180 Connect Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
x Preliminary Proxy Statement
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
o Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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x |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Title of each class of securities to which transaction applies:
180 Connect Inc. common stock, par value $0.0001 per share (the common stock)
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(2) |
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Aggregate number of securities to which transaction applies: |
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26,980,045 shares of common stock (consisting of 24,201,648 shares of common stock;
1,768,504 exchangeable shares which are exchangeable into shares of common stock; 743,500
shares of common stock subject to restricted stock units; 17,500 in-the-money options to
purchase common stock; and in-the-money warrants to purchase 266,393 shares of common
stock).
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(3) |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined): |
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The filing fee was based upon the sum of (a) $43,562,966.40 (based upon 24,201,648 shares
of common stock multiplied by the merger consideration of $1.80 per share), plus (b)
$3,183,307.20 (based upon 1,768,504 exchangeable shares multiplied by the merger
consideration of $1.80 per share), plus (c) $1,338,300 (based upon 743,500 shares of
common stock subject to restricted stock units multiplied by the merger consideration of
$1.80 per share), plus (d) $5,600 expected to be paid upon the cancellation of
in-the-money options to purchase common stock (based upon 17,500 shares of common stock
subject to in-the-money options multiplied by the difference between $1.80 and the
exercise price per share of such options), plus (e) $476,843.47 expected to be paid upon
the cancellation of in-the-money warrants to purchase common stock (based upon
in-the-money warrants to purchase 266,393 shares of common stock multiplied by the
difference between $1.80 and the exercise price per share of such warrants).
In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the
filing fee was determined by multiplying 0.00003930 by the sum of the preceding sentence.
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(4) |
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Proposed maximum aggregate value of transaction:
$48,567,017
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(5) |
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Total fee paid:
$1,909
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o |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing. |
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(1) |
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Amount Previously Paid:
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(2) |
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Form, Schedule or Registration Statement No.:
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(3) |
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Filing Party:
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(4) |
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Date Filed:
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[ ], 2008
Dear Stockholder:
The board of directors of 180 Connect Inc., acting upon the unanimous recommendation of the
special committee of the board of directors, has unanimously approved a merger agreement providing
for the acquisition of 180 Connect Inc. by DIRECTV Enterprises, LLC, subject to certain conditions.
If the merger contemplated by the merger agreement is completed, you will be entitled to receive
$1.80 in cash, without interest and less any applicable withholding taxes, in exchange for each
share of common stock owned by you at the effective time of the merger (unless you have exercised
your appraisal rights with respect to the merger).
At a special meeting of our stockholders, you will be asked to vote on a proposal to approve
and adopt the merger agreement. The special meeting will be held on [ ], 2008 at [9:00
a.m.] local time, at [ ]. Notice of the special meeting and the related proxy statement are
enclosed.
The accompanying proxy statement provides you with detailed information about the special
meeting, the merger agreement and the merger. A copy of the merger agreement is attached as Annex
A to the proxy statement. We encourage you to read the entire proxy statement and the merger
agreement carefully. You may also obtain more information about 180 Connect Inc. from documents we
have filed with the Securities and Exchange Commission.
Our board of directors has determined that the merger is fair to and in the best interests of
180 Connect Inc. and its stockholders and unanimously recommends that you vote FOR the approval
and adoption of the merger agreement. This recommendation is based, in part, upon the unanimous
recommendation of the special committee of the board of directors consisting of four independent
directors.
Your vote is very important. We cannot complete the merger unless a majority of the votes
entitled to be cast by the holders of our outstanding shares are cast in favor of the approval and
adoption of the merger agreement. The failure of any stockholder to vote on the proposal to
approve and adopt the merger agreement will have the same effect as a vote AGAINST the approval
and adoption of the merger agreement.
Whether or not you plan to attend the special meeting, please complete, date, sign and return,
as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or submit your
proxy by telephone or the Internet. If you attend the special meeting and vote in person, your
vote by ballot will revoke any proxy previously submitted.
Thank you in advance for your cooperation and continued support.
Sincerely,
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M. Brian McCarthy
Chairman of the Board
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Lawrence J. Askowitz
Chairman of the Special Committee |
Neither the Securities and Exchange Commission nor any state securities regulatory agency has
approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon
the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is
a criminal offense.
The proxy statement is dated [ ], 2008, and is first being mailed to stockholders on or
about [ ], 2008.
180 CONNECT INC.
6501 East Belleview Avenue
Englewood, Colorado 80111
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ ], 2008
To Stockholders of 180 Connect Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of 180 Connect Inc., will be
held on [ ], 2008 at [9:00 a.m.] local time, at [ ], for the following purposes:
1. Approval of the Merger Agreement with DirecTV. To consider and vote on a proposal to
approve and adopt the Agreement and Plan of Merger, dated as of April 18, 2008, among DIRECTV
Enterprises, LLC, a Delaware limited liability company, DTV HSP Merger Sub, Inc., a Delaware
corporation and wholly-owned subsidiary of DIRECTV Enterprises, LLC, and 180 Connect Inc., pursuant
to which DTV HSP Merger Sub, Inc. will merge with and into 180 Connect Inc., and each outstanding
share of 180 Connect Inc.s common stock, par value $0.0001 per share (other than shares held by
180 Connect Inc. as treasury stock and shares held by stockholders, if any, who have properly
demanded statutory appraisal rights), will be converted into the right to receive $1.80 in cash,
without interest and less any applicable withholding taxes. A copy of the merger agreement is
attached as Annex A to the accompanying proxy statement.
2. Adjournment or Postponement of the Special Meeting. To consider and vote on a proposal to
approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional
proxies if there are insufficient votes at the time of the meeting to approve and adopt the merger
agreement.
3. Other Matters. To transact other business as may properly come before the special meeting
or any adjournment or postponement thereof.
Only common stockholders of record on [ ], 2008 are entitled to notice of and to vote at
the special meeting or at any adjournment or postponement of the special meeting. Holders of
exchangeable shares of record on [ ], 2008 are entitled to receive notice of the special
meeting and to instruct Valiant Trust Company, as the trustee and holder of the Companys Special
Voting Share, via the enclosed Voting Instruction Form, to vote at the special meeting or at any
adjournment or postponement of the special meeting. All stockholders of record and holders of
exchangeable shares are cordially invited to attend the special meeting in person.
Each common stockholder is entitled to one vote for each share held on the record date, and
the trustee is entitled to one vote for each exchangeable share outstanding as of the record date.
Votes cast with respect to the exchangeable shares will be voted through the Special Voting Share
by the trustee as directed by the holders of exchangeable shares.
The approval and adoption of the merger agreement requires the affirmative vote of a majority
of the votes entitled to be cast by the holders of 180 Connect Inc.s common stock and by the
trustee as holder of the Special Voting Share as instructed by the holders of the exchangeable
shares, voting together as one class. Even if you plan to attend the special meeting in person, we
request that each common stockholder complete, sign, date and return the enclosed proxy prior to
the special meeting to ensure that your shares will be represented at the special meeting if you
are unable to attend. If you fail to return your proxy card, your shares will not be counted for
purposes of determining whether a quorum is present at the meeting and will have the same effect as
a vote against the approval and adoption of the merger agreement, but will not affect the outcome
of the vote regarding the adjournment proposal, if necessary. If you are a stockholder of record,
voting in person at the meeting will revoke any proxy previously submitted. If you hold your
shares through a bank, broker or other custodian, you must obtain a legal proxy from such custodian
in order to vote in person at the meeting.
If your shares are held by a bank or broker, please bring to the special meeting your
statement evidencing your beneficial ownership of 180 Connect Inc. common stock and photo
identification.
i
Stockholders of 180 Connect Inc. who do not vote in favor of the approval and adoption of the
merger agreement will have the right to seek appraisal of the fair value of their shares of common
stock if they deliver a demand for appraisal before the vote is taken on the merger agreement and
comply with all requirements of Delaware law, which are summarized in the accompanying proxy
statement. Holders of exchangeable shares, who do not exchange such shares before the vote is taken
on the merger agreement and comply with all requirements of Delaware law, are not entitled to
demand appraisal under Delaware law.
If you hold exchangeable shares and you wish to direct the trustee to cast the votes
represented by your exchangeable shares attached to the Special Voting Share on your behalf, you
should follow carefully the instructions in the Voting Instruction Form, which accompanies this
proxy statement. The procedure for instructing the trustee differs in certain respects from the
procedure for delivering a proxy, including the place for depositing the instructions and the
manner of revoking the proxy. The trustee should receive your voting instructions by []am
(Mountain Time) on [ ], 2008. This will give the trustee time to tabulate the voting
instructions and vote on your behalf. [If you wish to attend the meeting and vote in person,
rather than have the trustee exercise voting rights on your behalf, you may do so by following the
procedures set forth in the enclosed Voting Instruction Form.]
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, COMMON STOCKHOLDERS SHOULD PLEASE
COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY IN THE ACCOMPANYING
REPLY ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON.
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
By order of the Board of Directors,
Kyle M. Hall
Senior Vice President and Chief Legal Officer
[ ], 2008
ii
TABLE OF CONTENTS
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ANNEXES
Annex AAgreement and Plan of Merger
Annex BVoting Agreements
Annex COpinion of William Blair & Co.
Annex DSection 262 of the Delaware General Corporation Law
v
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to address briefly some commonly asked
questions regarding the merger, the merger agreement and the special meeting. These questions and
answers may not address all questions that may be important to you as a stockholder. Please refer
to the Summary and the more detailed information contained elsewhere in this proxy statement, the
annexes to this proxy statement and the documents referred to or incorporated by reference in this
proxy statement, which you should read carefully. See Where You Can Find More Information.
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Q:
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What is the proposed transaction? |
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A.
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The proposed transaction is the acquisition of 180 Connect Inc., which we refer to as 180
Connect, we, us or the Company, by DIRECTV Enterprises, LLC, which we refer to as DirecTV.
DirecTV is a wholly-owned subsidiary of DIRECTV Holdings LLC which, in turn, is a wholly-owned
subsidiary of The DIRECTV Group, Inc. The proposed transaction is to be accomplished through
a merger of DTV HSP Merger Sub, Inc., a wholly-owned subsidiary of DirecTV, which we refer to
as DTV HSP Merger Sub, into 180 Connect, with 180 Connect surviving. |
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Q:
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What will the Companys stockholders receive in the merger? |
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A:
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Upon completion of the merger, our stockholders will be entitled to receive $1.80 in cash, without interest and less any
applicable withholding taxes, for each share of our common stock they own, other than dissenting shares subject to
appraisal rights under Delaware law, which will be treated as described below. For example, if you own 100 shares of our
common stock, you will have the right to receive $180 in cash in exchange for your 180 Connect shares after completion of
the merger, less any applicable withholding tax. |
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Q:
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What will happen to my options and stock appreciation rights in the merger? |
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A:
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Upon completion of the merger, each outstanding option to acquire, or stock appreciation right with respect to, the
Companys common stock granted under our equity incentive plans, whether or not vested, that remains outstanding as of the
closing of the merger will be cancelled and converted into the right to receive a cash payment equal to the number of
shares of the Companys common stock then underlying the option or stock appreciation right, as applicable (assuming full
vesting), multiplied by the amount (if any) by which $1.80 exceeds the applicable exercise price of the option or base
price of the stock appreciation right, as applicable, less any applicable withholding taxes. Options and stock
appreciation rights that have an exercise price or base price, as applicable, in excess of $1.80 per share will receive no
merger consideration and will be cancelled upon the completion of the merger. |
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Q:
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What will happen to my restricted stock unit awards in the merger? |
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A:
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Upon completion of the merger, all restricted stock units, whether or not vested, will be cancelled and converted into the
right to receive a cash payment equal to the number of shares of the Companys common stock underlying the restricted stock
units multiplied by $1.80, less any applicable withholding taxes. |
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What will happen to my warrants in the merger? |
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A:
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Under the terms of the merger agreement, each outstanding warrant to purchase shares of common stock, whether or not
exercisable and vested at the effective time of the merger, will be cancelled and exchanged for the right to receive an
amount in cash, minus any applicable withholding taxes, equal to the product of (a) the total number of shares of Company
common stock subject to such warrant immediately prior to its cancellation and (b) the excess, if any, of $1.80 over the
exercise price per share of Company common stock subject to such warrant. Warrants that have an exercise price equal to or
in excess of $1.80 per share will receive no merger consideration. |
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Q:
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I am a holder of exchangeable shares. What will happen to my exchangeable shares in the merger? |
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A:
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In connection with the merger, 180 Connect Exchangeco Inc. has delivered a notice of redemption to all holders of
exchangeable shares declaring that, subject to the over-riding call right of 1305699 Alberta ULC, the exchangeable shares
shall be redeemed immediately prior to the completion of the merger. 1305699 Alberta ULC has exercised its over-riding call
right in accordance with the terms and conditions of the articles of 180 Connect Exchangeco Inc. and, consequently,
immediately prior to the completion of the merger, each outstanding exchangeable share shall be exchanged with 1305699
Alberta ULC for one share of our common stock. Upon completion of the merger, such shares of common stock shall entitle
the holders to receive $1.80 in cash, without interest and less any applicable withholding taxes for each share of our
common stock they have received in such exchange with 1305699 Alberta ULC. For example, if you own 100 exchangeable
shares, each of these shares will be exchanged for one share of our common stock immediately prior to completion of the
merger, and, upon completion of the merger, you will have the right to receive $180 in cash in exchange for these 180
Connect shares, less any applicable withholding tax. If the merger is not completed for any reason, then the exchangeable
share redemption date shall not occur and no exchange with 1305699 Alberta ULC will take place. |
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Q:
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When and where is the special meeting? |
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A:
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The special meeting of the Company will be held on [ ], 2008 at 9:00 a.m. local time, at [ ]. |
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Q:
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What vote is needed to adopt the merger agreement? |
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The affirmative vote of the holders of at least a majority of the votes entitled to be cast
by the holders of the outstanding shares of the Companys common stock together with the
votes cast by the trustee, pursuant to the Special Voting Share, as instructed by the
holders of the exchangeable shares, voting together as one class, is required to adopt the
merger agreement. |
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Q:
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How does the Companys board of directors recommend I vote? |
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A:
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At a meeting held on April 17, 2008, our board of directors unanimously determined that the merger is fair to, and in the
best interests of, 180 Connect and our stockholders, declared that the merger agreement is advisable and approved the
merger agreement and the other transactions contemplated by the merger agreement. The board of directors of 180 Connect
unanimously recommends that you vote FOR adoption of the merger agreement. |
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Q:
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What effects will the proposed merger have on the Company? |
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A:
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As a result of the proposed merger, the Company will cease to be a publicly-traded company and will be wholly owned by
DirecTV. You will no longer have any interest in the Companys future earnings or growth. Following completion of the
merger, the registration of the Companys common stock and the Companys reporting obligations with respect to the
Companys common stock under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act,, will
be terminated upon application to the Securities and Exchange Commission, which we refer to as the SEC. In addition, upon
completion of the proposed merger, shares of the Companys common stock will no longer be listed on any quotation system. |
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Q:
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What if the proposed merger is not completed? |
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A:
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It is possible that the proposed merger will not be completed. The proposed merger will not be completed if, for example,
a majority of the votes entitled to be cast by holders of 180 Connect stock do not vote to adopt the merger agreement. If
the merger is not completed, 180 Connect will remain a publicly held company. Under specified circumstances, the Company
may be required to pay DirecTV a termination fee and reimburse DirecTV for its expenses as described under the caption The
Merger Agreement Expenses and Termination Fees. The redemption and exchange of Exchangeable Shares is conditioned on
completion of the merger and, if the merger is not completed, the Exchangeable Shares will remain outstanding. |
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Q:
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What do I need to do now? |
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A:
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We urge you to read this proxy statement carefully, including its annexes, and to consider how the merger affects you.
Even if you plan to attend the special meeting, after carefully reading and considering the information contained in this
proxy statement, if you hold your shares in your own name as the stockholder of record, please vote your shares by
completing, signing, dating and returning the enclosed proxy card as soon as possible so that your shares can be voted at
the special meeting of our stockholders. You can also attend the special meeting and vote. DO NOT return your stock
certificates with your proxy. |
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Q:
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What happens if I do not return a proxy card? |
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A:
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If you fail to return your proxy card and you do not attend the special meeting in person, the effect will be that your
shares will not be counted for purposes of determining whether a quorum is present at the special meeting. In addition,
the failure to return your proxy card or attend and vote at the meeting will have the same effect as voting against the
adoption of the merger agreement. |
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Q:
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May I vote in person? |
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A:
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Yes. If your shares are not held in street name through a broker or bank, you may attend the special meeting of our
stockholders and vote your shares in person, rather than signing and returning your proxy card. If your shares are held in
street name, you must get a proxy from your broker or bank in order to attend the special meeting and vote. |
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Q:
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Do I need to attend the special meeting in person? |
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A:
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No. You do not have to attend the special meeting in order to vote your 180 Connect shares. Your shares can be voted at
the special meeting of our stockholders without attending by mailing your completed, dated and signed proxy card in the
enclosed return envelope. |
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Q:
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If my broker holds my shares in street name, will my broker vote my shares for me? |
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A:
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Your broker will not be able to vote your shares without instructions from you. You should instruct your broker to vote
your shares, following the procedures provided by your broker. Without instructions, your shares will not be voted, which
will have the same effect as a vote against the merger. |
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Q:
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May I change my vote after I have mailed my signed proxy card? |
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A:
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Yes. You may change your vote at any time before your proxy card is voted at the special meeting. You can do this in one
of three ways: |
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if you hold your shares in your name as a stockholder of record, you can send a
written, dated notice to the Chief Legal Officer of 180 Connect at 6501 East Belleview
Avenue, Englewood, Colorado 80111 stating that you would like to revoke your proxy; |
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by attending the special meeting and voting in person (your attendance at the
meeting will not, by itself, revoke your proxy; you must vote in person at the
meeting); |
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by submitting a later-dated proxy card to our Chief Legal Officer; or |
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if you have instructed a broker to vote your shares, by following the directions
received from your broker to change those instructions. |
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Q:
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When do you expect the merger to be completed? |
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A:
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We are working toward completing the merger as quickly as possible. We expect to complete the merger during the third
calendar quarter of 2008. In addition to obtaining stockholder approval, all other closing conditions under the merger
agreement must be satisfied or waived (as permitted by law). |
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Q:
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Am I entitled to appraisal or dissenters rights? |
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A:
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Holders of our common stock are entitled to appraisal rights under Delaware law in connection with the merger if they
follow the applicable legal requirements. See The MergerAppraisal Rights. |
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Q:
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Will I owe taxes as a result of the merger? |
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A:
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If completed, the merger will be a taxable transaction for United States and Canadian federal income tax purposes (and also
may be taxed under applicable state, local, provincial and other tax laws). In general, for United States and Canadian
federal income tax purposes, you will recognize gain or loss equal to the difference between (1) the amount of cash you
receive in the merger for your shares of 180 Connect common stock and (2) the tax basis of your shares of 180 Connect
common stock. Refer to the section entitled The MergerMaterial United States Federal Income Tax Consequences of the
Merger and The MergerMaterial Canadian Federal Income Tax Consequences for a more detailed explanation of the tax
consequences of the merger. You should consult your tax advisor on how specific tax consequences of the merger apply to
you. |
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Q:
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What happens if I sell my shares before the special meeting? |
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A:
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The record date of the special meeting is earlier than the special meeting and the date that the merger is expected to be
completed. If you transfer your shares of the Companys common stock after the record date but before the special meeting,
you will retain your right to vote at the special meeting, but will have transferred the right to receive the $1.80 per
share in cash to be received by our stockholders in the merger. In order to receive the $1.80 per share, you must hold
your shares through completion of the merger. |
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Q:
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What other matters will be voted on at the special meeting? |
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A:
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We do not expect to ask our stockholders to vote on any other matters at the special meeting. |
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Q:
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Should I send in my stock certificates now? |
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A:
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No. After the merger is completed, you will be sent a letter of transmittal with detailed written instructions for
exchanging your shares of our common stock for the merger consideration. If your shares are held in street name by your
broker, you will receive instructions from your broker as to how to effect the surrender of your street name shares in
exchange for the merger consideration. Please do not send your certificates in now. |
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Q:
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Will a proxy solicitor be used? |
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A:
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Yes. The Company has engaged [ ] to assist in the solicitation of proxies for the special meeting and the Company
estimates it will pay [ ] a fee of approximately $[ ]. The Company has also agreed to reimburse [ ] for
reasonable administrative and out-of-pocket expenses incurred in connection with the proxy solicitation and indemnify
[ ] against certain losses, costs and expenses. |
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Q:
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Who can help answer my other questions? |
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A:
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If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares, or need
additional copies of this proxy statement or the enclosed proxy card, please contact the Companys Chief Legal Officer at
6501 East Belleview Avenue, Englewood, Colorado 80111, or [ ], our proxy solicitor, at [ ]. |
4
INFORMATION FOR HOLDERS OF EXCHANGEABLE SHARES
In accordance with the voting and exchange trust agreement dated August 24, 2007 by and among
the Company, 180 Connect Exchangeco, Inc. and Valiant Trust Company, the Company issued a Special
Voting Share to the trustee, for the benefit of the holders (other than the Company or its
affiliates) of the exchangeable shares. The Special Voting Share carries a number of votes,
exercisable at any meeting at which the Companys stockholders are entitled to vote, equal to the
number of exchangeable shares then outstanding (other than exchangeable shares held by the Company
or its affiliates).
Each holder of exchangeable shares on the record date for any meeting at which the Companys
stockholders are entitled to vote is entitled to instruct the trustee to exercise that number of
votes attached to the Special Voting Share which relate to the exchangeable shares held by such
holder. The trustee will exercise each vote attached to the Special Voting Share only as directed
by the relevant holder and, in the absence of instructions from a holder as to voting, will not
exercise such votes.
This proxy statement is being presented to each holder of exchangeable shares by the trustee,
together with related meeting materials and a Voting Instruction Form as to the manner in which the
holder may instruct the trustee to exercise the votes attaching to the Special Voting Share.
In connection with the merger, 180 Connect Exchangeco Inc. has delivered a notice of
redemption to all holders of exchangeable shares declaring that, subject to the over-riding call
right of 1305699 Alberta ULC, the exchangeable shares shall be redeemed immediately prior to the
completion of the merger. 1305699 Alberta ULC has exercised its over-riding call right in
accordance with the terms and conditions of the articles of 180 Connect Exchangeco Inc. and,
consequently, immediately prior to the completion of the merger, each outstanding exchangeable
share shall be exchanged with 1305699 Alberta ULC for one share of our common stock. Upon
completion of the merger, such shares of common stock shall entitle the holders to receive $1.80 in
cash, without interest and less any applicable withholding taxes for each share of our common stock
they have received in such exchange with 1305699 Alberta ULC. For example, if you own 100
exchangeable shares, each of these shares will be exchanged for one share of our common stock
immediately prior to completion of the merger, and, upon completion of the merger, you will have
the right to receive $180 in cash in exchange for these 180 Connect shares, less any applicable
withholding tax. If the merger is not completed for any reason, then the exchangeable share
redemption date shall not occur and no exchange with 1305699 Alberta ULC will take place.
5
SUMMARY
This summary highlights selected information from this proxy statement and may not contain all
of the information that is important to you. To understand the merger fully and for a more
complete description of the legal terms of the merger, you should read carefully this entire proxy
statement and the documents we refer to herein. The merger agreement is attached as Annex A to
this proxy statement. We encourage you to read the merger agreement as it is the legal document
that governs the merger. See Where You Can Find More Information. Each item in this summary
refers to the page of this document on which the applicable subject is discussed in more detail.
The Parties to the Merger (Page [ ])
180 Connect
180 Connect is one of North Americas largest providers of installation services to the home
entertainment, communications, enterprise data and home integration service industries. 180 Connect
has over 4,000 employees in 85 branch locations conducting over 10,000 installations and service
calls a day. We operate a fleet of company-owned and leased vehicles ensuring a professional image
and timely arrival at the customer site. 180 Connects principal U.S. markets for its services are
the home entertainment and communications, enterprise data, and home integration service
industries. These industries complement our technical workforce, branch locations, and systems and
infrastructure.
DirecTV
DIRECTV Enterprises, LLC, or DirecTV, is a wholly-owned subsidiary of DIRECTV Holdings LLC
which, in turn, is a wholly-owned subsidiary of The DIRECTV Group, Inc. DIRECTV Holdings LLC and
its subsidiaries, which we refer to collectively as DIRECTV U.S., acquire, promote, sell and
distribute digital entertainment programming via satellite to residential and commercial
subscribers. DIRECTV U.S. is the largest provider of direct-to-home, or DTH, digital television
services and the second largest provider in the multi-channel video programming distribution, or
MVPD, industry in the United States. As of March 31, 2008, DIRECTV U.S. had approximately 17.0
million subscribers.
DTV HSP Merger Sub
DTV HSP Merger Sub is a direct wholly-owned subsidiary of DirecTV formed solely for the
purpose of facilitating the merger.
The Merger (Page [ ])
You are being asked to approve a merger agreement providing for the acquisition of 180 Connect
by DirecTV. Upon the terms and subject to the conditions contained in the merger agreement, DTV
HSP Merger Sub, a wholly-owned subsidiary of DirecTV, will be merged with and into 180 Connect. As
a result of the merger, we will cease to be a publicly traded company and will become a
wholly-owned subsidiary of DirecTV.
Merger Consideration (Page [ ])
Following completion of the merger, each holder of our shares of common stock outstanding
immediately prior to the merger (other than shares owned by us, DirecTV or DTV HSP Merger Sub or
any subsidiary thereof and other than shares owned by stockholders properly demanding appraisal
rights) will be entitled to receive $1.80 per share in cash, without interest and less applicable
withholding taxes, which we refer to in this proxy statement as the merger consideration.
6
After the merger is completed, you will have the right to receive the merger consideration but
you will no longer have any rights as a 180 Connect stockholder. You will receive your portion of
the merger consideration
after exchanging your 180 Connect stock certificates in accordance with the instructions
contained in a letter of transmittal to be sent to you shortly after completion of the merger.
For information regarding the rights of holders of exchangeable shares to receive the merger
consideration, please refer to the summary titled Effect on Exchangeable Shares below.
Effect on Awards Outstanding under 180 Connects Stock Plans and Agreements (Page [ ])
Upon completion of the merger, each outstanding option or stock appreciation right, whether or
not exercisable and vested at the effective time of the merger, will be canceled and converted into
the right to receive cash, in an amount equal to the product of (a) the total number of shares of
common stock subject to such option or stock appreciation right immediately prior to their
cancellation (assuming full vesting) and (b) the excess, if any, of $1.80 over the exercise price
or base price per share of common stock subject to the stock option or stock appreciation right, as
applicable, less any applicable withholding taxes. Options or stock appreciation rights that have
an exercise price or base price, as applicable, that is equal to or greater than $1.80 per share
will receive no merger consideration and will be cancelled upon the completion of the merger.
Upon completion of the merger, each restricted stock unit award that is outstanding at the
effective time of the merger will be canceled and converted into the right to receive $1.80 in cash
for each share of common stock subject to such restricted stock unit award immediately prior to the
effective time of the merger, less any applicable withholding taxes.
Effect on Warrants (Page [ ])
Under the terms of the merger agreement, each outstanding warrant to purchase shares of common
stock, whether or not exercisable and vested at the effective time of the merger, will be cancelled
and exchanged for the right to receive an amount in cash, minus any applicable withholding taxes,
equal to the product of (a) the total number of shares of Company common stock subject to such
warrant immediately prior to its cancellation and (b) the excess, if any, of $1.80 over the
exercise price per share of Company common stock subject to such warrant. Warrants that have an
exercise price equal to or in excess of $1.80 per share will receive no merger consideration.
Effects on Exchangeable Shares (Page [ ])
In connection with the merger, 180 Connect Exchangeco Inc. has delivered a notice of
redemption to all holders of exchangeable shares declaring that, subject to the over-riding call
right of 1305699 Alberta ULC, the exchangeable shares shall be redeemed immediately prior to the
completion of the merger. 1305699 Alberta ULC has exercised its over-riding call right in
accordance with the terms and conditions of the articles of 180 Connect Exchangeco Inc. and,
consequently, immediately prior to the completion of the merger, each outstanding exchangeable
share shall be exchanged with 1305699 Alberta ULC for one share of our common stock. Upon
completion of the merger, such shares of common stock shall entitle the holders to receive $1.80 in
cash, without interest and less any applicable withholding taxes for each share of our common stock
they have received in such exchange with 1305699 Alberta ULC. For example, if you own 100
exchangeable shares, each of these shares will be exchanged for one share of our common stock
immediately prior to completion of the merger, and, upon completion of the merger, you will have
the right to receive $180 in cash in exchange for these 180 Connect shares, less any applicable
withholding tax. If the merger is not completed for any reason, then the exchangeable share
redemption date shall not occur and no exchange with 1305699 Alberta ULC will take place.
Our Reasons for the Merger (Page [ ])
Our board of directors carefully considered the terms of the merger and other strategic
alternatives available to our company in deciding to enter into the merger agreement and to
recommend that stockholders vote FOR approval of the merger agreement. Among others, the
significant factors considered by our board of directors included:
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the consideration of $1.80 in cash per share of common stock to be paid in the
merger; |
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the Companys dependence on DIRECTV U.S. for a substantial portion of its revenues
and the ability of DIRECTV U.S. to terminate those arrangements; |
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the Companys inability to refinance its outstanding secured indebtedness on
reasonable terms; |
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the risks to the Company of remaining independent; |
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the terms and conditions of the merger agreement; |
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the alternatives for our stockholders; and |
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the opinion of William Blair & Co. that the $1.80 in cash per share of common stock
to be received by the holders of common stock pursuant to the merger agreement is fair,
from a financial point of view, to such holders. |
Recommendation of our Board of Directors (Page [ ])
Our board of directors, acting upon the unanimous recommendation of the special committee of
the board of directors consisting of four independent directors, has unanimously determined that
the terms of the merger agreement and the transactions described in the merger agreement are fair
to, and in the best interests of, our stockholders. Our board of directors unanimously recommends
that our stockholders vote FOR the approval of the merger agreement and FOR the adjournment or
postponement of the special meeting, if necessary or appropriate, to solicit additional proxies in
favor of the proposal to approve the merger agreement.
Opinion of William Blair, Financial Advisor to 180 Connect (Page [ ])
William Blair & Co., which we refer to as William Blair, acted as financial advisor to 180
Connect in connection with the merger. As part of its engagement, 180 Connect requested that
William Blair render an opinion as to whether the merger consideration to be paid by DirecTV was
fair, from a financial point of view, to 180 Connect stockholders. On April 17, 2008, William
Blair delivered its oral opinion to the special committee of the 180 Connect board of directors and
subsequently confirmed in writing that, as of such date and based upon and subject to the
assumptions and qualifications stated in its opinion, the merger consideration was fair, from a
financial point of view, to 180 Connect stockholders.
The full text of William Blairs written opinion, dated April 17, 2008, is attached as Annex C
to this document and incorporated into this document by reference. We urge holders of 180 Connect
common stock to read the entire opinion carefully to learn about the assumptions made, procedures
followed, matters considered and limits on the scope of the review undertaken by William Blair in
rendering its opinion. William Blairs opinion relates only to the fairness, from a financial
point of view, to 180 Connect stockholders of the consideration to be paid by DirecTV in the
merger, does not address any other aspect of the proposed merger or any related transaction, and
does not constitute a recommendation to any stockholder as to how that stockholder should vote with
respect to the merger agreement or the merger. William Blair did not address the merits of the
underlying decision by 180 Connect to engage in the merger.
The Special Meeting of 180 Connect Stockholders (Page [ ])
Date, Time and Place. A special meeting of our stockholders will be held on [ ], 2008
at 9:00 a.m. local time, at [ ], to consider and vote upon a proposal to adopt the merger
agreement.
Record Date and Voting Power. You are entitled to vote at the special meeting if you owned
shares of our common stock at the close of business on [ ], 2008, the record date for the
special meeting. If you are a common stockholder, you will have one vote at the special meeting
for each share of our common stock you owned at the close of business on the record date. On the
record date, there were [ ] shares of our common stock entitled to vote at the special
meeting. If you are a holder of exchangeable shares, you are entitled to instruct the trustee to
exercise that number of votes attached to the Special Voting Share which relate to the exchangeable
shares
held by you at the close of business on the record date. On the record date, there were
[ ] exchangeable shares entitled to instruct the trustee to vote at the special meeting.
