
Severability. If any term, provision or paragraph of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable for any reason, such determination shall be limited to the narrowest possible scope in
order to preserve the enforceability of the remaining portions of the term, provision or paragraph, and such determination shall not
affect the remaining terms, provisions or paragraphs of this Agreement, which shall continue to be given full force and effect.
16.
No Admission of Wrongdoing. Neither this Agreement nor the furnishing of the consideration for this
Agreement shall be deemed or construed at any time for any purpose as an admission by either of the parties or any of the Releasees
of any liability, or evidence of any liability, wrongful acts or unlawful conduct of any kind against Executive or any other person.
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17.
Cooperation. During Executive’s employment with the Company, Executive acknowledges that Executive has
been involved in business matters on behalf of the Company. As a further material inducement to the Company to make the
payments described herein, after the Separation Date, Executive hereby agrees to (a) provide Executive’s full and timely cooperation
to the Company regarding its business matters, specifically including but not limited to matters over which Executive had
responsibility or in which Executive was involved, as well as any legal, equitable, or business matters or proceedings which involve
the Company or any of its Executives, officers, or directors; (b) be reasonably available for questions or inquiries by phone, text, or
email, and at the Company’s reasonable request for any meetings or conferences deemed necessary to assist the Company; (c)
cooperate in the defense of any actual and potential claims, litigation, inquiry, investigation, or other matter, action, or proceeding
filed against the Company or its officers, directors, employees or agents, including but not limited to, any actual or potential claims
which may require Executive’s involvement post-employment; and (d) help transition Executive’s role and responsibilities to other
Company personnel, and provide information in response to the Company’s requests and inquiries, in connection with Executive’s
separation. The Company will pay reasonable travel and other expenses related to Executive’s cooperation in this regard. The
Company agrees to provide reasonable advance notice of the need for Executive’s cooperation.
18.
Entire Agreement, Amendment and Construction. No prior or contemporaneous oral or written agreements
or representations may be offered to alter the terms of this Agreement which represents the entire agreement and understanding of
the parties with respect to the subject matter hereof. This Agreement may not be modified, altered or changed except in writing and
signed by both parties wherein specific reference is made to this Agreement. The captions appearing in this Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of such Sections. This
Agreement shall be construed without regard to the party that drafted it. The language used in this Agreement shall be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any
party. Any ambiguity shall not be interpreted against either party but shall, instead, be resolved in accordance with other applicable
rules concerning the interpretation of contracts. The failure of the Company to enforce at any time any provision of this Agreement
will in no way be construed to be a waiver of such provision or of any other provision hereof.
19.
Counterparts; Electronic Delivery. This Agreement may be executed and delivered in one or more
counterparts and by fax, email or other electronic transmission, each of which to be deemed an original and all of which shall be
considered one and the same agreement. No party shall raise the use of a fax machine or email to deliver a signature or the fact that
any signature or agreement or instrument was transmitted or communicated through the use of a fax machine or email as a defense to
the formation or enforceability of this Agreement and each party forever waives any such defense.
20.
Assignment. Company and Releasees have the right to assign this Agreement, but Executive does not. This
Agreement inures to the benefit of the successors and assigns of the Company, who are intended third-party beneficiaries of this
Agreement.
21.
Time to Consider and Revoke. Executive understands that Executive has up to twenty-one (21) days to
consider the terms of this Agreement before signing it. Any modifications
A-8
made to this Agreement, material or not, will not extend the twenty-one (21) days period. Executive must execute this Agreement no
sooner than the Separation Date and no later than twenty-one (21) days immediately following the Separation Date. In addition, after
Executive signs the Agreement, Executive has the right to revoke and cancel this Agreement for seven (7) days after Executive signs
it. Any such revocation must be in writing and postmarked or delivered to the Company’s General Counsel, within seven (7) days of
Executive’s signing this Agreement to be effective. This Agreement will be effective, fully binding, enforceable, and irrevocable
upon the expiration of the seven day period if Executive does not revoke it (the “Effective Date”). If Executive does not sign this
Agreement, or signs it and then revokes Executive’s signature, this Agreement shall be null and void, and the Company shall have no
obligation to provide or pay any of the consideration described in Section 2 above.
A-9
IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Agreement as of the date set forth
below:
E2OPEN PARENT HOLDINGS, INC.
EXECUTIVE
Date
Date
A-10
Below is a list of the Company’s major subsidiaries as of February 28, 2021, their jurisdictions and the name under which they do business. Each subsidiary is
wholly owned.
SUBSIDIARIES OF REGISTRANT
Exhibit 21.1
Subsidiary
Amber Road, Inc.
E2open, LLC.
Inttra, Inc.
Zyme Solutions, Inc.
Jurisdiction
Delaware
Delaware
Delaware
Delaware
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit 31.1
I, Michael A. Farlekas, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended February 28, 2021 of E2open Parent Holdings, Inc.;
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;
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 period presented in this report;
The registrant’s other certifying officers 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)) for the registrant and have:
a.
b.
c.
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;
[Paragraph intentionally omitted in accordance with SEC Release Nos. 34-47986 and 34-54942];
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 officers 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
controls over financial reporting.
Date: May 20, 2021
By:
Name:
Title:
/s/ Michael A. Farlekas
Michael A. Farlekas
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit 31.2
I, Jarett J. Janik, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended February 28, 2021 of E2open Parent Holdings, Inc.;
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;
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 period presented in this report;
The registrant’s other certifying officers 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)) for the registrant and have:
a.
b.
c.
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;
[Paragraph intentionally omitted in accordance with SEC Release Nos. 34-47986 and 34-54942];
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 officers 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
controls over financial reporting.
Date: May 20, 2021
By:
Name:
Title:
/s/ Jarett J. Janik
Jarett J. Janik
Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
Exhibit 32.1
In connection with the Annual Report of E2open Parent Holdings, Inc (the “Company”) on Form 10-K for the fiscal year ended February 28, 2021, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Farlekas, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1.
2.
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 20, 2021
By:
Name:
Title:
/s/ Michael A. Farlekas
Michael A. Farlekas
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
Exhibit 32.2
In connection with the Annual Report of E2open Parent Holdings, Inc (the “Company”) on Form 10-K for the fiscal year ended February 28, 2021, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Jarett J. Janik, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1.
2.
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 20, 2021
By:
Name:
Title:
/s/ Jarett J. Janik
Jarett J. Janik
Chief Financial Officer
(Principal Financial and Accounting Officer)