| Item 1.01 |
Entry into a Material Definitive Agreement. |
Merger Agreement
On May 25, 2023, Embark Technology, Inc. (“Embark”)
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Applied Intuition, Inc. (“Parent”)
and Azara Merger Sub, Inc. (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions
set forth therein, Merger Sub will merge with and into Embark (the “Merger”), with Embark continuing as the surviving
corporation of the Merger and a wholly owned subsidiary of Parent.
The Transaction Committee of Embark’s Board
of Directors, comprised solely of independent and disinterested directors, unanimously determined that the transactions contemplated by
the Merger Agreement, including the Merger, are in the best interests of Embark and its stockholders, approved the Merger Agreement and
the transactions contemplated by the Merger Agreement, and resolved to recommend that Embark’s Board of Directors (the “Board”)
approve and adopt the Merger Agreement and the transactions contemplated by the Merger Agreement. Thereafter, the Board unanimously determined
that the transactions contemplated by the Merger Agreement, including the Merger, are in the best interests of Embark and its stockholders,
and approved the Merger Agreement and the transactions contemplated by the Merger Agreement, and resolved to recommend that Embark’s
stockholders vote to adopt the Merger Agreement and approve the Merger and the transactions contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, at the effective
time of the Merger (the “Effective Time”), each share of Class A common stock and Class B common stock of Embark, par
value $0.0001 per share (collectively, the “Common Stock”), outstanding immediately prior to the Effective Time (subject
to certain exceptions, including shares of Common Stock owned by stockholders of Embark who have not voted in favor of the adoption of
the Merger Agreement or the Merger nor consented to the Merger and have properly exercised appraisal rights in accordance with Section 262
of the General Corporation Law of the State of Delaware (the “DGCL”)) will, at the Effective Time, automatically be
converted into the right to receive $2.88 in cash without interest thereon (the “Per Share Price”), subject to applicable
withholding taxes.
Pursuant to the Merger Agreement, at the Effective
Time, each outstanding option to purchase shares of Common Stock that is vested or vests at the Effective Time after taking into account
any accelerated vesting in connection with the Merger, and with respect to which the exercise price is less than the Per Share Price (each,
a “Vested In-the-Money Company Option”) will automatically be cancelled and converted solely into the right to receive
an amount in cash equal to (1) the total number of shares of Common Stock subject to such option multiplied by (2) the excess,
if any, of the Per Share Price over the exercise price per share of such option, without interest and subject to applicable withholding
taxes. Each outstanding option to purchase shares of Common Stock that is unexercised immediately prior to the Effective Time and is not
a Vested In-the-Money Company Option will automatically be cancelled at the Effective Time for no consideration.
Pursuant to the Merger Agreement, at the Effective
Time, each of Embark’s outstanding restricted stock units that is subject solely to service-based vesting conditions (a “Company
RSU”) that is outstanding and vested (but not yet settled) or vests at the Effective Time after taking into account any accelerated
vesting in connection with the Merger will automatically be cancelled and converted solely into the right to receive an amount in cash
equal to (1) the total number of shares of Common Stock underlying such vested Company RSU, multiplied by (2) the Per Share
Price, without interest and subject to applicable withholding taxes. Each Company RSU that is not vested at the Effective Time will be
automatically cancelled at the Effective Time for no consideration.
Pursuant to the Merger Agreement, at the Effective
Time, each of Embark’s outstanding restricted stock units subject to any performance-based vesting conditions (a “Performance
RSU”) will automatically be cancelled for no consideration.
Pursuant to the Merger Agreement, at the Effective
Time, each of Embark’s outstanding and unexercised warrants (a “Company Warrant”) will, at the Effective Time,
be automatically cancelled and converted into the right to receive an amount in cash equal to (1) the total number of shares of Common
Stock underlying such Company Warrant, multiplied by (2) the excess, if any, of the Per Share Price over the Warrant Price (as defined
in the Warrant Agreement, dated January 12, 2021, between Embark and Continental Stock Transfer & Trust Company (the “Warrant
Agreement”)), without interest and subject to applicable withholding taxes.
The
Merger Agreement contains customary covenants made by each of Embark, Parent and Merger Sub, including, among others, covenants by Embark
regarding the conduct of its business prior to the closing of the Merger. Upon execution of the Merger Agreement, Embark became subject
to customary “no-shop” restrictions on its ability (and the ability of its subsidiaries and representatives), except as permitted
by the Merger Agreement, to, among other things, (1) solicit, initiate, or propose the making, submission or announcement of, or
knowingly induce, encourage, facilitate or assist, any proposal that constitutes, or would reasonably be expected to lead to an acquisition
proposal; (2) subject to certain exceptions, provide nonpublic information relating to Embark or any of its subsidiaries to third
parties; (3) engage in discussions or negotiations with third parties regarding alternative acquisition proposals; (4) approve, endorse,
or recommend any proposal that constitutes, or would reasonably be expected to lead to an acquisition proposal; (5) enter into any letter
of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to an acquisition proposal;
or (6) authorize, propose or commit to do any of the foregoing. Completion of the Merger is subject to customary closing conditions, including
(1) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Common Stock; and (2) the
absence of an order or law preventing the Merger. The consummation of the Merger will take place as promptly as practicable after the
satisfaction or waiver of the closing conditions, provided that unless the parties mutually agree, the Closing will not occur until the
earlier of August 4, 2023 and the date the United States District Court for the Northern District of California (the “Court”)
presiding over the legal proceeding captioned Hardy v. Embark Technology, Inc., et. al., Case No. 3:22-cv-02090-JSC (the “Legal
Proceeding”) enters an order approving Plaintiffs’ Unopposed Motion for Preliminary Approval of Class Action Settlement, filed
on May 17, 2023 (the “Motion”).
