3.Business Combination

On July 31, 2015, the Company consummated a business combination (the “Business Combination”) pursuant to the Stock Purchase Agreement, dated April 30, 2015 (the “Purchase Agreement”), by and between the Company and Dow providing for the acquisition by the Company of the AgroFresh Business from Dow, resulting in AgroFresh Inc. becoming a wholly-owned, indirect subsidiary of the Company. The Company was not required to redeem any shares of its common stock in connection with the closing of the Business Combination (the “Closing”). In the Business Combination and pursuant to the Purchase Agreement, the Company paid the following consideration to Rohm and Haas Company (“Rohm and Haas”), a subsidiary of Dow: (i) 17,500,000 shares of common stock (the “Stock Consideration”) and (ii) $635 million in cash (the “Cash Consideration”).

In addition, Dow is entitled to receive in 2018 a deferred payment from the Company of $50 million, subject to the Company’s achievement of a specified average EBITDA level over the two year period from January 1, 2016 to December 31, 2017.

On July 31, 2015, in connection with, and as a condition to, the Closing, Dow, Rohm and Haas, the Company and Boulevard Acquisition Sponsor, LLC (the “Sponsor”) entered into a Warrant Purchase Agreement (the “Warrant Purchase Agreement”). Pursuant to the Warrant Purchase Agreement, beginning on the Closing Date and ending on the date that is nine months after the Closing Date, the Company is required to purchase in the open market warrants issued in connection with the Public Offering, in an aggregate amount of $10 million, at a purchase price per warrant of no more than $1.25. If the Company has not purchased in the aggregate $10 million of warrants before April 30, 2016, the Sponsor may sell to the Company private placement warrants it holds at $1.00 per private placement warrant to satisfy the obligation (such private placement warrants, together with all other warrants purchased under the Warrant Purchase Agreement, the “Purchased Warrants”). Pursuant to the Warrant Purchase Agreement, the Company is required to issue to Rohm and Haas no later than April 30, 2016, warrants to purchase the Company’s common stock representing 66-2/3% of the Purchased Warrants at no cost to Rohm and Haas and on the same terms as the warrants issued in connection with the Public Offering. In the event that the Company has not issued to Rohm and Haas an aggregate of 6,000,000 warrants on or prior to April 30, 2016, (a) the Sponsor will be required to transfer to the Company, at no cost to the Company, the number of warrants equal to one-half of the difference between (i) 6,000,000 and (ii) the number of warrants issued by the Company to Rohm and Haas on or prior to such date (such difference between clauses (i) and (ii), the “Make-Up Warrant Amount”) and (b) the Company will be required to issue such number of warrants equal to the Make-Up Warrant Amount.

On July 31, 2015, in connection with, and as a condition to, the Closing, Dow, Rohm and Haas, AgroFresh Inc. and Boulevard entered into a Tax Receivables Agreement (the “Tax Receivables Agreement”). Pursuant to the Tax Receivables Agreement, the Company will pay annually to Dow 85% of the amount of the tax savings, if any, in U.S. Federal, state and local income tax or franchise tax that the Company actually realizes as a result of the increase in tax basis of the AgroFresh Inc. assets resulting from a section 338(h)(10) election that the Company and Dow have agreed to make in connection with the Business Combination. While the amount and timing of any payments under the Tax Receivables Agreement will vary depending upon a number of factors, including the amount and timing of the Company’s income, the Company expects that during the anticipated term of the Tax Receivables Agreement the payments that the Company may make to Dow could be substantial. In addition, payments under the Tax Receivables Agreement will give rise to additional tax benefits and therefore to additional potential payments under the Tax Receivables Agreement. The term of the Tax Receivables Agreement will commence at Closing and will continue until all such tax benefits have been utilized or expired, unless the Company exercises its right to terminate the Tax Receivables Agreement for an amount based on an agreed value of payments remaining to be made under the Tax Receivables Agreement.

In addition, pursuant to the terms of the Purchase Agreement, the amount of the Cash Consideration paid as part of the purchase price is subject to adjustment following the Closing based upon the working capital of the AgroFresh Business as of the Closing Date being greater or less than a target level of working capital determined in accordance with the Purchase Agreement.

The Company accounted for its acquisition of the AgroFresh Business as a business combination under the scope of FASB Accounting Standard Codification Topic (ASC) 805, Business Combinations, or ASC 805. Pursuant to ASC 805, the Company has been determined to be an accounting acquirer since the Company paid cash and equity consideration for all of the assets of the AgroFresh Business. The AgroFresh Business constitutes a business with inputs, processes and outputs. Accordingly, the acquisition of the AgroFresh Business constitutes the acquisition of a business in accordance with ASC 805 and is accounted for using the acquisition method.

The following summarizes the purchase consideration paid to Dow:

(in thousands)	Calculation of Purchase Price
Cash consideration	$	635,000
Stock consideration (1)	210,000
Warrant consideration (2)	19,020
Deferred payment (3)	17,172
Tax amortization benefit contingency (4)	145,174

Total purchase price	$	1,026,366

(1)

The Company issued 17,500,000 shares of common stock valued at $12.00 per share as of July 31, 2015.

