PUBLIC VERSION FILED ON: FEBRUARY 27, 2020

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE MINDBODY, INC., CONSOLIDATED STOCKHOLDER LITIGATION C.A. No. 2019-0442-KSJM

FIRST AMENDED VERIFIED CONSOLIDATED CLASS ACTION COMPLAINT

Lead Plaintiffs Luxor Capital Partners, LP, Luxor Capital Partners Offshore

Master Fund, LP, Luxor Wavefront, LP, and Lugard Road Capital Master Fund, LP

(collectively, “Lead Plaintiffs” or “Luxor”), by and through their attorneys, bring

this verified consolidated class action complaint (the “Consolidated Complaint”) on

behalf of themselves and all other similarly situated former stockholders of

MINDBODY, Inc. (“Mindbody” or the “Company”) against the defendants named

herein, in connection with the sale of Mindbody for $36.50 per share to Vista Equity

Partners (“Vista”), pursuant to a merger agreement dated December 23, 2018 (the

“Merger Agreement”). Except for allegations specifically pertaining to Lead

Plaintiffs and Lead Plaintiffs’ own acts, the allegations in the Consolidated

Complaint are based upon information and belief, which includes but is not limited

to: (i) Lead Plaintiffs’ analysis of, and communications with, Mindbody

management and its Board; (ii) Mindbody’s public filings with the United States

Securities and Exchange Commission (the “SEC”); (iii) other publicly available

data, including information provided by third party sources; (iv) documents that

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Lead Plaintiffs obtained pursuant to Section 220 of the Delaware General

Corporation Law; and (v) limited and incomplete document productions in the above-captioned consolidated action.

NATURE OF THE CASE 1. This action is brought by Luxor, which owned 18.9% of Mindbody’s outstanding common stock prior to the challenged buyout of Mindbody by Vista (the

“Merger”). That transaction was corrupted by (i) Mindbody founder, Chairman, and

CEO Richard Stollmeyer, (ii) Mindbody CFO Brett White, and (iii) Eric Liaw, the constituency director for venture capital firm IVP, each of whom was motivated to sell Mindbody at an artificially depressed price.

2. Mindbody was a rapidly growing software company that dominates the market for booking fitness classes and spa appointments. Stollmeyer co-founded

Mindbody in 2001. He took it public in 2015.

3. Mindbody suffered from a severe separation of ownership and control.

Stollmeyer and IVP held Class A and super-voting Class B shares representing approximately 32.1% of the Company’s voting power, even though their combined economic interest was just 6.6%. The supervoting shares were time-limited. IVP’s internal documents reflect that it wanted to exit its investment in 2018.

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4. Stollmeyer knew that a sale to Vista would provide him with

5. In a post-Merger interview for a podcast, Stollmeyer expressed his exasperation with how, prior to the Merger, when “98% of his net worth” was tied up in “extremely volatile” Mindbody stock, he took flak for selling “tiny bits” of his stake in the public market, which he described as “kind of like sucking through a very small straw”:

Stollmeyer: …. [F]or the entrepreneur or particularly for the CEO, [an IPO] is not a liquidity event. Your capital is locked inside the business, and you can sell tiny bits of it, called the 10b5-1 plan where you decide essentially a year in advance, a couple of quarters in advance, you come up with a plan that says sell off a little bit on these predefined dates. It doesn’t matter if the stock got hammered, it doesn’t matter if the stock’s high. So, it’s kind of like sucking through a very small straw. For me, I had been at it for a long time.

Q: How many years?

Stollmeyer: We were public in 2015, so I’d been at it for 15 years. We would have public investors. I would have them challenge me that I was selling my own stock, and he was like, “Don’t you believe in your own company, Rick?” 98% of my net worth is in the stock of my company, which is

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extremely volatile. I’m in my 50s now, and I’ve got kids in college. What kind of question is that?1

6. In early 2018,

7. One year later, due to the close of the Merger, Stollmeyer’s

The Merger allowed

His net worth was no longer tied up in a single illiquid, highly volatile stock.

8. Stollmeyer sought out a sale of Mindbody. On August 7, 2018,

Stollmeyer met with an investment banker. The banker reconnected him to Vista

1 Alejandro Cremades, Rick Stollmeyer On Selling For $1.9 Billion The Company That He Created Out Of His Own Garage, https://alejandrocremades.com/rick- stollmeyer-on-selling-for-1-9-billion-the-company-that-he-created-out-of-his-own- garage/. 4

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principal Monti Saroya, who had previously talked to Stollmeyer about buying

Mindbody.

9. On October 8-9, 2018, Stollmeyer attended a two-day Vista retreat. He met with Saroya and Vista founders Robert Smith and Brian Sheth. Stollmeyer found these meetings “mind blowing” and “inspiring.” And for good reason. Vista’s founders made presentations with slides labeled

Stollmeyer met Vista portfolio CEOs. Within three months, Stollmeyer had agreed to sell Mindbody to Vista. Before the stockholder vote, Stollmeyer was already celebrating with Vista’s Saroya and Vista portfolio company CEO Reggie

Aggarwal in Vista’s Super Bowl suite:

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(Stollmeyer is center; Aggarwal is to Stollmeyer’s left; Saroya is to his right.)

10.

Stollmeyer wanted to operate Mindbody “freed from the shackles of public market investors.” He planned to work for at least another three to five years.

Stollmeyer wrote that he would “not support the sale of MB at this time” unless he was assured that the acquirer would retain management post-buyout. Vista assured

Stollmeyer he would remain CEO post-buyout. As Stollmeyer said the day the deal was announced, “Vista loves me and wants to step on the gas. No retirement in my headlights!”

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11.

Stollmeyer also knew that he would receive new stock options in the post-merger company.

12. The entire senior management team was incentivized to sell Mindbody to Vista. Stollmeyer learned that management would receive new options for of the post-closing company – management’s pre-closing equity stake in

Mindbody.

13. To summarize, Vista’s purchase of Mindbody was a life-transforming, personally enriching event for Stollmeyer for reasons not shared by the public stockholders. Stollmeyer expected to:

•

•

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14. Stollmeyer and his colleagues manipulated the sale process to obtain massive personal benefits.

15. On October 16, Vista’s Saroya informed Stollmeyer that Vista was interested in acquiring Mindbody at “a substantial premium to [MINDBODY’s] recent trading range.” Mindbody’s 30-day VWAP prior to Vista’s October 16 indication of interest was $38.46, and Mindbody’s stock traded as high as $41.25 per share in October. Stollmeyer delayed informing his board of directors of Vista’s interest, and never disclosed to Mindbody’s board or its public stockholders Vista’s willingness to pay in excess of $41.25 per share.

16. After receiving Vista’s indication of interest, Stollmeyer and White drove down Mindbody’s stock price. After delaying the Company’s Q3 earnings call, Stollmeyer and White decided to inform Mindbody’s stockholders of a

“substantial guide down for the quarter” and “a significant reset of our Q4 growth expectations.” On November 6, 2018, Stollmeyer and White threw a recent acquisition “under the bus,” stating that “we’ve been humbled by the last couple of quarters in dealing with the magnitude of integrating these [newly acquired] businesses and ramping up growth at the same time.” Mindbody’s stock price plummeted by approximately 25% on the news.

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17. Stollmeyer knew that his “guide down” and “reset” would cause

Mindbody’s stock price to drop significantly. Stollmeyer and White also knew that this price drop was not justified by the Company’s actual performance and growth expectations. The Company’s internal projections for Q4 remained unchanged. As

Stollmeyer explained internally to management, “we are resetting street expectations to position ourselves up for future beat and raises.”

18. Meanwhile, Stollmeyer continued his private conversations with

Vista’s Saroya, steered the Company to Vista, and foreclosed price competition.

Stollmeyer vetoed outreach to certain potential alternative bidders, and manipulated the data room to provide substantially more diligence to Vista than any other prospective acquirer. Vista used its first-mover advantage to make a preemptive bid at $35 per share on December 18, 2018 – a mere 3 days after Mindbody opened the data room for the other potential bidders. Stollmeyer then accelerated the bid process to prevent other prospective acquirers from bidding.

19. The Board set up an ineffective special committee (the “Transaction

Committee”) that had limited power. IVP’s constituency director, Eric Liaw, was allowed to head the committee, despite IVP’s undisclosed desire to sell the Company in 2018.

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20. On December 24, 2018, Mindbody announced that it had agreed to sell itself to Vista for $36.50 per share, an 18.2% discount to Mindbody’s 52-week high

($44.60 per share), 16.8% discount to Mindbody’s stock price in late September

($43.85 per share) and far below the price Vista had been willing to pay only two months earlier. Stollmeyer and IVP entered into a voting agreement requiring them to vote their 32.1% voting power (approximately 46.2% when taking into account

Mindbody options and RSUs) in favor of the transaction.

21. The Merger Agreement included an illusory go-shop that Stollmeyer exhibited no interest in pursuing. The go-shop was scheduled over the year-end holidays and it required any prospective bidder to enter into a definitive alternative agreement within 30 days to qualify for the reduced go-shop termination fee. But, as Qatalyst advised, any potential bidder needed four to five weeks of diligence to even provide an indication of interest. Stollmeyer and White sabotaged the go-shop by disappearing on vacations, during which time they made themselves available to

Vista but refused to schedule any meetings with prospective bidders.

22. During the go-shop, Stollmeyer learned that Mindbody’s Q4 not only

“massively beat” analyst estimates, it beat the Company’s prior guidance (i.e., the guidance that pre-dated Stollmeyer’s “guide down” and “reset”). Stollmeyer kept

Mindbody’s Q4 results from potential bidders, except for Vista. Mindbody CFO

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Brett White stated in an email to Mindbody’s Audit Committee, “[s]ince our Q4 ’18 revenue exceeded consensus pretty meaningfully ($68.3m actual vs $66m consensus) we think the right thin[g] to do is to publicly release this information via

8-K no later than Feb. 7 so the shareholders have the information before they vote.”

Mindbody’s fiduciaries withheld the Q4 results.