8
Required Vote. The adoption of the merger agreement requires the affirmative vote of a
majority of the votes entitled to be cast by holders of our shares outstanding at the close of
business on the record date.
Voting and Proxies. Stockholders can cause their shares to be voted on matters presented at
the special meeting by signing, dating and returning the enclosed proxy card, or by attending the
meeting and voting in person. Holders of Exchangeable Shares must provide instructions to the
trustee in accordance with the enclosed Voting Instruction Form.
Conditions to Completion of the Merger (Page [ ])
Each partys obligation to effect the merger is subject to the satisfaction or waiver of
various conditions, which include the following:
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approval and adoption of the merger agreement by the affirmative vote of a majority
of the votes entitled to be cast by holders of the Companys outstanding shares; |
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no statute, rule, regulation, executive order, decree, judgment, injunction or other
order that prevents or prohibits the consummation of the merger or any of the material
transactions contemplated by the merger agreement shall have been enacted and be in
effect; and |
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the receipt of all approvals, consents, authorizations, qualifications and orders
from any governmental authority necessary to consummate the merger. |
DirecTV and DTV HSP Merger Sub will not be obligated to effect the merger unless various
conditions are satisfied or waived, which include the following:
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all specified third party consents shall have been obtained; |
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we must have performed in all material respects with all of our covenants and
agreements contained in the merger agreement that are to be performed at or prior to
the closing of the merger; |
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the representations and warranties of the Company must be true and complete in all
material respects as of the date of the merger agreement and as of the closing date of
the merger, except generally, where a failure to be so true and correct has not had and
would not reasonably be expected to have a material adverse effect on the Company; |
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no material adverse effect on the Company shall have occurred since the date of the
merger agreement; |
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there are no pending suits, actions, or proceedings by any governmental authorities
challenging the consummation of the merger or seeking to (i) impose material
limitations on DirecTVs ability to hold full rights of ownership in any securities of
the Company or to effectively control and operate the business and assets of the
Company and its subsidiaries, (ii) obtain damages arising out of the merger, or (iii)
compel DirecTV to divest or hold separate any significant portion of the Companys
business, assets or properties; and |
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no exchangeable shares shall have been issued after the date of the Agreement and
all of the exchangeable shares issued and outstanding as of the date of the merger
agreement shall have been exchanged for common stock immediately prior to closing. |
9
We will not be obligated to effect the merger unless the following conditions are satisfied or
waived:
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DirecTV and DTV HSP Merger Sub must have performed in all material respects all of
their covenants and agreements contained in the merger agreement that are to be
performed at or prior to the closing of the merger; and |
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the representations and warranties of DirecTV and DTV HSP Merger Sub must be true
and correct in all material respects as of the date of the merger agreement and as of
the closing date of the merger, except generally, where a failure to be so true and
correct has not had and would not reasonably be expected to have a material adverse
effect on the ability of DirecTV and DTV HSP Merger Sub to consummate the transactions
contemplated by the merger agreement. |
Parameters for Considering other Acquisition Proposals (Page [ ])
Until 12:01 a.m., New York City time, on May 19, 2008, we are permitted to solicit, initiate,
encourage and facilitate an acquisition proposal (including by way of providing access to
non-public information pursuant to an acceptable confidentiality and standstill agreement) and
enter into and maintain or continue discussions and negotiations regarding an acquisition proposal.
After 12:01 a.m., New York City time, on May 19, 2008, which we refer to as the No Shop
Period Start Date, we have agreed not to directly or indirectly solicit, initiate or encourage any
acquisition proposal, engage in any discussion or negotiations regarding an acquisition proposal,
disclose any non-public information relating to us or our subsidiaries, or their businesses,
assets, liabilities or prospects, or afford access to our or our subsidiaries properties, books or
records, to any person regarding an acquisition proposal; or enter into any letter of intent, agreement in principle, acquisition agreement or similar agreement relating to an acquisition proposal.
Notwithstanding these restrictions, at any time prior to the approval of the merger agreement
by our stockholders, we are permitted to:
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after the No Shop Period Start Date, maintain or continue discussions and
negotiations with a party (including by way of providing access to non-public
information pursuant to an acceptable confidentiality and standstill agreement) with
whom we were in contact after the date of the merger agreement and from whom we
received a written bona fide acquisition proposal on or prior to the No Shop Period
Start Date, with respect to which our board of directors determines prior to such date
and in good faith that such acquisition proposal constitutes a superior proposal; and |
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negotiate or otherwise engage in discussions with, and furnish non-public
information to, any other third party from whom we receive an unsolicited written bona
fide acquisition proposal with respect to which our board of directors determines in
good faith, (i) after consultation with its independent financial advisor, that the
acquisition proposal constitutes or could reasonably be expected to lead to a superior
proposal and (ii) after consultation with its outside legal counsel, that the failure
to take such action would be inconsistent with the directors fiduciary duties under
applicable law. |
Termination of the Merger Agreement (Page [ ])
The merger agreement may be terminated at any time prior to the effective time of the merger
under certain circumstances, including:
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by mutual written consent of the Company and DirecTV; |
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by either DirecTV or us, if |
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the merger is not completed on or before September 30, 2008, so long as the
failure of the merger to be completed by such date is not the result of, or
caused by, the failure of the terminating party to comply with the terms of the
merger agreement; |
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any governmental authority shall have enacted, issued, promulgated,
enforced, or entered any statute, rule, regulation, executive order, decree,
judgment, injunction or other order preventing or prohibiting the consummation
of the merger or any of the other material transactions contemplated in the
merger agreement and which is in effect, final and non-appealable; |
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our stockholders fail to approve and not adopt the merger agreement at the
special meeting or any adjournment or postponement thereof; or |
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there is any pending suit, action, or proceeding by any governmental
authority challenging the consummation of the merger or seeking to (i) impose
material limitations on DirecTVs ability to hold full rights of ownership in
any securities of the Company or to effectively control and operate the
business and assets of the Company and its subsidiaries, (ii) obtain damages
arising out of the merger, or (iii) compel DirecTV to divest or hold separate
any significant portion of the Companys business, assets or properties; or |
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if the other party has breached any of its representations, warranties,
covenants or other agreements contained in the merger agreement such that any
of the conditions to the completion of the merger would not be satisfied; or |
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and such breach cannot be or is not cured within 30 days notice; or |
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by DirecTV, if our board of directors approves, recommends or announces a neutral
position with respect to any other acquisition proposal or fails to reaffirm its
recommendation that our stockholders approve the merger agreement within five business
days of being requested to do so by DirecTV; or |
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by us, upon appropriate notice to DirecTV and payment of the applicable termination
fee and expenses, if our board of directors concludes in good faith after consultation
with our existing financial advisor and outside legal counsel that the failure to
terminate the merger agreement in connection with entering into a definitive agreement
with respect to an acquisition proposal that qualifies as a superior proposal is
inconsistent with the directors fiduciary duties under applicable law. |
Expenses and Termination Fees (Page [ ])
The merger agreement provides that regardless of whether the merger is consummated, except in
certain circumstances described below, all fees and expenses incurred by the parties will be borne
by the party incurring such expenses.
The merger agreement provides that the Company will be required to pay DirecTV a termination
fee of $500,000 and DirecTVs expenses in an amount equal to $2,000,000 upon termination of the
merger agreement in the following circumstances:
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our board of directors approves, recommends or announces a neutral position with
respect to any other takeover proposal; |
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our board of directors fails to reaffirm its recommendation that our stockholders
approve the merger agreement within five business days of being requested to do so by
DirecTV; or |
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the determination by our board of directors that an acquisition proposal received
constitutes a superior proposal and we enter into a definitive agreement to implement
such superior proposal; |
11
The merger agreement also requires that we pay DirecTV a termination fee of $500,000 and
DirecTVs expenses in an amount equal to $2,000,000 if the merger agreement is terminated because:
(i) the merger was not consummated on or before September 30, 2008, (ii) our stockholders did not
approve the merger agreement at the special meeting or any adjournment or postponement thereof, or
(iii) we breach any of our representations, warranties, covenants or other agreements contained in
the merger agreement such that any of the conditions to the completion of the merger would not be
satisfied and such breach cannot be or is not cured by us within 30 days notice; and, in each case,
a third party has made or delivered an acquisition proposal to the Company after the date of the
merger agreement but before the date that the merger is terminated and within twelve months of such
termination, either (A) we or any of our subsidiaries enter into a letter of intent, agreement in
principle, acquisition agreement or other similar agreement with any third party with respect to an
acquisition proposal or consummate an acquisition proposal, or (B) if we do not enter into any
agreement with respect to such acquisition proposal and any third party commences a tender offer or
exchange offer that, if consummated, would result in the acquisition by such third party, or any
affiliate thereof, making the tender or exchange offer of fifty percent or more of our common
stock.
Voting Agreements (Page [ ])
In connection and concurrently with the execution of the merger agreement, the Companys
Chairman, its President and Chief Executive Officer, and each of its directors, who are referred to
as the voting agreement stockholders and who owned collectively as of the record date [ ]
shares of our common stock, or approximately [15.6]% of the issued and outstanding shares of common
stock, entered into voting agreements with DirecTV. Pursuant to the voting agreements, the voting
agreement stockholders agreed, among other things, to grant to DirecTV an irrevocable proxy to vote
their shares of our common stock in favor of the adoption and approval of the merger agreement at
the special meeting. The information in this proxy statement regarding the voting agreement is
qualified in its entirety by reference to the voting agreements, a copy of the form of which is
attached as Annex B to this proxy statement.
Accounting Treatment (Page [ ])
The merger will be accounted for as a purchase transaction for financial accounting
purposes.
Interests of Certain Persons in the Merger (Page [ ])
When considering the unanimous recommendation of our board of directors with respect to the
adoption of the merger agreement, you should be aware that some of our directors and executive
officers have interests in the merger that may be different from, or in addition to, their
interests as 180 Connect stockholders and the interests of 180 Connect stockholders generally
including:
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receipt of cash consideration for their vested and unvested stock options,
restricted stock units, stock appreciation rights and warrants; |
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payment of severance and other benefits under certain circumstances; and |
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provision under the merger agreement of certain indemnification and insurance
arrangements by DirecTV for our current and former directors and officers. |
The 180 Connect board of directors was aware of these interests during its deliberations on
the merits of the merger and in deciding to recommend that you vote for the adoption of the merger
agreement at the special meeting.
Material United States Federal Income Tax Consequences of the Merger (Page [ ])
The receipt of cash in exchange for shares of our common stock in the merger or as the result
of the exercise of appraisal rights will be a taxable transaction to our stockholders for United
States federal income tax purposes. See The MergerMaterial United States Federal Income Tax
Consequences of the Merger.
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Material Canadian Federal Income Tax Consequences (Page [ ])
The exchange of an exchangeable share for 180 Connect common stock by an exchangeable
shareholder will be a taxable transaction for Canadian federal income tax purposes. Furthermore,
the exchange of our common stock for the cash merger consideration will be a taxable transaction to
our stockholders for Canadian federal income tax purposes. See The Merger Material Canadian
Federal Income Tax Consequences.
Tax matters can be complicated, and the tax consequences of the merger to you will depend on
the facts of your own situation. You should consult your own tax advisor to fully understand the
tax consequences of the merger to you.
Appraisal Rights (Page [ ])
Subject to compliance with the procedures set forth in Section 262 of the Delaware General
Corporation Law, which we refer to as the DGCL, holders of record of our common stock who do not
vote in favor of the adoption of the merger agreement and otherwise comply with the requirements of
Section 262 of the DGCL are entitled to appraisal rights in connection with the merger, whereby
such stockholders may receive the fair value of their shares in cash, exclusive of any element of
value arising from the expectation or accomplishment of the merger. Failure to take any of the
steps required under Section 262 of the DGCL on a timely basis may result in a loss of those
appraisal rights. These steps are described in this proxy statement. The provisions of Delaware
law that grant appraisal rights and govern such procedures are attached as Annex D. Holders of
exchangeable shares will not be able to exercise appraisal rights in accordance with the DGCL
unless such holders exchanged their exchangeable shares for shares of common stock before the vote
is taken on the merger agreement and have complied with the provisions of the DGCL described
herein.
13
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement, and the documents to which we refer you in this proxy statement, include
forward-looking statements based on estimates and assumptions. There are forward-looking
statements throughout this proxy statement, including, without limitation, under the headings
Summary, Questions and Answers about the Special Meeting and the Merger, The Merger and in
statements containing words such as believes, estimates, anticipates, continues,
contemplates, expects, may, will, could, should or would or other similar words or
phrases. These statements, which are based on information currently available to us, are not
guarantees of future performance and may involve risks and uncertainties that could cause our
actual growth, results of operations, performance and business prospects, and opportunities to
materially differ from those expressed in, or implied by, these statements. These forward-looking
statements speak only as of the date on which the statements were made and we expressly disclaim
any obligation to release publicly any updates or revisions to any forward-looking statement
included in this proxy statement or elsewhere. In addition to other factors and matters contained
or incorporated in this document, these statements are subject to risks, uncertainties, and other
factors, including, among others:
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the occurrence of any event, change or other circumstances that could give rise to
the termination of the merger agreement; |
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the outcome of any legal proceedings that have been or may be instituted against the
Company and others relating to the merger agreement; |
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the inability to complete the merger due to the failure to obtain stockholder
approval or the failure to satisfy other conditions to completion of the merger; |
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the failure of the merger to close for any other reason; |
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risks that the proposed transaction disrupts current plans and operations and the
potential difficulties in employee retention as a result of the merger; |
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the effect of the announcement of the merger on our customer relationships,
operating results and business generally; |
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the amount of the costs, fees, expenses and charges related to the merger; |
and other risks detailed in our current filings with the SEC, including our most recent filings on
Forms 10-Q and 10-K. See Where You Can Find More Information. Many of the factors that will
determine our future results are beyond our ability to control or predict. In light of the
significant uncertainties inherent in the forward-looking statements contained herein, readers
should not place undue reliance on forward-looking statements, which reflect managements views
only as of the date hereof. We cannot guarantee any future results, levels of activity,
performance or achievements. The statements made in this proxy statement represent our views as of
the date of this proxy statement, and it should not be assumed that the statements made herein
remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking
statements or update the reasons that actual results could differ materially from those anticipated
in forward-looking statements, except as required by law.
14
THE PARTIES TO THE MERGER
180 Connect
180 Connect is one of North Americas largest providers of installation services to the home
entertainment, communications, enterprise data and home integration service industries. 180 Connect
has over 4,000 employees in 85 branch locations conducting over 10,000 installations and service
calls a day. We operate a fleet of company-owned and leased vehicles ensuring a professional image
and timely arrival at the customer site. 180 Connects principal U.S. markets for its services are
the home entertainment and communications, enterprise data, and home integration service
industries. These industries complement our technical workforce, 85 branch locations, and our
systems and infrastructure.
Our principal executive offices are located at, and our mailing address is, 6501 East
Belleview Avenue, Englewood, Colorado 80111, and our telephone number at that address is (303)
395-6001.
DirecTV
DIRECTV Enterprises, LLC, or DirecTV, is a wholly-owned subsidiary of DIRECTV Holdings LLC
which, in turn, is a wholly-owned subsidiary of The DIRECTV Group, Inc. DIRECTV Holdings LLC and
its subsidiaries, which we refer to collectively as DIRECTV U.S., acquire, promote, sell and
distribute digital entertainment programming via satellite to residential and commercial
subscribers. DIRECTV U.S. is the largest provider of direct-to-home, or DTH, digital television
services and the second largest provider in the multi-channel video programming distribution, or
MVPD, industry in the United States. As of March 31, 2008, DIRECTV U.S. had approximately 17.0
million subscribers.
DTV HSP Merger Sub
DTV HSP Merger Sub is a direct wholly-owned subsidiary of DirecTV formed solely for the
purpose of facilitating the merger. DTV HSP Merger Sub is a Delaware corporation. The address of
its principal executive offices is 2230 E. Imperial Highway, El Segundo, California 90245 and the
telephone number at that address is (310) 964-5000.
15
THE SPECIAL MEETING
Date, Time and Place
We are furnishing this proxy statement to our stockholders as part of the solicitation of
proxies by our board of directors for use at the special meeting to be held at [ ] at 9:00
a.m. local time, on [ ], 2008, or at any postponement or adjournment thereof.
Purpose of Special Meeting
At the special meeting, we will ask our stockholders entitled to vote their shares to adopt
the merger agreement (and to approve the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies). Our stockholders must approve and adopt the merger
agreement in order for the merger to occur. If the stockholders fail to approve and adopt the
merger agreement, the merger will not occur. A copy of the merger agreement is attached to this
proxy statement as Annex A. Our board of directors has unanimously determined that the merger is
fair to, and in the best interests of, 180 Connect and our stockholders, declared the merger
agreement advisable and approved the merger agreement and the other transactions contemplated by
the merger agreement. The board of directors of 180 Connect unanimously recommends that 180
Connects stockholders vote FOR the adoption of the merger agreement.
Record Date; Stock Entitled to Vote; Quorum
Only holders of record of our shares at the close of business on [ ], 2008, the record
date, are entitled to notice of and to vote at the special meeting. Holders of record of our
exchangeable shares at the close of business on the record date are entitled to notice of the
special meting and are entitled to instruct the trustee, as holder of the Special Voting Share, to
vote the Special Voting Share at the special meeting. The Special Voting Share has the right to
cast a number of votes equal to the number of then-outstanding exchangeable shares but will only
cast a number of votes equal to the number of exchangeable shares as to which it has received
voting instructions from the owners of record of those exchangeable shares on the record date.
On the record date, approximately [ ] shares of our common stock were outstanding
and entitled to vote and approximately [ ] exchangeable shares were outstanding and
entitled to instruct the trustee to vote the Special Voting Share. A quorum will be present at the
special meeting if a majority of our shares outstanding and entitled to vote on the record date are
represented in person or by proxy. In the event that a quorum is not present at the special
meeting, it is expected that the meeting will be adjourned or postponed to solicit additional
proxies. Holders of record of our common stock on the record date are entitled to one vote per
share at the special meeting on the proposal to adopt the merger agreement. Holders of record of
our exchangeable shares on the record date are entitled to instruct the trustee to cast one vote
per exchangeable share through the Special Voting Share at the special meeting on the proposal to
adopt the merger agreement.
Votes Required
The approval and adoption of the merger agreement requires the affirmative vote of a majority
of the votes entitled to be cast by the holders of our shares outstanding on the record date. If a
holder of our common stock abstains from voting or does not vote, either in person or by proxy, it
will effectively count as a vote against the approval and adoption of the merger agreement. If a
holder of our exchangeable shares abstains from instructing the trustee from voting or does not
instruct the trustee to vote, either in person or by proxy, it will effectively count as a vote
against the approval and adoption of the merger agreement.
In connection and concurrently with the execution of the merger agreement, the voting
agreement stockholders, who owned collectively as of the record date [ ] shares of our common
stock, or approximately [15.6]% of the issued and outstanding shares of common stock, entered into
voting agreements with DirecTV. Pursuant to the voting agreements, the voting agreement
stockholders agreed, among other things, to vote all shares of 180 Connect common stock held by
them at the time of the special meeting for the approval and adoption of the merger agreement at
the special meeting. See Voting Agreements.
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Voting of Proxies
All shares represented by properly executed proxies received in time for the special meeting
will be voted at the special meeting in the manner specified by the holders. Properly executed
proxies that do not contain voting instructions will be voted FOR the approval and adoption of
the merger agreement.
Shares of our common stock represented at the special meeting but not voting, including shares
of our common stock for which proxies have been received but for which stockholders have abstained,
will be treated as present at the special meeting for purposes of determining the presence or
absence of a quorum for the transaction of all business.
Exchangeable shares represented by properly executed instructions to the trustee to vote the
Special Voting Share received in time for the special meeting will be voted at the special meeting
in the manner specified by the holders of the exchangeable shares.
Exchangeable shares represented at the special meeting by the trustee but not instructing the
trustee to vote the Special Voting Share, including exchangeable shares for which instructions have
been received by the trustee but for which holders of exchangeable shares have abstained, will be
treated as present at the special meeting for purposes of determining the presence or absence of a
quorum for the transaction of all business.
Only shares affirmatively voted FOR the approval and adoption of the merger agreement,
including properly executed proxies that do not contain voting instructions will be counted as
favorable votes for that proposal. If a holder of our common stock abstains from voting or does
not execute a proxy, it will effectively count as a vote AGAINST the approval and adoption of the
merger agreement. Brokers who hold shares of our common stock in street name for customers who are
the beneficial owners of such shares are not permitted to give a proxy to vote those customers
shares in the absence of specific instructions from those customers. These non-voted shares will
effectively count as votes AGAINST the approval and adoption of the merger agreement. Holders of
exchangeable shares that do not instruct the trustee to vote the Special Voting Share will
effectively count as votes AGAINST the approval and adoption of the merger agreement.
The persons named as proxies by a stockholder may propose and vote for one or more
adjournments of the special meeting, including adjournments to permit further solicitations of
proxies.
We do not expect that any matter other than the proposal to adopt the merger agreement will be
brought before the special meeting. If, however, our board of directors properly presents other
matters, the persons named as proxies will vote in accordance with their judgment as to matters
that they believe to be in the best interests of the stockholders.
Revocability of Proxies
Proxies received at any time before the special meeting, and not revoked or superseded before
being voted, will be voted at the special meeting. The grant of a proxy on the enclosed form of
proxy does not preclude a stockholder from voting in person at the special meeting. A stockholder
may revoke a proxy at any time prior to its exercise by:
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if you hold your shares in your name as a stockholder of record, sending a written,
dated notice to the Chief Legal Officer of 180 Connect at 6501 East Belleview Avenue,
Englewood, Colorado 80111 stating that you would like to revoke your proxy; |
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attending the special meeting and voting in person (your attendance at the meeting
will not, by itself, revoke your proxy; you must vote in person at the meeting); |
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submitting a later-dated proxy card to our Chief Legal Officer; or |
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if you have instructed a broker to vote your shares, following the directions
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Adjournments and Postponements
Although it is not currently expected, the special meeting may be adjourned or postponed for
the purpose of soliciting additional proxies. Any adjournment may be made without notice (if the
adjournment is not for more than thirty days or if after the adjournment no new record date is
fixed), other than by an announcement made at the special meeting of the time, date and place of
the adjourned meeting. Whether or not a quorum exists, holders of a majority of the combined
voting power of the Companys common stock represented in person or by proxy at the special meeting
and entitled to vote thereat may adjourn the special meeting. Any signed proxies received by the
Company which do not include voting instructions regarding an adjournment of the special meeting
will be voted FOR an adjournment or postponement of the special meeting, if necessary or
appropriate, to solicit additional proxies. Any adjournment or postponement of the special meeting
for the purpose of soliciting additional proxies will allow the Companys stockholders who have
already sent in their proxies to revoke them at any time prior to their use at the special meeting
as adjourned or postponed.
Rights of Stockholders Who Object to the Merger
Holders of shares of our common stock are entitled to statutory appraisal rights under
Delaware law in connection with the merger. This means that you are entitled to have the value of
your shares determined by the Delaware Court of Chancery and to receive payment based on that
valuation. The ultimate amount you receive as a dissenting stockholder in an appraisal proceeding
may be more than, the same as or less than the amount you would have received under the merger
agreement.
To exercise your appraisal rights, you must submit a written demand for appraisal to the
Company before the vote is taken on the merger agreement and you must not vote in favor of the
approval and adoption of the merger agreement. Your failure to follow exactly the procedures
specified under Delaware law will result in the loss of your appraisal rights. See Appraisal
Rights and the text of the Delaware appraisal rights statute reproduced in its entirety as Annex
D.
Holders of exchangeable shares will not be able to exercise appraisal rights in accordance
with the DGCL unless such holders exchanged their exchangeable shares for shares of common stock
before the vote is taken on the merger agreement and have complied with provisions of the DGCL as
described herein.
Solicitation of Proxies
This proxy solicitation is being made and paid for by the Company on behalf of its board of
directors. In addition, we have retained [ ] to assist in the solicitation. We will pay
[ ] approximately $[ ] plus reasonable out-of-pocket expenses for their assistance. Our
directors, officers and employees may also solicit proxies by personal interview, mail, e-mail,
telephone, facsimile or other means of communication. These persons will not be paid additional
remuneration for their efforts. We will also request brokers and other fiduciaries to forward
proxy solicitation material to the beneficial owners of shares of the Companys common stock that
the brokers and fiduciaries hold of record. Upon request, we will reimburse them for their
reasonable out-of-pocket expenses. In addition, we will indemnify [ ] against any losses
arising out of that firms proxy soliciting services on our behalf.
Questions and Additional Information
If you have additional questions about the merger, need assistance in submitting your proxy or
voting your shares, or need additional copies of this proxy statement or the enclosed proxy card,
please contact the Companys Chief Legal Officer at 6501 East Belleview Avenue, Englewood, Colorado
80111, or [ ], our proxy solicitor, at [ ].
18
THE MERGER
The following discussion summarizes the material terms of the merger. Stockholders should
read the merger agreement, which is attached as Annex A to this proxy statement.
Background of the Merger
In late August 2007, shortly after the closing of the arrangement transaction between the
Company (formerly known as Ad.Venture Partners, Inc.) and 180 Connect Inc. (a Canadian
corporation), the Company engaged William Blair & Co. to assist it in a proposed refinancing of the
Companys credit facilities. At the time, the Company hoped to reduce the interest rate on its
secured indebtedness, and to provide it with additional availability for ordinary course operations
and potential acquisition transactions.
However, due to several factors, among other things, (i) a higher than anticipated percentage
of stockholders of Ad.Venture Partners, Inc. voting against the arrangement and electing to convert
their shares into cash, (ii) a principal repayment being required to be paid to our senior lender,
(iii) the acceleration and redemption of our convertible notes by the holders thereof, and (iv)
significant costs incurred in connection with the arrangement, the net proceeds from the
arrangement transaction were less than anticipated, and accordingly, the Companys cash position
following the arrangement was not as strong as had been anticipated. As such, any refinancing
would need to provide sufficient availability to address potential cash flow shortfalls. In
addition, the Company sought to include its shares for listing on the The Nasdaq Stock Market and
American Stock Exchange, but due to the declining share price of our common stock the minimum
listing requirements of these exchanges were not satisfied and the Companys shares remained traded
on the OTC Bulletin Board.
Subsequently, the Company retained a second financial advisor to assist it in its refinancing
efforts. The Company also considered an equity financing, but determined that due to the Companys
weakened stock price, the effect of such a financing would result in unacceptable dilution to the
existing stockholders and would further depress the Companys stock price.
From September 2007 through February 2008, the Company negotiated with numerous parties in
connection with the refinancing of its debt facilities. The Company had limited success in
attracting prospective lenders, in large part because of (i) the significant deterioration in the
credit markets during such period, (ii) the weakening of the U.S. economy and its potential impact
on the Companys operations, (iii) the Companys customer concentration with DIRECTV U.S., (iv) the
ability of DIRECTV U.S. to cancel some or all of its business with the Company under its home
service provider (HSP) agreement with the Company, (v) the Companys history of operating losses
and its lack of material free cash flow, and (vi) the Companys predominately low margin business.
After negotiating several proposals and term sheets it received from prospective lenders, the
Company concluded that none of the proposed refinancing options would fully meet the Companys
financing needs and each of them would likely result in an increase in the Companys borrowing
costs and significant dilution to the Companys existing stockholders.
The Company also held discussions with its current senior lender, pursuant to which the
Company sought to modify the terms of its existing credit facilities, but ultimately the current
lender was unwilling to lend the Company additional funds or to modify the terms of its credit
facilities unless the Company would agree to prepay a significant portion of the current credit
facility. Absent entering into a new credit facility with a third party or obtaining a capital
infusion, the Company determined that it would be unable to reach an agreement with its current
lender to modify the terms of its credit facilities.
On November 7, 2007, Mr. Peter Giacalone, our chief executive officer, spoke about the Company
at an investor conference hosted by SMH Capital Inc., which we refer to as SMH Capital. At the
conference, Mr. Giacalone spoke with a representative of SMH Capital that had advised UniTek USA,
LLC, which we refer to as UniTek, in connection with its sale to an affiliate of HM Capital
Partners LLC, which we refer to as HM Capital, in September 2007. Like the Company, UniTek, among
other activities, provides installation services to DirecTV and various cable companies. During
their conversation, the SMH Capital representative suggested the possibility that UniTek might have
an interest in pursuing a going private transaction with the Company. Following the conference,
Mr. Giacalone informed Mr. Brian McCarthy, the Companys then executive chairman, of his
conversation with SMH Capital.
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On December 11, 2007,
a representative of HM Capital telephoned Mr. McCarthy and informed him
of HM Capitals investment in UniTek and UniTeks interest in a possible strategic transaction with
the Company. Mr. McCarthy responded to the representative of HM Capital that any strategic
transaction with the Company would have to reflect a significant premium to the current trading
price per share because the Company was not being properly valued by the public market.
On December 18, 2007, the board of directors held its regularly scheduled meeting to discuss
the operations and business of the Company. In response to reports from management regarding its
lack of success regarding refinancing the Company and weaker than expected financial results,
including disappointing results in the Companys network services and structured home wiring
business, the board discussed strategic alternatives in the event that the refinancing effort was
not successful, including equity issuances, sale and going-private transactions. The board heard
from Messrs. McCarthy and Giacalone about the contacts they had with SMH Capital, HM Capital, and
UniTek. The board made no definitive decision to pursue any specific strategic alternative, but it
did unanimously approve of management continuing general discussions with respect to a potential
transaction involving the Company.
On December 19, 2007, Mr. Giacalone and two other board members met with SMH Capital in SMH
Capitals New York offices to learn more about SMH Capitals industry background and capabilities,
and to generally explore what interest there might be in the marketplace regarding a transaction
concerning the Company, including the possible interest of UniTek.
Between December 19, 2007 and January 4, 2008, Mr. Giacalone had several telephonic
discussions with representatives of HM Capital and UniTek regarding the Company. The topics of
these discussions included the Companys performance though the third quarter of 2007, its debt and
earnings performance, fuel costs, its network services and home structured wiring businesses, and
the Companys customer satisfaction and quality service awards. In these discussions, Mr.
Giacalone expressed his opinion that, in order to have a chance for success, any offer for the
Company would have to reflect a significant premium to the current trading price per share because
the Company was not being properly valued by the public market.
On January 4, 2008, UniTek entered into a confidentiality and standstill agreement with the
Company requiring UniTek and its affiliates to, among other things, maintain as confidential
information all non-public evaluation material furnished to them about the Company either before or
after the date of such agreement.
On January 7, 2008, Mr. Giacalone, another 180 Connect board member, and a representative of
SMH Capital met with representatives of HM Capital and UniTek in Las Vegas, Nevada during the
annual Consumer Electronics Show and discussed, among other things, the Companys capital
structure, its stockholder composition, the proposal process and what matters should be covered in
any proposal letter concerning an offer for the Company, and possible valuations. Mr. Giacalone
again reiterated his opinion that any offer needed to reflect a significant premium to the current
stock price. The representatives of HM Capital and UniTek indicated that the board of directors
could expect to receive a proposal letter from UniTek concerning an offer to acquire the Company.
On January 8 and 9, 2008, Mr. Giacalone had several discussions with a representative of HM
Capital and UniTek concerning the Company and a proposal letter being prepared by UniTek concerning
an offer to acquire the Company. When informed that the offer was likely to be in the range of
$1.75 to $2.00 per share (subject to due diligence and other conditions), Mr. Giacalone informed
the HM Capital and UniTek representative that, in his opinion, if any offer was to have any chance
of acceptance by the Companys board and stockholders, the low point of any range of purchase price
could not be less than $2.00 per share.
On January 10, 2008, the Company received a proposal letter from UniTek containing an offer to
acquire all of the outstanding capital stock of the Company for cash at a purchase price per share
in the range of $1.75 to $2.00 (the Initial UniTek Proposal Letter). The Initial UniTek Proposal
Letter also, among other things, required the Company to negotiate exclusively with UniTek for 45
days (other than with respect to refinancing alternatives), permitted UniTek to seek approval by
DIRECTV U.S. of the proposed transaction after execution of the proposal
letter, and contained a general offer from UniTek to provide some form of interim financing
(to be mutually agreed upon) before consummation of the proposed transaction.