(2)

As discussed above, the Company entered into a Warrant Purchase Agreement whereby it agreed to issue to Dow a certain number of warrants by April 30, 2016. The Company calculated the fair value of the 6,000,000 warrants expected to be issued to Dow at $3.17 per warrant as of July 31, 2015.

(3)

As discussed above, the Company agreed to pay Dow a deferred payment of $50 million subject to the achievement of a specified average adjusted EBITDA level over the two year period from January 1, 2016 to December 31, 2017. The Company estimated the fair value of the deferred payment using the Black-Scholes option pricing model.

(4)

As discussed above, the Company entered into a Tax Receivables Agreement with Dow. The Company estimated the fair value of future cash payments based upon its estimate that the undiscounted cash payments to be made total approximately $319 million and are based on an estimated intangible write-up amortized over 15 years, tax effected at 37%, with each amortized amount then discounted to present value utilizing an appropriate market discount rate to arrive at the estimated fair value of the cash payments and the associated liability.

The determination of the purchase price, in particular the contingent consideration, is based on preliminary valuations and is subject to final adjustment to reflect the final valuations. These final valuations could have a material impact on the preliminary determination of the total purchase price disclosed above.

The Company recorded a preliminary allocation of the purchase price to the AgroFresh Business’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the July 31, 2015 closing date. The preliminary purchase price allocation is as follows:

	Preliminary Purchase Price Allocation (in thousands)
Cash and cash equivalents	$	9,459
Accounts receivable and other receivables	30,710
Inventories	129,062
Prepaid expenses and other current assets	359

Total current assets	169,590
Property and equipment	4,364
Identifiable intangible assets	836,044
Noncurrent deferred tax asset	401
Other assets	862

Total identifiable assets acquired	1,011,261
Accounts payable	(364		)
Accrued and other current liabilities	(7,746		)
Pension and deferred compensation	(712		)
Other long-term liabilities	(1,823		)
Current deferred tax liability	(401		)
Deferred tax liability	(14,371		)
Other liabilities	(1,033		)

Net identifiable assets acquired	984,811
Goodwill	41,555

Total purchase price	$	1,026,366

The preliminary values (in thousands) allocated to identifiable intangible assets and their estimated useful lives are as follows:

(in thousands, except useful life data)	Fair Value		Useful life
Software	$	44	4 years
Developed technology	790,500		12 to 23 years
Customer relationships	8,000		24 years
Service provider network	2,000		Indefinite Life
Trade name	35,500		Indefinite Life

Total intangible assets	$	836,044

Weighted average life of finite-lived intangible assets			19.89

The goodwill of $41.6 million arising from the Business Combination is primarily attributable to the market position of the AgroFresh Business. This goodwill is not expected to be deductible for income tax purposes.

For the two months ended September 30, 2015 (Successor), the Company incurred approximately $1.8 million of transaction expenses directly related to the Business Combination.

The Company incurred $0.1 million and $1.4 million of transaction expenses, not reported in the Predecessor condensed consolidated statements of comprehensive income (loss), directly related to the Business Combination for the month ended July 31, 2015 (Predecessor) and the seven months ended July 31, 2015 (Predecessor), respectively. Transaction expenses, which were $1.3 million through June 30, 2015 and $0.7 million for the fiscal year 2014, were reported by the Company in prior 10-Q and 10-K filings which are also not reported with the Predecessor condensed consolidated statements of comprehensive income (loss). Cash outflows of $1.2 million related to transaction expenses previously expensed by the Company are reported as cash outflows for operating activities for the two months ended September 30, 2015. In addition, in connection with the Business Combination, the Company paid deferred underwriter compensation of $7.8 million in connection with the Company’s Public Offering which is included as cash outflows for financing activities for the two months ended September 30, 2015.

The preliminary allocation of the purchase price, as well as the preliminary purchase price, is based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date and is subject to final adjustment to reflect the final valuations, including the final working capital settlement and the value of contingent consideration. These final valuations of the assets and liabilities could have a material impact on the preliminary purchase price allocation disclosed above.

The following unaudited pro forma combined financial information presents the Company’s results as though the Company and the AgroFresh Business had combined at January 1, 2014. The unaudited pro forma condensed consolidated financial information has been prepared using the acquisition method of accounting in accordance with U.S. GAAP (in thousands):

	(Unaudited) (in thousands)
	One month ended			Seven months ended			Three months ended		Nine months ended
	July 31, 2015 (pro forma)			July 31, 2015 (pro forma)			September 30, 2014 (pro forma)		September 30, 2014 (pro forma)
Net Sales	$	1,990		$	51,515		$	65,745	$	112,239
Net (loss) income	$	(5,870	)	$	(37,585	)	$	35,527	$	2,218