PARTIES AND NON-PARTIES 23. Lead Plaintiffs are part of the Luxor Capital Group, a private investment firm that invests in public equity, fixed income markets and private companies. Luxor owned Mindbody shares since 2016 and regularly engaged with

Mindbody’s senior management, including Stollmeyer, regarding publicly available information about the Company. Indeed, Stollmeyer described Luxor as having

“unparalleled knowledge of MB” and “unfettered access to [CFO] Brett White and me for years.” At the time of the sale to Vista, Luxor beneficially owned 9,074,929

Class A shares of Mindbody, representing approximately 18.9% of Mindbody’s outstanding common stock. Luxor also owned 2,634,769 shares issuable upon conversion of Convertible Notes.

24. Defendant Stollmeyer co-founded Mindbody in 2001, and served as the

Company’s Chairman and CEO since October 2004. As of the January 18, 2019 record 11

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date (the “Record Date”) for the Special Meeting, Stollmeyer held 264,618 Class A shares (1 vote per share) and options and 1,543,952 Class B super-voting shares (10 votes per share) and options, including shares owned by family members and/or subject to a proxy to Stollmeyer. Stollmeyer’s Class B super-voting shares gave him approximately 19.8% of the Company’s fully diluted voting power. The Class B shares were set to automatically convert to Class A shares in 2021, after which

Stollmeyer’s voting power would match his economic ownership of the Company of less than 4%. Vista retained Stollmeyer at the post-buyout Company.

25. Defendant Brett T. White served as Mindbody’s Chief Financial Officer and Chief Operating Officer since 2013. As of the Record Date for the Special

Meeting, White held 138,702 Class A shares and options and 165,874 Class B super- voting shares and options. Vista retained White at the post-buyout Company.

26. Defendant Eric Liaw served as a Company director since February

2014. Liaw served as Chairman of the Transaction Committee and a member of the

Audit Committee. Liaw is a general partner of non-party IVP, a venture capital firm.

IVP began investing in Mindbody in 2012, invested over $20 million in Mindbody prior to the Company’s 2015 IPO, and nominated Liaw to the Board. IVP’s investment in Mindbody was part of a fixed-life investment fund, which seeks to exit its investments between three to five years. IVP had a 2018 target date to

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liquidate its Mindbody investment, and Liaw was planning to step down from the

Board in 2019. Before the Merger, IVP held 1,039,349 shares of Class A stock and

1,602,683 shares of Class B stock (67.5% of the Company’s outstanding Class B stock), which gave IVP approximately 24.6% of the Company’s total voting power.

27. Non-parties Katherine Blair Christie, Court Cunningham, Gail

Goodman, Cipora Herman, Adam Miller, and Graham Smith were members of the

Board of Directors of Mindbody.

28. Non-party Vista is a private equity firm headquartered in San Francisco,

California with more than $46 billion in cumulative capital commitments. Vista invests in companies that are generally past the venture stage of their lifecycle. Vista markets itself as “exclusively invest[ing] in software, data, and technology-enabled organizations led by world-class management teams.”

29. Non-party Mindbody is a Delaware corporation headquartered in San

Luis Obispo, California, that was publicly traded on the NASDAQ under the ticker symbol “MB.” Mindbody operates a cloud-based business management software and payments platform for businesses in the wellness services industry. Mindbody initially focused on the fitness industry, eventually dominating the U.S. market for booking fitness classes. By the time of the acquisition, Mindbody had made significant inroads into international markets and non-fitness wellness companies,

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such as beauty salons and spas. After the Merger, Mindbody became a wholly- owned subsidiary of Vista.

30. Non-party Qatalyst is an investment bank that acted as Mindbody’s financial advisor in connection with the sale to Vista. Qatalyst was founded by two former Vista employees, Brian Cayne and Frank Quattrone, and has received tens of millions of dollars for representing Vista and Vista targets in buyouts. Frank

Quattrone’s brother, David Quattrone, is also the co-founder of CVent, which was sold to Vista in 2016. David Quattrone remains CVent’s Chief Technology Officer under Vista’s control. Shortly before the sale of Mindbody to Vista, Qatalyst’s Jeff

Chang acted as financial advisor to Ping Identity and Lithium Technologies, Inc.

(“Lithium”) in their sales to Vista. While advising the Mindbody Transaction

Committee, Chang was also acting as financial advisor to Apptio, which was in the process of being acquired by Vista. Chang had also just represented Vista in connection with its investment in iCIMS. The Proxy did not disclose Qatalyst’s or

Chang’s deep relationships with Vista.

FACTUAL BACKGROUND

P. Mindbody Positions Itself for “Much Greater Growth” 31. Mindbody operates a cloud-based business management software and payments platform for businesses in the wellness services industry, including pilates, yoga and spinning. In 2005, the Company launched Mindbody Online, which was 14

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the first fully cloud-based “software as a service” or “SaaS” platform targeting the wellness industry. Since then, Mindbody increased its total addressable market and made significant investments to increase market penetration and grow consumer online bookings. Mindbody also expanded its services to aggregate available classes and appointments, and released its application programming interface platform to allow developers and integration partners to build custom private apps.

32. In 2012, Mindbody received multiple rounds of venture capital funding, including from IVP. Stollmeyer took the Company public in 2015. In the years leading up to the IPO, Stollmeyer and Vista discussed a buyout and in 2017, Vista reconnected with Stollmeyer but chose not to engage in buyout talks at that time because the stock “was then trading at an all-time high.” These facts were not disclosed in the Proxy.

33. After the IPO, Mindbody continued to grow organically and through acquisitions. In the first quarter of 2018, Mindbody made two strategic acquisitions:

(a) On February 19, 2018, Mindbody acquired FitMetrix, Inc.

(“FitMetrix”), a company that integrates fitness studio

equipment and wearables with performance tracking technology

(the “FitMetrix Acquisition”).

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(b) On April 2, 2018, Mindbody paid $150 million to acquire Booker

Software, Inc. (“Booker”), a cloud-based business management

company for salons and spas, which added (i) 10,000 salons and

spas to the Mindbody marketplace, and (ii) a marketing software

for wellness businesses called “Frederick.”

Upon the acquisition of Booker, Mindbody’s stock price closed at $37.50 per share.

34. Throughout 2018, Stollmeyer and White repeatedly informed the

Company’s stockholders that the costs associated with integrating Booker into

Mindbody were investments that would spur Mindbody’s growth and profitability in 2019 and thereafter. For example, on May 8, 2018, Mindbody held its Q1 2018 earnings call, where Stollmeyer explained Mindbody’s strategy as follows:

We’re significantly investing both in Booker and FitMetrix to set the stage for a much greater growth to come . . . . [W]e’re layering in the significant OpEx to get that done quickly so that we can exit 2018 with a truly unified and aligned business, capable of returning to profitability and growing strongly for years to come.

35. On July 31, 2018, Mindbody held its Q2 2018 earnings call. Stollmeyer reported “solid progress on our integration, strong early adoption of Frederick and

FitMetrix, continued success in target market subscriber growth and rapid expansion of our consumer brand.” He reiterated management’s expectation that Mindbody’s acquisitions would “fuel strong growth in the target market customer base in 2019 .

. . to open a new chapter in our growth story.” In response to questions by analysts, 16

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Stollmeyer assured investors that Mindbody’s guidance for non-GAAP net income losses was the result of integration costs and not concerns with Mindbody’s growth.

Stollmeyer explained: “we’re in the sweet spot of adoption of fitness. There’s no end in sight for fitness growth. The market is still growing.”

36. Stollmeyer emphasized that Mindbody’s integration efforts would result in significant growth in 2019 and beyond:

We’re still very bullish on where this is going to take us in 2019. We just want to be cautious for the balance of the year . . . . MINDBODY and Booker united . . . is going to fuel much greater growth in the periods ahead . . . . There’s no one in the world that has our go-to- market capabilities now in any of our target markets and nobody has the strength of our products . . . . [W]e’re very excited about our long- term growth prospects. We’re excited to return to profitability in 2019 . . . .

37. White again reiterated Stollmeyer’s message, stating: “We remain on target to return to non-GAAP profitability in 2019 . . . we’ve done a lot of heavy lifting on the integration.”

Q. Stollmeyer and IVP Each Become Interested in Selling Mindbody 38. As noted above, Stollmeyer and IVP controlled approximately 32.1% of the vote (and approximately 46.2% of the vote when taking into account Mindbody options and RSUs), even though their economic interest was approximately 6.6%.

Their super-voting stock was subject to a time-based sunset provision, which would automatically convert the Class B super-voting stock to common stock by 2021,

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leaving Stollmeyer and IVP with less than 10% of the vote. As a result, Stollmeyer and IVP had an ever-shortening runway in which they could exert their outsized voting control. This dynamic created a powerful incentive for Stollmeyer and IVP to use their control while they had it to engage in self-interested conduct.2

39. Stollmeyer wanted to take Mindbody private

while also keeping his position as CEO

Stollmeyer had no plans to retire from the

Company he founded, but he was tired of the complexities and stresses of running a public company and wanted to “be freed from the shackles of public market investors.”

40. As noted above, Stollmeyer revealed in an interview that selling stock post-IPO under his 10b5-1 plan was “kind of like sucking through a very small straw”:

[F]or the entrepreneur or particularly for the CEO, [an IPO] is not a liquidity event. Your capital is locked inside the business, and you can sell tiny bits of it, called the 10b5-1 plan where you decide essentially a year in advance, a couple of quarters in advance, you come up with a plan that says sell off a little bit on these predefined dates. It doesn’t matter if the stock got hammered, it doesn’t matter if the stock’s high. So, it’s kind of like sucking through a very small straw. For me, I had

2 See Jill E. Fisch and Steven Davidoff Solomon, The Problem of Sunsets, 99 B.U.L. REV. 1057, 1083 (2019) (“knowledge that the founder’s control is drawing to an end can cause the founder to engage in short-termist behavior such as excessive risk- taking or conservatism, self-dealing, or opportunistic behavior with other ventures”). 18

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been at it for a long time…. We were public in 2015, so I’d been at it for 15 years.… 98% of my net worth is in the stock of my company, which is extremely volatile. I’m in my 50s now, and I’ve got kids in college.