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On January 13, 2008, the board of directors met telephonically to discuss the Initial UniTek
Proposal Letter. The board also heard from McDermott Will & Emery, referred to as McDermott, the
Companys outside corporate counsel, regarding Delaware law issues in connection with a sale of the
Company, including the need to include a provision in the Initial UniTek Proposal Letter that would
allow the Company to do a market check before or after a definitive agreement was executed with
respect to the proposed transaction. SMH Capital joined the meeting and stated, among other
things, that, based on its experience, there may be a limited universe of prospective strategic or
growth-oriented acquirers for the Company because of, among other things, the Companys DIRECTV U.S.
customer concentration and the Companys need to expedite any due diligence process because of its
urgent refinancing needs. Upon receiving advice from SMH Capital and McDermott, the board formed a
special committee comprised of independent directors to hire a financial advisor and to evaluate
the Initial UniTek Proposal Letter and any other strategic transaction alternatives for the
Company. Mr. Giacalone advised the special committee members of the terms of a draft engagement
letter from SMH Capital to act as financial advisor to the special committee and delivered the
draft letter to them for their consideration.
On January 15, 2008, the special committee of the board met telephonically and agreed to
commence an interview process in order to engage an investment bank to represent the special
committee in negotiations with UniTek and to target additional potential purchasers regarding a
strategic transaction with the Company.
On January 16, 2008, a representative of SMH Capital presented his views on the UniTek offer
to the special committee and discussed SMH Capitals prior experience in advisory transactions of
this nature. On January 17, 2008, the special committee held further meetings and discussions with
other investment banks to evaluate which investment bank it should engage and to determine the
scope of the engagement.
On January 18, 2008, the special committee recommended to the board of directors that SMH
Capital be engaged as the Companys financial advisor and on the same day the full board approved
the engagement of SMH Capital. The board also evaluated its response to the Initial UniTek
Proposal Letter and determined to propose to enter into an exclusivity arrangement with UniTek,
provided that, among other things, UniTek agreed to increase the purchase price to a range of $2.00
to $2.25 per share.
Between January 18, 2008 and January 24, 2008, SMH Capital, as authorized by the board of
directors, conducted a market check, whereby, SMH Capital contacted 38 parties, five of whom
signed confidentiality and standstill agreements and received descriptive materials related to the
Company. None of these parties ultimately submitted an offer to acquire the Company.
Between January 18, 2008 and January 22, 2008, our senior management and our legal and
financial advisors engaged in negotiations with representatives of HM Capital and UniTek regarding
the Initial UniTek Proposal Letter.
On January 22, 2008, the Company received an unsolicited letter of intent from Creative
Vistas, Inc., which we refer to as CVAS, containing, among other things, CVASs offer to acquire
all of the outstanding capital stock of the Company for a purchase price per share which CVAS
valued at $2.75, payable in shares of CVAS common stock, with a maximum aggregate purchase price
value of $60 million and an offer by CVAS to provide up to $12 million of secured financing
independent of the proposed acquisition. The letter also provided that the Company enter into
exclusivity with CVAS for a period of due diligence and that the definitive acquisition agreement
would contain a no-shop provision which would restrict the Company from seeking additional
offers, subject to a fiduciary out for any superior proposals. In the letter, CVAS informed the
Company that it had acquired approximately 10% of the Companys common stock.
On January 23, 2008, the special committee met telephonically, with the other members of the
board present, to analyze the CVAS offer. SMH Capital presented its analysis of the CVAS offer,
including an analysis of the value of the CVAS proposal and whether the trading price of its stock
represented its true equity value, as well as an analysis of the liquidity of the stock. SMH
Capital also advised the special committee that CVAS had refused to enter into a non-disclosure
agreement which contained a standstill provision. The special committee resolved to
not pursue discussions with CVAS in light of, among other things, the determination that the
value of the proposed UniTek offer, expected to be reflected in the revised UniTek proposal letter,
exceeded that of the CVAS offer. The special committee then determined to enter into exclusive
discussions with UniTek, subject to the receipt of a revised proposal letter reflecting the
modified terms of the UniTek proposal, and confirmed the engagement of William Blair & Co.,
pursuant to a previously executed engagement letter to provide advisory services and to deliver a
fairness opinion with respect to any acquisition of the Company.
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On January 24, 2008 the Company received and executed a revised proposal letter from UniTek
that, among other things, increased the purchase price offered to a range of $2.00 to $2.25 per
share and required that the Company enter into exclusive discussions with UniTek. Also on January
24, 2008, as authorized by the board, SMH Capital informed CVAS that the Company was entering into
exclusive negotiations with another party regarding a transaction.
On January 25, 2008, CVAS publicly announced its acquisition of approximately 10% of the
Companys common stock from Laurus Master Fund, Ltd., the Companys senior lender, and certain of
its affiliates. In its Schedule 13D filed on February 1, 2008, CVAS stated that it would consider a
possible acquisition or financing transaction with the Company.
On January 30, 2008, the board met telephonically to discuss the status of negotiations with
the Companys existing lender and other potential financing sources. On January 31, 2008, the
special committee met to discuss the status of the negotiations with UniTek. SMH Capital reported
that UniTeks due diligence of the Company had commenced.
Between January 31, 2008 and February 4, 2008, members of our management met in person with
representatives of HM Capital and UniTek to prepare materials for presentation to DIRECTV U.S. in
order to obtain the approval of DIRECTV U.S. of the proposed transaction between UniTek and the
Company.
On February 5, 2008, Mr. Giacalone met with representatives of HM Capital, UniTek and DIRECTV
U.S. in order to discuss obtaining approval from DIRECTV U.S. of the proposed transaction between
UniTek and the Company. Mr. Giacalone subsequently reported to the board of directors that, during such discussions, DIRECTV U.S. had conveyed its strategic interest in
owning and operating a meaningful percentage of DIRECTV U.S.s home service provider installation
services, and it was his understanding that this would include certain markets in which the Company performed installation services for
DIRECTV U.S. DIRECTV U.S. expressed an interest in possibly acquiring certain of the Companys
markets as part of the proposed transaction between UniTek and the Company.
On February 6, 2008, the board met telephonically to discuss the refinancing efforts and
further negotiations with its existing lender regarding the terms of its current financing. The
board also discussed the various alternatives open to the Company if acceptable financing terms
could be reached with its existing lender or other prospective financing sources, including the
continued operation of the Company, as well as the alternative of selling only certain parts of the
Companys business and retaining other lines of business. In addition, the board discussed the
meeting between UniTek, HM Capital, DIRECTV U.S. and Mr. Giacalone, and Mr. Giacalone described to
the board the expressed interest of DIRECTV U.S. in becoming an owner-operator and entering into
the home service provider, or HSP, business in certain markets. Management and counsel also
discussed with the board the due diligence meetings with UniTek, and updated the board regarding
the status of certain litigation matters involving the Company.
On February 12, 2008, SMH Capital reported to the special committee that UniTek and DIRECTV
U.S. had discussions regarding the transaction and that, in the event a transaction was consummated
between the Company and UniTek, it was contemplated that DIRECTV U.S. would acquire from UniTek a
meaningful percentage of the Companys satellite installation services. The special committee
discussed whether direct discussions could be initiated with DIRECTV U.S. to determine their
interest in a possible transaction with the Company that did not include UniTek, but the committee
was advised that the Company was restricted from directly discussing a possible transaction with
DIRECTV U.S. due to its exclusivity obligation to UniTek.
On February 13, 2008, the Company received a revised letter of intent from CVAS containing,
among other things, CVASs revised offer to acquire all of the outstanding capital stock of the
Company for a purchase
price per share which CVAS valued at $3.00, one-half of which would be paid in cash and
one-half of which would be paid in shares of CVAS common stock, up to a maximum purchase price of
$78.6 million. The CVAS revised letter of intent also contained the offer by CVAS to provide up to
$12 million of secured financing independent of the proposed acquisition. Because of its
exclusivity obligation to UniTek, the Company was precluded from responding to the revised CVAS
proposal.
22
Between February 6, 2008 and February 20, 2008, representatives of DIRECTV U.S., HM Capital,
UniTek and the Company had several separate discussions with each other concerning various aspects
of the proposed UniTek acquisition of the Company. During one such discussion on February 13,
2008, representatives of HM Capital and UniTek informed Mr. Giacalone that it had been told by
DIRECTV U.S. that DIRECTV U.S. wanted to own and operate a meaningful percentage of DIRECTV U.S.s
home service provider installation services and that it was interested in acquiring 100% of the
Company. As part of such proposed acquisition, DIRECTV U.S. would sell to UniTek certain assets of
the Company, including the Companys cable business and certain of the Companys DIRECTV U.S.
markets. UniTek agreed to the revised transaction proposals with DIRECTV U.S. and also agreed to
permit the Company to evaluate a proposal from DIRECTV U.S. to acquire the Company.
On February 21, 2008, the Company received a proposal letter from The DirecTV Group, Inc. containing,
among other things, an offer to acquire all of the outstanding capital stock of the Company for
cash at a purchase price per share in the range of $2.00 to $2.25 (the Initial DirecTV Proposal
Letter).
On February 22, 2008, the special committee met to discuss the Initial DirecTV Proposal
Letter. On the same day, the full board also met to discuss the change in the proposed sale
structure from UniTek to DIRECTV U.S. SMH Capital also advised that DIRECTV U.S would be willing,
as part of its offer, to adjust certain terms under the Companys HSP agreements with DIRECTV U.S.,
which adjustments could reduce the Companys urgency to refinance its indebtedness in the near
term. The board considered whether it would be possible to solicit other prospective buyers for
the Company or for the portions of the Company proposed to be acquired by UniTek from DIRECTV U.S.,
but William Blair reported that it believed any such sale would be difficult to achieve, if other
potential buyers understood that DIRECTV U.S. intended to enter the HSP market. In addition, SMH
Capital and members of senior management reported that DIRECTV U.S. had informed them that the
offer by The DirecTV Group, Inc., would be put at risk if the Company sought to terminate its exclusivity with
UniTek without immediately entering into exclusivity with DIRECTV U.S. At the February 22nd
meeting, the board also evaluated the status of the revised CVAS offer and the status of the other
refinancing options. The board considered whether it needed to engage in conversations with CVAS before entering into exclusivity with
DIRECTV U.S. William Blair advised the directors that senior management had indicated its belief that DIRECTV U.S. would ultimately determine which entities would provide it with installation services, and
that, in managements view, it was unlikely that DIRECTV U.S. would continue as a customer of the Company if an entity with no prior history as a
DIRECTV U.S. home service provider acquired the Company. The board instructed SMH Capital to conduct further analysis of the revised
CVAS offer, but prohibited any direct contact or other action with respect to CVAS because of the
above-referenced potential risk to the DIRECTV U.S. transaction.
At a telephonic meeting of the special committee held on February 24, 2008, the special
committee further reviewed the Initial DirecTV Proposal Letter and instructed SMH Capital on
particular provisions to be negotiated relating to price, exclusivity, timeline for execution of
definitive documents and interim financing arrangements.
Between February 22, 2008 and February 28, 2008, our senior management and our legal and
financial advisors engaged in negotiations with representatives of DIRECTV U.S. regarding certain
provisions of the Initial DirecTV Proposal Letter unrelated to the purchase price.
On February 25, the special committee was presented with an updated financial analysis of the
CVAS offer by SMH Capital which also recounted that CVAS had not executed a non-disclosure and
standstill agreement. The special committee determined that the equity portion of the CVAS offer
was potentially overvalued and that there were concerns regarding the ability of CVAS to finance
the transaction, given the relative sizes of the respective businesses. The special committee also
considered the likelihood of CVAS consummating a transaction with the Company if it were to know
that DIRECTV U.S. was pursuing a transaction with the Company and that it had expressed interest in
entering the satellite installation business in certain of the Companys key markets. Based on the
foregoing and the concurring views expressed by both financial advisors, the special committee
reached the conclusion that the DIRECTV U.S. offer was the more attractive option for shareholders
and accordingly that the CVAS offer should not be pursued at such time. The special committee
continued to evaluate the DIRECTV U.S. proposal and requested an analysis of the Companys value
from the financial advisors. Later the same day the special committee again met to instruct the
Companys financial advisors on negotiation of the Initial DirecTV Proposal Letter.
23
On February 26, the special committee met again to obtain feedback from the financial advisors
regarding the negotiations with DIRECTV U.S.. The financial advisors and senior management reported that DIRECTV U.S.
had made clear that it intended to enter into the HSP business and that it would pursue other
alternatives to implement this strategic decision if the Company did not enter into a transaction
with DIRECTV U.S. The special committee agreed on specific proposed changes to the Initial DirecTV
Proposal Letter and instructed management to deliver the revised letter with such proposed changes.
On February 29, 2008, the Company received and subsequently executed a revised proposal letter
from The DIRECTV Group, Inc., that contained the same range of purchase price of $2.00 to $2.25 per
share contained in the Initial DirecTV Proposal Letter, but also contained an agreement of DIRECTV
U.S. to adjust certain terms of its payment and equipment vendor arrangements with the Company
under the Companys HSP agreements with DIRECTV U.S., which adjustments when formalized between the
parties in a letter agreement dated March 10, 2008, reduced the Companys urgency to refinance its
indebtedness in the near term. Also on February 29, 2008, the Company and UniTek mutually agreed
to terminate their exclusive arrangement under the UniTek proposal letter executed on January 24,
2008. On March 3, 2008, The DIRECTV Group, Inc. and the Company amended the February 29, 2008
DirecTV proposal letter to reflect certain mutually agreed upon immaterial amendments.
From March 3, 2008 to April 9, 2008, DIRECTV U.S. conducted due diligence on the Company.
On March 15, 2008, the Company received a draft merger agreement from DirecTV, which among
other things, proposed a deal structure which was contingent upon the closing of an asset sale and
exchange transaction between DirecTV and UniTek. This structure was rejected by the Company and
ultimately deleted in subsequent negotiations. From March 15, 2008 to April 16, 2008, our senior
management and outside legal counsel were engaged in negotiations with representatives of DirecTV
regarding the merger agreement, including preparation of the related disclosure schedules.
On March 18, 2008, the special committee met to discuss open issues on the transaction and the
negotiation of definitive agreements with DirecTV. McDermott described the merger agreement in
detail to the members of the special committee and highlighted the issues which were still being
negotiated with DirecTV, which were principally the voting agreements, the definition of material
adverse effect, the requirement that the Company force the vote at a stockholders meeting, the
no-shop provision, and the termination fees. The special committee determined to have a full board
meeting to discuss the transaction issues before further negotiating the merger agreement.
On March 20, 2008, the board met telephonically and McDermott reviewed the material issues
still being negotiated in the proposed merger agreement. SMH Capital and Mr. Giacalone informed
the special committee that DirecTV had still not provided a firm purchase price. Mr. Westberg
then gave a brief summary of the accommodations DIRECTV U.S. had made to its vendor terms with the
Company which had a positive effect on the Companys cash management efforts. William Blair
reported on the status of its work in connection with its proposed fairness opinion.
On March 26, 2008, the special committee met telephonically and McDermott and SMH Capital
reviewed the material issues still being negotiated in the proposed merger agreement and the status
of managements and McDermotts work on the disclosure schedules to the merger agreement.
On April 1, 2008, Mr. Giacalone received a telephone call from a representative of DirecTV
informing him that the Company should expect a revised proposal letter from The DIRECTV Group, Inc.
whereby DirecTV would be reducing its offer to acquire the Company to $1.60 per share as a result
of certain adverse findings from DirecTVs and its advisors due diligence examination of the
Company. The revised letter was ultimately delivered on April 9, 2008.
On April 2, 2008, the special committee met telephonically and SMH Capital and Mr. Giacalone
summarized the recent discussions with DirecTV regarding a possible $1.60 per share purchase price
due to certain adverse due diligence findings, and Mr. Giacalone reviewed the actions taken and to
be taken by senior management in an effort to rebut such findings. Mr. Giacalone also reported
that he understood that DirecTV was still negotiating the purchase price for its proposed
transaction with UniTek. Certain board members in attendance
expressed doubt about the Companys ability to obtain stockholder voting agreements required
by DirecTV and the ability to achieve a majority stockholder vote for a transaction with a purchase
price of less than $2.00 per share.
24
Between April 1, 2008 and April 3, 2008, our senior management and outside legal counsel were
engaged in negotiations with representatives of DirecTV in an effort to address the adverse due
diligence concerns reported by DirecTV, including negotiations in person with DirecTV
representatives on April 3, 2008.
On April 8, 2008, the special committee met telephonically and SMH Capital and Mr. Giacalone
summarized the recent discussions with DirecTV representatives regarding purchase price, including
discussions that suggested DirecTV might be planning to increase its offer to $1.80 per share. SMH
Capital and Mr. Giacalone reported that despite managements belief that it had addressed many of
DirecTVs adverse due diligence concerns, DirecTV did not appear to be willing to offer more than
$1.80 per share. Mr. Giacalone also reported that he understood that DirecTV was still
negotiating the purchase price for its proposed transaction with UniTek. He also reviewed,
generally, the Companys business, financial condition and results of operations, and some of the
economic and market conditions adversely affecting the Company and the risks that would be involved
if the Company was to remain independent, including the risk of not being able to refinance the
Companys debt on acceptable terms.
On April 9, 2008, the Company received a revised proposal letter from The DIRECTV Group, Inc.
that contained, among other things, an offer to acquire the Company for $1.80 per share and an
extension of the exclusivity period to April 18, 2008.
On April 10, 2008, the board met telephonically and SMH Capital summarized the recent
discussions with DirecTV regarding the revised purchase price of $1.80 per share, including that,
after several calls between members of the special committee and SMH Capital, the special committee
authorized SMH Capital to respond to DirecTV that the board required a purchase price of $2.00 per
share or it would need DirecTV to reduce its requested termination fee and permit the Company to
solicit acquisition proposals from third parties for a period following execution of the merger
agreement. McDermott discussed the other material issues still being negotiated in the proposed
merger agreement and provided a general description of the go-shop provision which the Company
would request from DirecTV and compared it to the fiduciary out provisions already in the
proposed merger agreement.
On April 11, 2008, the special committee met telephonically and senior management summarized
the projected adverse impact on the Companys business, financial condition and results of
operation, both short and long-term, should the board reject DirecTVs offer and the Company remain
independent. Among other possible factors likely to adversely affect the Company, senior
management cited the substantial risk of loss of a material portion of DIRECTV U.S. business in
certain geographic areas served by the Company, rising fuel prices, rising costs associated with
defending pending class action claims, and continuing deterioration in the credit markets that
would not only further hinder managements efforts to refinance the Company on acceptable terms,
but would also continue to adversely affect customers of the Companys network services and
structured wiring businesses. Senior management also reviewed the cost reductions efforts made to
date. SMH Capital then reported that DirecTV had indicated that the Company should expect a
revised proposal that would, among other things, contain a $1.80 per share purchase price, provide
the Company with a limited go-shop period after execution of the merger agreement, address the
termination fee issue and require the merger agreement be approved by a unanimous vote of the board
and the agreement that all stockholders on the board would agree to vote their shares in support of
the transaction. The revised proposal was received in the evening of April 11, 2008.
On April 13, 2008, the special committee met telephonically and SMH Capital and McDermott
reviewed the revised proposal delivered by DirecTV and the recent discussions with DirecTV related
thereto. SMH Capital reported that certain termination fee and related expense reimbursement
issues were still being negotiated, but that the special committee should expect the aggregate
amount of termination fee and expense reimbursement in the final merger agreement to be $2.5
million, as set forth in the revised proposal. SMH Capital then summarized what process would be
undertaken by SMH Capital during the go-shop period. The special committee then authorized senior
management to agree to the terms of the proposal and to work with the committees legal and financial
advisors to finalize the merger agreement consistent therewith.
25
On April 13, 2008, the Company conveyed to the The DirecTV Group, Inc. that it agreed to the terms of the revised proposal from
The DIRECTV Group,
Inc. regarding the purchase price of $1.80 per share, an agreement of DirecTV to include in
the merger agreement the unlimited right of the Company to solicit competing offers for the Company
for a period of 30 days following the parties execution of the merger agreement and an extension
of the exclusivity period through April 18, 2008.
On April 17, 2008, the special committee and the board, jointly, met telephonically and
McDermott reviewed with the special committee the terms of the proposed merger agreement.
Representatives of William Blair presented to the special committee its financial analysis of the
proposed transaction and delivered its oral opinion to the special committee, and subsequently
confirmed in writing that, as of April 17, 2008 and based upon and subject to the factors and
assumptions set forth therein, the $1.80 in cash per share to be received by the Companys
stockholders pursuant to the merger agreement was fair, from a financial point of view, to such
holders. Following a thorough and extensive discussion involving members of the special
committee and the board, (i) the special committee unanimously proposed and recommended that the
board adopt and approve the merger agreement, the merger and the other transactions contemplated
thereby , and (ii) the board determined that the merger was fair and in the best interest of the
Companys stockholders, unanimously approved the merger agreement, the merger and the other
transactions contemplated by the merger agreement, resolved to recommend that the Companys
stockholders vote to adopt the merger agreement and authorized its executive officers to execute
and deliver the merger agreement subject to finalizing and resolving any open issues on the merger
agreement.
Thereafter, during the evening of April 17, 2008, representatives of the Company and its
advisors and representatives of DirecTV and its advisors had several discussions to finalize the
merger agreement and the exhibits and schedules thereto and other related transaction documents.
Early in the morning on April 18, 2008, the Company, DirecTV and DTV HSP Merger Sub executed and
delivered the merger agreement and publicly announced the signing of the merger agreement.
Concurrently with the execution of the merger agreement, DirecTV and the Companys stockholders
party to voting agreements executed and delivered the voting agreements.
In a separate transaction to which the Company is not a party, on April 18, 2008, DTV HSP
Merger Sub entered into an asset purchase and exchange agreement with UniTek pursuant to which DTV
HSP Merger Sub agreed to sell, upon the consummation of the merger, the Companys cable services
business and its satellite installation services business in specified markets to UniTek in
exchange for certain of UniTeks satellite installation services in specified markets and a cash
payment.
From April 18, 2008 to April 27, 2008, SMH Capital contacted third parties to solicit them to
submit competing offer proposals for the Company, in accordance with the terms of the go-shop
provision of the merger agreement.
On April 27, 2008 the special committee met and SMH Capital and McDermott summarized an issue
that had arisen as a result of an unsolicited request for information about the Company from
Company A following the Companys execution of the merger agreement. In accordance with applicable
provisions of the merger agreement, the Company notified DirecTV of its intent to enter into a
confidentiality and standstill agreement with Company A. The Company received a letter from
DirecTV in response in which, among other things, DirecTV cited the direct competitor status of
Company A to DIRECTV U.S. and advised the Company that DIRECTV U.S. believed it had the right to
terminate both the HSP agreement of DIRECTV U.S. with the Company and the merger agreement if the
Company or its representatives had any discussions with, or made any disclosures to, Company A.
The special committee authorized McDermott and SMH Capital to attempt to negotiate the issue with
DirecTV to allow for some reasonable level of disclosure, taking into account the competitor status
of Company A, the confidentiality provisions of the Companys HSP agreement with DIRECTV U.S. and
the boards fiduciary obligations under Delaware law.
On April 28, 2008, the special committee met telephonically and SMH Capital and McDermott
explained that DirecTV was unwilling to change its position on discussions with and disclosures to
Company A. Following a thorough and extensive discussion and deliberation, the special committee
authorized SMH Capital to advise Company A that, because of contractual obligations to DirecTV
concerning confidential information, the Company would be unable to provide Company A with any
information, written or oral, concerning the Company and that Company A would have to determine
whether it wanted to make an acquisition proposal to the Company based on publicly disclosed
information about the Company. SMH Capital also advised the committee as to the status of the
go-shop efforts, indicating, among other things, given that the Company had entered into a merger agreement with an affiliate of DIRECTV U.S., the
Companys major customer, there was limited interest by
other parties in considering a transaction with the Company and that only one other party, Company
B, had expressed an interest in receiving information about the Company and that Company B had
executed a confidentiality and standstill agreement in connection therewith.
26
Reasons for the Merger
In reaching its determination that the merger is advisable and in the best interests of our
stockholders, our board of directors consulted with senior management, legal counsel and financial
advisors. The following describes material reasons, factors and information taken into account by
our board of directors in deciding to approve and adopt the merger agreement and the transactions
contemplated thereby and to recommend that our stockholders approve the merger agreement:
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Merger Consideration Premium. The $1.80 per share merger consideration represents a
significant premium to the recent closing trading price of our common stock. The $1.80
per share merger consideration represents a premium of approximately 96% to the closing
price of our common stock on April 16, 2008, the last full trading day before our board
approved and adopted the merger agreement, and a premium of approximately 50% to the
average daily closing price of our common stock since December 31, 2007. |
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Risk of Loss of a Material Portion of DirecTV Business. DIRECTV U.S. represented
approximately 84% of the Companys revenue in fiscal year 2007. It was the boards understanding that DIRECTV U.S.
intended to own and operate a meaningful percentage of its
installation services, including certain markets in which the Company performs installation services
for DIRECTV U.S. under its home service provider agreement with DIRECTV U.S. DIRECTV
U.S. also advised the Company that it intended to either acquire home service providers
that service the geographic areas which it preferred to own and operate or consider
whether it might exercise its contractual rights to cancel contracts with home service
providers in such geographic areas. As a result of the foregoing, absent the merger
with DirecTV, the Company believes that there was a substantial risk of loss of a
material portion of DIRECTV U.S. business in certain geographic areas served by the
Company under its HSP agreement with DIRECTV U.S. |
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Inability to Refinance the Company on Reasonable Terms. Between August 2007 and
February 2008, the Company conducted two separate processes managed by two different
placement agents to explore various debt refinancing alternatives. In general, the
Company had limited success in attracting prospective lenders, in large part because of
the significant deterioration in the credit markets during such period, the Companys
customer concentration with DIRECTV U.S. and the ability of DIRECTV U.S. to cancel some
or all of its business with the Company under its HSP agreement (each as referenced
above), the Companys history of operating losses and its lack of material free cash
flow, and the Companys predominately low margin business. And, after receiving and
negotiating the several proposals and term sheets it was able to attract from
prospective lenders, the Company concluded that none of the proposed refinancing
options would fully meet the Companys financing needs and all of them would likely
result in significant dilution to the Companys existing stockholders. |
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Risks of Remaining Independent. Our board of directors considered information
relating to our business, financial condition, results of operations, pending class
action claims, the nature of our business and industry in which we compete, certain
economic and market conditions (including credit market conditions) on both a
historical and prospective basis, as well as our strategic and financial objectives
and, in light of all of the foregoing information, determined that there existed
significant risk that these objectives would be difficult to achieve if the Company was
to remain independent. |
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Terms of the Merger Agreement. Our board of directors considered the financial and
other terms and conditions of the merger agreement, by themselves and in comparison to
the terms of agreements in other similar transactions, including: |
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the structure of the merger as an all-cash transaction, which will allow our
stockholders to realize immediately fair value and liquidity for their
investment and which will provide them with certainty of value for their
shares; |
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the right of our board of directors for a period of 30 days following
execution of the merger agreement to solicit acquisition proposals from third
parties and to furnish information to and conduct negotiations with such third
parties; |
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the additional right of our board of directors under certain circumstances,
in connection with the discharge of its fiduciary duties to our stockholders,
to consider unsolicited acquisition proposals and to furnish information to and
conduct negotiations with third parties that make an unsolicited acquisition
proposal prior to obtaining stockholder approval; |
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the ability of our board of directors to change its recommendation with
respect to the merger under certain circumstances should we receive an
unsolicited proposal that our board of directors determines to be a superior
proposal, to terminate the merger agreement and to enter into an agreement with
respect to such superior proposal; |
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the board of directors understanding, after consultation with financial
advisors and legal counsel, that our obligations to pay a $500,000 termination
fee to DirecTV and to reimburse DirecTV for $2,000,000 million in expenses (and
the circumstances when such fee is payable and such expenses reimbursable) are
reasonable and customary in light of the benefits of the merger, commercial
practice and transactions of this size and nature; |
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DirecTVs obligation to complete the merger is not subject to any financing
contingencies; and |
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the likelihood of satisfying the other conditions to DirecTVs obligations
to complete the merger and the likelihood that the merger will be completed. |
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Alternatives for our stockholders. Our board of directors concluded that the merger
is more favorable to our stockholders than any other alternative reasonably available
to us. In connection with its evaluation of the merger agreement, our board considered
the following alternatives, among other things: (i) a sale of our company to a third
party; (ii) continuing to execute our strategic operating plan; and (iii) a variety of
possibilities relating to one or more of our businesses, including strategic sales. Our
board believes that the merger is more attractive to our stockholders than any of these
alternatives based on the per share consideration to be paid in the merger compared to
the potential value of these alternatives, the risks related to these alternatives and
the amount of time required to implement such alternatives. |
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Financial analysis and opinion of William Blair. The board considered the financial
presentation by William Blair at the meeting of the board of directors on April 17,
2008 (and prior board meetings), and its opinion that, as of April 17, 2008, and based
upon and subject to the assumptions made, matters considered and limitations set forth
in the opinion, the consideration to be received by our stockholders in the merger is
fair from a financial point of view to such holders. See The MergerOpinion of
William Blair, Financial Advisor to 180 Connect |
28
Our board of directors also considered a variety of risks and other potentially negative factors
relating to the merger in its deliberations, including:
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Failure to Close. The risks and costs to us if the merger does not close for any
reason, including the diversion of management and employee attention, employee
attrition and the effect on customer and vendor relationships. |
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Becoming a Wholly Owned Subsidiary. The fact that we will no longer exist as an
independent, publicly traded company, and our stockholders will no longer participate
in any of our future earnings or growth and will not benefit from any appreciation in
our value. |
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Taxation. The fact that gains realized from an all-cash transaction would generally
be taxable to our stockholders for U.S. federal income tax purposes. |
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Disruptions. The potential impact of the announcement and pendency of the merger,
including the potential impact of the merger on our employees and customers and the
potential risk of diverting management focus and resources from other strategic
opportunities and from operational matters while working to negotiate and close the
merger with DirecTV, which could potentially impair our prospects as an independent
company if the merger is not consummated. |
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Operating Restrictions. The fact that, pursuant to the merger agreement, we must
generally conduct our business in the ordinary course, and we are subject to a variety
of other restrictions on the conduct of our business prior to closing of the merger or
termination of the merger agreement without the consent of DirecTV, which may delay or
prevent us from pursuing business opportunities that may arise or preclude actions that
would be advisable if we were to remain an independent company. |
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No Solicitation; Termination Fee. The fact that under the terms of the merger
agreement, after the Go-Shop Period, we cannot solicit new acquisition proposals from
third parties and may be required to pay to DirecTV a termination fee of $500,000 and
reimburse DirecTV for $2,000,000 of expenses if the merger agreement is terminated
under certain circumstances, which, in addition to being costly, might have the effect
of discouraging other parties from proposing an alternative transaction that might be
more advantageous to our stockholders than the merger. |
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Officers and Directors. The fact that the interests of our executive officers and
directors in the merger may be different from, or in addition to, the interests of our
stockholders generally. See Interests of Certain Persons in the Merger. |
The foregoing discussion summarizes the material factors considered by our board of directors in
its consideration of the merger. After considering these factors, our board of directors concluded
that the positive factors relating to the merger agreement outweighed the negative factors. In view
of the wide variety of factors considered by our board of directors, the board did not find it
practicable to quantify or otherwise assign relative weights to the foregoing factors. Our board of
directors unanimously approved and adopted and recommends the merger agreement based upon the
totality of the information presented to and considered by it.
Recommendation of the Board of Directors
After careful consideration, our board of directors, acting upon the unanimous recommendation
of the special committee of the board of directors consisting of four independent directors, has
unanimously determined that the merger is fair to, and in the best interests of, 180 Connect and
our stockholders, declared the merger agreement advisable and approved the merger agreement and the
other transactions contemplated by the merger agreement. ACCORDINGLY, THE BOARD OF DIRECTORS OF
180 CONNECT UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THE MERGER AGREEMENT AND FOR
THE ADJOURNMENT OR POSTPONEMENT OF THE SPECIAL MEETING, IF NECESSARY OR APPROPRIATE, TO SOLICIT
ADDITIONAL PROXIES IN FAVOR OF THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
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Opinion of William Blair, Financial Advisor to 180 Connect
William Blair acted as financial advisor to 180 Connect in connection with the merger. As
part of its engagement, 180 Connect requested that William Blair render an opinion as to whether
the merger consideration to be paid by DirecTV was fair, from a financial point of view, to 180
Connect stockholders. On April 17, 2008, William Blair delivered its oral opinion to the special
committee of the 180 Connect board of directors and subsequently confirmed in writing that, as of
such date and based upon and subject to the assumptions and qualifications stated in its opinion,
the merger consideration was fair, from a financial point of view, to 180 Connect stockholders.