Either
Embark or Parent may terminate the Merger Agreement if (1) the Effective Time has not occurred by August 23, 2023 (subject to an
automatic extension to November 21, 2023, if the definitive proxy statement has not been filed with the United States Securities and Exchange
Commission (the “SEC”) on or before June 23, 2023, or if the SEC provides comments to the preliminary proxy statement)
(as may be extended pursuant the Merger Agreement, the “Termination Date”), (2) a governmental authority of competent
jurisdiction has issued a final non-appealable governmental order that permanently prohibits, makes illegal or enjoins the consummation
of the Merger, (3) any law has been enacted, entered, enforced or deemed applicable to the Merger that permanently prohibits, makes
illegal or enjoins the consummation of the Merger or (4) Embark’s stockholders fail to adopt the Merger Agreement. Embark may
terminate the Merger Agreement in certain additional limited circumstances, including to allow Embark to enter into an agreement providing
for an alternative acquisition transaction that constitutes a Superior Proposal (as defined in the Merger Agreement). Parent may terminate
the Merger Agreement in certain additional limited circumstances, including if the Board withdraws its recommendation that Embark’s
stockholders vote to adopt the Merger Agreement or if the Court presiding over the Legal Proceeding enters an order denying the Motion
(the “Legal Proceeding Termination”).
Upon termination of the Merger Agreement under
specified circumstances, Embark will be required to pay Parent a termination fee of $3,000,000. Specifically, this termination fee is
payable by Embark to Parent if the Merger Agreement is terminated by (1) Parent following (a) the Board’s determination to
change its recommendation with respect to the Merger or (b) the Company’s willful breach of its “no-shop” obligations;
or (2) Embark following the decision by the Board to authorize the acceptance of a Superior Proposal. The termination fee will also
be payable in certain circumstances if (1) the Merger Agreement is terminated because (a) the Merger is not completed by the
Termination Date; (b) Embark’s stockholders fail to adopt the Merger Agreement or (c) the Company breaches its representations or
covenants at a level specified in the Merger Agreement; and (2) within one year of the termination of the Merger Agreement, Embark
consummates an Acquisition Transaction (as defined in the Merger Agreement) or enters into a definitive agreement providing for the consummation
of an Acquisition Transaction, in each case, subject to certain exceptions with respect to a liquidation or dissolution of the Company.
Upon the Legal Proceeding Termination, Parent will be required to pay to the Company a termination fee of $1,000,000.
The Merger Agreement also provides that Embark,
on one hand, or Parent and Merger Sub, on the other hand, may specifically enforce the obligations under the Merger Agreement, including
the obligation to consummate the Merger if the conditions set forth in the Merger Agreement are satisfied.
The Merger Agreement contains representations
and warranties by each of Parent, Merger Sub and Embark. These representations and warranties were made solely for the benefit of the
parties to the Merger Agreement and:
| · | should not be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those
statements prove to be inaccurate; |
| · | may have been qualified in the Merger Agreement by disclosures that were made to the other party in connection with the negotiation
of the Merger Agreement; |
| · | may apply contractual standards of “materiality” that are different from “materiality” under applicable securities
laws; and |
| · | were made only as of the date of the Merger Agreement or such other date or dates as may be specified in the Merger Agreement. |
The foregoing description of the Merger Agreement
is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 and is incorporated
by reference.
Voting and Support Agreements
On May 25, 2023, in connection with the execution
of the Merger Agreement, Alex Rodrigues and Brandon Moak, solely in their capacity as stockholders of Embark, have entered into a voting
and support agreement with the Company and Parent (the “Founder Voting Agreement”). In addition, on May 25, 2023, in
connection with the execution of the Merger Agreement, affiliates of Sequoia Capital (Sequoia Capital U.S. Growth Fund VII, L.P., Sequoia
Capital U.S. Growth VII Principals Fund, L.P., Sequoia Capital U.S. Venture Fund XV, L.P., Sequoia Capital U.S. Venture Partners Fund
XV (Q), L.P., Sequoia Capital U.S. Venture Partners Fund XV, L.P. and Sequoia Capital U.S. Venture XV Principals Fund, L.P.), one of Embark’s
major investors, entered into a voting and support agreement with the Company and Parent (the “Major Stockholder Voting Agreement”
and, together with the Founder Voting Agreement, the “Voting Agreements”). In total, the stockholders that signed the
Voting Agreements represent approximately seventy-three percent (73%) of Embark’s outstanding voting power based on the number of
shares of Common Stock outstanding as of May 23, 2023. Under the Voting Agreements, the stockholders party thereto have agreed to vote
their shares of Common Stock in favor of the adoption of the Merger Agreement, not transfer their shares of Common Stock, subject to certain
exceptions, and certain other matters. The Voting Agreements terminate in certain circumstances, including upon the valid termination
of the Merger Agreement in accordance with its terms.
The foregoing description of the Voting Agreements
is qualified in its entirety by reference to the full text of the Founder Voting Agreement and Major Stockholder Voting Agreement, copies
of which are filed as Exhibit 10.1 and 10.2 hereto, respectively, and are incorporated by reference.