41. In February 2018, Stollmeyer executed a new 10b5-1 plan

Stollmeyer told

42.

43. IVP also wanted to force a sale of Mindbody. The IVP fund that made the Mindbody investment in 2012 was past its three to five-year investment horizon.

IVP’s Mindbody investment was entering its seventh year by late 2018.

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44. IVP’s desire to sell was not theoretical. An internal IVP presentation from an August 6, 2018 IVP Partners Meeting states that IVP’s target exit date for its

Mindbody investment was “2018.” IVP’s designee, Liaw, planned to step down from the Board in 2019. IVP could not easily sell-off its large block of Mindbody stock on public markets without incurring a discount. IVP knew that the best way for it to exit its Mindbody investment quickly was to sell the Company quickly. IVP was highly motivated and well positioned, as a Class B stockholder with over 24% of Mindbody’s voting power and a representative on the Board, to push for a buyout in late 2018.

R. Vista Emerges as an Ideal Solution for Stollmeyer and IVP 45. On August 7, 2018, in a meeting with Jeff Chang, an investment banker from Qatalyst, Stollmeyer shared his frustrations with running a public company and his preference for selling Mindbody to a private equity fund that would agree to employ Stollmeyer and his management team in the post-merger entity.

46. Within hours after the meeting, the Qatalyst banker re-connected

Stollmeyer with Vista Principal Monti Saroya and introduced Stollmeyer to contacts at suggesting in each case that they meet to discuss Stollmeyer’s “vision and the

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platform that he is building.” Saroya quickly responded to set up a meeting with

Stollmeyer.

47. Vista has a history of retaining management in take-private transactions. Of the twenty companies Vista acquired in 2017 and 2018, Vista kept senior management aboard at seventeen of them, including the management teams of Lithium, Datto, Applause, MarketTrack, and Xactly. Vista also kept senior management in the 2016 acquisitions of Cvent, Ping Identity, RDC, and Infoblox.

48. Vista also has a history of tying retained management’s post- transaction financial rewards to Vista’s ROI or MOIC. In connection with its buyout of Solera, Vista provided buy-side equity to the target CEO that positioned the target

CEO to receive almost $1 billion over a seven-year period if Vista achieved a four times cash-on-cash return on its investment.

49. On August 23, 2018, Saroya and Vista Vice President, Nicolas Stahl, met with Stollmeyer onsite at Mindbody to discuss Mindbody’s business and

“Rick’s goals.” While Stollmeyer was not yet part of the Vista “family,” Vista invited Stollmeyer to attend Vista’ October 8-9, 2018 CXO Summit in Carlsbad,

California. Vista calls its portfolio company CEOs “CXOs” and the Vista CXO

Summit is an annual Vista retreat for the Vista portfolio company CXOs. Stollmeyer

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did not meet with until mid-October and early November, respectively.

S. Management Touts the Company’s Strong Prospects 50. Throughout September 2018, Stollmeyer and White touted the

Company’s acquisitions, including Booker, as investments that would spur growth in 2019 and thereafter. Mindbody’s nonpublic management projections included a

Booker business customer price increase that would result in $1.9 million in incremental revenue for Mindbody between the second and fourth quarters of 2019.

51. On September 9, Stollmeyer informed management that “[o]ur acquisitions, including Booker/Frederick and Fitmetrix improve our market position further.” The same day, in an email to “MB Leaders,” Stollmeyer endorsed an analyst report issued by Wells Fargo Securities, which stated that the Company “is positioned to generate annual revenue growth of at least 20+% and ultimately, EPS growth in excess of that as the company begins to drive operating leverage and margin expansion.” The report explained that the Company had increased revenues by a compound annual growth rate of 41.7% since 2012, and that average revenues per subscriber had doubled since 2014. Stollmeyer approved of Wells Fargo’s analysis of the Company’s “opportunity to take advantage of consumer + industry trends to build a network effect that drives our marketplace.” Wells Fargo provided

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a price target of $45 per share based on the Company’s strong growth projections in

EBITDA and revenue, “which is based on management’s guidance.”

52. On September 18, the Company held a conference for stock analysts following the Company. During this “analyst day,” Stollmeyer and White highlighted the Company’s market dominance, and growth in various financial metrics, including average revenue per subscriber and the acceleration of gross merchandise volume. Stollmeyer presented slides emphasizing that “The Integration is Working,” meaning that Mindbody was effectively integrating Booker and other recent acquisitions:

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53. Analysts were thrilled. J.P. Morgan maintained an “Overweight” recommendation with a price target of $48, reporting, among other things, that “MB has a great competitive position and a long runway of companies to penetrate and grow as customers.” J.P. Morgan highlighted the importance of integrating Booker’s and Mindbody’s payment systems, noting that “[t]he payment integration is particularly important to revenue and profit” and that the “payment 2.0 and inventory integration [are] two major milestones coming down the pike in 2019.” KeyBanc

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also maintained an “Overweight” recommendation with a price target of $47 due, in part, to Mindbody unveiling “Payments 2.0.”

54. “Payments 2.0” was a new payments platform that simplified on- boarding new customers with a single sign-on payment offering, as compared to the existing and more onerous process that could take several days and 13 different steps to set up. William Blair explained that the Payments 2.0 platform would convert the onboarding process into a single screen and offer instant approval to allow

Mindbody’s salon and spa customers to begin accepting payments and receive payouts in as quickly as two days. The faster onboarding process and payout schedule incentivized customers to take advantage of Mindbody’s payment processing services, increasing the Company’s revenues and profits.

55. Within a week of the analyst day, Mindbody’s stock price had increased by almost 7%. On September 25, 2018, the stock closed at $43.85 per share.

T. Vista Entices Stollmeyer to Take the Company Private 56. At the October 8 and 9 Vista CXO Summit, Stollmeyer continued his discussions with Saroya and Vista co-founders Robert Smith and Brian Sheth. Vista had discussions with Stollmeyer concerning his future with Vista.

57. Throughout the conference, Vista made a series of presentations to

Stollmeyer

Vista Founder, Chairman, & CEO, 25

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Robert Smith’s presentation included a

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59. Stollmeyer texted Saroya that the “[p]resentations are very impressive.”

Stollmeyer also texted Mindbody President Mike Mansbach that the presentations were “mind blowing” and “inspiring” and that “[o]n top of it all. I actually like them.

From Robert Smith on down. You would too.”

60. Vista and Qatalyst also facilitated reference calls and meetings between

Stollmeyer and Vista portfolio company CEOs so that Stollmeyer could learn what it’s like to sell to Vista as a founder of a company and more about Vista’s track record of maintaining, compensating and providing ownership to target management teams. For example, at Stollmeyer’s request, he was introduced to Reggie Aggarwal,

CEO of Cvent, Inc., and Andre Durand, CEO of Ping Identity. Both companies were acquired by Vista in 2016, and both CEOs continued to be employed by Vista.

Stollmeyer later admitted privately that his conversations with Aggarwal and Durand influenced his decision to sell to

Vista. However, Stollmeyer did not inform the Board or Mindbody’s public stockholders of these conversations. Stollmeyer also did not engage in any reference calls with any CEOs from other private equity fund portfolio companies.

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61. The message from Vista was clear: if Stollmeyer would facilitate a sale to Vista, he would be rewarded with post-buyout employment for him and his team and that Vista had a long history

62. As explained further below, prior to the signing of the Merger

Agreement, Qatalyst informed Stollmeyer and White that management could expect to receive a equity stake in the post-merger entity, management’s pre- deal stake in Mindbody. With these pre-signing expectations, Vista successfully recruited and motivated Stollmeyer and White to steer the take-private to Vista and to reduce the sale price. Indeed, the day after the CXO Summit, Vista internally touted that they “have built a strong relationship with the CEO [Stollmeyer].”

U. Stollmeyer Misleads the Board about His Discussions with Vista and Qatalyst 63. On October 9 (the second day of the Vista CXO retreat), Mindbody management decided to delay the Company’s Q3 earnings call from its regularly scheduled date in October to November.

64. Meanwhile, Stollmeyer continued his discussions about a potential transaction with Qatalyst’s Jeff Chang and Vista’s Saroya. On October 11, 2018,

Chang asked Stollmeyer for more information “for the valuation work we did for

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you.” Three days later, Stollmeyer continued the discussion about a potential transaction with Saroya.

65. On October 16, 2018, Saroya provided Stollmeyer with “a direct expression of interest” to acquire Mindbody at “a substantial premium to recent trading range.” Mindbody’s 30-day VWAP prior to October 16 was $38.46 and it traded as high as $41.25 per share in October.

66. Stollmeyer did not immediately tell the Board about Vista’s expression of interest, and never told the Board that Vista said it would pay a “substantial premium” to Mindbody’s “recent trading range.”

67. On October 17, 2018, Stollmeyer informed CFO White, President

Mansbach and General Counsel Kimberly Lytikainen of Vista’s expression of interest.

68. Stollmeyer advised White, Mansbach and Lytikainen that Jeff Chang at

Qatalyst “would be our best choice to advise as we explore the possibility of taking

MB private in 2019.” Stollmeyer further advised that he believed “a sale to PE or synergistic strategic may be our be[s]t path forward to achieve our 3 Year Plan and ultimate vision,” that it “would not be an automatic ‘exit’ for any of us or our principles,” but, “[r]ather, we would lean into an acquirer who sees our current

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capabilities,” and that he “would not support the sale of MB at this time in any other circumstance.”

69. Stollmeyer instructed White, Mansbach and Lytikainen not to discuss a sale of the Company with any Board members. Stollmeyer explained: “I plan to socialize this possibility to the Board Directors individually over the next week.

Please do not hint or otherwise discuss with them or anyone else until I have a chance to do so and give you the green light.” Stollmeyer’s control of the information flow was critically important because Stollmeyer did not inform the Board that he was front-running their decision-making without any authority or that he had engaged in numerous discussions with Vista and Qatalyst to sell Mindbody.