The full text of William Blairs written opinion, dated April 17, 2008, is attached as Annex C
to this document and incorporated into this document by reference. We urge holders of 180 Connect
common stock to read the entire opinion carefully to learn about the assumptions made, procedures
followed, matters considered and limits on the scope of the review undertaken by William Blair in
rendering its opinion. William Blairs opinion relates only to the fairness, from a financial
point of view, to 180 Connect stockholders of the consideration to be paid by DirecTV in the
merger, does not address any other aspect of the proposed merger or any related transaction, and
does not constitute a recommendation to any stockholder as to how that stockholder should vote with
respect to the merger agreement or the merger. William Blair did not address the merits of the
underlying decision by 180 Connect to engage in the merger. The following summary of William
Blairs opinion is qualified in its entirety by reference to the full text of the opinion.
William Blair provided the opinion described above for the information and assistance of the
180 Connect board of directors in connection with its consideration of the merger. The terms of
the merger agreement and the amount and form of the merger consideration, however, were determined
through negotiations between 180 Connect and DirecTV, and were approved by the 180 Connect board of
directors. William Blair provided financial advice to 180 Connect during such negotiations.
However, William Blair did not recommend any specific amount or form of consideration to 180
Connect, or that any specific amount or form of consideration constituted the only appropriate
consideration for the proposed merger.
In connection with its opinion, William Blair, among other things:
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reviewed the draft merger agreement distributed to William Blair on April 17, 2008; |
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reviewed certain audited historical financial statements of 180 Connect Inc. (a
Canadian corporation prior to the merger with Ad.Venture Partners) for the three years
ended December 31, 2006; |
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reviewed audited financial statements of 180 Connect for the three years ended
December 31, 2007; |
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reviewed certain internal business, operating and financial information and
forecasts of 180 Connect for fiscal years 2008 through 2012 (the Forecasts), prepared
by the senior management of 180 Connect; |
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reviewed information regarding publicly available financial terms of certain other
business combinations William Blair deemed relevant; |
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reviewed the financial position and operating results of 180 Connect compared with
those of certain other publicly traded companies William Blair deemed relevant; |
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reviewed current and historical market prices and trading volumes of the common
stock of 180 Connect; and |
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performed such other financial analyses and considered such other information,
including certain other public information about 180 Connect, as William Blair deemed
appropriate for the purposes of its opinion. |
William Blair also held discussions with members of the senior management of 180 Connect to discuss the foregoing, and took into account the accepted financial and investment
banking procedures and considerations that it deemed relevant.
30
In rendering its opinion, William Blair assumed and relied, without independent verification,
upon the accuracy, completeness and fair presentation of all the information reviewed by or
discussed with William Blair for
purposes of its opinion, including without limitation the Forecasts developed by the senior
management of 180 Connect. William Blairs opinion was conditional upon the accuracy, completeness
and fair presentation of such information. William Blair did not make or obtain an independent
valuation or appraisal of the assets, liabilities or solvency of 180 Connect or DirecTV. William
Blair was advised by the senior management of 180 Connect that the Forecasts examined by William
Blair were reasonably prepared on bases reflecting the best estimates then available and judgments
of the senior management of 180 Connect. In that regard, William Blair assumed that (i) the
Forecasts would be achieved in the amounts and at the times contemplated thereby, and (ii) all
material assets and liabilities (contingent or otherwise) of 180 Connect were as set forth in 180
Connects financial statements or other information made available to William Blair. William Blair
expressed no opinion with respect to the Forecasts or the estimates and judgments on which they
were based. William Blair did not analyze any forecasts of 180 Connect for periods after 2012.
William Blairs opinion did not address the relative merits of the merger as compared to any
alternative business strategies that might exist for 180 Connect or the effect of other
transactions in which 180 Connect might engage. William Blairs opinion was based upon economic,
market, financial and other conditions existing on, and other information disclosed to William
Blair as of, April 17, 2008. Although developments subsequent to April 17, 2008 may affect its
opinion, William Blair does not have any obligation to update, revise or reaffirm its opinion.
William Blair relied as to all legal, accounting and tax matters on advice of advisors to 180
Connect, and assumed that the executed merger agreement would substantially conform to, and the
merger would be consummated on, the terms described in the draft merger agreement reviewed by it,
without any amendment or waiver of any material terms or conditions. William Blair was not
requested to, and did not seek alternative participants for the merger.
William Blair did not express any opinion as to the price at which the common stock of 180
Connect will trade at any future time or as to the effect of the announcement of the merger on the
trading price of the common stock of 180 Connect. William Blair noted that the trading price may
be affected by a number of factors, including but not limited to:
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dispositions of the common stock of 180 Connect by stockholders within a short
period of time after the date of the merger agreement; |
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changes in prevailing interest rates and other factors which generally influence the
price of securities; |
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adverse changes in the capital markets from the date on which the opinion was
delivered; |
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the occurrence of adverse changes in the financial condition, business, assets,
results of operations or prospects of 180 Connect or DirecTV or in their respective
target markets; |
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any actions by or restrictions of federal, state or other governmental agencies or
regulatory authorities; and |
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timely completion of the merger on the terms and conditions that are acceptable to
all parties in interest. |
The following is a summary of the material financial analyses performed and material factors
considered by William Blair to arrive at its opinion. William Blair performed certain procedures,
including each of the financial analyses described below, and reviewed with 180 Connects board of
directors the assumptions upon which such analyses were based, as well as other factors. Although
the summary does not purport to describe all of the analyses performed or factors considered by
William Blair in this regard, it does set forth those considered by William Blair to be material in
arriving at its opinion.
Selected Public Company Analysis. William Blair reviewed and compared certain financial
information relating to 180 Connect to corresponding financial information, ratios and public
market multiples for publicly traded companies with operations in the specialty outsourced services
sector and with similar business characteristics. The companies selected by William Blair were:
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Black Box Corporation; |
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Comfort Systems USA, Inc.; |
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Dycom Industries, Inc.; |
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FirstService Corporation; |
31
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MasTec, Inc.; |
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Matrix Service Company; |
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Quanta Services, Inc.; and |
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Rollins, Inc. |
Among the information William Blair considered were revenue, earnings before interest,
taxation, depreciation and amortization (which we refer to as EBITDA), and earnings before interest
and taxation (which we refer to as EBIT). William Blair considered the enterprise value as a
multiple of revenue, EBITDA and EBIT for each company for the last twelve months for which results
were publicly available and for the respective calendar year EBITDA and EBIT estimates for 2008.
The operating results and the corresponding derived multiples for 180 Connect and each of the
selected companies were based on each companys most recent available publicly disclosed financial
information, closing share prices as of April 15, 2008 and consensus Wall Street analysts
estimates for calendar year 2008 where appropriate. William Blair noted that it did not have
access to internal forecasts for any of the selected public companies, except 180 Connect. The
implied enterprise value of the transaction is based on the equity value implied by the purchase
price plus the total debt, less any excess cash and cash equivalents at December 31, 2007 based on
180 Connects 2007 Annual Report on Form 10-K.
William Blair then compared the implied transaction multiples for 180 Connect to the range of
trading multiples for the selected companies. Information regarding the range of multiples from
William Blairs analysis of selected publicly traded companies is set forth in the following table:
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Implied |
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Selected Public Company |
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Transaction |
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Valuation Multiples |
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Multiple |
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Min |
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Median |
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Mean |
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Max |
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Enterprise Value/LTM Revenue |
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0.36x |
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0.70x |
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0.88x |
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1.84x |
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0.28x |
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Enterprise Value/2008E Revenue |
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0.32x |
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0.64x |
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0.76x |
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1.59x |
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0.31x |
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Enterprise Value/LTM EBITDA |
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4.9 x |
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8.3 x |
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10.2 x |
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16.5 x |
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5.4 x |
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Enterprise Value/2008E EBITDA |
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5.1 x |
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7.0 x |
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7.4 x |
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11.1 x |
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8.2 x |
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Enterprise Value/LTM EBIT |
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8.0 x |
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11.3 x |
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13.7 x |
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23.3 x |
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27.5 x |
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Enterprise Value/2008E EBIT |
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5.8 x |
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9.4 x |
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10.1 x |
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15.1 x |
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NMF |
William Blair noted that the implied transaction multiples based on the terms of the merger
were below the range of LTM and 2008E revenue, within the range of LTM and 2008E EBITDA, and above
the range of LTM EBIT multiples of the selected public companies.
Although William Blair compared the trading multiples of the selected companies as of April
15, 2008 and applied such multiples to 180 Connect, none of the selected companies is identical to
180 Connect. Accordingly, any analysis of the selected publicly traded companies necessarily
involved complex considerations and judgments concerning the differences in financial and operating
characteristics and other factors that would necessarily affect the analysis of trading multiples
of the selected publicly traded companies.
Selected M&A Transactions Analysis. William Blair performed an analysis of selected recent
business combinations consisting of transactions announced subsequent to January 1, 1999 and
focused primarily on the specialty outsourced service sector and transactions having similar
business characteristics. William Blairs analysis was based solely on publicly available
information regarding such transactions. The selected transactions were not intended to be
representative of the entire range of possible transactions in the respective industries. The
transactions examined were (target/acquiror):
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InfraSource Services, Inc./Quanta Services, Inc.; |
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The ServiceMaster Company/Clayton, Dubilier & Rice, Inc.; |
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Cable Express Holding Co./Dycom Industries, Inc.; |
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J.C. Ehrlich Co., Inc./Rentokil Initial plc; |
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Digital Satellite Services, Inc./MasTec, Inc.; |
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Prince Telecom Holdings, Inc./Dycom Industries, Inc.; |
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Middleton Pest Control, Inc./Sunair Electronics, Inc.; |
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Norstan, Inc./Black Box Corporation; |
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Residential Services Group, Inc./Direct Energy Marketing Limited; |
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Western Pest Services/Rollins, Inc.; |
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Geek Squad, Inc./Best Buy Co., Inc.; |
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Arguss Communications, Inc./Dycom Industries, Inc.; |
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Building One Services Corporation/Group Maintenance America Corp.; |
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Service Experts, Inc./Lennox International Inc.; and |
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American Residential Services, Inc./The ServiceMaster Company. |
William Blair reviewed the consideration paid in the selected transactions in terms of the
enterprise value of such transactions as a multiple of revenue, EBITDA and EBIT of the target for
the latest twelve months prior to the announcement of these transactions. William Blair compared
the resulting range of transaction multiples of revenue, EBITDA, and EBIT for the selected
transactions to the implied transaction multiples for 180 Connect. Information regarding the range
of multiples from William Blairs analysis of selected transactions is set forth in the following
table:
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Implied |
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Selected M&A Transaction |
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Transaction |
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Valuation Multiples |
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Multiple |
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Min |
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Median |
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Mean |
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Max |
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Enterprise Value/LTM Revenue |
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0.44x |
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0.64x |
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0.87x |
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1.64x |
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0.28x |
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Enterprise Value/2008E Revenue |
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0.31x |
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Enterprise Value/LTM EBITDA |
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5.6 x |
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8.6 x |
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10.6 x |
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20.3 x |
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5.4 x |
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Enterprise Value/2008E EBITDA |
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8.2 x |
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Enterprise Value/LTM EBIT |
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6.1 x |
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15.5 x |
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16.0 x |
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26.4 x |
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27.5 x |
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Enterprise Value/2008E EBIT |
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NMF |
William Blair noted that the implied transaction multiples based on the terms of the merger
were below the range of multiples of LTM revenue and LTM EBITDA, and above the range of multiples
of LTM EBIT of the selected transactions.
Although William Blair analyzed the multiples implied by the selected transactions and applied
such multiples to 180 Connect, none of these transactions or associated companies is identical to
the merger of 180 Connect and DTV HSP Merger Sub. Accordingly, any analysis of the selected
transactions necessarily involved complex considerations and judgments concerning the differences
in financial and operating characteristics, parties involved and terms of their transactions and
other factors that would necessarily affect the implied value of DirecTV versus the values of the
companies in the selected transactions.
Premiums Paid Analysis. William Blair reviewed data from 52 acquisitions of domestic publicly
traded companies listed on the OTC Bulletin Board and 114 domestic publicly traded companies listed
on the NYSE, NASDAQ and AMEX occurring since January 1, 2002 and with equity values between $25
million and $75 million which were financed with one hundred percent (100%) cash consideration.
Specifically, William Blair analyzed the acquisition price per share as a premium to the closing
share price one (1) day, one (1) week, four (4) weeks, sixty (60) days, and ninety (90) days prior
to the announcement of the transaction. William Blair compared the median of the resulting stock
price premiums for the reviewed transactions to the premiums implied by the merger based on 180
Connects stock price one (1) day, one (1) week, four (4) weeks, sixty (60) days, and ninety (90)
days prior to April 16, 2008. Information regarding the premiums from William Blairs analysis of
selected transactions is set forth in the following table:
33
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OTC Bulletin Board Listed Target Companies |
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Implied Transaction |
Premium Period |
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Median of Transaction Premiums |
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Premium |
One Day |
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31.1 |
% |
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100.0 |
% |
One Week |
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33.5 |
% |
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74.8 |
% |
One Month |
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29.8 |
% |
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56.5 |
% |
Sixty Days |
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37.8 |
% |
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52.5 |
% |
Ninety Days |
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37.0 |
% |
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91.5 |
% |
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NYSE/NASDAQ/AMEX Listed Target Companies |
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Implied Transaction |
Premium Period |
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Median of Transaction Premiums |
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Premium |
One Day |
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26.6 |
% |
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100.0 |
% |
One Week |
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31.1 |
% |
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74.8 |
% |
One Month |
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38.6 |
% |
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56.5 |
% |
Sixty Days |
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33.3 |
% |
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52.5 |
% |
Ninety Days |
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33.2 |
% |
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91.5 |
% |
William Blair noted that the premiums implied by the transaction were above the median of the
premiums paid for the referenced transaction groups for each of the one day, one week, four weeks,
sixty day, and ninety day time periods.
Discounted Cash Flow Analysis. William Blair utilized the Forecasts to perform a discounted
cash flow analysis of 180 Connects projected future cash flows for the period commencing on
January 1, 2008 and ending December 31, 2012. Using discounted cash flow methodology, William
Blair calculated the present values of the projected free cash flows for 180 Connect. In this
analysis, William Blair assumed a transaction value at an exit multiple of 5.5x to 8.5x EBITDA in
2012. William Blair further assumed an annual discount rate ranging from eighteen percent (18.00%)
to twenty two percent (22.00%). William Blair determined the appropriate discount range based upon
an analysis of the weighted average cost of capital of 180 Connect and comparable public companies.
William Blair aggregated (1) the present value of the free cash flows over the applicable forecast
period with (2) the present value of the range of terminal values. The aggregate present value of
these items represented the enterprise value range. An equity value was determined by adding back
the amount of net cash at December 31, 2007 based on 180 Connects 2007 Annual Report on Form 10-K.
The implied range of equity values for 180 Connect implied by the discounted cash flow analysis
ranged from approximately $33.0 million to $73.7 million, as compared to the implied equity value
for 180 Connect of approximately $48.6 million.
Based on the Forecasts and assumptions set forth above, the discounted cash flow analysis of
180 Connect, yielded an implied range of equity value per share for 180 Connect from approximately
$1.22 to $2.73, as compared to the merger consideration per share of $1.80.
In addition, William Blair performed a discounted cash flow analysis to calculate the present
values of the projected free cash flows for 180 Connect using a discount rate that approximates
inherent business risks associated with 180 Connect. Such risk factors include (1) significant
customer concentration, (2) likelihood in the future of entering competition with its largest
customer, (3) inability to re-finance balance sheet without incurring significant stockholder
dilution, and (4) financial risk of high levels of indebtedness. William Blair assumed a
transaction value of 5.5x to 8.5x EBITDA in 2012. William Blair further assumed a risk adjusted
annual discount rate ranging from twenty three percent (23.00%) to thirty one percent (31.00%),
adjusted for risks previously mentioned. William Blair aggregated (1) the present value of the
free cash flows over the applicable forecast period with (2) the present value of the range of
terminal values. The aggregate present value of these items represented the enterprise value
range. An equity value was determined by adding back the amount of net cash at December 31, 2007
based on 180 Connects 2007 Annual Report on Form 10-K. The implied range of equity values for 180
Connect implied by the discounted cash flow analysis ranged from approximately $12.4 million to
$53.4 million, as compared to the implied equity value for 180 Connect of approximately $48.6
million.
34
Based on the projections and assumptions set forth above, the discounted cash flow analysis
applying discount rates that approximate inherent business risks of 180 Connect yielded an implied
range of equity value per share for 180 Connect from approximately $0.46 to $1.98, as compared to
the merger consideration per share of $1.80.
Leveraged Acquisition Analysis. William Blair utilized the Forecasts to perform an analysis
concerning the price that could be paid by a typical leveraged buyout purchaser to acquire 180
Connect. In this analysis, William Blair assumed (1) a capital structure and financing rate
scenario consistent with the proposed debt capital structure that 180 Connect might have in a
leveraged acquisition; (2) a holding period commencing December 31, 2007 and ending December 31,
2012; (3) a targeted internal rate of return to equity investors of approximately 25% to 35%; (4) a
range of exit multiples of 180 Connects projected 2012 EBITDA of 5.5x to 8.5x; and (5)
accumulation of cash at an interest rate of 3.0%. This analysis indicated that the consideration a
leveraged buyout purchaser, with the aforementioned targeted internal rate of return expectations,
might be willing to pay per share of 180 Connect common stock ranged from $0.84 to $1.98, as
compared to the consideration per share to be received in the merger of $1.80 per share.
General. This summary is not a complete description of the analysis performed by William
Blair but contains the material elements of the analysis. The preparation of an opinion regarding
fairness is a complex process involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to partial analysis or
summary description. The preparation of an opinion regarding fairness does not involve a
mathematical evaluation or weighing of the results of the individual analyses performed, but
requires William Blair to exercise its professional judgment, based on its experience and
expertise, in considering a wide variety of analyses taken as a whole. Each of the analyses
conducted by William Blair was carried out in order to provide a different perspective on the
financial terms of the proposed merger and add to the total mix of information available. The
analyses were prepared solely for the purpose of William Blair providing its opinion and do not
purport to be appraisals or necessarily reflect the prices at which securities actually may be
sold. William Blair did not form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion about the fairness of the consideration to be
paid by 180 Connect. Rather, in reaching its conclusion, William Blair considered the results of
the analyses in light of each other and ultimately reached its opinion based on the results of all
analyses taken as a whole and in consideration of the process undertaken by 180 Connect. William
Blair did not place particular reliance or weight on any particular analysis, but instead concluded
that its analyses, taken as a whole, supported its determination. Accordingly, notwithstanding the
separate factors summarized above, William Blair believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by it, without
considering all analyses and factors, may create an incomplete view of the evaluation process
underlying its opinion. No company or transaction used in the above analyses as a comparison is
directly comparable to 180 Connect or the merger. In performing its analyses, William Blair made
numerous assumptions with respect to industry performance, business and economic conditions and
other matters. The analyses performed by William Blair are not necessarily indicative of future
actual values and future results, which may be significantly more or less favorable than suggested
by such analyses.
William Blair is a nationally recognized firm and, as part of its investment banking
activities, is regularly engaged in the valuation of businesses and their securities in connection
with merger transactions and other types of strategic combinations and acquisitions. William Blair
is familiar with 180 Connect, having advised 180 Connect Inc. in its strategic alternatives review
during 2006 and having provided certain investment banking services to 180 Connect and its board of
directors from time to time, including having acted as financial advisor for 180 Connect Inc. in
its merger with Ad.Venture Partners, Inc. in August 2007 (for which William Blair received
remuneration of approximately $3.25 million). Furthermore, in the ordinary course of its business,
William Blair and its affiliates may beneficially own or actively trade common shares and other
securities of 180 Connect or DirecTV Group for its own account and for the accounts of customers,
and, accordingly, may at any time hold a long or short position in these securities.
180 Connect hired William Blair based on its qualifications and expertise in providing
financial advice to companies and its reputation as a nationally recognized investment banking
firm. Pursuant to a letter agreement dated September 25, 2007 and as amended on February 14, 2008,
William Blair was paid $50,000 for the retention of its services and an additional $250,000 upon
the delivery of its opinion, dated April 17, 2008, as to the fairness, from a financial point of
view, of the merger consideration to be paid by DirecTV to 180 Connect stockholders. Furthermore,
under the terms of the letter agreement, William Blair will be entitled to receive an additional
fee of
$550,000 upon consummation of the merger. In addition, 180 Connect has agreed to reimburse
William Blair for certain of its out-of-pocket expenses (including fees and expenses of its
counsel) reasonably incurred by it in connection with its services and will indemnify William Blair
against potential liabilities arising out of its engagement.
35
As described above, William Blairs opinion to the Special Committee of 180 Connects board of
directors was one of many factors taken into consideration by 180 Connects board of directors in
making its determination to approve the merger. The foregoing summary does not purport to be a
complete description of the analyses performed by William Blair in connection with its fairness
opinion and is qualified in its entirety by reference to the written opinion of William Blair
attached as Annex C to this document. William Blairs opinion was reviewed and approved by its
fairness opinion committee.
Appraisal Rights
If the merger is consummated, holders of our common stock on the date of consummation who
demand the appraisal of such holders shares and who do not vote in favor of the merger are
entitled to certain appraisal rights under Section 262 of the DGCL in connection with the merger.
Such holders who perfect their appraisal rights and follow the procedures in the manner prescribed
by the DGCL will be entitled to have their shares converted into the right to receive from us such
consideration as may be determined by the Delaware Court of Chancery, which we refer to as the
Court, to be due pursuant to the DGCL. Any stockholder who wishes to demand appraisal rights, or
who wishes to preserve his or her right to do so, should review this section carefully, since
failure to comply with the procedures set forth in Section 262 of the DGCL will result in the loss
of such rights. All references in this summary to appraisal rights of a stockholder are to the
record holder or holders of shares of our common stock.
REFERENCE IS MADE TO SECTION 262 OF THE DGCL, A COPY OF WHICH IS ATTACHED TO THIS PROXY
STATEMENT AS ANNEX D, FOR A COMPLETE STATEMENT OF THE APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS.
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THAT SECTION.
FAILURE TO STRICTLY FOLLOW THE PROCEDURES SET FORTH IN SECTION 262 OF THE DGCL MAY RESULT IN
THE LOSS, TERMINATION OR WAIVER OF APPRAISAL RIGHTS. 180 CONNECT STOCKHOLDERS WHO VOTE TO ADOPT THE
MERGER AGREEMENT WILL NOT HAVE A RIGHT TO HAVE THEIR SHARES OF OUR COMMON STOCK APPRAISED OR
OTHERWISE BE ENTITLED TO APPRAISAL RIGHTS. STOCKHOLDERS DESIRING TO EXERCISE THEIR APPRAISAL
RIGHTS MUST ALSO SUBMIT TO US A WRITTEN DEMAND FOR PAYMENT OF THE FAIR VALUE OF THE SHARES OF
COMPANY COMMON STOCK HELD BY THEM PRIOR TO THE VOTE OF THE STOCKHOLDERS ON THE MERGER.
Each stockholder electing to demand the appraisal of his, her or its shares must deliver to us,
prior to the taking of a vote on the merger, a written demand for appraisal of his, her or its
shares of our common stock. Such written demand for appraisal must be executed by or on behalf of
the stockholder of record and must reasonably inform us of the identity of the stockholder of
record and that such stockholder intends to demand the appraisal of his, her or its shares of our
common stock.
Such written demand should be delivered to c/o 180 Connect, 6501 East Belleview Avenue,
Englewood, Colorado 80111, Attention: General Counsel. A person having a beneficial interest in
shares of the Companys common stock that are held of record in the name of another person, such as
a broker, fiduciary, depositary or other nominee, must act promptly to cause the record holder to
follow properly and in a timely manner the steps summarized herein and set forth in their entirety
in Section 262 of the DGCL to perfect appraisal rights. If the shares of Company common stock are
owned of record by a person other than the beneficial owner, including a broker, fiduciary (such as
a trustee, guardian or custodian), depositary or other nominee, such demand must be executed by or
for the record owner. If the shares of Company common stock are owned of record by more than one
person, as in a joint tenancy or tenancy in common, such demand must be executed by or for all
joint owners. An authorized agent, including an agent for two or more joint owners, may execute the
demand for appraisal for a stockholder of record; however, the agent must identify the record owner
and expressly disclose the fact that, in exercising the demand, he or she is acting as agent for
the record owner. If a stockholder holds shares of Company common stock through a broker who in
turn holds the shares through a central securities depository nominee, a demand for
appraisal of such shares must be made by or on behalf of the depository nominee and must
identify the depository nominee as record holder.
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A record holder, such as a broker, fiduciary, depositary or other nominee, who holds shares of
Company common stock as a nominee for others, may exercise appraisal rights with respect to the
shares held for all or less than all beneficial owners of shares as to which such person is the
record owner. In such case, the written demand must set forth the number of shares covered by such
demand. Where the number of shares is not expressly stated, the demand will be presumed to cover
all shares of Company common stock outstanding in the name of such record holder.
Within 10 days after the effective date of the merger, the surviving corporation will notify
each stockholder who is entitled to appraisal rights, has properly demanded appraisal in
accordance with Section 262 of the DGCL and has not voted in favor of the merger of the date that
the merger became effective.
At any time within 60 days after the effective date of the merger, any stockholder who has
delivered a written demand to us will have the right to withdraw such written demand for appraisal
and to accept the terms of the merger agreement by delivering to the surviving corporation a
written withdrawal of such prior written demand and acceptance of the merger consideration. After
this period, a stockholder may withdraw his, her or its written demand for appraisal and receive
payment for his, her or its shares as provided in the merger agreement only with our consent.
Within 120 days after the effective time of the merger, we, as the surviving corporation, or
any electing stockholder who has satisfied the requirements of Section 262 and who is otherwise
entitled to appraisal rights may file a petition with the Court, with a copy served on us in the
case of a petition filed by a stockholder, demanding a determination of the fair value of the
shares of all electing stockholders. We have no present intention to file such a petition if
demand for appraisal is made and stockholders seeking to exercise appraisal rights should not
assume that we will file such a petition or that we will initiate any negotiations with respect to
the fair value of such shares. If no petition for appraisal is filed with the Court within 120
days after the effective time of the merger, electing stockholders rights to appraisal shall
cease, and all holders of shares of Company common stock will be entitled to receive the
consideration offered pursuant to the merger agreement.
Within 120 days after the effective time of the merger (but not thereafter), any stockholder
who has satisfied the requirements of Section 262 may deliver to the surviving corporation a
written request for a statement listing the aggregate number of shares not voted in favor of the
merger and with respect to which demands for appraisal have been received and the aggregate number
of holders of such shares. We, as the surviving corporation in the merger, must mail such written
statement to the stockholder no later than the later of 10 days after the stockholders request is
received by us or 10 days after the latest date for delivery of a demand for appraisal under
Section 262.
The beneficial owner of shares of stock held either in a voting trust or by a nominee on
behalf of such person may, in such persons own name, file a petition with the Court or request
from us, as the surviving corporation, a statement listing the number of shares not voted in favor
of the merger and with respect to which demands for appraisal have been received and the aggregate
number of holders of such shares.
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At the hearing on a petition, the Court will determine the stockholders who have complied with
Section 262 and are entitled to an appraisal of their shares and may require the stockholders who
have demanded appraisal to submit their certificates to the Register in Chancery. Failure to
comply may result in a dismissal of the proceedings as to such stockholder. After the Court
determines the stockholders entitled to an appraisal, the appraisal proceeding will be conducted in
accordance with the rules specifically governing appraisal proceedings. Through such proceeding
the Court will determine the fair value of the shares exclusive of any element of value arising
from the accomplishment or expectation of the merger, together with an interest, if any, to be paid
on the amount determined to be the fair value. The Court will direct the payment of the fair value
of the shares, together with interest, if any, by the surviving corporation to the stockholders
entitled thereto.
180 Connect stockholders considering seeking appraisal rights under Delaware law should note
that they could receive a value for their shares that is more, the same or less than the
consideration they would receive pursuant to the merger agreement if they did not seek appraisal.
The costs of the appraisal proceeding may be determined by the Court and taxed against the parties
as the Court deems equitable under the circumstances. However, costs do not include attorneys and
expert witness fees. Each electing stockholder is responsible for his, her or its attorneys and expert witness expenses, although upon application of an electing stockholder, the Court may order
that all or a portion of the expenses incurred by any stockholder in connection with the appraisal
proceeding, including reasonable attorneys fees and the fees and expenses of experts, be charged
pro rata against the value of all shares that are under these proceedings. 180 CONNECT STOCKHOLDERS
CONSIDERING EXERCISING APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS WITH REGARD TO
THE TAX CONSEQUENCES OF SUCH ACTIONS.
At the effective time of the merger, the shares of our common stock held by an electing
stockholder will be canceled, and such stockholder will be entitled to no further rights except the
right to receive payment of the fair value of such holders shares. However, if such electing
stockholder fails to perfect or withdraws or loses his or her appraisal rights with respect to his
or her shares of our common stock, such holder will receive the applicable merger consideration in
exchange for his or her common stock under the terms of the merger agreement.
To the extent that there are any inconsistencies between the foregoing summary and Section 262
of the DGCL, the DGCL shall control.
Holders of exchangeable shares will not be able to exercise appraisal rights in accordance
with the DGCL unless such holders exchanged their exchangeable shares for shares of common stock
before the vote is taken on the merger agreement and have complied with the applicable provisions
of the DGCL described herein.
Accounting Treatment
The merger will be accounted for as a purchase transaction for financial accounting
purposes.
Form of the Merger
Subject to the terms and conditions of the merger agreement and in accordance with Delaware
law, at the effective time of the merger, DTV HSP Merger Sub, Inc., a wholly owned subsidiary of
DirecTV and a party to the merger agreement, will merge with and into us. We will survive the
merger as a wholly owned Delaware subsidiary of DirecTV.
Merger Consideration
At the effective time of the merger, each outstanding share of our common stock (other than
treasury shares, shares held by DirecTV or DTV HSP Merger Sub, Inc., shares held by any direct or
indirect wholly owned subsidiary belonging to us or DirecTV and those shares held by stockholders
who perfected their appraisal rights as described in Appraisal Rights), will be canceled and
automatically converted into the right to receive $1.80 in cash, without interest. Treasury
shares, shares of our common stock held by DirecTV or DTV HSP Merger Sub, Inc. and shares held by
our or DirecTVs wholly owned subsidiaries will be canceled immediately prior to the effective time
of the merger.
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As of the effective time of the merger, all shares of our common stock will no longer be
outstanding and will automatically be canceled and will cease to exist and each holder of a
certificate representing any shares of our common stock (other than stockholders who have perfected
their appraisal rights) will cease to have any rights as a stockholder, except the right to receive
$1.80 per share in cash, without interest. The price of $1.80 per share was determined through
arms-length negotiations between DirecTV and us.
DirecTV shall be entitled to deduct and withhold from any consideration payable pursuant to
the merger agreement such amounts as DirecTV is required to deduct and withhold under applicable
tax laws. See The MergerMaterial United States Federal Income Tax Consequences of the Merger.
Conversion of Shares; Procedures for Exchange of Certificates
The conversion of our common stock into the right to receive $1.80 per share in cash, without
interest, will occur automatically at the effective time of the merger. As soon as reasonably
practicable after the effective time of the merger, DirecTV will cause a letter of transmittal to
be mailed to each former 180 Connect stockholder. The letter of transmittal will contain
instructions for obtaining cash in exchange for shares of our common stock. You should not return
stock certificates with the enclosed proxy.
Upon surrender of a stock certificate representing shares of our common stock, together with a
duly completed and validly executed letter of transmittal, and any other documents that may be
reasonably required by the exchange agent, the holder of the certificate will be entitled to
receive from the exchange agent, on behalf of DirecTV, as promptly as practicable in accordance
with the exchange agents customary procedures, $1.80 in cash for each share represented by the
stock certificate, and the corresponding stock certificate will be cancelled. Any holder who
surrenders such certificate and duly completes and executes the letter of transmittal will also
have waived all appraisal rights under the applicable provisions of the DGCL.