70. The Proxy states that on October 26, in response to an inquiry from

Vista, the Board discussed hiring a financial advisor and forming a Strategic

Committee. The October 26 Board minutes do not mention Vista’s indication of interest, including Vista’s willingness to “pay a substantial premium to recent trading range.” The Board materials and Board minutes do not mention any potential sale process, the hiring of a financial advisor, or the formation of a committee.3

3 By this point, Stollmeyer had coined the deal code name “Vandenberg,” which is the name of a nearby Air Force base that launches rockets, implying that the Company expected explosive growth under the ownership of Vista. The codename is notable for another reason: The first letter of most sell-side codenames is the name of the target. For instance, Qatalyst’s internal codename was “Mamba” for 31

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71. The Proxy states that the Board established the Transaction Committee on October 30. There are no Board minutes from October 30.

72. In reality, Stollmeyer “socialized” the idea of a take-private transaction individually with directors Liaw (who was already predisposed to favor a near-term sale) and Goodman. On October 28, 2018, Stollmeyer sent them talking points in support of a transaction, including:

• We believe more than ever that our [total addressable market] is enormous and is ripe for the taking. That’s why we went out and bought Booker, Frederick and Fitmetrix in 2018.

• Integration of these acquisitions is complex but proceeding well. Full realization of the synergies will take 1-2 years.

• While we actually don’t need capital to invest (we have 5 years on our debt), we would like to be able to move more quickly out of the public eye and have a partner to work with that shares the vision.

73. Sensing an opportunity to sell by IVP’s year-end target, Liaw sprang into action. He offered advice to Stollmeyer on positioning the Company for a sale, suggesting that “[e]arlier on, you can throw the public investors under the bus and complain about how frustrating it is that they only care about things every 90 days and yet their decision making impacts your employee morale, etc.” Stollmeyer

“Mindbody.” “Vandenberg” seemingly reflected Stollmeyer’s real target: selling specifically to Vista. 32

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replied that Liaw’s “suggested approach . . . makes sense” and that he would have no problem telling prospective acquirers that “[w]e have never been better positioned to realize our vision.”

74. Liaw wrote an email with the subject heading “Ad hoc committee” to

Lytikainen, copying directors Stollmeyer, Goodman, and Cunningham. It stated:

“The directors on this email have agreed to form an ad hoc strategy committee for the company.” Liaw instructed Lytikainen that there was no need to invite

Mindbody’s outside counsel, Cooley. Cooley had attended the Board meeting two days earlier, when there was no mention of a potential take-private transaction. By excluding Cooley, Liaw made sure that Board members Christie, Herman, Miller and Smith remained unaware of the take-private discussions.

75. On October 31, the ad hoc Transaction Committee met with Cooley.

Cooley advised that the committee should be “independent and free of any influence from members of management or other directors who, depending on the circumstances, could have (or could be viewed to have) a potential conflict.”

Nevertheless, Liaw saw to it that Stollmeyer continued to attend committee meetings, and that Stollmeyer continued to control the entire process. Liaw also failed to disclose his conflict to the Board.

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76. Stollmeyer still did not inform any Board member of (i) Vista’s indication of interest to acquire Mindbody at “a substantial premium to recent trading range,” (ii) his desire to retain Jeff Chang at Qatalyst, or (iii) his plan to meet with Chang at the Qatalyst retreat at Pebble Beach the following weekend. Nor did

Stollmeyer inform any Board members of his plan to “reset” street expectations and drive down the stock price before continuing his take-private discussions with Vista.

V. Stollmeyer And White Intentionally Drive Down Mindbody’s Stock Price 77. Meanwhile, Stollmeyer and White plotted to drive down Mindbody’s stock price.

78. Mindbody was a fast-growing technology company with different revenue streams. Mindbody generated revenues from: (i) software subscriptions paid for by fitness and beauty businesses; (ii) revenue-sharing arrangements with payment processing companies; (iii) charging fees for other service providers to access its application programming interface; and (iv) fees from its subscribers by operating a consumer market-place where it sourced new customers for its subscribers. Stollmeyer and White knew that analysts had limited insight into

Mindbody’s revenues, and were focused on management comments and guidance concerning revenue growth.

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79. On October 17, 2018, CFO White asked Senior Director of Investor

Relations Nicole Gunderson if she had “a creative way to guide 2019” on the

November 6 earnings call. Gunderson relayed that, even though the Company would realize the monetization of the new Payments 2.0 platform, Stollmeyer “doesn’t want to talk to payments,” and wanted to guide below the Wall Street expectations by “throwing Booker under the bus.” In other words, Stollmeyer planned to downplay the enormous growth potential of the payments-segment of the Company, including Payments 2.0, and to exaggerate the difficulty of the Booker integration.

80. On October 19, Mindbody’s Chief Strategy Officer and former CEO of

Booker, Josh McCarter, complained that management’s draft presentation to the

Board concerning the new three-year plan was “shortchanging…payments and related financial services.” He stressed that the payments segment comprised

“almost 40% of our revenue – and has a huge story to it we can sell to our team and investors.”

81. On October 25, when management circulated a draft Board presentation concerning the Company’s growth narrative, Josh McCarter again complained that

“I still feel we’re missing detail on Payments.”

82. On October 26, Stollmeyer convened a Board meeting. The Board materials that were sent to the Board before the meeting reflected management’s

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optimistic outlook. The materials provided, among other things, that “[m]ultiple revenue streams contribute to organic multi-year growth,” that “Beauty and

Wellness Growth accelerate in 2020/2021,” that “Booker platform customers [will] receive price increases in March 2019,” that “Payments volume growth re-inflects in H2” 2019, and that Mindbody would experience “Mid 20s [% revenue] growth

[in 2019] without an MB price increase.” The board materials did not include

McCarter’s proposed edits emphasizing the “huge story” about the payment segment.

83. In preparing for the Q3 analyst call on Tuesday, November 6,

Stollmeyer told White and Mansbach that “a few hundred thousand of Q4 revenue makes a huge difference Tuesday.” Stollmeyer knew that reducing Q4 guidance by a few hundred thousand dollars would significantly affect Mindbody’s stock price.

84. Internal company documents reveal that Stollmeyer’s desire to provide downward guidance was not consistent with the Company’s actual expectations. For example, on November 3, a manager in financial planning and analysis text messaged

Mindbody’s senior finance manager that there was no basis to deviate from

Mindbody’s prior guidance:

The philosophy is to forecast for the quarter not the month. We use the first month to identify if there is anything material that would affect the quarter. We minimally beat in October – that tells me we are on track to hit our forecast…. The question is – did the assumptions we saw in

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month 1 cause us to think our assumptions for month 2 and 3 need to be revised – I do not know of anything in the flash [revenue report] that would materially change our assumptions for the preceding months.

85. On November 5, the day before the delayed earnings call, Stollmeyer circulated his draft script for the earnings call to management. Among other things, his draft dilated on the impact of “Payments 2.0”: “Due to our large payments portfolio, we expect this to begin materially inflecting payments volume and payments related revenue growth as we exit 2019 and enter 2020.” He also noted that

“costumers drive record sales of Frederick and FitMetrix in Q3, with new sales growing 70% for Frederick and over 200% for FitMetrix since their respective acquisitions.”

86. In the evening of November 5, Stollmeyer suddenly convened the Audit

Committee to review the Q4 forecast and “align[] around a substantial guide down for the quarter.”

87. Stollmeyer revised the Company’s press release for the call to say that

“[w]hile we remain excited about our long term growth opportunities, we encountered greater operating challenges than expected in Q3, and this caused our results to come in below expectations.” Stollmeyer also revised his script for the call to say that:

We also experienced notable execution challenges in Q3, including an unexpected buildup of deferred revenue from Branded Mobile Apps and a slower ramp of our newly formed Fitness and Beauty and 37

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Wellness sales teams. These short term issues reflect in less than anticipated Q3 revenues, and a significant reset to our Q4 growth expectations. In my view these challenges stem from growing pains as our people, processes and systems adjust to the increased complexity of our business post-acquisitions.

88. Stollmeyer’s revisions to the press release and script for the analyst call contradicted the Company’s internal documents, Stollmeyer’s internal statements, and Stollmeyer’s recent statements to stockholders that the integration of Booker,

Frederick and FitMetrix was “working” and “proceeding well.”

89. Stollmeyer and White led the Q3 analyst call on November 6. White provided the lowered guidance. Unlike previous analyst calls where management was upbeat and optimistic, Stollmeyer and White took a somber tone. Their remarks purposefully did not focus on the revenue growth in 2019 from Payments 2.0.

Rather, Stollmeyer threw “Booker under the bus,” emphasizing the downward guidance due to purported integration problems:

The combined effects of our recent acquisitions, go-to market reorganization and expanding consumer and partner initiatives have made MINDBODY a considerably more complex business to operate than it was just 6 months ago, and we did not meet our growth expectations in the second and third quarters. We expect this to continue lagging a bit in Q4 as we communicated in our last call -- or continue to lag the expectations we communicated in our last call.

90. In response to questions from analysts, Stollmeyer represented that the lagging results were caused by a failure of management execution, noting that

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“we’ve been humbled by the last couple of quarters in dealing with the magnitude of integrating these businesses and ramping up growth at the same time.”

91. As pointed out by a JMP Securities LLC analyst, Stollmeyer’s comments conflicted with his analyst day comments that “The Integration is

Working”: “We had the Analyst Day on September 19, and one of your slides was the integration is working. So I mean, at what point did you realize that the results were going to be disappointing?” Stollmeyer’s answer that “we really started realizing in

October” lacked credibility because the Company “minimally beat in October,” which indicated that it was “on track to hit [its] forecast.”

92. Mindbody’s accompanying Form 8K on November 6 projected Q4 revenues of $65 to $67 million – reduced from the $68 million Mindbody had publicly projected in August. This reduction of between $1 and $3 million was much more than the few hundred thousand dollars Stollmeyer had said would make a huge difference to investors. Stollmeyer’s counsel has admitted that the market was

“focused on guidance, future guidance.”

93. The Company internally did not reduce its projected Q4 revenues.

Notwithstanding Stollmeyer’s public downward guidance of $65-$67 million in Q4 revenue, management internally was still projecting Q4 revenue of $68.1 million.

Indeed, as Stollmeyer would later testify under oath, he makes it a practice of guiding

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below actual expectations because “[i]t’s much better to guide a bit below what you’re expecting and then beat those expectations.”

94. After the earnings call, every analyst but one downgraded or reduced its price target for the Company. The Company’s stock price plummeted. After having closed at $32.63 on November 6, the price opened at $25.00 on November 7.

Mindbody’s Senior Director of Investor Relations confirmed that analysts were concerned with management’s inconsistent messaging between the “bullish tone at our recent analyst day” and the new tune that there would be “longer than expected integration and growth acceleration of Booker.”

95. Among other dejected analysts, Jefferies noted that the stock price drop was understandable because of the “unclear signals” about the Booker integration, and lowered its price target from $48 to $42. UBS was “worried” that the Booker salon and spa market was “tougher to enter” than previously thought, and lowered its price target from $43 to $28. J.P. Morgan lowered its price target from $48 to

$31: “the execution miss steps will call into question execution and we expect investors to quickly revert [from a ten year DCF model] to a revenue multiple in the near term,” with the obvious implication that the market had lost faith in management’s growth story.

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96. Stollmeyer knew that his downward guidance would have a devastating effect on the stock price. On November 6, Stollmeyer text messaged Chang, saying

“We’re not surprised by the after-market reaction. I’m fine.”

97. Stollmeyer had wanted to “reset” street expectations. On November 7,

Stollmeyer explained to Mindbody’s newly-hired Chief Technology Officer: that

“We are resetting street expectations to position ourselves up for future beat and raises. We have a strong year of growth planned in 2019.”

98. White continued to cover up the real reasons for the guide down. In a

November 13 interview with a UBS analyst, he repeated Stollmeyer’s misleading narrative that the guide down was due to integration problems with Booker.

99. Liaw recognized that Stollmeyer’s downward guidance would continue to depress the Company’s stock price until the Company announced 2018 Q4 results.

As he privately explained to his partners at IVP, “the company will be in the penalty box through Q4 for sure with lots of questions in investors’ minds until (i) 2019 guidance is provided on the Q4 call and (ii) progress is made against those goals.”

100. The Company never got out of the “penalty box.” Stollmeyer rushed to complete the Merger, and Mindbody never disclosed its Q4 results.

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W. Stollmeyer Pushes to Sell the Company to Vista

101. On November 10, Stollmeyer texted Saroya, and asked to speak by phone. Shortly thereafter, Stollmeyer and Saroya agreed to meet at Vista’s San

Francisco offices. Given the extreme market reaction to Stollmeyer’s downward guidance only days earlier, it is inferable that Stollmeyer reassured Vista that the

Booker integration was “working” and that he was just “resetting market expectations” in a way that would benefit Vista. Their interests were aligned in getting Mindbody sold to Vista at a “premium” to an artificially low stock price.

102. The Board made no effort to oversee Stollmeyer. The Board formed a transaction committee, but according to the Proxy, this was “for the limited purpose of reviewing the potential engagement of a financial advisor to assist Mindbody with evaluating potential strategic alternatives and evaluating candidates for this role, including Qatalyst Partners.” On November 14, 2018, the Transaction Committee interviewed Qatalyst and Centerview as potential financial advisors. Stollmeyer was present throughout the meeting. He pushed for the retention of Qatalyst, including because “Q[atalyst] has proven results with our most likely suitors” (e.g., Vista). By this time, Stollmeyer had already met with Qatalyst at Pebble Beach and was already receiving advice from Qatalyst concerning a deal, including in text messages that morning. The Transaction Committee authorized the retention of Qatalyst.

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103. On November 14, 2018, Qatalyst presented a process timeline to

Stollmeyer and the Transaction Committee. Qatalyst made clear that a potential bidder would need four to five weeks to conduct diligence before submitting a non- binding indication of interest, plus another four weeks to submit a final bid. The timeline contemplated a tentative deal announcement date of February 18, 2019.

104. On November 17, Stollmeyer and Qatalyst selected potential bidders for

Qatalyst to contact. The list was designed to continue Vista’s advantage and depress the price for Mindbody. Stollmeyer and Qatalyst did not include logical financial buyers like SoftBank (which owns the Softbank Vision Fund, the world’s largest private equity fund with $100 billion under management that is focused on technology investments), (a global growth equity firm with $28 billion under management that provides capital and strategic support for growth companies and a history in the technology space), or Tamesek (manages a net portfolio of $308 billion and the largest investor in ClassPass).

105. Stollmeyer and Qatalyst did not include logical strategic buyers, such as InterActiveCorp, which owns over 150 brands, including fitness applications like

Daily Burn, and which may not have needed Stollmeyer and his management team to build Mindbody into a great company. Mindbody’s Chief Strategy Officer, Josh

McCarter, recommended that Mindbody reach out to Global Payments because

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“[t]hey are making a push into vertical saas so they would possible be a good one if we’re trying to push valuation up.” Stollmeyer responded that he removed Global

Payments from outreach – even though Qatalyst had the company on the list – because Stollmeyer “[didn’t] want to work for a Payments company.”

106. On November 19, Stollmeyer executed an engagement letter with

Qatalyst. It provided Qatalyst with a powerful incentive to recommend and push for a sale of the Company. Qatalyst stood to receive $2 million for rendering a fairness opinion and 1.5% of the deal’s value if a deal occurred.

107. Stollmeyer continued his private conversations with Vista, including on

November 21, 2018.

X. The Transaction Committee Changes Its Mandate But Not Its Role 108. On November 26, almost a month after the Transaction Committee’s initial “formation,” the Board executed a written consent to extend the Transaction

Committee’s mandate as follows:

[T]o advise, direct and oversee management of MINDBODY in the review and negotiation of strategic alternatives, to evaluate indications of interest related thereto, to initiate solicitations of indications of interest, to meet on a regular basis with the management of MINDBODY concerning such activities, and to make recommendations to the Board of Directors with respect to the foregoing[.] 109. The Transaction Committee never retained its own counsel or financial advisor, and Stollmeyer and Qatalyst continued to dominate the process. Stollmeyer, 44

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not the Transaction Committee, conducted the review and negotiation of “strategic alternatives.” The Transaction Committee and the Board merely received “updates” from management on the status of management’s activities in arranging a going- private transaction.

Y. Stollmeyer Facilitates an Early Bid from Vista 110. In late November, Qatalyst’s Chang provided Stollmeyer, White and

Liaw with a list of Vista diligence requests. Stollmeyer and White immediately used that list to populate a dataroom for Vista.

111. According to the data room log produced in response to Lead Plaintiffs’

Section 220 Demand, Vista received access to 1,042 documents, while entities providing financing for Vista received access to over 1,000 documents. Every other potential bidder received a tiny fraction of that level of due diligence.

112. Four other potential

received access to a data room with only 35 documents, between

December 15 and 19. was not granted access to the data room at all.

received access to 36 documents between December 17 and 20. Stollmeyer later admitted to Lead

Plaintiffs that he did not want to work for

113. Stollmeyer and Vista had met and spoken privately on numerous occasions since August 2018, well before Vista signed a confidentiality agreement 45

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on December 6, 2018. Stollmeyer and Saroya continued text messaging and speaking by phone throughout November and mid-December concerning Vista’s review of the 1,000 documents in the data room to which Vista received access.

Stollmeyer did not provide the same access to potential competing bidders.

114. Stollmeyer provided Saroya with real-time input on Vista’s valuation model, allowing Vista to quickly submit a preemptive bid. Saroya and Stollmeyer spoke on the evening of December 17 to talk “about go to market and some of

[Vista’s] findings” and they spoke again on December 18 so that Stollmeyer could explain why “Square Scheduler [is] not a relevant competitor” and “[o]rganic growth in Higher Price Tiers [is] better than your team has modeled.” Stollmeyer did not provide the same availability or input to any other potential bidder.

115. Vista knew that its informational advantage gave it an insurmountable head start over any purported competition. For example, on December 18, Vista

Vice President Nicholas Stahl told a co-worker that which was considering an acquisition of Mindbody, “will never get there” because it would take them “3 months” “to figure it out.” Vista, on the other hand, had been

“figur[ing] it out” since August and was ready to pounce.

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116. On December 18, just 3 days after the data room was opened for competing bidders, Saroya informed Stollmeyer that Vista would make an offer for

Mindbody at $35 per share. Vista’s December 18 offer letter noted that

117. Vista’s bid included a merger agreement with an atypically restrictive go-shop provision. To qualify for the lower go-shop termination fee, the competing bidder would need to make a full-blown Superior Proposal and enter into an alternative definitive agreement within 30 days after announcement of the Vista deal

118. Vista confirmed that Stollmeyer would be retained and would receive post-closing rewards that aligned his incentives with Vista’s. In its offer letter, Vista said it was “thoroughly impressed with Mindbody’s executive management team,” and “look[ed] forward to forming a successful and productive partnership with them going forward.” Moreover, the letter made clear that Vista “seeks to invest in and partner with superior management teams,” and that

Z. Management Impedes Other Potential Bidders 119. After Vista made its offer on December 18, Stollmeyer continued to run interference with other bidders. When asked for information, Stollmeyer 47

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told the head of IR that “we’d like to hold off on sharing our marketplace analysis on this until we have price on the table.”

120. On December 19, Qatalyst informed the Transaction Committee that

were still engaged in diligence, and that was early in its due diligence process and had not provided guidance on its valuation of

Mindbody or a timeline for producing a potential indication of interest. Qatalyst informed the Committee that it had instructed to provide an indication of interest within the next 24-48 hours.

121. Stollmeyer, Qatalyst, and the Transaction Committee members were aware that and Recruit would be unable to meet this artificially expedited schedule. According to Qatalyst, any potential bidder without the benefit of the inside track given to Vista needed four to five weeks of diligence to provide an indication of interest. Nonetheless, the Transaction Committee directed Qatalyst to communicate to all potential bidders “the competitive nature of the process, accelerated timeline, and the need for prompt indications of interest.”