In the event of a transfer of ownership of shares of our common stock that is not registered
in our stock transfer records, the merger consideration for shares of our common stock may be paid
to a person other than the person in whose name the surrendered certificate is registered if:
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the certificate formerly representing the shares is presented to the exchange agent
accompanied by all documents required to evidence the transfer, and |
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documents are presented to the exchange agent evidencing, to the reasonable
satisfaction of DirecTV, that any applicable stock transfer taxes have been paid or are
not applicable. |
If payment is to be made to a person other than the person in whose name the surrendered
certificate is registered, the exchange agent may require a properly executed stock power with the
signature on the stock power and on the letter of transmittal guaranteed by a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, all as shall be more particularly
described in the letter of transmittal.
In the event of a lost, stolen or destroyed certificate representing shares of common stock,
the merger consideration for shares of our common stock may be paid to a person upon their making
of an affidavit of such fact. The exchange agent may further require the owner of the lost, stolen
or destroyed certificate to provide a reasonable form of bond as indemnity and may further require
such owner to execute an indemnity agreement.
No interest will be paid or accrue on any cash payable upon the surrender of stock
certificates representing shares of our common stock. The cash paid upon conversion of shares of
our common stock will be issued in full satisfaction of all rights relating to the shares of our
common stock.
If any cash deposited with the exchange agent is not claimed within six (6) months after the
effective time of the merger, DirecTV may require such cash be returned to DirecTV. Thereafter,
holders must look to DirecTV for payment as general creditors.
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Effect on Awards Outstanding under 180 Connects Stock Plans and Agreements
Subject to the consummation of the merger, as of the effective time of the merger, all
outstanding options and stock appreciation rights, whether or not exercisable and vested at the
effective time of the merger, will be canceled and converted into the right to receive cash in an
amount equal to the product of (a) the total number of shares of common stock subject to such
options or stock appreciation rights immediately prior to their cancellation and (b) the excess, if
any, of $1.80 over the exercise price or base price per share of common stock subject to the stock
option or stock appreciation right, as applicable (assuming full vesting), less any applicable
withholding taxes. Options and stock appreciation rights that have an exercise price or base price
equal to or in excess of $1.80 per share will receive no merger consideration and will be cancelled
upon the effective time of the merger.
Subject to the consummation of the merger, as of the effective time of the merger, each
restricted stock unit award that is outstanding at the effective time of the merger will be
canceled and converted into the right to receive $1.80 in cash for each share of common stock
subject to such restricted stock unit award at the effective time of the merger (assuming full
vesting), less any applicable withholding taxes.
Effect on Warrants
Under the terms of the merger agreement, each outstanding warrant to purchase shares of common
stock, whether or not exercisable and vested at the effective time of the merger, will be cancelled
and exchanged for the right to receive an amount in cash, minus any applicable withholding taxes,
equal to the product of (a) the total number of shares of Company common stock subject to such
warrant immediately prior to its cancellation and (b) the excess, if any, of $1.80 over the
exercise price per share of Company common stock subject to such warrant. Warrants that have an
exercise price equal to or in excess of $1.80 per share will receive no merger consideration.
Effect on Exchangeable Shares
In connection with the merger, the board of directors of 180 Connect Exchangeco Inc. has
determined that it will best facilitate the transactions contemplated by the merger agreement to
accelerate, in accordance with the terms of the articles of 180 Connect Exchangeco Inc., the
redemption of the exchangeable shares to occur immediately prior to the completion of the merger.
This acceleration is conditioned upon consummation of the merger. In the event that the merger is
not consummated for any reason, the redemption date of the exchangeable shares shall not be
accelerated. In connection with the conditional acceleration of the redemption of the exchangeable
shares, 1305699 Alberta ULC has exercised its over-riding call right to acquire all the
exchangeable shares immediately prior to such redemption and consequently, shall acquire each
outstanding exchangeable share in exchange for one share of Company common stock at the redemption
time. If the merger is completed, 1305699 Alberta ULC will acquire 100% of the outstanding
exchangeable shares that it does not hold at such time, and each holder of exchangeable shares
immediately prior to the consummation of the merger shall receive one share of Company common stock
for each exchangeable share held. Such shares of Company common stock shall be entitled to receive
the merger consideration upon consummation of the merger as described elsewhere in this proxy
statement.
Effective Time of the Merger
If the merger is completed, it will become effective upon the filing of a certificate of
merger with the Delaware Secretary of State or at such later time as is agreed upon by DirecTV and
us and specified in the certificate of merger. The filing of the certificate of merger will occur
as soon as practicable on or after the closing of the merger, which (if it occurs) will take place
on the second business day after satisfaction or waiver of the conditions to the completion of the
merger described in the merger agreement or at such other time as agreed to by DirecTV, DTV HSP
Merger Sub and us.
Delisting and Deregistration of 180 Connects Common Stock
If the merger is completed, our common stock will no longer be traded on the OTC Bulletin
Board and will be deregistered under the Exchange Act.
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Material United States Federal Income Tax Consequences of the Merger
The following summary of material U.S. federal income tax consequences of the merger does not
address any tax consequences arising under the income or other tax laws of any state, local or
foreign jurisdiction or (except where specifically noted) any tax treaties. It is not intended to
be, nor should it be construed as being, legal or tax advice, and stockholders should consult their
own tax advisors concerning the tax consequences of the proposed transaction in light of their
individual circumstances. This summary is based on the Internal Revenue Code of 1986, as amended
(the Code), applicable Treasury Regulations, and administrative and judicial interpretations
thereof, each as in effect as of the date of this proxy statement, all of which may change,
possibly with retroactive effect. Any such change could affect the accuracy of the statements and
conclusions discussed below and the U.S. federal income tax consequences of the merger.
This summary assumes that stockholders hold their shares as capital assets. This summary does
not address all tax consequences that may be relevant to particular holders in light of their
individual circumstances, or the tax consequences to holders subject to special tax rules,
including, without limitation: banks, insurance companies, regulated investment companies,
tax-exempt organizations, financial institutions, broker-dealers, traders, persons, if any, holding
180 Connect common stock as qualified small business stock, persons holding 180 Connect common
stock as part of a hedging, straddle, conversion or other integrated transaction, U.S.
expatriates, partnerships and other pass-through entities that are holders of shares of 180 Connect
common stock and members of such partnerships or other pass-through entities, persons whose
functional currency is not the U.S. dollar, U.S. persons that are holders of exchangeable shares,
and persons subject to the alternative minimum tax. This discussion may not be applicable to
stockholders who acquired shares of 180 Connect common stock pursuant to the exercise of options or
warrants or otherwise as compensation. Further, this discussion does not address the U.S. federal
income tax consequences of exchanges of 180 Connect options, warrants, or restricted stock units in
connection with the merger. We urge all stockholders to consult their own tax advisors as to the
specific tax consequences of the merger to them.
As used in this proxy statement, a U.S. holder means a beneficial owner of shares of 180
Connect common stock that is a U.S. person. A U.S. person is a person that is, for U.S. federal
income tax purposes:
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a citizen or resident of the United States; |
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a corporation (or other entity classified as a corporation for U.S. federal income
tax purposes) created or organized under the laws of the United States or any state
within the United States or the District of Columbia; |
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an estate whose income is includible in gross income for U.S. federal income tax
purposes, regardless of its source; or |
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a trust if it has validly elected to be treated as a U.S. person for U.S. federal
income tax purposes or whose administration is subject to the primary supervision of a
U.S. court and that has one or more U.S. persons who have the authority to control all
substantial decisions of the trust. |
If a partnership or other pass-through entity holds stock, the tax treatment of a member
generally will depend upon the status of the member and the activities of the partnership or other
entity. Partnerships and other pass-through entities that hold our common stock, and their
members, are urged to consult their own tax advisors about the U.S. federal income tax consequences
of the merger to them.
A non-U.S. holder is a beneficial owner of shares of 180 Connect common stock or
exchangeable shares who is not a U.S. person.
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Consequences of the Merger to U.S. Holders. The receipt by a U.S. holder of cash in exchange
for shares of 180 Connect common stock in the merger, or as a result of the exercise of appraisal
rights, will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S.
holder will recognize capital gain or loss equal to the difference between the amount of cash
received and the U.S. holders adjusted tax basis in the shares of 180
Connect common stock exchanged. Gain or loss will be calculated separately for each block of
shares, with each block of shares consisting of shares acquired at the same cost in a single
transaction. Such gain or loss will be long-term capital gain or loss if the U.S. holder held its
shares for more than one year as of the time of the exchange. In the case of U.S. holders who are
individuals, trusts or estates, any such long-term capital gain may be taxed at preferential rates.
Certain limitations apply to the deductibility of capital losses by U.S. holders.
Consequences of the Merger to Non-U.S. Holders. A non-U.S. holder generally will not be
subject to U.S. federal income tax on gain (if any) realized upon the receipt of cash in exchange
for shares of 180 Connect common stock in the merger (or, in the case of a non-U.S. holder of
exchangeable shares, upon the exchange of its exchangeable shares for shares of 180 Connect common
stock followed immediately by the exchange of such shares of 180 Connect common stock for cash in
the merger), or as a result of the exercise of appraisal rights. However, a non-U.S. holder may be
subject to U.S. federal income tax on such gain if:
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the gain is effectively connected with the conduct by the non-U.S. holder of a trade
or business in the United States (and, if a treaty applies, such gain is attributable
to a U.S. permanent establishment), in which case the gain will be taxed on a net basis
in the manner applicable to U.S. holders. In addition, a corporate non-U.S. holder may
be subject to a branch profits tax on such income at a 30 percent rate (or such lower
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the non-U.S. holder is an individual who is present in the United States for 183
days or more in the taxable year of disposition and certain other conditions are met;
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180 Connect is a U.S. real property holding corporation (USRPHC). |
180 Connect does not believe that it at any time has constituted a USRPHC and, as a condition
to closing, we will be certifying to DirecTV that we are not and have not been a USRPHC.
Information Reporting Requirement and Backup Withholding. Cash payments made pursuant to the
merger will be reported to 180 Connect stockholders and the Internal Revenue Service to the extent
legally required and it is possible that the Internal Revenue Service may make its reports
available to tax authorities in the country of residence of a non-U.S. holder.
Certain non-corporate holders of shares of 180 Connect common stock may be subject to backup
withholding, currently at a 28% rate, on cash received pursuant to the exchange. Backup
withholding generally will not apply, however, to a holder of shares of 180 Connect common stock
who: (i) furnishes a correct taxpayer identification number and certifies that it is not subject to
backup withholding on the Internal Revenue Service Form W-9, which will be included in the letter
of transmittal that will be sent to U.S. holders if the merger is completed; (ii) provides a
certification of foreign status on Internal Revenue Service Form W-8BEN, which will be included in
the letter of transmittal that will be sent to non-U.S. holders if the merger is completed; or
(iii) is otherwise exempt from backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under the backup
withholding rules will be eligible for a refund or allowed as a credit against a holders U.S.
federal income tax liability, provided the holder timely furnishes the required information to the
Internal Revenue Service.
THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY
AND IS NOT LEGAL OR TAX ADVICE. STOCKHOLDERS ARE ENCOURAGED TO CONSULT THEIR OWN TAX ADVISORS AS
TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL OR NON-U.S. TAX LAWS.
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Material Canadian Federal Income Tax Consequences
General. The following is a summary of the material Canadian federal income tax considerations
under the Income Tax Act (Canada), which we refer to as the Canadian Tax Act), of the exchange of
exchangeable shares for
180 Connect common stock and the exchange of 180 Connect common stock upon the merger generally
applicable to a holder of exchangeable shares or a holder of 180 Connect common stock (in each case
a securityholder) who, for the purposes of the Canadian Tax Act and at all relevant times (i) is
or is deemed to be resident in Canada, (ii) deals at arms length with, and is not affiliated with,
any of 180 Connect, 1305699 Alberta ULC, DTV HSP Merger Sub and the surviving corporation, and
(iii) holds their 180 Connect common stock and/or exchangeable shares as capital property. 180
Connect common stock and exchangeable shares will generally be considered to be capital property of
a securityholder unless such holder holds such shares in the course of carrying on a business of
buying and selling securities or such securityholder has acquired such shares in a transaction or
transactions considered to be an adventure in the nature of trade.
This summary is not applicable to: (i) a securityholder that is a financial institution (as
defined in the Canadian Tax Act for purposes of the mark-to-market rules) or a specified financial
institution within the meaning of the Canadian Tax Act; (ii) a securityholder an interest in which
is a tax shelter investment for purposes of the Canadian Tax Act; (iii) a securityholder with
respect to whom 180 Connect is a foreign affiliate for the purposes of the Canadian Tax Act; or
(iv) a securityholder to whom the functional currency reporting rules in subsection 261(4) of the
Canadian Tax Act applies. Such securityholders should consult their own tax advisors having regard
to their particular circumstances. No inquiry has been made concerning whether 180 Connect is a
foreign investment entity, or FIE, within the meaning of the Canadian Tax Act. For purposes of
this summary, it has been assumed that 180 Connect is not an FIE. This summary also assumes that
the exchangeable shares will be acquired by 1305699 Alberta ULC pursuant to its over-riding call
right and will not be redeemed or otherwise acquired by 180 Connect Exchangeco Inc.
This summary is based on the current provisions of the Canadian Tax Act, counsels
understanding of the current published administrative and assessing practices of the Canada Revenue
Agency and all specific proposals to amend the Canadian Tax Act publicly announced by the
Department of Finance (Canada) prior to the date hereof. This summary assumes that such proposed
amendments will be enacted as proposed, however no assurances can be provided in that regard. This
summary does not otherwise take into account or anticipate any changes in law, whether by judicial,
governmental or legislative decision or action, nor does it take into account provincial,
territorial or foreign tax legislation or considerations, which may differ significantly from those
discussed herein. This summary is of a general nature only and is not intended to be, nor should
it be construed to be, legal or tax advice to any particular securityholder. Accordingly,
securityholders should consult their own tax advisors for advice with respect to their own
particular circumstances.
For purposes of the Canadian Tax Act, all amounts relating to the acquisition, holding or
disposition of securities (including adjusted cost base and proceeds of disposition) must be
expressed in Canadian dollars. Amounts denominated in U.S. dollars must be converted into Canadian
dollars based on the exchange rate quoted by the Bank of Canada at noon on the day on which that
amount first arose.
Exchange of Exchangeable Shares for 180 Connect Common Stock. The transfer of an exchangeable
share to 1305699 Alberta ULC for 180 Connect common stock will be a disposition of the exchangeable
share for the purposes of the Canadian Tax Act. The proceeds of disposition to such securityholder
for such exchangeable share will be equal to the fair market value of the 180 Connect common stock
received upon the exchange. The securityholder will realize a capital gain (or a capital loss) to
the extent that the fair market value of the 180 Connect common stock, net of any reasonable costs
of disposition, exceeds (or is less than) the adjusted cost base of such exchangeable share. Such
capital gain (or capital loss) will be subject to the tax treatment described below under Taxation
of Capital Gains and Capital Losses.
The cost of the 180 Connect common stock received by a securityholder of exchangeable shares
in such circumstances will be equal to the fair market value of such 180 Connect common stock at
the time of the exchange. This cost will be averaged with the adjusted cost base of all other 180
Connect common stock held by the securityholder as capital property for the purpose of determining
the adjusted cost base of each share of 180 Connect common stock held by such securityholder for
the purposes of the Canadian Tax Act.
Consequences of the Merger. The receipt of the cash merger consideration in exchange for 180
Connect common stock upon the merger will result in a securityholder recognizing a capital gain (or
a capital loss) in respect of the disposition of their 180 Connect common stock to the extent that
the cash merger consideration, net of any
reasonable costs of disposition, exceeds (or is less than) the total adjusted cost base of the 180
Connect common stock. Such capital gain (or capital loss) will be subject to the tax treatment
described below under Taxation of Capital Gains and Capital Losses.
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Taxation of Capital Gains and Capital Losses. Generally, one-half of any capital gain (a
taxable capital gain) realized by a securityholder in a taxation year must be included in the
securityholders income for the year, and one-half of any capital loss (an allowable capital
loss) realized by a securityholder in a taxation year must be deducted from taxable capital gains
realized by the securityholder in that year. Allowable capital losses for a taxation year in excess
of taxable capital gains for that year may, generally, be carried back and deducted in any of the
three preceding taxation years or carried forward and deducted in any subsequent taxation year
against net taxable capital gains realized in such years, to the extent and under the circumstances
described in the Canadian Tax Act.
The amount of any capital loss realized by a securityholder that is a corporation on the
disposition of exchangeable shares may be reduced by the amount of dividends received or deemed to
be received by the securityholder on such shares (or on shares for which the shares have been
substituted) to the extent and under the circumstances described by the Canadian Tax Act. Similar
rules may apply to a partnership or trust that owns exchangeable shares where a corporation,
partnership or trust is a member or beneficiary. Holders to whom these rules may be relevant should
consult their own tax advisors.
A securityholder that, throughout the relevant taxation year, is a Canadian-controlled
private corporation (as defined in the Canadian Tax Act) may be liable to pay a refundable tax of
6 2/3% on its aggregate investment income (as defined in the Canadian Tax Act), including taxable
capital gains.
Dissenting Securityholders. A dissenting securityholder who dissents to the merger and, as a
consequence, receives a cash payment (other than interest, if any) from the surviving corporation
in respect of the fair value of such securityholders 180 Connect common stock will be considered
to have disposed of such 180 Connect common stock for proceeds of disposition equal to the amount
of such payment (exclusive of interest) and will realize a capital gain (or a capital loss) equal
to the amount by which such cash payment (exclusive of interest) exceeds (or is exceeded by) the
adjusted cost base of such 180 Connect common stock to the dissenting securityholder, net of any
reasonable costs of disposition. The tax treatment of capital gains and capital losses is
discussed above.
A dissenting securityholder who receives interest on a payment received in respect of the fair
value of the securityholders 180 Connect common stock will be required to include the full amount
of such interest in income. A dissenting securityholder will generally be entitled to claim a
foreign tax credit for any United States withholding tax applicable to any interest payment. In
addition, a dissenting securityholder that, throughout the relevant taxation year, is a
Canadian-controlled private corporation (as defined in the Canadian Tax Act ) may be liable to
pay a refundable tax of 6 2/3% on its aggregate investment income (as defined in the Canadian Tax
Act), including interest income.
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THE MERGER AGREEMENT
The following summary of the merger agreement is qualified in its entirety by reference to the
complete text of the merger agreement, which is incorporated by reference and a copy of
which is attached as Annex A to this proxy statement. The rights and obligations of the parties
are governed by the express terms and conditions of the merger agreement and not by this summary or
any other information contained in this proxy statement. We urge you to read the merger agreement
carefully and in its entirety, as well as this proxy statement, before making any decisions
regarding the merger.
The merger agreement has been included with this proxy statement to provide you additional
information regarding its terms. The merger agreement sets forth the contractual rights of DirecTV
and us but is not intended to be a source of factual, business or operational information about
DirecTV and us. That kind of information can be found elsewhere in this proxy statement and in the
other filings we make with the SEC, which are available as described in Where You Can Find More
Information.
As a stockholder, you are not a third party beneficiary of the merger agreement and therefore
you may not directly enforce any of its terms or conditions. The parties representations,
warranties and covenants were made as of specific dates and only for purposes of the merger
agreement and are subject to important exceptions and limitations, including a contractual standard
of materiality different from that generally relevant to investors. In addition, the
representations and warranties may have been included in the merger agreement for the purpose of
allocating risk between DirecTV and us, rather than to establish matters as facts. Certain of the
representations, warranties and covenants in the merger agreement are qualified by information we
filed with the SEC prior to the date of the merger agreement, as well as by disclosure schedules we
delivered to DirecTV prior to signing the merger agreement. The disclosure schedules have not been
made public because, among other reasons, they include confidential or proprietary information. We
believe, however, that all information material to a stockholders decision to approve the merger
is included or incorporated by reference in this proxy statement.
Furthermore, you should not rely on the covenants in the merger agreement as actual
limitations on our business because we may take certain actions that are either expressly permitted
in the confidential disclosure schedules to the merger agreement or as otherwise consented to by
DirecTV, which may be given without prior notice to the public.
The Merger
The merger agreement provides for the merger of DTV HSP Merger Sub, Inc. with and into 180
Connect upon the terms, and subject to the conditions, of the merger agreement. As the surviving
corporation, 180 Connect will continue to exist following the merger. Upon consummation of the
merger, the directors and officers of DTV HSP Merger Sub, Inc. will be the initial directors and
officers of the surviving corporation. All directors and officers will hold their positions until
their successors are elected or appointed and qualified or until the earlier of their resignation
or removal.
Effective Time
If the merger is completed, it will become effective upon the filing of a certificate of
merger with the Delaware Secretary of State or at such later time as is agreed upon by DirecTV and
us and specified in the certificate of merger. The filing of the certificate of merger will occur
as soon as practicable on or after the closing of the merger, which (if it occurs) will not be
later than the second business day after satisfaction or waiver of the conditions to the completion
of the merger described in the merger agreement or at such other time as agreed to by DirecTV and
us.
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Merger Consideration
Each share of our common stock issued and outstanding immediately prior to the effective time
of the merger will be converted into the right to receive $1.80 in cash, without interest and less
applicable withholding taxes, except for:
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shares held by holders who have not voted in favor of the merger and who have
properly exercised their rights to dissent from the merger under Delaware law; and |
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shares held in treasury or owned by DirecTV or us or any of our respective
subsidiaries. |
After the merger is effective, each holder of a certificate representing any shares of common
stock (other than shares for which appraisal rights have been properly demanded and perfected) will
no longer have any rights with respect to the shares, except for the right to receive the merger
consideration.
Treatment of Options and Other Awards
Stock Options and Stock Appreciation Rights. As of the effective time of the merger, each
outstanding stock option and stock appreciation right, whether or not exercisable and vested at the
effective time of the merger, will be canceled and exchanged for the right to receive an amount in
cash equal to the product of (x) the total number of shares of Company common stock subject to such
stock option or stock appreciation right immediately prior to the effective time (assuming full
vesting) and (y) the excess, if any, of (i) $1.80 over (ii) the exercise price or base price per
share of common stock subject to such stock option or stock appreciation right, as applicable, less
any applicable withholding taxes. Any stock option or stock appreciation right that has an
exercise price or base price per share of common stock, that is equal to or greater than $1.80 per
share will not receive any payment.
Restricted Stock Units. As of the effective time of the merger, each restricted stock unit
award, whether or not vested at the effective time of the merger, shall be cancelled and exchanged
for the right to receive an amount in cash equal to the product of (x) the total number of shares
of Company common stock subject to such restricted stock unit immediately prior to the effective
time (assuming full vesting) and (y) $1.80, less any applicable withholding taxes.
Warrants. Under the terms of the merger agreement, each outstanding warrant to purchase
shares of common stock, whether or not exercisable and vested at the effective time of the merger,
will be cancelled and exchanged for the right to receive an amount in cash, minus any applicable
withholding taxes, equal to the product of (a) the total number of shares of Company common stock
subject to such warrant immediately prior to its cancellation and (b) the excess, if any, of $1.80
over the exercise price per share of Company common stock subject to such warrant.
As of the effective time, the Companys option plans will be terminated and no further awards
or grants shall be made thereunder.
Payment for the Shares of Common Stock
[ ] or another bank or trust company designated by DirecTV and reasonably
acceptable to 180 Connect shall act as the exchange agent and shall make payment of the merger
consideration as described above. At the effective time of the merger, DirecTV will deposit in
trust with the exchange agent cash sufficient to pay the merger consideration to the stockholders.
As soon as reasonably practicable after the effective time of the merger, DirecTV will cause a
letter of transmittal to be mailed to each former 180 Connect stockholder. The letter of
transmittal will contain instructions for obtaining cash in exchange for shares of our common
stock. You should not return stock certificates with the enclosed proxy.
Upon surrender of a stock certificate representing shares of our common stock, together with a
completed and validly executed letter of transmittal, and any other documents that may be
reasonably required by the exchange agent, the holder of the certificate will be entitled to
receive from the exchange agent, on behalf of DirecTV, as promptly as practicable in accordance
with the exchange agents customary procedures, $1.80 in cash (less applicable withholding taxes)
for each share represented by the stock certificate, and the corresponding stock certificate will
be cancelled.
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In the event of a lost, stolen or destroyed certificate representing shares of common stock,
the merger consideration for shares of our common stock may be paid to a person upon their delivery
of an affidavit of such fact to the exchange agent and an indemnity in form reasonably satisfactory
to DirecTV against any claims that may be made against the exchange agent or DirecTV or otherwise
respect to the certificate. DirecTV may further require the owner of the lost, stolen or destroyed
certificate to post a bond, in such reasonable amount as DirecTV may direct, as an indemnity.
No interest will be paid or accrue on any cash payable upon the surrender of stock
certificates representing shares of our common stock. The cash paid upon conversion of shares of
our common stock (which will not include the shares of dissenting stockholders) will be issued in
full satisfaction of all rights relating to the shares of our common stock.
If any cash deposited with the exchange agent is not claimed within six months after the
effective time of the merger, DirecTV may require such cash be returned to DirecTV. Thereafter,
holders must look to DirecTV for payment as general creditors.