122. No potential competing bidder had enough time to make a bid. The other potential bidders withdrew or gave indications that they could not produce bids on “a timeline that would be competitive with Vista.” The Company was on track

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to be sold within IVP’s year-end exit objective, before the Company made public its

Q4 results.

123. On December 20, the Board met with Qatalyst and senior management to discuss that only Vista had bid. The Board instructed Qatalyst to seek $40.00 per share from Vista.

124. On December 21, Vista made a best and final offer of $36.50 per share.

Qatalyst’s presentation made clear that management could expect a equity stake in the post-closing company. The Board decided to accept Vista’s offer. Liaw emailed his IVP colleagues stating that he “personally thought Vista would come up to $38,” but the problem was that the market was depressed and “the rest of the possible field is far behind.”

AA. The Board Approves the Unfair Deal with Vista

125. On December 23, the Board held a meeting during which Qatalyst again advised that other bidders needed time to complete due diligence before they could submit bids. There was no need to rush to sell the Company. Mindbody had plenty of capital to fund its long-term growth, with five years remaining on its debt agreement. Stollmeyer, Liaw, and the rest of the Board did not slow down the process to allow potential bidders to submit bids. Qatalyst delivered its fairness opinion, and the Board unanimously approved the Merger.

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126. As a condition of Vista’s execution of the Merger Agreement,

Stollmeyer and IVP executed irrevocable proxies directing the holder to vote all

Mindbody shares they beneficially owned in favor of the Merger, constituting approximately 32.1% of Mindbody’s outstanding voting power (the “Irrevocable

Proxies”). The Irrevocable Proxies are a share lock-up that, combined with the classified Board, termination fees and other defensive measures, severely impaired the possibility of alternative bids.

127. On Christmas Eve, Mindbody and Vista announced the Sale, touting that the Merger provided a 68% premium to Mindbody’s per share closing price of

$21.72 on December 21. The stated premium is misleading because Mindbody’s stock price was artificially depressed as a result of Stollmeyer’s decision to “reset” street expectations by providing false downward guidance for Q4. The deal price was also an 18.2% discount to Mindbody’s 52-week high ($44.60 per share), 16.8% discount to Mindbody’s stock price in late September ($43.85 per share), and 5.1% discount to Mindbody’s 30-day VWAP before Vista’s October indication of interest.

128. On December 26, Stollmeyer spoke with Luxor representatives.

During the call, Stollmeyer agreed with Luxor that the Company had significant growth potential and value. Stollmeyer justified selling to Vista by saying that after spending time with Vista co-founder Robert Smith, Stollmeyer was impressed by

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the success Vista had achieved in buying Marketo. Stollmeyer explained that Vista had acquired Marketo for $1.79 billion in 2016, and subsequently sold it for $4.75 billion in 2018, and he believed that he could replicate this outcome with Vista. Of no coincidence, one of Vista’s “mind blowing” recruitment presentations to

Stollmeyer from the October 2018 CXO Summit included

129. In other words, Stollmeyer wanted to share in the increase in value of

Mindbody in private hands, as compared to the deflated purchased price at which

Stollmeyer was helping Vista buy the Company.

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BB. The Go-Shop Was Illusory 130. Vista’s Merger Agreement included a thirty-day go-shop period, during which Mindbody could solicit and negotiate alternative acquisition proposals.

131. Vista knew that it was highly unlikely that anyone would “jump” the go-shop. Indeed, upon announcement of the buyout an investment banker from

Credit Suisse informed Saroya that he “really like[d] the company, had “discussed it with strategics,” but did not think they would “jump the go shop but will be natural buyers in the future” when Vista flipped the investment at a premium – as it did with

Marketo.

132. The timing of the announcement and the unusual language of the go- shop deterred a potentially competing bid, especially in light of the nature of the company requiring extensive due diligence and Vista’s unlimited matching rights.

133. The go-shop started on Christmas Eve and ran for just 30 days, a short period during a time of year when many potential bidders do not have adequate resources to source or execute on new transactions. The likelihood that a potential bidder will ever emerge in a go-shop is tiny.4 For a variety of reasons, including the

4 See Guhan Subramanian & Annie Zhao, Go-Shops Revisited, HARV. L. REV. (forthcoming) (finding that a competing bid emerged in only 1 out of 40 go-shops with acquiror matching rights from 2015-2018). 52

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duration of the go-shop and the time of year, the odds of a competing bidder emerging for Vista were infinitesimal.

134. The go-shop required that a competing bidder make a Superior Proposal that was accepted within the 30-day go-shop period to qualify for the reduced termination fee. Contrary to most merger agreements with a go-shop, the Vista go- shop did not have an “Excluded Party” status for bidders who made a proposal that was “reasonably likely” to lead to a Superior Proposal. This feature – coupled with the truncated time-period over the holidays and Qatalyst’s assessment that bidders would need four to five weeks of diligence to make a proposal – effectively neutered the go-shop. Softbank (which owns the Softbank Vision Fund, the world’s largest private equity fund with $100 billion under management that is focused on technology investments) and (a global growth equity firm with $28 billion under management that provides capital and strategic support for growth companies and a history in the technology space) specifically communicated that they could not compete for Mindbody because of the go-shop’s highly compressed timeline.

135. Stollmeyer and White also went on vacation during the go-shop.

Stollmeyer went on vacation during the post-holiday portion of the go-shop, returning on January 14, 2019, with only eight days remaining in the go-shop period.

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Stollmeyer was in a remote location where the “cell service was spotty.” White was on vacation until January 4, 2019, without access to email. On January 6, 2019,

White text messaged Stollmeyer: “I assume that we will be declining any go shop management discussion until you return, correct?”

136. Although Stollmeyer’s “cell service was spotty” and vacation location was too remote to help facilitate a genuine go-shop, he made himself available to

Vista. On January 11, 2019, Stollmeyer quickly answered Vista’s invitation to its

February 2, 2019 Vista CXO Summit in Atlanta. While the CXO Summit was scheduled for two-weeks before the Mindbody stockholder vote and Stollmeyer initially had other travel plans for that week, he immediately cancelled them so that he could attend the CXO Summit and attend the Super Bowl in Vista’s suite.

137. Mindbody provided less diligence to go-shop participants than was provided to Vista and all of Vista’s financing sources. Mindbody only populated the go-shop data room with diligence Vista had before its initial bid of $35 per share

“with some subtractions” and did not include the additional diligence Vista received before making its final bid of $36.50, such as Mindbody’s payment provider contracts.

138. Stollmeyer and White delayed providing diligence effectively running the clock on the go-shop. Mindbody delayed its negotiation with

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concerning a reasonable non-disclosure agreement until only one week was left in the go-shop. White then delayed for days in approving diligence requests, thereby preventing from receiving certain diligence before the January 22, 2019 go-shop deadline. White was aware that he was impeding a potential competing bid

He confirmed with Qatalyst that “The price goes up at noon, right” in reference to the increase in the termination fee at the conclusion of the go-shop.

CC. Mindbody Conceals Its Stellar Q4 Results 139. On January 5, 2019, Stollmeyer gushed to senior management: “Our estimated revenue of $68.3M reflects +37% growth YoY and a massive beat against the Street’s consensus midpoint of $66M.” Betraying his real motives, Stollmeyer commented that Mindbody was “saying goodbye to the public markets (for now).”

140. Mindbody internally confirmed Q4 revenues of $68.3 million. These revenues were higher than Mindbody’s original Q4 guidance issued before

Stollmeyer’s downward adjustment on November 6, 2018 that caused Mindbody’s stock price to fall by approximately 25%.

141.

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but not to other bidders, ISS, or stockholders in advance of the February 14 meeting.

Defendants knew that doing so was wrong.

142. Mindbody’s Q4 results were withheld from Mindbody’s stockholders.

On January 24, White emailed the Audit Committee that “[s]ince our Q4 ’18 revenue exceeded consensus pretty meaningfully ($68.3m actual vs $66m consensus) we think the right thin[g] to do is to publicly release this information via

8-K no later than Feb. 7 so the shareholders have the information before they vote.”

Liaw responded that he “agree[d] with this approach,” but asked if the Board was

“under any obligation to . . . reconfirm that our budget for ‘19” (i.e., the projections given to stockholders) was reliable. Director Graham Smith then responded that he wanted to know what would happen “if the vote fails on Feb. 14” before weighing in on White’s proposal that Q4 results be publicly disclosed.

143. On January 31, Mindbody was drafting a pre-announcement release of its Q4 results because it did not want to do “a full earnings release for Q418.”

Cooley sent the pre-announcement release to Vista’s counsel, and asked if “Vista has a different view on this approach.” Cooley followed up the next day, asking:

“any thoughts on the pre-announcement? We are happy to discuss if Vista had different views on this approach.”

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144. On February 4, Vista’s (and now Mindbody and Stollmeyer’s) litigation counsel, Matthew Solum, wrote to Vista regarding the supplemental disclosures.

145. On February 6, Cooley sent a revised version of the supplemental disclosures that reflected K&E’s comments.

146. The next day, Mindbody filed supplemental disclosures with the SEC.

The Q4 results were not included.

147. Stockholders were never informed of this highly material information before the Merger vote on February 15, 2019. The proxy statement disclosed that

Qatalyst had relied on management’s and research analysts’ projections. ISS made specific mention that the supposed “premium” offered by the deal was below

Mindbody’s share prices in March 2018 through September 2018, which were

“consistently” above the deal price, and that the supposed premium resulted from

“disappointing guidance for Q4 revenue [that] led shares to fall 19.8 percent the next day.” ISS asked about the actual Q4 results and the disparity between the guidance and the actuals. Mindbody responded that it would get back to ISS, but never did. Disclosure of the actual Q4 results would have allowed stockholders to have better information.

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DD. Mindbody Provides False and Misleading Information to Stockholders

146. To obtain approval for the Merger, Mindbody disseminated materially misleading information.

Mindbody’s expected financial results in Q4

147. Stollmeyer and White “reset” street expectations on November 6, 2018 by providing downward guidance for Q4 revenues – reducing expected Q4 revenues by $1 million to $3 million – based on a failure of management “in dealing with the magnitude of integrating these [new] businesses and ramping up growth at the same time.” Stollmeyer made these representations knowing that: (i) Vista had indicated on October 16, 2018 that it was willing to acquire Mindbody at “a substantial premium to recent trading range” and Mindbody had traded as high as $41.25 per share in October; (ii) his downward guidance would cause a significant drop in

Mindbody’s stock price; and (iii) the integration of Booker, Frederick and FitMetrix was “working” and “proceeding well.” Stollmeyer made these representations while he was secretly negotiating a going-private with Vista, which was aligning his personal incentives with obtaining a lower sales price for Vista.

148. After Stollmeyer and White’s surprise announcement for Q4, the

Company’s stock price plummeted from $32.63 at the close on November 6 to

$25.00 at the open on November 7.

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149. Under the “Reasons for the Merger” section in the Proxy Statement, the

Board considered the premium of “approximately 68% to $21.72, the closing price of MINDBODY’s Class A common stock on December 21, 2018,” and the premium of “approximately 42% to “the 30-day volume weighted average price of $25.68,” ending on December 21, 2018.

150. This characterization of the Merger consideration was misleading. The

Proxy did not disclose that the Merger consideration was an 18.2% discount to

Mindbody’s 52-week high ($44.60 per share) and 16.8% discount to Mindbody’s stock price in late September ($43.85 per share). The Proxy did not disclose that on

October 16, 2018, Vista indicated that it would “pay a substantial premium to

[Mindbody’s] recent trading range” and Mindbody had traded as high as $41.25 per share in October. The Proxy did not disclose that Stollmeyer was intentionally

“resetting street expectations to position ourselves up for future beat and raises,” that the purported integration problems at Mindbody did not support Stollmeyer and

White’s significant downward guidance of Q4 revenues, or that Mindbody’s internal projections for Q4 remained unchanged.

151. The Proxy also did not disclose Mindbody’s actual Q4 results that beat

Mindbody’s guidance for Q4 at any time – before and after Stollmeyer’s false downward guidance. Stollmeyer, White and the Board knew in January 2019 that

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Mindbody’s Q4 revenue of $68.3 million materially beat consensus and beat the

Company’s 2018 revenue guidance before the “reset.” They also knew that this was material information for Mindbody stockholders in deciding whether they should vote in favor of the Sale to Vista under the terms of the Merger Agreement and was material to the Board’s recommendation of the Merger. Yet, the Q4 results were intentionally withheld from Mindbody’s stockholders, perpetuating Mindbody’s position in the “penalty box” based on the false impression that Mindbody was experiencing slower growth.

Stollmeyer’s Material Conflicts

152. Stollmeyer had material conflicts of interest that were not disclosed to

Mindbody’s stockholders.

153. As noted above, Stollmeyer had an idiosyncratic need for liquidity.

154. His private interests were aligned with Vista – not with the interests of

Mindbody’s public stockholders. Stollmeyer no longer wanted to run a public company, but did not want to retire. Stollmeyer had numerous private meetings with

Vista and knew that he would be retained at the post-closing Company which would free him “from the shackles of public market investors.”

155. When Lead Edge Capital asked Stollmeyer: “You going to retire? Or keep running it?,” Stollmeyer responded: “Vista loves me and wants to step on the gas. No retirement in my headlights!” Stollmeyer expressed the same expectation 60

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to two of his financial advisors in a text message: “Vista’s in love with me (and me with them). No retirement in my headlights. However, I will likely sell most or all of my stock. It will be incumbent upon them to provide compelling incentives.”

156. Stollmeyer was well-aware of Vista’s philosophy and practice of aligning management’s interests with the interests

This practice incentivized Stollmeyer to push for a sale of Mindbody to Vista at a lower price in the first place.

157. On March 28, 2019, Stollmeyer’s financial advisor reported that

”

158. Stollmeyer also had added assurance that he would be retained because he had a massive golden parachute in the event of his termination. An analyst pegged the value of his golden parachute at 2.8% of the Company’s equity.

159. Stollmeyer’s conflict of interest was material and not disclosed. Nor was it disclosed that Mindbody management expected to its equity position in Mindbody post-closing.

Liaw’s Material Conflicts

160. Liaw’s private interests were aligned with IVP – not with the interests of Mindbody’s public stockholders. The IVP fund that made the Mindbody 61

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investment had an investment horizon of three to five years that expired in 2017,

IVP was looking to exit Mindbody by the end of 2018, and Liaw expected to step down from the Board in 2019. These facts made Liaw highly motivated and well positioned as a representative of a Class B stockholder with over 24% of Mindbody’s voting power to push for a buyout in late 2018, regardless of the interests of

Mindbody’s public stockholders.

161. Liaw did not disclose his conflict of interest to the Board, which allowed him to be appointed Chairman of the Transaction Committee. Liaw’s conflict of interest was material and also not disclosed to stockholders asked to approve the Sale.

The Sale Process

162. The Proxy falsely suggests that the process leading to the Sale of

Mindbody to Vista was open, fair and at arms’ length. Induced by Vista, Stollmeyer ensured that the process leading to the Sale of Mindbody to Vista was not open, not fair, and not at arms’ length. Stollmeyer provided Vista with every possible advantage, including Stollmeyer’s intentional depression of the stock price,

Stollmeyer’s unauthorized back channeling with Saroya from August 2018 through

January 2019, Stollmeyer’s corruption of the pre-announcement process, and

Stollmeyer’s sabotaging of the go-shop. None of this was disclosed to stockholders.

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163. For example, the Proxy did not disclose that:

• Stollmeyer had numerous private meetings with senior Vista employees

(including Vista’s co-founders Robert Smith and Brian Sheth)

discussing a take-private of Mindbody.

• On October 16, 2018, Vista provided Stollmeyer with a “direct

expression of interest” to acquire Mindbody at “a substantial premium

to recent trading range.” Mindbody’s 30-day VWAP prior to October

16 was $38.46 and it traded as high as $41.25 per share in October.

Stollmeyer also failed to disclose this material information to the Board.

• Stollmeyer instructed Qatalyst not to approach Global Payments for a

potential bid even though Global Payments was “making a push into

vertical saas so they would be a possible good one if we’re trying to

push valuation up,” because he could not see himself working at a

payment company.

• Stollmeyer was providing real time input into Vista’s valuation model

as Vista received access to 1,042 documents in its data room, while

other potential bidders

received no real-time input for their valuation

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models from Stollmeyer and access to a data room with only 35

documents.

• Stollmeyer refused to provide diligence requested by

made its initial bid of $35 per share, even though Vista and Mindbody

did not enter into an exclusivity agreement, and Stollmeyer later

admitted that he did not want to work for

• Qatalyst and the Transaction Committee knew that no other potential

bidder had enough time to complete diligence and submit a bid that

could be accepted and lead to a definitive alternative agreement within

the go-shop period, especially when nine of the 30 days consisted of the

end-of-the-year holiday season.

• Stollmeyer and White went on vacation during the go-shop. Stollmeyer

was on vacation in a remote location where the “cell service was

spotty,” returning only on January 14, 2019, while White agreed to

decline any management meetings with potential bidders until

Stollmeyer’s return from vacation. White was also on vacation until

January 4, 2019, without access to email.

• Mindbody provided less diligence to the go-shop participants than was

provided to Vista and all of Vista’s financing sources. Mindbody only

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populated the go-shop data room with diligence Vista had before its

initial bid of $35 per share “with some subtractions” and did not include

the additional diligence Vista received before making its final bid of

$36.50, such as Mindbody’s payment provider contracts.

• Softbank and decided they could not compete for

Mindbody due to the go-shop’s highly compressed timeline;

• White delayed providing with diligence so that would not

receive certain due diligence before the January 22, 2019 go-shop

deadline.

EE. The Merger Consideration is Unfair 164. The Merger Consideration is a mere 2.8% premium to Mindbody’s 30- day VWAP immediately before the November 6, 2018 earnings call when Stollmeyer delivered a “reset” of guidance. The deal price was also an 18.2% discount to

Mindbody’s 52-week high ($44.60 per share), 16.8% discount to Mindbody’s stock price in late September ($43.85 per share), and 5.1% discount to Mindbody’s 30-day

VWAP the day before Vista’s October indication of interest.

165. Stollmeyer and the Board agreed to the Sale at the trough of a temporary market down turn when there was no need to sell the Company, Mindbody was in the “penalty box” due to Stollmeyer’s sudden downgrade of the Company’s

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expected performance in Q4, and (unbeknownst to public investors) Mindbody was poised to beat Stollmeyer’s downgraded guidance for Q4.

166. The fourth quarter of 2018 was a volatile quarter for the stock market due to investor concerns over rising bond yields, the trade dispute with China and a partial government shutdown. Indeed, December 2018 was the worst December for the stock market since the Great Depression.

167. This temporary market-wide downturn also affected Mindbody’s stock price. For example, as shown by the below chart, on December 3, 2018, Mindbody’s

Class A stock closed at $28.03. By December 19, 2018, it closed at $23.70. December

20 and 21, 2018 brought a further two-day plunge to the stock markets and

Mindbody’s stock, which declined to $21.72. Indeed, the week ending December 21,

2018 was the worst week for stocks since the 2008-2009 financial crisis. In that week,

Mindbody’s Class A stock fell from $24.98 to $21.72 ($3.26), a 13% decline in a single week:

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$50

$45

$40

$35

$30

$25

$20

$15 01-Aug-2018 01-Sep-2018 01-Oct-2018 01-Nov-2018 01-Dec-2018

168. As demonstrated by the charts of the S&P 500 and NASDAQ below, the market-wide downturn was short lived, but Mindbody was sold before its stock had a chance to rebound to where it was in late-September ($43.85 per share):

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169. Mindbody’s stock price declines were caused by Stollmeyer’s downward guidance and market-wide movements that had no bearing on Mindbody’s operative reality or intrinsic value. Indeed, Q4 2018 was an especially inopportune time to sell the Company because Mindbody had not yet realized the returns of the

FitMetrix and Booker Acquisitions, the monetization of a new payments system, or the results of a planned price increase for its customers. Mindbody was poised for explosive growth in 2019.