Representations and Warranties
In the merger agreement, we made customary representations and warranties to DirecTV relating
to, among other things:
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organization and similar matters with respect to us and our subsidiaries; |
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the authorization, execution, delivery, performance and enforceability of the merger
agreement and related matters; |
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our capital structure and our subsidiaries capital structure; |
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our indebtedness; |
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compliance with charter documents or equivalent organizational documents and all
legal requirements regarding this transaction by us and our subsidiaries; |
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our SEC filings, certifications, internal financial reporting and disclosure
controls and procedures, and accounting practices; |
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our financial statements and the absence of undisclosed material liabilities; |
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the absence of certain changes or events; |
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our possession of governmental licenses and permits; |
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litigation and compliance with laws; |
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employment matters; |
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tax matters; |
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our owned and leased real property; |
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environmental matters; |
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our insurance coverage; |
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our intellectual property; |
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our employee benefit plans; |
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our material contracts; |
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our affiliate transactions; |
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the recommendation of our board of directors; |
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our satisfaction of anti-takeover laws, if applicable, and otherwise that such laws
are not applicable to the merger; |
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the vote required to approve the merger agreement; |
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our title to personal properties and the good operating condition of the assets used
in our business; |
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no illegal payments, bribes or kickbacks made by us or our subsidiaries; |
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the accuracy of information in this proxy statement (other than information supplied
by DirecTV); |
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our receipt of a fairness opinion from William Blair & Co. that the merger
consideration is fair from a financial point of view to our stockholders; and |
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our brokers or financial advisors. |
In the merger agreement, DirecTV and DTV HSP Merger Sub, Inc. made customary representations
and warranties to us relating to, among other things:
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corporate organization and similar matters; |
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the authorization, execution, delivery, performance and enforceability of the merger
agreement and related matters; |
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capitalization of DTV HSP Merger Sub; |
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compliance with charter documents or equivalent organizational documents and all
legal requirements regarding this transaction by DirecTV and DTV HSP Merger Sub; |
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the absence of litigation preventing, modifying, delaying or challenging the
transactions contemplated by the merger agreement; |
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the absence of any brokers, finders, or financial advisors fees due in connection
with the transaction; |
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the sufficiency of DirecTVs resources to pay the merger consideration; and |
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the accuracy of information supplied by DirecTV or DTV HSP Merger Sub for inclusion
in this proxy statement. |
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Material Adverse Effect
Several of our representations and warranties contained in the merger agreement are qualified
by reference to whether the item in question would reasonably be expected to have a material
adverse effect. The merger
agreement provides that a material adverse effect means any changes, effects or
circumstances, taken as a whole, that:
(i) are, or would reasonably be expected to be, materially adverse to the assets,
liabilities, business, results of operations or financial condition of the Company and our
subsidiaries, taken as a whole;
(ii) materially impair, or would reasonably be expected to materially impair, DirecTVs
right to direct the operation of the businesses of the Company and our subsidiaries; or
(iii) materially impair, or would reasonably be expected to materially impair, the
validity or enforceability of the merger agreement against the Company or materially
adversely affect or delay the Companys ability to consummate the merger and other
transactions contemplated hereby or perform its obligations under the merger agreement;
provided, however, that the term material adverse effect shall not include any change, effect or
circumstance arising from:
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conditions generally affecting the cable and satellite installation, home
security and home networking industries in which the Company and our subsidiaries
operate so long as the Company and our subsidiaries, taken as a whole, are not
disproportionately affected; |
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conditions generally affecting the general economy as a whole so long as the
Company and our subsidiaries, taken as a whole, are not disproportionately affected; |
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any change in generally accepted accounting principles, or any change of a
legal requirement; |
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the announcement of the execution of the merger agreement or the prospective
consummation of the transactions contemplated by the merger agreement, provided the
party claiming this exemption shall bear the burden of demonstrating the cause of such
change, effect or circumstance; |
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any action taken or failed to be taken by DirecTV or any of its affiliates; or |
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any acts of terrorism or war or any weather-related event, fire or natural
disaster or any escalation thereto. |
Conduct of Business Pending the Merger
Under the merger agreement, we have agreed that prior to the earlier of the termination of the
merger agreement or the effective time of the merger, subject to certain exceptions, unless we
obtain DirecTVs prior written consent we will use commercially reasonable efforts and will cause
each of our subsidiaries use commercially reasonable efforts to:
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carry on our and their businesses in the ordinary course consistent with past
practice; |
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preserve intact our and their assets, present business organizations, lines of
business, rights and franchises and their relationships with customers, suppliers,
employees, independent contractors and others with which we or they have business
dealings; and |
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comply with all applicable legal requirements. |
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In addition, we have agreed that, among other things and subject to certain exceptions,
neither we nor any of our subsidiaries may, without DirecTVs written consent:
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amend, modify, terminate or enter into any material contract or other material
transaction except, with respect to material contracts or other material transactions, other than those evidencing or relating to indebtedness, for
non-substantive amendments or modifications in the ordinary course of business
consistent with past practice; |
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waive, release or assign any material rights or claims under any material contract
except in the ordinary course of business consistent with past practice; |
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abandon, sell, assign or grant any security interest in or to any material owned
intellectual property, third party intellectual property or third party intellectual
property agreement; |
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grant to any third party any license, sublicense or covenant not to sue with respect
to any material owned intellectual property or third party intellectual property, other
than to customers in the ordinary course of business consistent with past practice; |
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develop, create or invent any material intellectual property jointly with any third
party, other than in the ordinary course of business consistent with past practice; |
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voluntarily disclose, or authorize any disclosure of, any confidential owned
intellectual property, unless such owned intellectual property is subject to a
confidentiality or non-disclosure covenant protecting against further disclosure
thereof; |
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amend, modify or terminate any material third party intellectual property agreement,
except for non-substantive amendments or modifications in the ordinary course of
business consistent with past practice; |
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sell, lease, license, mortgage, encumber or otherwise dispose of or subject to a
lien any assets of the Company or any of our subsidiaries, or any interests therein,
except for the disposition of assets in the ordinary course of business consistent with
past practice that do not, in the aggregate, exceed $250,000 (measured by the higher of
the book value of all such assets sold or the proceeds from the sale thereof); |
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amend or propose to amend our or any of our subsidiaries certificate of
incorporation or bylaws (or equivalent organizational documents); |
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split, combine, subdivide, reclassify, redeem, purchase or otherwise acquire any shares of our capital stock or other equity interests or declare, set aside, make or
pay any dividend or other distribution (whether in cash, stock or property or any
combination thereof), in respect of our or our subsidiaries capital stock, or redeem,
repurchase or otherwise acquire or offer to redeem, repurchase or otherwise acquire any
securities of the Company or any of our subsidiaries, except for (1) dividends paid by
any subsidiary that is, directly or indirectly, wholly owned by the Company and (2)
stock issuances made in connection with the exercise of any option, stock appreciation
right or restricted stock unit award under the Companys option plans or exercise of
any outstanding Company warrants; |
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issue, deliver, sell, encumber or otherwise dispose of or subject to a lien, or
authorize the issuance, delivery, sale, encumbrance or disposition of, or lien on any shares of our capital stock of any class or other equity interests or any securities
convertible into or exercisable for, or any rights, warrants or options to acquire, any
such capital stock or other equity interests, other than the issuance of shares of the
Companys common stock upon the exercise of the Companys stock options or the
Companys restricted stock units outstanding as of the date hereof in accordance with
their present terms and the issuance of shares of the Companys common stock upon the
exercise of the Company warrants outstanding as of the date hereof in accordance with
their present terms; |
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increase benefits under any benefit plan, except as required by applicable legal
requirements or the terms of any benefit plan in effect as of the date of the merger
agreement; |
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increase funding under any benefit plan, except as required by applicable legal
requirements or the terms of any benefit plan in effect as of the date of the merger
agreement; |
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establish, adopt, enter into, amend (other than any amendment that would result in a
reduction in the costs of such benefit plan) or terminate any benefit plan or any plan,
agreement, program, policy, trust, fund or other arrangement that would be a benefit
plan if it were in existence as of the date of the merger agreement, except as required
by applicable legal requirements or the terms of any benefit plan in effect as of the
date of the merger agreement; |
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grant or agree to grant any increase in the rates of salaries or compensation
payable to any employee or independent contractor, except as required by applicable
legal requirements or the terms of any benefit plan in effect as of the date of the
merger agreement; |
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loan any money to any employee or independent contractor of the Company, except as
required by applicable legal requirements or the terms of any benefit plan in effect as
of the date of the merger agreement; |
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grant any awards under any benefit plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock or the removal of existing restrictions in any awards made thereunder)
or take any action to accelerate the vesting or payment of any compensation or benefit
under any benefit plan, except for acceleration of vesting of Companys stock options
or the Companys restricted stock units as required under the Companys option plans,
and except as required by applicable legal requirements or the terms of any benefit
plan in effect as of the date of the merger agreement; |
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take any action that could give rise to severance benefits payable to any employee
or independent contractor of the Company or our subsidiaries, including as a result of
consummation of any of the transactions contemplated by the merger agreement, except as
required by applicable legal requirements or the terms of any benefit plan in effect as
of the date of the merger agreement; |
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hire any new employee or consultant with an annual compensation level in excess of
$100,000 or who is eligible to earn or is paid a bonus in excess of $25,000, except as
required by applicable legal requirements or the terms of any benefit plan in effect as
of the date of the merger agreement; |
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acquire or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a material portion or the assets of, or by any other manner, any
business or any corporation, partnership, association or other business organization or
division thereof having a value in excess of $250,000, or otherwise acquire or agree to
acquire any assets having a value in excess of $250,000; |
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enter into any material partnership arrangements; joint development agreements or
strategic alliances, other than in the ordinary course of business consistent with past
practice; |
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repurchase or incur, or agree to repurchase or incur, any indebtedness in excess of
$250,000; |
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pay, discharge or satisfy any material claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise) for an amount in excess of
$250,000 or $500,000 in the aggregate, other than pursuant to agreements contemplating
such payment, discharge or satisfaction entered into prior to the date of the merger
agreement; |
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settle or compromise any litigation, investigation, arbitration, proceeding or claim
(whether or not commenced prior to the date of the merger agreement) in the individual
amount of $250,000 or $500,000 in the aggregate, other than settlements or compromises
of litigation where the amount paid (after giving effect to insurance proceeds actually
received) in settlement or compromise does not exceed the Companys reserves on its
books; |
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commence any lawsuit, other than (1) for the routine collection of bills, or (2) in
such cases where the Company in good faith determines that failure to commence suit
would result in the material impairment of a valuable aspect of the business of the
Company or any of our subsidiaries; provided that the Company shall consult with
DirecTV prior to the filing of such a suit; |
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make or change any tax election, amend any tax return, apply for any rulings
relating to taxes, enter into any closing agreement in respect of taxes, settle any tax
liability, claim or assessment in excess of amounts reserved therefor in the latest
Company SEC Reports, consent to an extension or waiver of the limitation period
applicable to any claim or assessment in respect of any taxes, file any late tax return
or file any tax return that is not the ordinary course of business; |
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except as may be required as a result of a change in law or in generally accepted
accounting principles, change any of the accounting methods, practices, policies or
principles for financial accounting or tax purposes; |
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adopt a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of our
subsidiaries (other than the merger); |
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adopt or enter into any collective bargaining agreement or other labor union
contract; |
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make any material changes to the insurance on our and our subsidiaries assets
without DirecTVs prior written consent, which consent shall not be unreasonably
delayed or withheld; |
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amend, modify, fail to perform its obligations under or terminate a material lease,
except for non-substantive amendments or modifications in the ordinary course of
business consistent with past practice, or effectuate a plant closing or mass
layoff, as those terms are defined in WARN or other similar legal requirements
(determined without regard to terminations of employment occurring on or after the
effective time of the merger); |
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make any individual or series of related payments outside the ordinary course of
business in excess of $100,000; |
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fail to make in a timely manner any filings with the SEC required under the
Securities Act or the Exchange Act or the respective rules and regulations promulgated
thereunder; |
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change any of the material terms pursuant to which its products or services are
generally sold or marketed, other than negotiation of individual contracts or purchase
or service orders in the ordinary course of business consistent with past practice; |
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enter into new lines of business (other than in accordance with business plans of
the Company or any of our subsidiaries that have been disclosed to DirecTV prior to the
date of the merger agreement or discontinuations of products scheduled as of the date
of the merger agreement) or cease to engage in any material line of business in which
the Company or any of our subsidiaries is engaged as of the date of the merger
agreement; or |
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authorize any of, or commit or agree to take any of, the foregoing actions. |
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Restrictions on Solicitation of Other Offers
The merger agreement provides that, until 12:01 a.m., New York City time, on May 19, 2008 (the
No-Shop Period Start Date), we and our representatives are permitted to:
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initiate, solicit, facilitate and encourage the making or submission of any
acquisition proposal (including by way of providing access to non-public information
pursuant to an acceptable confidentiality and standstill agreement), provided that we
(i) provide DirecTV with notice of our intent to enter into a confidentiality and
standstill agreement, (ii) promptly (within one business day) notify DirecTV of receipt
of any acquisition proposal or request for information or access to our properties,
books or records that could reasonably be expected to lead to an acquisition proposal,
and (iii) promptly provide DirecTV with any material non-public information that we
provide to any person that was not previously provided to DirecTV; and |
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enter into and maintain or continue discussions or negotiations with respect to any
acquisition proposal or otherwise cooperate with or assist or participate in, or
facilitate any inquiries, proposals, discussions or negotiations regarding an
acquisition proposal. |
From the No-Shop Period Start Date, until the earlier of the effective time of the merger or
the date of termination of the merger agreement, we have agreed not to and will cause our
representatives not to directly or indirectly:
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solicit, initiate or encourage any acquisition proposal, or engage in any
discussions, or negotiations regarding an acquisition proposal; |
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disclose any non-public information, or afford access to our or our subsidiaries
properties, books or records to, any person regarding an acquisition proposal; or |
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enter into any letter of intent, agreement in principle, acquisition agreement or
similar agreement relating to an acquisition proposal. |
Notwithstanding these restrictions, at any time prior to the approval of the merger and merger
agreement by our stockholders, we may negotiate or otherwise engage in discussions with, and
furnish any non-public information or afford access to our or our subsidiaries properties, books
or records to, any third party to the extent that the third party delivers to us an unsolicited
written bona fide acquisition proposal:
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that did not result from our or our representatives breach of the non-solicitation
provisions of the merger agreement; |
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our board of directors determines in good faith (after consultation with its
existing financial advisor) that such acquisition proposal constitutes, or could be
reasonably expected to lead to, a superior proposal; and |
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our board of directors determines in good faith (after consultation with its outside
legal counsel) that failure to take such action would be inconsistent with the
fiduciary duties of the board of directors under applicable law. |
We will furnish any non-public information to such third party only after (i) providing
written notice to DirecTV of our intent to furnish such information or enter into discussions with
such third party, which notice shall include the identity of the third party making such
acquisition proposal and a copy of such acquisition proposal, and (ii) entering into a
confidentiality and standstill agreement with such third party that contains provisions no less
restrictive with respect to such third party as those contained in the confidentiality agreement
entered into with DirecTV. In addition, we will provide or make available to DirecTV any
non-public information concerning us or our subsidiaries provided to such third party.
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A superior proposal means any bona fide, written acquisition proposal not solicited in
breach of the non-solicitation provisions of the merger agreement from a third party that (i) is
for more than fifty percent of our voting power or fifty percent of our consolidated assets, (ii) a
majority of our entire board of directors determines in good faith (after consultation with its
financial advisor and outside legal counsel), taking into account the person making the acquisition
proposal and the likelihood and timing of consummation (including the financial, legal, regulatory
and other aspects of the acquisition proposal deemed relevant by our board of directors in good
faith), would result in a transaction that is superior from a financial point of view to our
stockholders than the merger, including, to the extent received, any proposed alterations of the
terms of the merger agreement proposed by DirecTV in response to such superior proposal, and (iii)
is not subject to any material contingency, including any contingency related to financing, unless,
in good faith judgment of our board of directors, such contingency is reasonably capable of being
satisfied by such third party within a reasonable period of time.
We may also maintain or continue discussions (including by way of providing access to
non-public information pursuant to an acceptable confidentiality and standstill agreement) with
respect to a bona fide written acquisition proposal submitted by any person prior to the No-Shop
Period Start Date (such person we refer to as an Excluded Party), and that our board of directors
determines in good faith, prior to the No-Shop Period Start Date, constitutes a superior proposal,
provided that we have complied with our obligations to DirecTV.
In addition, as of the No-Shop Period Start Date, we have agreed to and will cause our
representatives to:
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immediately cease or cause to be terminated any solicitation, engagement, discussion
or negotiation with any person (other than with respect to an Excluded Party) with
respect to any acquisition proposal; and |
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use our (and will cause our representatives to use their) reasonable best efforts to cause to
be returned or destroyed all confidential information provided or made available to such person.
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We will promptly (within one business day) notify DirecTV in the event we receive an
acquisition proposal, or communication, or request for access to our properties, books or records
that could reasonably be expected to lead to an acquisition proposal. Such notice will include the
identity of the third party making the acquisition proposal and a copy or reasonably detailed
summary of such acquisition proposal.
An acquisition proposal means any offer or proposal (written or oral) for: (i) a merger,
consolidation, share exchange, business combination, reorganization, recapitalization or other
similar transaction or series of related transactions involving us (other than the merger with
DirecTV); (ii) any sale, lease, exchange, transfer or other disposition (including by way of
merger, consolidation or exchange), in a single transaction or a series of related transactions, of
our assets constituting ten percent or more of our consolidated assets or accounting for ten
percent or more of our consolidated revenues (other than the merger with DirecTV); (iii) any tender
offer, exchange offer or other offer for, or acquisition or series of related acquisitions by any
person or group (within the meaning of Regulation 13D under the Securities Act) of beneficial
ownership of ten percent or more of any class of our capital stock or one percent or more of any
class of capital stock of any of our subsidiaries; or (iv) the issuance or disposition of ten
percent or more of any class of our capital stock or one percent or more of any class of capital
stock of any of our subsidiaries.
Recommendation/Withdrawal/Termination in Connection with a Superior Proposal
The merger agreement requires us to call, give notice of, convene and hold a meeting of our
stockholders to adopt the merger agreement, the merger and the related transactions. Our board of
directors has unanimously resolved to recommend that our stockholders adopt the merger agreement.
However, the merger agreement provides that if our board of directors determines (after
consultation with its financial advisor and outside legal counsel) prior to the adoption of the
merger agreement by our stockholders that the failure of the board of directors to withdraw, modify
or propose publicly to withdraw or modify its recommendation that our stockholders adopt the merger
agreement is inconsistent with its fiduciary duties under applicable law, then our board of
directors may withdraw, modify or propose publicly to withdraw or modify its recommendation that
our stockholders adopt the merger agreement.
54
The merger agreement further provides that if, after considering an acquisition proposal, but
prior to obtaining our stockholders approval of the merger agreement, our board of directors
determines that such acquisition proposal constitutes a superior proposal, then we may enter into a
definitive agreement to implement such superior proposal, but only:
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after we provide written notice to DirecTV advising DirecTV that we received a
superior proposal, identifying the third party making such superior proposal, and
indicating that our board of directors intends to withdraw, modify or publicly propose
to withdraw or modify its recommendation that our stockholders adopt the merger
agreement, accompanied by a copy of the proposed superior proposal; |
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if DirecTV does not within three business days after its receipt of notice of the
superior proposal make an offer that is at least as favorable to our stockholders from
a financial point of view (as determined in good faith by our board of directors) as
such superior proposal; and |
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if, simultaneously with executing such definitive agreement, we terminate the merger
agreement in accordance with the applicable provisions and pay DirecTV a termination of
fee of $500,000 and DirecTVs expenses in the amount of $2,000,000. |
Reasonable Efforts
Except as otherwise limited by the terms of the merger agreement, we and DirecTV have each
agreed to use our commercially reasonable efforts to consummate and make effective the merger and
the other transactions contemplated by the merger agreement and to fulfill and cause to be
fulfilled the conditions to closing under the merger agreement. We have further agreed to:
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the obtaining of any necessary consent, authorization, order or approval of, or any
exemption by, any governmental authority and/or any other public or private third party
which is required to be obtained by DirecTV or us or any of our subsidiaries in
connection with the merger and the other transactions contemplated by the merger
agreement and the making or obtaining of all necessary filings and registrations with
respect thereto; |
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the execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, the merger
agreement; and |
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the taking of all acts necessary to cause the conditions of the closing to be
satisfied as promptly as practicable and the taking of all actions necessary to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to the merger agreement, the merger or any other transactions contemplated
by the merger agreement. |
We agreed to prepare and file with the SEC this proxy statement for use in connection with the
solicitation of proxies from our stockholders in favor of the adoption of the merger agreement and
approval of the merger and to use our reasonable best efforts to cause such proxy statement to be
cleared by the SEC as promptly as practicable.
55
Continuation of 180 Connects Employee Benefits
The merger agreement provides that, for a period of twelve (12) months following the effective
time of the merger, DirecTV will provide, or will require the surviving corporation to provide,
active employees of the surviving corporation and its subsidiaries with employee benefits that are
no materially less favorable in the aggregate than those provided by us or our subsidiaries
immediately prior to the merger (other than equity based benefits). With respect to any of
DirecTVs employee benefit plans in which the employees of the surviving corporation or its
subsidiaries participate subsequent to the effective time of the merger, DirecTV shall, or shall
cause the surviving corporation or its subsidiaries to
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with respect to DirecTVs medical, dental and vision plans, waive all
limitations as to pre-existing condition exclusions or other limitations or
eligibility waiting periods applicable to 180 Connect employees to the same extent
as DirecTV would with respect to other transferred employees (or, with respect to
any insured plan, to request that the insurance company waive such limitations),
and |
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recognize all service of the employees of 180 Connect or its subsidiaries with
such entity for purposes of eligibility to participate and vesting (but not
benefit service), under any DirecTV employee benefit plan in which such employees
may be eligible to participate after the effective time of the merger. |
Indemnification and Insurance
The merger agreement provides that DirecTV and DTV HSP Merger Sub agree that all rights to
exculpation and indemnification for acts or omissions occurring at or prior to the effective time
of the merger, whether asserted or claimed prior to, at or after the effective time of the merger
(including any matters arising in connection with the merger and the other transactions
contemplated by the merger agreement), now existing in favor of our or our subsidiaries current or
former directors, officers or employees, as provided in our respective certificates of
incorporation or bylaws (or comparable organization documents) or in any indemnification agreement
between us or any of our subsidiaries and an indemnified party, in each case as in effect as of the
date of the merger agreement, shall survive the merger and shall continue in full force and effect.
The surviving corporation shall (and DirecTV shall cause the surviving corporation to) indemnify,
defend, and hold harmless, and advance expenses to indemnified persons with respect to all acts or
omissions by them in their capacities as such at an time prior to the effective time of the merger,
to the fullest extent required by (i) the certificate of incorporation or by-laws (or equivalent
organizational documents) of 180 Connect or any of our subsidiaries as in effect on the date of the
merger agreement, and (ii) any indemnification agreements between 180 Connect or any of our
subsidiaries and any indemnified person.
The merger agreement further provides that for six years after the effective time of the
merger, and for a price not to exceed a stated amount set forth in the merger agreement, DirecTV
shall cause the surviving corporation to maintain coverage under the Companys directors and
officers liability insurance policies as in effect as of the date of the merger agreement for acts
or omissions occurring prior to the effective time of the merger. In lieu of the foregoing,
DirecTV may, or may cause the surviving corporation to, purchase six year tail coverage covering
acts or omissions prior to the effective time of the merger on terms not materially less favorable
to any director, officer or employee to the existing policy of the Company as in effect of the date
of the merger agreement. Premiums for such tail coverage shall be capped at an amount set forth in
the merger agreement.
Conditions to the Completion of the Merger
Each partys obligation to effect the merger is subject to the satisfaction or waiver of
various conditions, which include the following:
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approval and adoption of the merger agreement by the affirmative vote of a majority
of the votes entitled to be cast by holders of the Companys outstanding shares; |
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no statute, rule, regulation, executive order, decree, judgment, injunction or other
order that prevents or prohibits the consummation of the merger or any of the material
transactions contemplated by the merger agreement shall have been enacted and be in
effect; and |
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the receipt of all approvals, consents, authorizations, qualifications and orders
from any governmental authority necessary to consummate the merger. |
56
DirecTV and DTV HSP Merger Sub will not be obligated to effect the merger unless various
conditions are satisfied or waived, which include the following:
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all specified third party consents shall have been obtained; |
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we must have performed in all material respects with all of our covenants and
agreements contained in the merger agreement that are to be performed at or prior to
the closing of the merger; |
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the representations and warranties of the Company must be true and complete in all
material respects as of the date of the merger agreement and as of the closing date of
the merger, except generally, where a failure to be so true and correct has not had and
would not reasonably be expected to have a material adverse effect on the Company; |
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no material adverse effect on the Company shall have occurred since the date of the
merger agreement; |
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there are no pending suits, actions, or proceedings by any governmental authorities
challenging the consummation of the merger or seeking to (i) impose material
limitations on DirecTVs ability to hold full rights of ownership in any securities of
the Company or to effectively control and operate the business and assets of the
Company and its subsidiaries, (ii) obtain damages arising out of the merger, or (iii)
compel DirecTV to divest or hold separate any significant portion of the Companys
business, assets or properties; and |
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no exchangeable shares shall have been issued after the date of the Agreement and
all of the exchangeable shares issued and outstanding as of the date of the merger
agreement shall have been exchanged for common stock immediately prior to closing. |
We will not be obligated to effect the merger unless the following conditions are satisfied or
waived:
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each of DirecTV and DTV HSP Merger Sub must have performed in all material respects
with all of its covenants and agreements contained in the merger agreement that are to
be performed at or prior to the closing of the merger; and |
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the representations and warranties of DirecTV and DTV HSP Merger Sub must be true
and correct in all material respects as of the date of the merger agreement and as of
the closing date of the merger, except generally, where a failure to be so true and
correct has not had and would not reasonably be expected to have a material adverse
effect on the ability of DirecTV and DTV HSP Merger Sub to consummate the transactions
contemplated by the merger agreement. |
Termination
The merger agreement may be terminated at any time prior to the effective time of the merger
under certain circumstances, including:
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by mutual written consent of the Company and DirecTV; |
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by either DirecTV or us, if |
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the merger is not completed on or before September 30, 2008, so long as the
failure of the merger to be completed by such date is not the result of, or
caused by, the failure of the terminating party to comply with the terms of the
merger agreement; |
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any governmental authority shall have enacted, issued, promulgated,
enforced, or entered any statute, rule, regulation, executive order, decree,
judgment, injunction or other order preventing or prohibiting the consummation
of the merger or any of the other material transactions contemplated in the
merger agreement and which is in effect, final and non-appealable; |
57
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our stockholders fail to approve and do not adopt the merger agreement at
the special meeting or any adjournment or postponement thereof; |
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there is any pending suit, action, or proceeding by any governmental
authority challenging the consummation of the merger or seeking to (i) impose
material limitations on DirecTVs ability to hold full rights of ownership in
any securities of the Company or to effectively control and operate the
business and assets of the Company and its subsidiaries, (ii) obtain damages
arising out of the merger, or (iii) compel DirecTV to divest or hold separate
any significant portion of the Companys business, assets or properties; or |
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if the other party has breached any of its representations, warranties,
covenants or other agreements contained in the merger agreement such that any
of the conditions to the completion of the merger would not be satisfied and
such breach cannot be or is not cured within 30 days notice; or |
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by DirecTV, if our board of directors approves, recommends or announces a neutral
position with respect to any other acquisition proposal or fails to reaffirm its
recommendation that our stockholders approve the merger agreement within five business
days of being requested to do so by DirecTV; or |
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by us, upon appropriate notice to DirecTV and payment of the applicable termination
fee and expenses, if our board of directors concludes in good faith after consultation
with our existing financial advisor and outside legal counsel that the failure to
terminate the merger agreement in connection with entering into a definitive agreement
with respect to an acquisition proposal that qualifies as a superior proposal is
inconsistent with the directors fiduciary duties under applicable law. |
Termination Fee and Expenses
The merger agreement provides that regardless of whether the merger is consummated, except in
certain circumstances described below, all fees and expenses incurred by the parties shall be borne
by the party incurring such expenses.
The merger agreement provides that the Company will be required to pay DirecTV a termination
fee of $500,000 and DirecTVs expenses in an amount equal to $2,000,000 upon termination of the
merger agreement in the following circumstances:
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our board of directors approves, recommends or announces a neutral position with
respect to any other acquisition proposal; |
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our board of directors fails to reaffirm its recommendation that our stockholders
approve the merger agreement within five business days of being requested to do so by
DirecTV; or |
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the determination by our board of directors that an acquisition proposal received
constitutes a superior proposal and we enter into a definitive agreement to implement
such superior proposal. |
The merger agreement also requires that we pay DirecTV a termination fee of $500,000 and
DirecTVs expenses in an amount equal to $2,000,000 if the merger is terminated because: (i) the
merger was not consummated on or before September 30, 2008, (ii) our stockholders did not approve
the merger agreement, or (iii) we breach any of our representations, warranties, covenants or other
agreements contained in the merger agreement such that any of the conditions to the completion of
the merger would not be satisfied and we fail to cure such breach within 30 days; and, in each
case, a third party has made or delivered an acquisition proposal to the Company and within twelve
months of such termination, either (A) we enter into a letter of intent, agreement in principle,
acquisition agreement or other similar agreement with any third party with respect to, or
consummate, an acquisition proposal, or (B) if we do not enter into any agreement with respect to such acquisition proposal and any
third party commences a tender offer or exchange offer that, if consummated, would result in the
acquisition by such third party, or any affiliate thereof, making the tender or exchange offer of
fifty percent or more of our common stock.
58
Amendment and Waiver
We, DirecTV and DTV HSP Merger Sub may amend the merger agreement at any time by the execution
of a written agreement. At any time prior to the effective time of the merger, the parties may:
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waive any inaccuracies in the representations and warranties of the other party
contained in the merger agreement or in any document delivered pursuant to the merger
agreement; or |
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waive compliance by the other party with any of the agreements or conditions
contained in the merger agreement. |
After the adoption of the merger agreement by the stockholders of the Company, no amendment or
waiver of the merger agreement shall be effective that by law requires further approval of our
stockholders unless the required approval is obtained. Any extensions or waivers must be in writing
and signed by the party granting such extension or waiver.
Specific Performance
In the event of a breach of the merger agreement, the parties have agreed that they would be
entitled to specific performance of the terms of the merger agreement in addition to any other
remedies at law or in equity.
59
VOTING AGREEMENTS
The following description summarizes the material provisions of the voting agreements and is
qualified in its entirety by reference to the complete text of the form of voting agreement. The
form of voting agreement included in this proxy statement as Annex B contains the material terms of
the voting agreements and stockholders should read it carefully and in its entirety.
In connection and concurrently with the execution of the merger agreement, the Companys
Chairman, its President and Chief Executive Officer, and each of its directors, who are referred to
as the voting agreement stockholders and who owned collectively as of the record date [ ]
shares of our common stock, or approximately [ ]% of the issued and outstanding shares of common
stock, entered into voting agreements with DirecTV. Pursuant to the voting agreements, the voting
agreement stockholders agreed, among other things, to grant to DirecTV an irrevocable proxy to vote
their shares of our common stock in favor of the adoption and approval of the merger agreement at
the special meeting. The voting stockholders also agreed to cause all shares owned by them to be
voted in according with such irrevocable proxy. The information in this proxy statement regarding
the voting agreement is qualified in its entirety by reference to the voting agreements, a copy of
the form of which is attached as Annex B to this proxy statement.
The voting agreement stockholders further agreed not to:
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sell, transfer, pledge, or dispose of the shares of our common stock held by them
other than, among other things and subject to certain conditions, for transfers to any
member of such voting agreement stockholders immediate family or to a trust for the
benefit of such voting agreement stockholder or any member of their immediate family,
or transfers upon the death of such voting agreement stockholder (except with respect
to two of the voting stockholders who are current directors of the Company, who have
the right, pursuant to their voting agreements, to sell, transfer, pledge or dispose of
a limited number of shares of our common stock which are subject to existing option
agreements); |
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enter into any agreements which would be inconsistent with the voting agreements,
with respect to their shares of our common stock; or |
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exercise any rights of appraisal or dissent. |
The voting agreements (including the irrevocable proxies granted thereunder) will terminate
upon the earliest of:
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the mutual written consent of the voting agreement stockholders and DirecTV: |
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the effective time of the merger; and |
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the termination of the merger agreement in accordance with its terms. |
60
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL HOLDERS
The following table sets forth, as of May 8, 2008, certain information with respect to the
beneficial ownership of 180 Connects common stock by (i) each stockholder known by 180 Connect to
be the beneficial owner of more than 5% of 180 Connects common stock, (ii) each director of 180
Connect, (iii) each named executive officer of 180 Connect who served as an executive officer of
180 Connect during the year ended December 31, 2007, and (iv) all directors and executive officers
of 180 Connect as a group.
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Name and Address of |
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Amount and Nature of |
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Beneficial Owner |
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Beneficial Ownership |
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Percent of Class |
Howard S. Balter(1) |
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3,978,551 |
(2) |
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15.1 |
% |
Ilan M. Slasky(1) |
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2,482,782 |
(3) |
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9.7 |
% |
Lawrence J. Askowitz(1) |
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50,500 |
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* |
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M. Brian McCarthy(1) |
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157,500 |
(4) |
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* |
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Peter Giacalone(1) |
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302,500 |
(5) |
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1.2 |
% |
David Hallmen(1) |
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125,522 |
(6) |
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* |
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Byron Osing(1) |
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1,925,001 |
(7) |
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7.7 |
% |
Jiri Modry(1) |
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0 |
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* |
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Thomas Calo(1) |
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0 |
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* |
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Steven Westberg(1) |
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2,000 |
(8) |
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* |
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Creative Vistas Inc.
2100 Forbes Street, Unit 8-10, Whitby,
Ontario L1N 9T3
Canada |
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3,124,407 |
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12.9 |
% |
Quaker Capital Management Corporation
401 Wood Street, Suite 1300
Pittsburgh, PA 15222 |
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1,328,360 |
(9) |
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5.5 |
% |
Millenco, LLC
666 Fifth Avenue, 8th Floor
New York, New York 10103 |
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1,969,304 |
(10) |
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7.5 |
% |
All directors and executive
officers as a group (10
individuals) |
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9,024,356 |
(11) |
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31.6 |
% |
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* |
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Less than 1.0% |
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(1) |
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Under the rules of the SEC, a person is deemed to be the beneficial owner of shares that can
be acquired by such person within 60 days upon the exercise of options or vesting of
restricted stock units. Unless otherwise indicated, shares listed as beneficially owned are
held directly. |
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(2) |
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Includes (i) 1,005,829 shares held by Mr. Balter; (ii) 2,129,602 shares which may be
purchased upon exercise of warrants that were exercisable as of May 9, 2008, or within 60 days
of such date; (iii) 300,000 shares held by H. Balter 2007 Associates, LLC, of which Mr. Balter
is sole non-managing member; (iv) 200,000 shares held by The Howard S. Balter 2007 Grantor
Retained Annuity Trust II; (v) 95,000 shares held by 180 Connect Disposition LLC; (vi)
222,000 shares held by Myrna Weinberger TTEE, Balter Family Trust U/A DTD 11/17/1997; (vii)
24,360 shares which may be sold upon exercise of options held by certain third parties that
were exercisable as of May 9, 2008, or within 60 days of such date; and (viii) 1,760 shares
which may be sold upon exercise of options that were exercisable as of May 9, 2008, or within
60 days of such date, which Mr. Balter has agreed to sell to certain third parties. Mr. Balter
disclaims beneficial ownership of the shares held by Myrna Weinberger TTEE, Balter Family
Trust U/A DTD 11/17/1997. |
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(3) |
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Includes (i) 676,500 shares held by Mr. Slasky; (ii) 300,000 shares held by the Ilan Slasky
2007 Grantor Retained Annuity Trust; (iii) 216,484 shares held jointly
with Reva Slasky; (iv) 1,264,798 shares held jointly with Reva Slasky which may be purchased
upon exercise of warrants that were exercisable as of May 9, 2008, or within 60 days of such
date; and (v) 25,000 shares which may be
sold upon exercise of options held by certain third parties that were exercisable as of May
9, 2008, or within 60 days of such date. |
61
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(4) |
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Includes (i) 57,500 shares held by Mr. McCarthy; (ii) 42,500 shares which may be purchased
upon exercise of options that were exercisable as of May 9, 2008, or within 60 days of such
date; (iii) 42,500 shares which may be purchased upon exercise of restricted stock units that
were exercisable as of May 9, 2008, or within 60 days of such date; and (iv) 15,000 shares
which may be purchased upon exercise of SARs that were exercisable as of May 9, 2008, or
within 60 days of such date. |
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(5) |
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Includes (i) 195,000 shares held by Mr. Giacalone; (ii) 46,250 shares which may be purchased
upon exercise of options that were exercisable as of May 9, 2008, or within 60 days of such
date; (iii) 46,250 shares which may be purchased upon exercise of restricted stock units that
were exercisable as of May 9, 2008, or within 60 days of such date; and (iv) 15,000 shares
which may be purchased upon exercise of SARs that were exercisable as of May 9, 2008, or
within 60 days of such date. |
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(6) |
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Includes (i) 73,865 shares held by Mr. Hallmen; and (ii) 51,657 shares which may be purchased
upon exercise of options that were exercisable as of May 9, 2008, or within 60 days of such
date. |
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(7) |
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Includes (i) 1,179,767 shares held by Mr. Osing; (ii) 660,000 exchangeable shares held by Mr.
Osing; and (iii) 85,234 shares which may be purchased upon exercise of options that were
exercisable as of May 9, 2008, or within 60 days of such date. |
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(8) |
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Includes 2,000 shares which may be purchased upon exercise of SARs that were exercisable as
of May 9, 2008, or within 60 days of such date. |
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(9) |
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Derived from a jointly-filed Schedule 13D, dated August 24, 2007, filed by Quaker Capital
Management Corporation, a Pennsylvania corporation (Quaker Capital Management), Quaker
Capital Partners I, LP, a Delaware limited partnership, Quaker Capital Partners II, LP, a
Delaware limited partnership, Quaker Premier, LP, a Delaware limited partnership, Quaker
Premier II, LP, a Delaware limited partnership, and Mr. Mark G. Schoeppner. As of August 24,
2007, Quaker Capital Management may be deemed to be the beneficial owner of 1,328,360 shares
of common stock. |
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(10) |
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Derived from a jointly-filed Schedule 13D, dated August 24, 2007, filed by Millenco, LLC, a
Delaware limited liability company (formerly Millenco, L.P., a Delaware limited partnership)
(Millenco), Millennium Management, LLC, a Delaware limited liability company (Millennium
Management), and Israel A. Englander (Mr. Englander). As of August 24, 2007, each of
Millenco, Millennium Management, and Mr. Englander may be deemed to be the beneficial owner of
1,969,304 warrants to purchase shares of common stock. |
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(11) |
|
Includes (i) 3,394,400 shares which may be purchased upon exercise of warrants that were
exercisable as of May 9, 2008, or within 60 days of such date; (ii) 225,641 shares which may
be purchased upon exercise of options that were exercisable as of May 9, 2008, or within 60
days of such date; (iii) 88,750 shares which may be purchased upon exercise of restricted
stock units that were exercisable as of May 9, 2008, or within 60 days of such date; (iv)
32,000 shares which may be purchased upon exercise of SARs that were exercisable as of May 9,
2008, or within 60 days of such date; and (v) 660,000 exchangeable shares. |
62
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In addition to their interests in the merger as stockholders, certain of our directors and
executive officers have interests in the merger that differ from, or are in addition to, your
interests as a stockholder. In considering the unanimous recommendation of our board of directors
to vote FOR the approval of the merger agreement, you should be aware of these interests. Our
board of directors was aware of, and considered the interests of, our directors and executive
officers in approving and adopting the merger agreement, the merger and the transactions
contemplated by the merger agreement. Except as described below, such persons have, to our
knowledge, no material interest in the merger that differs from your interests generally.