170. If Stollmeyer and the Board had allowed the sale process to run through

January 2019, as recommended by Qatalyst, potential bidders included in the initial outreach would have had sufficient time to complete their due diligence and stockholders would have learned of the stellar Q4 results, beating the Company’s guidance before the “reset.” By then, Mindbody would also have left the “penalty box” and its stock price would have re-bounded, as was the case with its peers and the rest of the stock market. There is every reason to believe the market for

Mindbody at the end of Q1 2019 would have been at least as strong as it was in

October 2018, when Vista was prepared to pay a “substantial premium” to

Mindbody’s recent trading range.

CLASS ACTION ALLEGATIONS 171. Lead Plaintiffs bring this action on behalf of themselves and on behalf of a class of former public stockholders of Mindbody (the “Class”). Excluded from 68

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the Class are Defendants and any directors or officers of MINDBODY, as well as the members of their immediate families, and any entity in which any of them has a controlling interest, and the legal representatives, heirs, successors, or assigns of any such excluded party.

172. This action is properly maintainable as a class action.

173. The members of the Class are so numerous that joinder of all members is impracticable.

174. There are common questions of fact and law including, among other things the following:

a. Whether Stollmeyer, White, and/or Liaw breached their

fiduciary duties in connection to approving the Merger;

b. Whether Stollmeyer, White, and/or Liaw breached their

fiduciary duty of candor in connection to issuing the false and

misleading Proxy Statement;

c. Whether Lead Plaintiffs and the other members of the Class are

entitled to damages.

175. Lead Plaintiffs’ claims are typical of the claims of the members of the

Class, and Plaintiffs do not have any interests adverse to the Class.

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176. Lead Plaintiffs are adequate representatives of the Class, have retained skilled counsel with extensive litigation in this nature, and will fairly and adequately protect the interests of the Class.

177. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for the party opposing the Class.

178. Defendants have acted on grounds generally applicable to the Class with respect to the matters complained of herein, thereby making appropriate the relief sought herein with respect to the Class as a whole.

COUNT I Breach Of Fiduciary Duty (Against Stollmeyer and White in their Capacity as Executive Officers)

179. Lead Plaintiffs incorporate each allegation set forth above as if fully set forth herein.

180. As Mindbody officers, Stollmeyer and White owed Lead Plaintiffs and all other Mindbody stockholders fiduciary duties of loyalty, care and candor. In connection with the Company’s sale, Stollmeyer and White had an obligation to

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maximize stockholder value and refrain from benefitting themselves at the expense of Mindbody’s common stockholders.

181. Stollmeyer and White initiated and timed the going private process for their own self-interest at an inopportune time for Mindbody’s public stockholders.

Without Board authorization, Stollmeyer conducted deal discussions with Vista for months. Stollmeyer and White knew that they would be retained by Vista post-closing and expected that Mindbody management would double their equity position in

Mindbody post-closing. Stollmeyer and White were also enticed with the opportunity to As a result, Stollmeyer and White were incentivized

Consistent with those incentives, Stollmeyer and White “reset” street expectations on November 6, 2018 by providing downward guidance for Q4 revenues even though internal projections for Q4 remained unchanged. Predictably, Mindbody’s stock price fell substantially. Stollmeyer and White then tilted the sale process to

Vista by, among other things, (i) not reaching out to certain logical buyers and removing other logical buyers because of their own interests; (ii) providing superior diligence to Vista; (iii) accelerating the process after Vista made it acquisition proposal; and (iv) sabotaging the go-shop process.

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182. Stollmeyer and White also misled the Board. Stollmeyer and White did not inform the board that they had “reset” street expectations or that they tilted the sales process to Vista for their own self interests. Nor did they tell the Board that, on October 16, 2019, Vista told Stollmeyer that it would “pay a substantial premium to [Mindbody’s] recent trading range.” Mindbody’s 30-day VWAP prior to October 16 was $38.46 and it traded as high as $41.25 per share in October. As a result of Stollmeyer and White’s failure to disclose material information to the

Board, the Board’s decision to approve the Sale was not fully informed.

183. Lead Plaintiffs and the Class have suffered damages as a result of the acts and conduct of Stollmeyer and White alleged herein, including but not limited to the unfair merger consideration and the lost opportunity of a shareholder maximizing transaction not reached at the trough of the market in late 2018.

COUNT II Breach Of Fiduciary Duty (Against Stollmeyer and Liaw) 184. Lead Plaintiffs repeat and re-allege all previous allegations as if fully set forth herein.

185. As Mindbody directors, Stollmeyer and Liaw owed Lead Plaintiffs and other public stockholders of Mindbody fiduciary duties of loyalty, care, and candor.

As a result, in connection with the sale of the Company, Stollmeyer and Liaw had an obligation to disclose all material information to Mindbody stockholders. 72

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186. In breach of this obligation, Stollmeyer and Liaw chose not to disclose, among other things, Mindbody’s Q4 results even though the Board was aware that those results were material to Mindbody stockholders in deciding whether to approve the Sale. As White explained in his January 24, 2019 email to Mindbody’s

Audit committee, “[s]ince our Q4 ’18 revenue exceeded consensus pretty meaningfully ($68.3m actual vs $66m consensus) we think the right thin[g] to do is to publicly release this information via 8-K no later than Feb. 7 so the shareholders have the information before they vote.” Liaw “agree[d] with this approach.” As did

Mindbody’s counsel, Cooley, which prepared a pre-announcement release of

Mindbody’s Q4 results. Ultimately, however, Stollmeyer and Liaw chose not to disclose Mindbody’s Q4 results.

187. Stollmeyer also did not inform Mindbody’s stockholders that he had

“reset” street expectations to position Mindbody “for future beat and raises” that

Mindbody never had the opportunity to experience or that he tilted the sale process to Vista for his own self-interest. Nor did Stollmeyer inform Mindbody’s stockholders that, on October 16, 2019, Vista told Stollmeyer that it would “pay a substantial premium to [Mindbody’s] recent trading range.” Mindbody’s 30-day

VWAP prior to October 16 was $38.46 and it traded as high as $41.25 per share in

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October. As a result of these omissions (and others discussed above), stockholders voted to approve the Sale without the benefit of all material information.

188. Liaw is also liable for elevating his own interests of causing IVP to exit its Mindbody investment in 2018 over the interests of Mindbody’s stockholders.

Liaw failed to disclose his liquidity motivation to both the Board and Mindbody’s stockholders. He positioned himself as the Chairman of the Transaction Committee and caused Mindbody to enter into the Sale before the market recovered from the worst December fall-out since the Great Depression and before Mindbody made public its Q4 results.

189. Stollmeyer and Liaw’s failure to inform the stockholders and provide full and accurate disclosure is a knowing and deliberate breach of their duty of loyalty, is not in good faith and involves intentional misconduct and a knowing violation of Delaware fiduciary duty law.

190. Lead Plaintiffs and the Class have suffered damages as a result of the acts and conduct Stollmeyer and Liaw alleged herein, including but not limited to the unfair merger consideration and the lost opportunity of a shareholder maximizing transaction not reached at the trough of the market in late 2018.

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PRAYER FOR RELIEF

WHEREFORE, Lead Plaintiffs demand judgment in their favor and in favor of the Class and against all Defendants as follows:

A. Declaring that this Action is properly maintainable as a class action, and certifying Luxor as Class representative and Luxor’s counsel as Class counsel;

B. Declaring that Stollmeyer, White, and Liaw breached their fiduciary duties owed to Lead Plaintiffs and the Class;

C. Awarding damages, including rescissory damages, to Lead Plaintiffs and the Class;

D. Awarding Lead Plaintiffs the costs and disbursements of this Action, including reasonable attorneys’ and experts’ fees; and

E. Granting such other and further relief as this Court may deem just and proper.

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FRIEDLANDER & GORRIS, P.A.

/s/ Joel Friedlander Joel Friedlander (Bar No. 3163) OF COUNSEL: Jeffrey M. Gorris (Bar No. 5012) Christopher M. Foulds (Bar No. 5169) Mark Lebovitch Christopher Quinn (Bar No. 5823) Jeroen van Kwawegen 1201 N. Market Street, Suite 220 Christopher J. Orrico Wilmington, DE 19801 Andrew E. Blumberg (302) 573-3500 BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP BERNSTEIN LITOWITZ BERGER 1251 Avenue of the Americas & GROSSMANN LLP 44th Floor New York, NY 10020 /s/ Gregory V. Varallo (212) 554-1400 Gregory V. Varallo (Bar No. 2242) 500 Delaware Avenue, Suite 901 Wilmington, DE 19801 (302) 364-3600

Co-Lead Counsel for Plaintiffs

DATED: February 20, 2020

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{FG-W0461423.} CERTIFICATE OF SERVICE

I hereby certify that, on February 27, 2020, I caused a true and correct copy of the Public Version of First Amended Verified Consolidated Class Action

Complaint to be served upon the following counsel of record by

File&ServeXpress:

Lisa A. Schmidt, Esquire Ryan D. Stottmann, Esquire Srinivas M. Raju, Esquire Colleen W. Hill, Esquire Matthew D. Perri, Esquire Jarrett W. Horowitz, Esquire RICHARDS LAYTON MORRIS NICHOLS ARSHT & FINGER, P.A. & TUNNELL, LLP One Rodney Square 1201 N. Market Street, 16th Floor 920 N. King Street Wilmington, DE 19801 Wilmington, DE 19801

Gregory V. Varallo, Esquire BERNSTEIN LITOWITZ BERGER & GROSSMAN LLP 500 Delaware Avenue, Suite 901 Wilmington, DE 19801

/s/ Joel Friedlander Joel Friedlander (Bar No. 3163)

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