Change-in-Control/Severance Agreements
We currently have employment agreements in place with Peter Giacalone, Steven Westberg, and
Mark Burel that contain change in control severance payments. These agreements generally provide,
among other things, that if such persons employment is terminated (i) by the Company without cause
(as defined in the agreement) or (ii) by the executive for good reason (as defined in the
agreement), the executive shall be entitled to the following: (a) a multiple (the Multiple) of
the sum of the executives annual base salary; (b) continued health insurance benefits for a period
of one year for Messrs. Westberg and Burel and one and a half years for Mr. Giacalone; (c) any
earned but unpaid compensation that is earned through the effective date of the termination; and
(d) any and all vested and earned but unpaid amounts payable pursuant to any applicable incentive
or deferred compensation plans. The Multiple for Mr. Giacalone is two and for Messrs. Westberg and
Burel is one and a half. Under Messrs. Westberg and Burels employment agreement, if all or any
portion of the benefits, distributions or payments would constitute an excess parachute payment
within the meaning of Section 280G of the Internal Revenue Code, as amended, resulting in the
imposition on the executive of an excise tax, the payments, distributions and benefits will be
grossed-up so as to place the executive in the same after-tax position as if no excise tax had
been imposed.
Pursuant to the provisions of the employment agreements described above, consummation of the
merger will not itself trigger any right to receive a change in control severance payment. If,
hypothetically, the change in control severance payments were triggered shortly after the merger,
the maximum approximate amount that would be payable (based on current compensation and including
amounts payable in respect of any excess parachute payments, as applicable) to each of these
officers would be as follows:
|
|
|
|
|
|
|
Hypothetical Change in |
Executive Officers |
|
Control Severance Payment |
Peter Giacalone |
|
$ |
900,000 |
|
Steven Westberg |
|
$ |
412,500 |
|
Mark Burel |
|
$ |
487,500 |
|
On August 2, 2007, the Company and Mr. McCarthy, the Companys then-Executive Chairman,
entered into an amendment to Mr. McCarthys previously existing employment agreement. Pursuant to
the amendment, for the 2008 calendar year, Mr. McCarthy is to serve as the non-executive Chairman
of the Board on a part-time basis, and during the 2008 calendar year, he will receive $240,000 as
an annual salary and is entitled to receive a bonus of up to 100% of his annual salary. From
January 1, 2009 to September 1, 2009, Mr. McCarthy would continue to serve as the non-executive
Chairman of the Board of Directors at an annual board remuneration of $75,000, but would not
entitled to receive a bonus. After October 1, 2009, Mr. McCarthy would continue to serve as a
director until the expiration of his term as a director, for which he would be compensated at the
level at which the independent directors of the Company would be compensated. In consideration for
Mr. McCarthys agreement to terminate his employment agreement prior to the end of its term, Mr. McCarthy (i)
received a cash severance payment in the amount of $400,000 on December 31, 2007, and (ii) his
rights to receive long-term incentive awards was revised to 170,000 restricted stock units and
170,000 share appreciation rights or stock options.
63
On March 21, 2008, the board of directors of the Company approved the following: (i) certain
bonus targets for Mr. McCarthy for 2008, which targets were tied to the per share price received in
any acquisition transaction and provided a range of bonus from $0 to $240,000; and (ii) upon a
change in control of the Company,
the Company would pay to Mr. McCarthy the remaining balance due under his employment agreement for
the full term thereof. Based upon merger consideration of $1.80 per share, Mr. McCarthy will
receive no bonus under the bonus target provision of his agreement, and will be entitled to
receive, upon consummation of the merger, a lump-sum payment (reflecting the balance due under his
employment agreement) of $176,250, assuming the change-in-control transaction occurs on June 30,
2008 and Mr. McCarthy has no accrued salary owed to him as of such date.
Treatment of Stock Options, Restricted Stock Units and Stock Appreciation Rights
Stock Options
Under the terms of the merger agreement, all outstanding stock options, whether or not
exercisable and vested at the effective time of the merger, will be cancelled and converted into
the right to receive cash in an amount equal to the product of (a) the total number of shares of
common stock subject to such options immediately prior to their cancellation and (b) the excess, if
any, of $1.80 over the exercise price per share of common stock subject to the stock option
(assuming full vesting), less any applicable withholding taxes. Options that have an exercise price
equal to or in excess of $1.80 per share will receive no merger consideration and will be cancelled
upon the effective time of the merger.
The following table shows, for our directors and executive officers: (i) the aggregate number
of shares subject to outstanding options, (ii) the cash-out value of such outstanding options
assuming the completion of the merger with the merger consideration of $1.80 per share, (iii) the
aggregate number of shares subject to outstanding but unvested options, and (iv) the cash-out value
of such outstanding, but unvested options again, assuming the completion of the merger with the
merger consideration of $1.80 per share. The information in the table is as of May 8, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Shares |
|
|
Aggregate Cash-Out |
|
|
Aggregate Number of |
|
|
Aggregate Cash-Out |
|
|
|
|
|
Subject to All |
|
|
Value of All |
|
|
Shares Underlying |
|
|
Value of Unvested |
|
|
Name |
|
|
Options |
|
|
Options |
|
|
Unvested Options |
|
|
Options |
|
|
Peter Giacalone |
|
|
|
185,000 |
|
|
|
$ |
0 |
|
|
|
|
138,750 |
|
|
|
$ |
0 |
|
|
|
M. Brian McCarthy |
|
|
|
170,000 |
|
|
|
$ |
0 |
|
|
|
|
127,500 |
|
|
|
$ |
0 |
|
|
|
David Hallmen |
|
|
|
51,657 |
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Thomas Calo |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Jiri Modry |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Lawrence Askowitz |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Howard S. Balter |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Ilan M. Slasky |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Byron Osing |
|
|
|
85,233 |
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Steven Westberg |
|
|
|
60,000 |
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Mark Burel |
|
|
|
60,000 |
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Restricted Stock Units
Under the terms of the merger agreement, each restricted stock unit award that is outstanding
at the effective time of the merger will be cancelled and converted into the right to receive $1.80
in cash for each share of common stock then subject to such restricted stock unit award (assuming
full vesting), less any applicable withholding taxes.
64
The following table shows, for our directors and executive officers the aggregate number of
restricted stock units and the cash-out value of such restricted stock units (calculated at $1.80
per restricted share unit). The information in the table is as of May 8, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Number of |
|
|
Aggregate Cash-Out Value |
|
|
Name |
|
|
Restricted Stock Units |
|
|
of Restricted Stock Units |
|
|
Peter Giacalone |
|
|
|
185,000 |
|
|
|
$ |
333,000 |
|
|
|
M. Brian McCarthy |
|
|
|
170,000 |
|
|
|
$ |
306,000 |
|
|
|
David Hallmen |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Thomas Calo |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Jiri Modry |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Lawrence Askowitz |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Howard S. Balter |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Ilan M. Slasky |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Byron Osing |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Steven Westberg |
|
|
|
40,000 |
|
|
|
$ |
72,000 |
|
|
|
Mark Burel |
|
|
|
40,000 |
|
|
|
$ |
72,000 |
|
|
|
Stock Appreciation Rights
Under the terms of the merger agreement, all outstanding stock appreciation rights, whether or
not exercisable and vested at the effective time of the merger, will be cancelled and converted
into the right to receive cash in an amount equal to the product of (a) the total number of shares
of common stock subject to such stock appreciation rights immediately prior to their cancellation
and (b) the excess, if any, of $1.80 over the base price per share of common stock subject to the
stock appreciation right (assuming full vesting), less any applicable withholding taxes. Stock
appreciation rights that have an exercise price equal to or in excess of $1.80 per share will
receive no merger consideration and will be cancelled upon the effective time of the merger.
The following table shows, for our directors and executive officers: (i) the aggregate number
of shares subject to outstanding stock appreciation rights, (ii) the cash-out value of such
outstanding stock appreciation rights assuming the completion of the merger with the merger
consideration of $1.80 per share, (iii) the aggregate number of shares subject to outstanding but
unvested stock appreciation rights, and (iv) the cash-out value of such outstanding, but unvested
stock appreciation rights again assuming the completion of the merger with the merger consideration
of $1.80 per share. The information in the table is as of May 8, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Shares |
|
|
Aggregate Cash- |
|
|
Aggregate Number of |
|
|
Aggregate Cash-Out |
|
|
|
|
|
Subject to |
|
|
Out Value of |
|
|
Shares Underlying |
|
|
Value of |
|
|
Name |
|
|
All SARs |
|
|
All SARs |
|
|
Unvested SARs |
|
|
Unvested SARs |
|
|
Peter Giacalone |
|
|
|
60,000 |
|
|
|
$ |
0 |
|
|
|
|
45,000 |
|
|
|
$ |
0 |
|
|
|
M. Brian McCarthy |
|
|
|
60,000 |
|
|
|
$ |
0 |
|
|
|
|
45,000 |
|
|
|
$ |
0 |
|
|
|
David Hallmen |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Thomas Calo |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Jiri Modry |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Lawrence Askowitz |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Howard S. Balter |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Ilan M. Slasky |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Byron Osing |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Steven Westberg |
|
|
|
7,999 |
|
|
|
$ |
0 |
|
|
|
|
5,999 |
|
|
|
$ |
0 |
|
|
|
Mark Burel |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
65
Warrants
Under the terms of the merger agreement, each outstanding warrant to purchase shares of common
stock, whether or not exercisable and vested at the effective time of the merger, will be cancelled
and exchanged for the right to receive an amount in cash, less any applicable withholding taxes,
equal to the product of (a) the total number of shares of Company common stock subject to such
warrant immediately prior to its cancellation and (b) the excess, if any, of $1.80 over the price
per share of common stock subject to such warrant. Warrants that have an exercise price in excess
of $1.80 per share will receive no merger consideration.
The following table shows, for our directors (none of our executive officers hold any
warrants): (i) the aggregate number of shares subject to outstanding warrants, (ii) the cash-out
value of such outstanding warrants assuming the completion of the merger with the merger
consideration of $1.80 per share, (iii) the aggregate number of shares subject to outstanding but
unvested warrants, and (iv) the cash-out value of such outstanding but unvested
warrants again assuming the completion of the merger with the merger consideration of $1.80
per share. The information in the table is as of May 8, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Shares |
|
|
Aggregate Cash-Out |
|
|
Aggregate Number of |
|
|
Aggregate Cash-Out |
|
|
|
|
|
Subject to All |
|
|
Value of All |
|
|
Shares Underlying |
|
|
Value of Unvested |
|
|
Name |
|
|
Warrants |
|
|
Warrants |
|
|
Unvested Warrants |
|
|
Warrants |
|
|
Peter Giacalone |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
M. Brian McCarthy |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
David Hallmen |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Thomas Calo |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Jiri Modry |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Lawrence Askowitz |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Howard S. Balter |
|
|
|
1,729,602 |
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Ilan M. Slasky |
|
|
|
1,264,798 |
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Byron Osing |
|
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
$ |
0 |
|
|
|
Equity Plan for Non-Employee Directors
In November 2007, the board of directors of the Company approved the Companys Equity Plan for
Non-Employee Directors, referred to herein as the directors plan. Under the directors plan, each
non-employee director of the Company (currently Messrs. Askowitz, Balter, Calo, Hallmen, Modry,
Osing and Slasky) is eligible to receive (i) an initial grant of share units having a value equal
to $50,000 (granted either on the effective date of the directors plan or, for those individuals
who become eligible directors after such date, on the date such individual becomes a director) and
(ii) with respect to calendar years beginning on and after January 1, 2008, an annual grant of
share units having a value of $50,000. The 2008 annual grant was to be made in two installments,
with each non-employee director having received share units with a value equal to $16,667 on
January 2, 2008 and the remaining units, with a value of $33,333, to be made on the date of
the Companys 2008 annual meeting of stockholders (assuming the stockholders having approved the
directors plan at such annual meeting). In March 2008, the directors plan was amended to provide
that if a change in control of the Company occurred prior to the Companys 2008 annual meeting of
stockholders, on the effective date of such change of control transaction, (x) all outstanding
awards in respect of initial grants and the first installment of the 2008 annual grants would vest
and be settled in cash, and (y) in lieu of receiving the second installment of the 2008 annual
grant, each non-employee director would receive a cash payment equal to $33,333. The following
table reflects the payments that will be made to the Companys non-employee directors pursuant to
the directors plan upon consummation of the merger (assuming merger consideration of $1.80 per
share).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of 2008 |
|
|
|
|
|
|
|
|
Total Shares |
|
|
Cash-Out Value of |
|
|
Annual Grant, |
|
|
|
|
|
Name |
|
|
Units |
|
|
Share Units |
|
|
Second Installment |
|
|
Total Cash-Out Value |
|
|
Lawrence Askowitz |
|
|
|
33,739 |
|
|
|
$ |
60,730 |
|
|
|
$ |
33,333 |
|
|
|
$ |
94,064 |
|
|
|
Howard S. Balter |
|
|
|
11,905 |
|
|
|
$ |
11,905 |
|
|
|
$ |
33,333 |
|
|
|
$ |
54,762 |
|
|
|
Thomas Calo |
|
|
|
34,127 |
|
|
|
$ |
61,429 |
|
|
|
$ |
33,333 |
|
|
|
$ |
94,762 |
|
|
|
David Hallmen |
|
|
|
33,739 |
|
|
|
$ |
60,730 |
|
|
|
$ |
33,333 |
|
|
|
$ |
94,064 |
|
|
|
Jiri Modry |
|
|
|
33,739 |
|
|
|
$ |
60,730 |
|
|
|
$ |
33,333 |
|
|
|
$ |
94,064 |
|
|
|
Byron Osing |
|
|
|
33,739 |
|
|
|
$ |
60,730 |
|
|
|
$ |
33,333 |
|
|
|
$ |
94,064 |
|
|
|
Ilan M. Slasky |
|
|
|
11,905 |
|
|
|
$ |
11,905 |
|
|
|
$ |
33,333 |
|
|
|
$ |
54,762 |
|
|
|
66
Directors and Officers Indemnification and Insurance
Under the merger agreement, DirecTV has agreed to cause the surviving corporation to honor the
Companys obligations existing as of the date of the merger agreement to indemnify, defend and hold
harmless each current and former director and officer of the Company or any of its subsidiaries
from liability and expenses for matters arising at or prior to the effective time of the merger to
the fullest extent required by the certificate of incorporation or by-laws of the Company or any of
its subsidiaries and any indemnification agreements between the Company or any of its subsidiaries
and any such current or former directors or officers that was in effect as of April 18, 2008.
DirecTV has also agreed to cause the surviving corporation to provide to the Companys current
and former directors and officers, for at least six years after the effective time of the merger,
with an insurance and indemnification policy that provides coverage for events occurring at or
prior to the effective time of the merger or, if substantially equivalent insurance coverage is
unavailable, the best available coverage, subject to certain limitations on the amount of premiums
required to be paid for such insurance coverage. In lieu of the foregoing, DirecTV may cause the
surviving corporation to purchase six year tail coverage covering the Companys current and
former directors and officers for events occurring at or prior to the effective time of the merger,
subject to certain limitations on the amount of premiums required to be paid.
67
STOCKHOLDER PROPOSALS
We will hold a 2008 annual meeting of our stockholders only if the merger is not completed.
Stockholder proposals may be included in our proxy materials for an annual meeting so long as
they are provided to us on a timely basis and satisfy the other conditions set forth in applicable
SEC rules. For a stockholder proposal to be included in our proxy materials for the 2008 annual
meeting, the proposal must have been received at our principal executive offices, addressed to the
Chief Legal Officer, not later than [ ]. In order for it to be timely, stockholder
business that is not intended for inclusion in our proxy materials may be brought before the annual
meeting so long as we received notice of the proposal as specified by our bylaws, addressed to the
Chief Legal Officer at our principal executive offices, not later than [ ]. Unless we
received notice in the manner and by the dates specified above, the proxy holders shall have
discretionary authority to vote for or against any such proposal presented at our 2008 annual
meeting of stockholders.
OTHER MATTERS
As of the date of this proxy statement, our board of directors knows of no matters that will
be presented for consideration at the special meeting other than as described in this proxy
statement.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
Stockholders who share a single address will receive only one proxy statement at that address
unless the Company has received instructions to the contrary from any stockholder at that address.
This practice, known as householding, is designed to reduce the Companys printing and postage
costs. However, if a stockholder of record residing at such an address wishes to receive a
separate copy of this proxy statement or of future proxy statements (as applicable), he or she may
contact our Chief Legal Officer at (303) 395-6001 or write to Chief Legal Officer, 180 Connect
Inc., 6501 East Belleview Avenue, Englewood, Colorado 80111. We will deliver separate copies of
this proxy statement promptly upon written or oral request. If you are a stockholder of record
receiving multiple copies of this proxy statement, you can request householding by contacting 180
Connect in the same manner. If you own your shares of our common stock through a bank, broker or
other stockholder of record, you can request additional copies of this proxy statement or request
householding by contacting the stockholder of record.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the
SEC and with securities commissions in Canada. You may read and copy any reports, statements or
other information that we file with the SEC at the SECs public reference room at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our SEC filings are also available to the public at the
SECs website at http://www.sec.gov. Our Canadian filings are available at www.sedar.com. You
also may obtain free copies of the documents the Company files with the SEC by going to the
Investors Relations section of our website at www.180connect.net. Our website address is
provided as an inactive textual reference only. The information provided on our website is not part
of this proxy statement, and therefore is not incorporated by reference.
DirecTV and DIRECTV U.S. have supplied certain information contained in this proxy statement
relating to DirecTV and DIRECTV U.S. and we have supplied all such information relating to us.
Our stockholders should not send in their 180 Connect certificates until they receive the
transmittal materials from the exchange agent. Our stockholders of record who have further
questions about their stock certificates or the exchange of our common stock for cash should call
the exchange agent, whose contact information will be included in the letter of transmittal.
68
Any person to whom this proxy statement is delivered may request copies of the proxy statement
or other information concerning us, without charge, by written or telephonic request directed to
the Companys Chief Legal
Officers office at (303) 395-6001, on the Companys website at www.180connect.net or from the
SEC through the SECs website at the address provided above.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT TO VOTE
YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED
[ ], 2008. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO
STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
69
Annex A
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 18, 2008,
BY AND AMONG
DIRECTV ENTERPRISES, LLC
DTV HSP MERGER SUB, INC.
AND
180 CONNECT INC.
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS |
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A-1 |
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ARTICLE II THE MERGER |
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A-10 | |
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Section 2.1 The Merger |
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A-10 | |
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Section 2.2 Consummation of Merger |
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A-11 | |
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Section 2.3 Effect of Merger |
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A-11 | |
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Section 2.4 Certificate of Incorporation and Bylaws |
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A-11 | |
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Section 2.5 Directors and Officers |
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A-11 | |
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Section 2.6 Effect on the Shares |
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A-11 | |
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Section 2.7 Dissenting Shares |
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A-12 | |
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Section 2.8 Exchange of Certificates |
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A-13 | |
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Section 2.9 Stock Options; Restricted Stock Units; Warrants |
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A-15 | |
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Section 2.10 Closing |
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A-17 | |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
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A-17 | |
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Section 3.1 Organization and Qualification |
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A-17 | |
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Section 3.2 Authorization |
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A-18 | |
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Section 3.3 Capitalization and Share Ownership |
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A-18 | |
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Section 3.4 Indebtedness |
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A-20 | |
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Section 3.5 Governmental Authorization; Noncontravention |
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A-20 | |
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Section 3.6 SEC Filings |
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A-21 | |
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Section 3.7 Financial Statements; Undisclosed Liabilities |
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A-23 | |
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Section 3.8 Absence of Certain Changes |
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A-23 | |
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Section 3.9 Licenses |
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A-25 | |
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Section 3.10 Litigation; Compliance with Laws |
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A-26 | |
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Section 3.11 Employment Matters |
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A-26 | |
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Section 3.12 Tax Matters |
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A-28 | |
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Section 3.13 Real Property |
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A-31 | |
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Section 3.14 Environmental Matters |
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A-32 | |
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Section 3.15 Insurance |
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A-33 | |
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Section 3.16 Intellectual Property |
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A-33 | |
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Section 3.17 Employee Benefits |
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A-36 |
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TABLE OF CONTENTS
(continued)
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Section 3.18 Material Contracts |
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A-38 | |
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Section 3.19 Affiliate Transaction |
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A-41 | |
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Section 3.20 Board Recommendation |
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A-41 | |
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Section 3.21 Antitakeover Statutes |
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A-41 | |
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Section 3.22 Vote Required |
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A-42 | |
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Section 3.23 Title to Personal Property; Condition and Sufficiency of Assets |
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A-42 | |
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Section 3.24 Certain Business Practices |
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A-42 | |
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Section 3.25 Proxy Statement |
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A-42 | |
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Section 3.26 Opinion of Financial Advisor |
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A-43 | |
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Section 3.27 Finders and Brokers |
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A-43 | |
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND MERGER SUB |
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A-43 | |
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Section 4.1 Organization and Qualification |
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A-43 | |
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Section 4.2 Authorization |
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A-44 | |
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Section 4.3 Capitalization and Share Ownership |
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A-44 | |
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Section 4.4 Governmental Authorization; Noncontravention |
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A-45 | |
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Section 4.5 Litigation |
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A-45 | |
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Section 4.6 Ownership of Company Common Stock |
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A-46 | |
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Section 4.7 Finders and Brokers |
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A-46 | |
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Section 4.8 Sufficient Funds |
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A-46 | |
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Section 4.9 Information Supplied |
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A-46 | |
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ARTICLE V PRE-CLOSING COVENANTS AND ADDITIONAL AGREEMENTS |
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A-46 | |
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Section 5.1 Conduct of Business |
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A-46 | |
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Section 5.2 Preparation of the Proxy Statement |
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A-50 | |
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Section 5.3 Access to Information |
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A-51 | |
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Section 5.4 Company Stockholders Meeting |
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A-52 | |
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Section 5.5 Acquisition Proposals |
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A-52 | |
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Section 5.6 Reasonable Efforts; Consents |
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A-55 | |
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Section 5.7 Employee Benefits |
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A-56 |
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-ii-
TABLE OF CONTENTS
(continued)
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Section 5.8 Control of Other Partys Business |
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A-57 | |
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Section 5.9 Directors and Officers Indemnification and Insurance |
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A-57 | |
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Section 5.10 Public Statement and Press Releases |
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A-58 | |
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Section 5.11 Notice Obligations |
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A-58 | |
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Section 5.12 Certain Actions and Proceedings |
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A-59 | |
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Section 5.13 Monthly Financial Statements |
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A-59 | |
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Section 5.14 Pre-Acquisition Reorganization |
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A-59 | |
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ARTICLE VI CONDITIONS TO EACH PARTYS OBLIGATIONS |
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A-60 | |
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Section 6.1 Company Stockholders Approval |
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A-60 | |
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Section 6.2 Legal Prohibition |
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A-60 | |
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Section 6.3 Receipt of Government Consents |
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A-60 | |
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ARTICLE VII CONDITIONS OF THE PURCHASERS AND MERGER SUBS OBLIGATIONS |
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A-60 | |
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Section 7.1 Receipt of Third Party Consents |
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A-60 | |
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Section 7.2 Performance by Company |
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A-61 | |
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Section 7.3 Truth of Representations and Warranties |
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A-61 | |
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Section 7.4 Companys Closing Certificate |
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A-61 | |
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Section 7.5 No Material Adverse Effect |
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A-61 | |
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Section 7.6 Restraint |
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A-61 | |
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Section 7.7 FIRPTA Certificate |
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A-62 | |
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Section 7.8 Exchangeable Shares |
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A-62 | |
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ARTICLE VIII CONDITIONS OF COMPANYS OBLIGATIONS |
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A-62 | |
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Section 8.1 Performance by the Purchaser and Merger Sub |
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A-62 | |
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Section 8.2 Truth of Representations and Warranties |
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A-62 | |
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Section 8.3 Purchasers Closing Certificate |
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A-63 | |
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ARTICLE IX TERMINATION |
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A-63 | |
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Section 9.1 Termination |
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A-63 | |
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Section 9.2 Effect of Termination |
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A-64 | |
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Section 9.3 Fee and Expenses |
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A-65 |
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-iii-
TABLE OF CONTENTS
(continued)
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ARTICLE X MISCELLANEOUS |
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A-66 | |
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Section 10.1 Amendments, Waivers |
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A-66 | |
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Section 10.2 Entire Agreement |
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A-66 | |
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Section 10.3 Binding Effect; Assignment |
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A-66 | |
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Section 10.4 Headings; Certain Construction Rules |
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A-67 | |
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Section 10.5 Notices |
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A-67 | |
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Section 10.6 Governing Law |
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A-68 | |
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Section 10.7 Further Actions |
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A-68 | |
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Section 10.8 Gender, Tense, Etc. |
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A-68 | |
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Section 10.9 Severability |
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A-68 | |
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Section 10.10 No Third Party Rights |
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A-69 | |
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Section 10.11 Non-Survival |
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A-69 | |
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Section 10.12 Counterparts |
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A-69 | |
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Section 10.13 Specific Performance |
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A-69 | |
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Section 10.14 Waiver of Jury Trial |
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A-69 |
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-iv-
LIST OF SCHEDULES
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Schedule 1
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Permitted Liens |
Schedule 2.9(a)
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Stock Options |
Schedule 2.9(c)
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Warrants |
Schedule 2.9(d)
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Stock Options, Restricted Stock Units and Warrants |
Schedule 3.1(b)
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Subsidiaries |
Schedule 3.3(a)
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Company Stock Issuance Rights |
Schedule 3.3(b)
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Capitalization and Share Ownership of the Companys Subsidiaries |
Schedule 3.4
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Indebtedness |
Schedule 3.5(b)
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Consents |
Schedule 3.6(b)
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SEC Filings |
Schedule 3.6(c)
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SEC Filings |
Schedule 3.6(f)
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Internal Controls over Financial Reporting |
Schedule 3.6(g)
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Disclosure Controls and Procedures |
Schedule 3.7(b)
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Undisclosed Liabilities |
Schedule 3.8
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Absence of Certain Changes |
Schedule 3.10(a)
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Litigation |
Schedule 3.10(b)
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Matters Originating in the Past Three Years |
Schedule 3.11(a)
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Employment Matters |
Schedule 3.11(c)
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Collective Bargaining Matters |
Schedule 3.11(d)
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Pending Union Organizing Activity |
Schedule 3.11(h)
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Employment Agreements |
Schedule 3.12(a)
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Tax Returns |
Schedule 3.12(b)
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Tax Deficiencies |
Schedule 3.12(c)
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Consolidated Federal Return |
Schedule 3.12(f)
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Section 482 of the Internal Revenue Code |
Schedule 3.12(g)
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Use of Net Operating Losses |
Schedule 3.13(b)
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Leased Real Property |
Schedule 3.14(e)
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Environmental Matters |
Schedule 3.15
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Insurance |
Schedule 3.16(a)
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Owned Intellectual Property |
Schedule 3.16(b)
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Licensed Intellectual Property |
Schedule 3.17(a)
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Benefit Plans |
Schedule 3.17(h)
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Employment Agreements |
Schedule 3.17(l)
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Foreign Benefit Plans |
Schedule 3.18
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Material Contracts |
Schedule 3.18(b)
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Material Contracts |
Schedule 4.4(a)
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Governmental Consents |
Schedule 5.1
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Conduct of Business |
Schedule 6.3
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Government Consents |
Schedule 7.1
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Third Party Consents |
-v-
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this Agreement) is dated as of April 18, 2008, by
and among DirecTV Enterprises, LLC, a Delaware limited liability company (the
Purchaser), DTV HSP Merger Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of the Purchaser (Merger Sub) and 180 Connect Inc., a Delaware corporation
(the Company and, together with the Purchaser and Merger Sub, the Parties).
RECITALS
WHEREAS, the boards of directors of the Purchaser, Merger Sub and the Company each have
approved this Agreement and have determined that it is in the best interests of their respective
stockholders for Merger Sub to merge with and into the Company, upon the terms and subject to the
conditions of this Agreement, with the Company being the Surviving Corporation (as defined herein)
and becoming a wholly owned subsidiary of the Purchaser (the Merger);
WHEREAS, immediately prior to the Closing, the holders of the Exchangeable Shares will have
exchanged (by way of exercise by 1305699 Alberta ULC of the redemption call right set forth in the
articles of the Canadian Subsidiary) their Exchangeable Shares for such number of shares of Company
Common Stock (the Share Exchange) as is set forth opposite such holders name in the Company
Disclosure Schedule;
WHEREAS, after giving effect to the Share Exchange, certain stockholders of the Company will
own such number of shares of Company Common Stock as is set forth opposite such stockholders name
in the Company Disclosure Schedule;
WHEREAS, concurrently with the execution and delivery of this Agreement and as an inducement
to the willingness of the Purchaser and Merger Sub to enter into this Agreement, certain
stockholders of the Company will, concurrently with the execution of this Agreement, enter into a
Voting Agreement, dated as of the date hereof (the Voting Agreement), in substantially
the form set forth on Exhibit A hereto; and
WHEREAS, the Purchaser, Merger Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, and intending to be legally bound hereby,
the Purchaser, Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
Acquisition Proposal means any offer or proposal (written or oral) for: (i) a
merger, consolidation, share exchange, business combination, reorganization, recapitalization or
other similar transaction or series of related transactions involving the Company (other than the
A-1
Merger); (ii) any sale, lease, exchange, transfer or other disposition (including by way of merger,
consolidation or exchange), in a single transaction or a series of related transactions, of the
assets of the Company constituting ten percent (10%) or more of the consolidated assets of the
Company or accounting for ten percent (10%) or more of the consolidated revenues of the Company
(other than the Merger); (iii) any tender offer, exchange offer or other offer for, or acquisition
or series of related acquisitions by any Person or group (within the meaning of Regulation 13D
under the Securities Act) of beneficial ownership of ten percent (10%) or more of any class of
capital stock of the Company or one percent (1%) or more of any class of capital stock of any of
the Companys Subsidiaries; or (iv) the issuance or disposition of ten percent (10%) or more of any
class of capital stock of the Company or one percent (1%) or more of any class of capital stock of
any of the Companys Subsidiaries.
Action means any action, complaint, petition, investigation, suit or other
proceeding, whether administrative, civil or criminal, in law or in equity, or before any
arbitrator or Governmental Authority.
Affiliate means, with respect to any specified Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control with, such specified
Person. For purposes of this definition, control (including, with correlative meanings, the
terms controlled by and under common control with), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
Agreement is defined in the first paragraph of this Agreement.
Benefit Plans means all employee benefit plans (as defined in Section 3(3) of ERISA)
and each and every written, unwritten, formal or informal plan, agreement, program, policy or other
arrangement involving direct or indirect compensation (other than workers compensation,
unemployment compensation and other government programs), employment, severance, consulting,
disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights, other
forms of incentive compensation, post-retirement insurance benefits, or other employee benefits, in
each case, that covers or provides benefits to any Employee or Independent Contractor and that is
entered into, maintained or contributed to by the Company or any of its Subsidiaries or with
respect to which the Company or any of its Subsidiaries has or may in the future have any liability
(contingent or otherwise).
Business Day means any day other than a Saturday or Sunday or a day on which
national banking institutions in the City of New York, New York are authorized or obligated by law
or executive order to be closed.
Canadian Subsidiary means 180 Connect Exchangeco Inc., a corporation organized under
the laws of Canada and an indirect, wholly-owned Subsidiary of the Company.
Certificate of Merger is defined in Section 2.2.
A-2
Change in the Company Recommendation is defined in Section 5.5(e).
Closing is defined in Section 2.10.
Closing Date is defined in Section 2.10.
Code means the Internal Revenue Code of 1986, as amended, and as the context
requires, the Treasury regulations promulgated thereunder.
Company is defined in the first paragraph of this Agreement.
Company Board Recommendation is defined in Section 3.20.
Company Certificate is defined in Section 2.6(c).
Company Common Stock means the common stock, par value $0.0001 per share, of the
Company.
Company Disclosure Schedule is defined in Article III.
Company Intellectual Property means all Owned Intellectual Property and Third Party
Intellectual Property.
Company Option Plans means the Companys 2007 Long-Term Incentive Plan and the
Amended and Restated Equity Plan for Non-Employee Directors.
Company Preferred Stock means the preferred stock, par value $0.0001 per share, of
the Company.
Company RSU is defined in Section 2.9(b).
Company SEC Reports is defined in Section 3.6(a).
Company Stockholders Approval means the approval of the Merger and this Agreement
by the holders of a majority of the outstanding shares of the Company Common Stock entitled to vote
thereon.
Company Stockholders Meeting is defined in Section 5.4(a).
Company Stock Issuance Rights is defined in Section 3.3(a).
Company Stock Option is defined in Section 2.9(a).
Company Warrant is defined in Section 2.9(c).
Confidentiality Agreement means the Confidentiality Agreement, dated March 3, 2008,
between the Company and the Purchaser.
DGCL means the Delaware General Corporation Law.
A-3
Dissenting Shares is defined in Section 2.7.
D&O Insurance is defined in Section 5.9(b).
Effective Date is defined in Section 2.2.
Effective Time is defined in Section 2.2.
Employee means any present or former director, officer or employee of the Company or
its Subsidiaries.
End Date is defined in Section 9.1(b).
Environmental Claim means any notice, claim, demand, action, suit, complaint,
proceeding, request for information or other communication by any Governmental Authority or any
Person (other than the Company or a Subsidiary of the Company) against the Company or a Subsidiary
of the Company, in either case alleging noncompliance with, or liability or potential liability
under, Environmental Laws (including liability or potential liability or investigatory costs,
cleanup costs, governmental response costs, natural resource damages, property damage, personal
injury, fines or penalties), including those arising out of, based on or resulting from the
presence, discharge, emission, release or threatened release of any Hazardous Materials at any
location currently or previously owned, leased or operated by the Company or any of its
Subsidiaries.
Environmental Laws means any and all applicable foreign, federal, state and local
statutes, rules, regulations, ordinances, orders, decrees and other laws relating to contamination,
pollution or protection of the environment, including laws relating to the use, treatment, storage,
release, disposal or transportation of Hazardous Materials.
Environmental Permits means all permits, licenses, registrations and other
governmental authorizations required under Environmental Laws for the Company and its Subsidiaries
to conduct their operations and businesses.
ERISA means the Employee Retirement Income Security Act of 1974, as amended, and, as
the context requires, any rules or regulations promulgated thereunder.
ERISA Affiliate means any trade or business (whether or not incorporated) (i) under
common control within the meaning of Section 4001(b)(1) of ERISA with the Company, or (ii) which
together with the Company is treated as a single employer within the meaning of Section 4114(b),
(c), (m) or (o) of the Code.
Exchange Act means the Securities Exchange Act of 1934, as amended, together with
the rules and regulations of the SEC promulgated thereunder.
Exchange Agent is defined in Section 2.8(a).
Exchange Fund is defined in Section 2.8(b).
A-4
Exchangeable Share Certificate means a certificate representing an Exchangeable
Share.
Exchangeable Share Provisions means the rights, privileges, restrictions and
conditions of the Exchangeable Shares as set forth in the articles of the Canadian Subsidiary.
Exchangeable Shares means the non-voting exchangeable shares of the Canadian
Subsidiary.
Excluded Shares is defined in Section 2.6(a).
Fixed Assets is defined in Section 3.23.
Foreign Benefit Plan is defined in Section 3.17(l).
GAAP means generally accepted accounting principles as in effect from time to time
in the United States as set forth on the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board.
Governmental Authority means any foreign, federal, state or local government or any
agency, authority, subdivision or instrumentality of any of the foregoing, including any court,
tribunal, department, bureau, commission or board, or any quasi-governmental, arbitrator or private
body exercising any regulatory, taxing, inspecting or other governmental authority.
Hazardous Materials means any element, compound, substance or other material
(including any pollutant, contaminant, hazardous waste, hazardous substance, chemical substance or
product) that is listed, classified or regulated pursuant to any Environmental Law, including any
petroleum product, by-product or additive, asbestos, presumed asbestos-containing material,
asbestos-containing material, medical waste, biological waste, chlorofluorocarbon,
hydrochlorofluorocarbon, lead-containing paint or plumbing, polychlorinated biphenyls (PCBs),
radioactive material, infectious materials, potentially infectious materials or disinfecting
agents.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
from time to time, and the rules and regulations promulgated thereunder.
Indebtedness means (i) indebtedness for borrowed money, including indebtedness
evidenced by a note, bond, debenture or similar instrument, and any guarantees or keep-well
obligations or other contingent obligations in respect thereof, (ii) obligations to pay rent or
other amounts under any lease of real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on a balance sheet
under GAAP, (iii) obligations in respect of outstanding letters of credit, acceptances and similar
obligations created for the account of such Person, (iv) all obligations or extensions of credit
whether secured or unsecured, absolute or contingent, (v) unmatured reimbursement obligations with
respect to letters of credit or guarantees issued for the account of or on behalf of the Company or
any of its Subsidiaries, (vi) all obligations representing the deferred purchase price
A-5
of property,
(vii) all obligations secured by any mortgage, pledge, security interest or other lien on property
owned or acquired by the Company or any of its Subsidiaries, whether or not the obligations secured
thereby shall have been assumed, (viii) all obligations under synthetic leases, and (ix) all
guarantees with respect to indebtedness of others. Notwithstanding the foregoing, Indebtedness
shall not be deemed to include operating leases for office equipment and similar assets.
Indemnified Parties is defined in Section 5.9(a).
Independent Contractor means any present or former independent contractor or
consultant retained to perform services for the Company or its Subsidiaries.
Intellectual Property means all (i) Inventions, (ii) Trademarks, (iii) ownership
rights to any copyrightable works, including registrations and applications for registration
thereof, (iv) Software and (v) confidential and proprietary information, including trade secrets,
know-how, technology, processes, products and methods, whether or not reduced to practice.
Inventions means patents, patent applications, statutory invention registrations,
inventions or discoveries made, developed, conceived or reduced to practice prior to the Effective
Time, including any provisional, utility, continuation, continuation-in-part or divisional
applications filed in the United States or other jurisdiction prior to the Effective Time, and all
reissues thereof and all reexamination certificates issuing therefrom.
IRS means the Internal Revenue Service.
Knowledge means the actual knowledge of any of the executive officers of the
Company, after a reasonable investigation by such individuals.
Leased Real Property is defined in Section 3.13(b).
Legal Prohibition is defined in Section 9.1(b)(ii).
Legal Requirement means any statute, ordinance, code, constitution, law, rule,
regulation, order or other requirement, standard or procedure enacted, adopted or applied by any
Governmental Authority (including judicial or arbitral decisions applying common law or
interpreting any other Legal Requirement) applicable to a Person, its business or its operations.
Licenses is defined in Section 3.9.
Liens means any, with respect to any property or asset, a mortgage, easement,
covenant, lien, pledge (including any negative pledge), security interest or other encumbrance of
any nature whatsoever in respect of such property or asset.
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Material Adverse Effect means any changes, effects or circumstances, taken as a
whole, that:
(i) are, or would reasonably be expected to be, materially adverse to the assets,
liabilities, business, results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole;
(ii) materially impair, or would reasonably be expected to materially impair, the
Purchasers right to direct the operation of the businesses of the Company and its
Subsidiaries; or
(iii) materially impair, or would reasonably be expected to materially impair, the
validity or enforceability of this Agreement against the Company or materially adversely
affect or delay the Companys ability to consummate the Merger and other transactions
contemplated hereby or perform its obligations under this Agreement;
provided, however, that the term Material Adverse Effect shall not include any change, effect or
circumstance arising from:
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(A) |
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conditions generally affecting the cable and satellite installation, home
security and home networking industries in which the Company and its Subsidiaries
operate so long as the Company and its Subsidiaries, taken as a whole, are not
disproportionately affected; |
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(B) |
|
conditions generally affecting the general economy as a whole so long as the
Company and its Subsidiaries, taken as a whole, are not disproportionately affected; |
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|
(C) |
|
any change in GAAP or any change of a Legal Requirement; |
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(D) |
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the announcement of the execution of this Agreement or the prospective
consummation of the transactions contemplated by this Agreement, provided the party
claiming this exemption shall bear the burden of demonstrating the cause of such
change, effect or circumstance; |
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(E) |
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any action taken or failed to be taken by Purchaser or any of its Affiliates;
or |
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(F) |
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any acts of terrorism or war or any weather-related event, fire or natural
disaster or any escalation thereto. |
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Material Contracts is defined in Section 3.18(a). |
Material Lease means the leases and subleases for real property set forth on
Schedule 3.13(b).
Maximum Premium Amount is defined in Section 5.9(b).
Merger is defined in the Recitals to this Agreement.
Merger Consideration is defined in Section 2.6(b).
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Merger Sub is defined in the first paragraph of this Agreement.
No-Shop Period Start Date is defined in Section 5.5(a).
Notice of Superior Proposal is defined in Section 5.5(e).
Option Consideration is defined in Section 2.9(a).
Owned Intellectual Property means all Intellectual Property owned by the Company
and/or its Subsidiaries.
Parties is defined in the first paragraph of this Agreement.
Permitted Liens means (i) zoning, entitlement or land use regulations, (ii)
easements, rights-of-way or other restrictions on the use of the Real Property (provided that such
liens and restrictions were incurred either prior to the time the Company or any of its
Subsidiaries acquired an interest in the Real Property or thereafter in the ordinary course of
business consistent with past practice and do not, individually or in the aggregate, materially
interfere with the use of such Real Property or the Companys or its Subsidiaries operation of
their respective business as currently operated), (iii) liens imposed by Legal Requirement,
including carriers, warehousemens, landlords and mechanics liens, in each case incurred in the
ordinary course of business consistent with past practice for sums not yet due or being contested
in good faith by appropriate proceedings, (iv) liens for Taxes, assessments or other governmental
charges not yet subject to penalties for non-payment or which are being contested in good faith by
appropriate proceedings (provided appropriate reserves required pursuant to GAAP have been made in
respect thereof in the financial statements included with the latest Company SEC Reports), (v)
liens in favor of issuers of surety or performance bonds or letters of credit or bankers
acceptances issued pursuant to the request of and for the account of the Company or any of its
Subsidiaries in the ordinary course of its business, (vi) landlords liens with respect to tenants
personal property, fixtures or leasehold improvements at the leased premises arising under leases
with respect to Leased Real Property, state statute or principles of common law, and (vii) the
liens set forth on Schedule 1.
Person means a natural person, corporation, partnership, limited partnership,
limited liability company, trust or unincorporated organization or similar entity, or a
Governmental Authority.
Proxy Statement means the proxy statement to be distributed to the stockholders of
the Company in connection with the Merger and the related transactions contemplated by this
Agreement, including any preliminary proxy statement, definitive proxy statement or supplement or
amendment thereto, in each case filed with the SEC in accordance with the terms and provisions of
this Agreement.
Purchaser is defined in the first paragraph of this Agreement.
Purchaser Disclosure Schedule is defined in Article IV.
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Purchaser Expenses is defined in Section 9.3(b).
Real Property is defined in Section 3.13(c).
Representatives is defined in Section 5.5(a).
Restraint is defined in Section 7.6.
RSU Consideration is defined in Section 2.9(b).
SEC means the United States Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended, together with the rules
and regulations of the SEC promulgated thereunder.
Software means computer and electronic data processing software and programs in any
form, including source code, object code, encryption keys and other security features, all
versions, conversions, updates, patches, corrections, enhancements and modifications thereof and
all related documentation, and all formulae and algorithms, used in the ownership, marketing,
development, maintenance, support and delivery of such software thereto.
SOX means the Sarbanes-Oxley Act of 2002.
Subsidiary means with respect to any Person, another Person (i) of which greater
than fifty percent (50%) of the capital stock, voting securities, other ownership or equity
interests having voting power under ordinary circumstances to elect directors or similar members of
the governing body of such corporation or other entity (or, if there are no such voting interests,
greater than fifty percent (50%) of the equity interests) are owned or controlled, directly or
indirectly, by such first Person or (ii) of which such first Person is a general partner or similar
controlling member.
Superior Proposal is defined in Section 5.5(b).
Surviving Corporation is defined in Section 2.1.
Tax or Taxes means any (i) federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, personal holding company,
accumulated earnings, sales, use, transfer, real property gains, registration, value added, excise,
natural resources, severance, stamp, occupation, premium, windfall profit, environmental,
customs, duties, real property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever,
(ii) interest, penalties, fines, or additions to tax or additional amounts with respect to any item
described in clause (i) or this clause (ii), and (iii) liability in respect of any items described
in clauses (i) or (ii) payable as a successor, by reason of contract, assumption, transferee
liability, operation of law, Treasury Regulation section 1.1502-6(a) (or any predecessor or
successor thereof or any analogous or similar provision under law) or otherwise.
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Tax Return means any return, report, information return or other document (including
any related or supporting information, any schedule or attachment thereto, and any amendment
thereof) filed or required to be filed with any federal, foreign, state or local taxing authority
in connection with the determination, assessment, collection, administration or imposition of any
Taxes.
Termination Date is defined in Section 9.1.
Termination Fee is defined in Section 9.3(b).
Third Party is defined in Section 5.5(b).
Third Party Intellectual Property means all Intellectual Property, other than Owned
Intellectual Property, that is licensed by the Company and/or a Subsidiary of the Company, but
excluding Software that is shrink-wrap and similar commercial mass-market Software that is
readily available through regular commercial distribution channels and pursuant to which a third
party grants nonexclusive end-user license rights to the Company or any of its Subsidiaries for
non-customized Software.
Third Party Intellectual Property Agreement means any license, sublicense, or other
agreement pursuant to which the Company or any of its Subsidiaries is granted, obtains or holds any
rights to practice or use any Third Party Intellectual Property.
Trademarks means names and marks, including product names and marks previously
acquired by the Company or any of its Subsidiaries, brands and slogans, registered and unregistered
trademarks, service marks, domain name registrations, trade dress, logos, and other source
identifiers, including registrations and applications for registration thereof and all goodwill
associated therewith.
WARN means the Workers Adjustment and Retraining Notification Act.
Warrant Consideration is defined in Section 2.9(c).
ARTICLE II
THE MERGER
Section 2.1 The Merger
Upon the terms and subject to the conditions of this Agreement, Merger Sub shall be merged
with and into the Company in accordance with the DGCL, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the
Surviving Corporation). Upon the consummation of the Merger on the terms and conditions
of this Agreement, the Surviving Corporation shall succeed to all the rights, assets, liabilities
and obligations of the Company and Merger Sub in accordance with the provisions of the DGCL.
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Section 2.2 Consummation of Merger
At the Closing, the Parties shall cause the Merger to be consummated by duly filing with the
Secretary of State of Delaware a properly executed certificate of merger in accordance with the
provisions of the DGCL. Such certificate of merger shall be referred to herein as the
Certificate of Merger. In accordance with the DGCL and the terms of the Certificate of
Merger, the Merger shall be effective at the time and date which is the date and time of the filing
of the Certificate of Merger with the Secretary of State of Delaware or such other time and date as
the Purchaser and the Company may agree and as shall be specified in the Certificate of Merger
(such time and date being hereinafter referred to respectively as the Effective Time and
the Effective Date).
Section 2.3 Effect of Merger
The Merger shall have the effects set forth in this Article II and in Section 259 of
the DGCL.
Section 2.4 Certificate of Incorporation and Bylaws
The certificate of incorporation of the Company shall be the certificate of incorporation of
the Surviving Corporation at the Effective Time and until amended in accordance with its terms and
as provided by law. The bylaws of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the bylaws of the Surviving Corporation from and after the Effective Time unless and
until amended in accordance with their terms and the terms of the certificate of incorporation of
the Surviving Corporation and as provided by law.
Section 2.5 Directors and Officers
From and after the Effective Time, the directors and officers of the Surviving Corporation
shall be the directors and officers of Merger Sub immediately prior to the Effective Time. Such
persons shall serve as directors or hold office in accordance with the certificate of incorporation
and bylaws of the Surviving Corporation until the earlier of their resignation or removal or until
their respective successors are duly elected or appointed and qualified.
Section 2.6 Effect on the Shares
As of the Effective Time, by virtue of the Merger and without any action on the part of the
Purchaser, Merger Sub, the Company or the holder of any shares of Company Common Stock or any
shares of common stock of Merger Sub:
(a) Cancellation and Conversion of Certain Stock. Each share of Company Common Stock that
immediately prior to the Effective Time is held by the Company, as treasury stock or otherwise, or
by the Purchaser or any of its wholly owned Subsidiaries (collectively, the Excluded
Shares) shall automatically be canceled and retired and shall cease to exist and no cash or
other consideration shall be delivered in exchange therefor.
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(b) Conversion of Common Stock. Subject to Section 2.7, each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares
and Excluded Shares) shall be converted into the right to receive $1.80 in cash payable to the
holder thereof, without interest (the Merger Consideration), less any required
withholding taxes.
(c) Cancellation and Retirement of the Company Common Stock. As of the Effective Time, all
issued and outstanding shares of Company Common Stock (other than Dissenting Shares, which shall be
treated in accordance with Section 2.7, and Excluded Shares, which shall be canceled in
accordance with Section 2.6(a)) shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate (each a
Company Certificate) previously representing any such shares of Company Common Stock
shall cease to have any rights with respect thereto, except the right to receive, upon surrender of
such Company Certificate in accordance with Section 2.8, the Merger Consideration into
which the shares of Company Common Stock represented by such Company Certificate have been
converted pursuant to this Section 2.6.
(d) Conversion of Stock of Merger Sub. Each share of common stock, par value $0.01 per share,
of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted
into one (1) share of common stock of the Surviving Corporation and shall constitute the only
issued and outstanding capital stock of the Surviving Corporation following the Effective Time.
Section 2.7 Dissenting Shares
Notwithstanding any provision of this Agreement to the contrary, shares of Company Common
Stock that are issued and outstanding immediately prior to the Effective Time and that are held by
stockholders who have not voted in favor of the adoption of this Agreement and approval of the
Merger or consented thereto in writing and who have properly exercised their right to dissent from
the Merger in accordance with, and shall have complied with all other applicable requirements of,
Section 262 of the DGCL (the Dissenting Shares) shall not be converted into the right to
receive the Merger Consideration at or after the Effective Time, but instead shall become the right
to receive such consideration as may be determined to be due to the holder of such Dissenting
Shares pursuant to the DGCL, less any required withholding
taxes; provided, however, that any Dissenting Shares held by a holder who shall have failed to
perfect or shall have effectively withdrawn or lost its right to appraisal and payment under
Section 262 of the DGCL shall thereupon be deemed to have been converted into the right to receive
the Merger Consideration, without interest thereon and less any required withholding taxes, and
shall no longer be considered Dissenting Shares. Any holder of Dissenting Shares who becomes
entitled to payment for such holders Company Common Stock pursuant to Section 262 of the DGCL
shall receive payment therefor only from the Surviving Corporation. The Company shall give the
Purchaser prompt notice of any demands received by the Company for appraisal of shares, and the
Purchaser shall have the right to participate in all negotiations and proceedings with respect to
such demands. Except with the prior written consent of the Purchaser or as may otherwise be
required by applicable law, the Company shall not make any payment with respect to, or settle or
offer to settle, any such demands.
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Section 2.8 Exchange of Certificates
(a) Exchange Agent. Prior to the Closing Date, the Purchaser shall appoint a bank or trust
company (reasonably acceptable to the Company) to act as exchange agent (the Exchange
Agent) for the payment of the Merger Consideration.
(b) Exchange Fund. At the Effective Time, the Purchaser will make available to the Exchange
Agent cash in an amount and at times necessary to pay the Merger Consideration (the Exchange
Fund) due upon the surrender of the Company Certificates. If at any time after the Effective
Time, the Exchange Fund is insufficient to pay the Merger Consideration, then Purchaser shall
immediately deposit cash in an amount equal to such deficiency. The Exchange Fund shall not be
used for any purpose other than the payment of the Merger Consideration and stockholders of the
Company shall not be entitled to receive interest on any funds in the Exchange Fund.
(c) Exchange Procedures. As soon as reasonably practicable after the Effective Time, the
Purchaser and the Surviving Corporation will cause the Exchange Agent to send to each holder of
record of the Company Certificates whose shares were converted pursuant to Section 2.6 into
the right to receive the Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company Certificates shall pass, only
upon delivery of the Company Certificates to the Exchange Agent and shall be in such form and have
such other provisions as the Purchaser and the Surviving Corporation and the Exchange Agent shall
reasonably specify) and (ii) instructions for use in effecting the surrender of the Company
Certificates in exchange for the Merger Consideration. Upon surrender of a Company Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents as may reasonably
be required by the Exchange Agent, the holder of such Company Certificate shall be entitled to
receive in exchange a check in the amount (after giving effect to any required tax withholding) of
the Merger Consideration that the holder is entitled to receive under Section 2.6, and the
Company Certificate so surrendered shall immediately be canceled. No interest will be paid or
accrued with respect to any Merger Consideration deliverable upon due surrender of the Company
Certificates. In the event of a transfer of ownership of the Company Common Stock that is not
registered in the transfer records of the
Company, payment may be made to a transferee if, and only if, the Company Certificate
representing such Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section 2.8, each
Company Certificate (other than the Company Certificates representing Dissenting Shares) shall be
deemed at any time after the Effective Time for all purposes to represent only the right to receive
upon such surrender the Merger Consideration which the holder thereof has the right to receive in
respect of such Company Certificate pursuant to this Article II. In the case of the
Company Certificates representing Dissenting Shares, each Company Certificate representing
Dissenting Shares shall be deemed at any time after the Effective Time for all purposes to
represent only the right to receive the fair value of such Dissenting Shares pursuant to the DGCL.
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(d) No Further Ownership Rights in the Company Common Stock. The payment of the Merger
Consideration upon the surrender for exchange of shares of Company Common Stock in accordance with
the terms hereof shall be deemed to have been issued and made in full satisfaction of all rights
pertaining to such shares of the Company Common Stock, and following the Effective Time, there
shall be no further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of the Company Common Stock that were outstanding immediately prior to
the Effective Time and the stock transfer books shall be closed at the Effective Time. If, after
the Effective Time, the Company Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Section 2.8, subject to
applicable law in the case of the Company Certificates representing Dissenting Shares. From and
after the Effective Time, holders of the Company Certificates shall cease to have any rights as
stockholders of the Company, except as provided by law.
(e) Lost, Stolen or Destroyed Certificates. If any Company Certificates shall have been lost,
stolen or destroyed, then payment shall be made in accordance with this Section 2.8 in
exchange for such lost, stolen or destroyed the Company Certificates, upon the delivery to the
Exchange Agent of an affidavit of that fact by the Person claiming such Company Certificate to be
lost, stolen or destroyed and an indemnity in form reasonably satisfactory to the Purchaser (and,
if required by the Purchaser, the posting by such Person of a bond, in such reasonable amount as
the Purchaser may direct, as an indemnity) against any claim that may be made against the Exchange
Agent or the Purchaser or otherwise with respect to such Company Certificate.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund made available to the
Exchange Agent pursuant to this Section 2.8 that remains undistributed to holders of the
Company Certificates for six (6) months after the Effective Time shall be delivered by the Exchange
Agent to the Purchaser, upon demand, and any holders of the Company Certificates who have not
theretofore complied with this Section 2.8 shall thereafter only look to the Purchaser for
payment of the Merger Consideration.
(g) No Liability. Neither the Purchaser, the Company, the Surviving Corporation nor the
Exchange Agent shall be liable to any Person for any stock or cash held by the Purchaser, the
Surviving Corporation or the Exchange Agent for payment pursuant to this Section 2.8
properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest the Exchange Fund as
directed by the Purchaser; provided that such investment shall be in (i) securities issued or
directly and fully guaranteed or insured by the Unites States of America government or any agency
or instrumentality thereof, (ii) commercial paper obligations rated A-1 or P-1 or better by Moodys
Investor Services, Inc. or Standard & Poors Corporation, respectively, or (iii) certificates of
deposit and bankers acceptances and overnight bank deposits with any commercial bank, depository
institution or trust company incorporated or doing business under the laws of the United States of
America, any state thereof or the District of Columbia. Any interest and other income resulting
from such investments shall be paid to the Purchaser.
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(i) Withholding Rights. The Purchaser, the Surviving Corporation and the Exchange Agent (and
any other Person that has any withholding obligation with respect to any payment made to any Person
pursuant to this Agreement) shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the Code or under any
provision of any state, local or foreign tax law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having been paid to such
Person in respect of which such deduction or withholding was made.
Section 2.9 Stock Options; Restricted Stock Units; Warrants
(a) Prior to the Effective Time, the Company shall take all actions necessary and appropriate
to provide that, as of the Effective Time, each then outstanding option or share appreciation right
to purchase shares of Company Common Stock (a Company Stock Option) granted under the
Company Option Plan or as set forth on Schedule 2.9(a), and whether or not exercisable and
vested at the Effective Time, shall be canceled and, in exchange therefor, each former holder of
any such cancelled Company Stock Option shall be entitled to receive, in consideration of such
cancellation, an amount in cash equal to the Option Consideration (net of any applicable
withholding taxes). For purposes of this Agreement, the term Option Consideration with
respect to a Company Stock Option means an amount equal to the product of (x) the total number of
shares of Company Common Stock subject to such Company Stock Option immediately prior to its
cancellation (assuming full exercisability) and (y) the excess, if any, of (i) $1.80 over (ii) the
exercise price per share of Company Common Stock subject to such Company Stock Option; provided,
however, that any Company Stock Option that has an exercise price per share of the Companys Common
Stock, that is equal to or greater than the Merger Consideration per share shall not receive any
payment in respect thereof. At or as soon as practicable following the Effective Time, the
Purchaser shall provide each holder of Company Stock Options that are cancelled pursuant to this
Section 2.9(a) with a payment as described in this Section 2.9(a), and any such
cancelled Company Stock Options shall no longer be exercisable by the former holder thereof, but
shall only entitle such holder to the payment described in this Section 2.9(a). By virtue
of the foregoing treatment of the Company Stock
Options, the Parties agree that no Person shall have any right under or with respect to any
Company Stock Option after the Effective Time other than the right to receive the applicable
payment (if any) due pursuant to this Section 2.9(a).
(b) Prior to the Effective Time, the Company shall take all actions necessary and appropriate
to provide that, as of the Effective Time, each restricted stock unit award (a Company
RSU) granted under the Company Option Plan, whether or not vested at the Effective Time, shall
be cancelled and, in exchange therefor, each former holder of any such cancelled Company RSU shall
be entitled to receive, in consideration of such cancellation, an amount in cash equal to the RSU
Consideration (net of any applicable withholding taxes); it being understood that such actions of
the Company shall include, without limitation, obtaining
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any consents necessary from each holder of
a Company RSU immediately prior to the Effective Time to cancel such Company RSU as provided in
this Section 2.9(b). For purposes of this Agreement, the term RSU Consideration
with respect to a Company RSU means an amount equal to the product of (x) the total number of
shares of Company Common Stock subject to such Company RSU immediately prior to its cancellation
(assuming full vesting) and (y) $1.80. At or as soon as practicable following the Effective Time,
the Purchaser shall provide each holder of Company RSUs that are cancelled pursuant to this
Section 2.9(b) with a payment as described in this Section 2.9(b), and any such
cancelled Company RSU shall no longer be exercisable by the former holder thereof, but shall only
entitle such holder to the payment described in this Section 2.9(b). By virtue of the
foregoing treatment of the Company RSUs, the Parties agree that no Person shall have any right
under or with respect to any Company RSU after the Effective Time other than the right to receive
the applicable payment (if any) due pursuant to this Section 2.9(b).
(c) Except as set forth on Schedule 2.9(c), prior to the Effective Time, the Company
shall take all actions necessary and appropriate to provide that, as of the Effective Time, each
then outstanding warrant to purchase shares of Company Common Stock (a Company Warrant),
whether or not exercisable and vested at the Effective Time, shall be canceled and, in exchange
therefor, each former holder of any such cancelled Company Warrant shall be entitled to receive, in
consideration of such cancellation, an amount in cash equal to the Warrant Consideration (net of
any applicable withholding taxes); it being understood that, except as set forth on Schedule
2.9(c), such actions of the Company shall include, without limitation, obtaining any consents
necessary from each holder of a Company Warrant immediately prior to the Effective Time to cancel
such Company Warrant as provided in this Section 2.9(c). For purposes of this Agreement,
the term Warrant Consideration with respect to a Company Warrant means an amount equal to
the product of (x) the total number of shares of Company Common Stock subject to such Company
Warrant immediately prior to its cancellation and (y) the excess, if any, of (i) $1.80 over (ii)
the exercise price per share of Company Common Stock subject to such Company Warrant. As soon as
practicable following the Effective Time, the Purchaser shall provide each holder of Company
Warrants that are cancelled pursuant to this Section 2.9(c) with a payment as described in
this Section 2.9(c), and any such cancelled Company Warrants shall no longer be exercisable
by the former holder thereof, but shall only entitle such holder to the payment described in this
Section 2.9(c). By virtue of the foregoing treatment of the Company Warrants, the Parties
agree that no Person shall have any right under or with respect to any Company Warrant after the
Effective Time other than the right to receive the applicable payment (if any) due pursuant to this
Section 2.9(c).
(d) Except as set forth in Schedule 2.9(d), the Company shall take all necessary
actions with respect to the Company Stock Options, the Company RSUs and the Company Warrants to
terminate such Company Stock Options, Company RSUs and Company Warrants as of the Effective Time
and to implement the foregoing provisions of this Section 2.9. The Board of Directors of
the Company, or, if appropriate, any committee of the Board of Directors administering the Company
Option Plan, shall adopt such resolutions or take such actions as are necessary to implement the
foregoing provisions of this Section 2.9 and carry out the terms of this Agreement. As of
the Effective Time, the Company Option Plan shall be terminated and no further awards or grants
shall be made thereunder.
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Section 2.10 Closing
Unless the transactions herein contemplated have been abandoned and this Agreement terminated
pursuant to Section 9.1, the closing of the transactions contemplated by this Agreement
(the Closing) shall take place at the offices of OMelveny & Myers LLP, 400 S. Hope St.,
Los Angeles, CA 90071, on the second (2nd) Business Day after all of the closing
conditions set forth on Articles VI, VII and VIII have been satisfied or
waived (except for those conditions that, by the express terms thereof, are not capable of being
satisfied until the Effective Time, but subject to the satisfaction or waiver of those conditions)
(in any event, the Closing Date), unless otherwise provided by the mutual agreement, in
writing, of the Company, the Purchaser and Merger Sub.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser and Merger Sub that, except as set
forth on the Company Disclosure Schedule delivered by the Company to the Purchaser prior to the
execution and delivery of this Agreement, which Company Disclosure Schedule identifies exceptions
only by the specific section or subsection of this Agreement to which each entry relates, which
exceptions shall also apply to any other section or subsection of this Agreement to the extent that
it is reasonably apparent that such exceptions are applicable to any other such section or
subsection (the Company Disclosure Schedule):
Section 3.1 Organization and Qualification
(a) The Company is a corporation duly formed, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate powers to own, lease and operate its
properties and to carry on its business as currently conducted. The Company is duly qualified or
licensed to do business as a foreign corporation or other foreign legal entity and is in good
standing in each jurisdiction where such qualification is necessary (except, in the case of good
standing, for entities organized under the laws of any jurisdiction that does not recognize such
concept), with such exceptions as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Complete and correct copies of the certificate of
incorporation and bylaws (or equivalent organizational documents), all as
amended to date, of the Company and each of its Subsidiaries have been delivered or made
available to the Purchaser and no other organizational documents are applicable to or binding upon
the Company or any of its Subsidiaries. Such certificates of incorporation and bylaws (or
equivalent organizational documents) are in full force and effect as of the date hereof and neither
the Company nor any of its Subsidiaries is in violation of any of their respective provisions.
(b) Schedule 3.1(b) of the Company Disclosure Schedule sets forth all Subsidiaries of
the Company, including, for each Subsidiary, (i) such Subsidiarys jurisdiction of incorporation,
(ii) all other jurisdictions in which such Subsidiary is authorized to do business, and (iii) a
complete and accurate list of such Subsidiarys current directors and officers. Each Subsidiary of
the Company has been duly formed and is validly existing and in good standing
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under the laws of the
jurisdiction of its incorporation or organization, and has all requisite corporate powers to own,
lease and operate its properties and to carry on its business as currently conducted. Each
Subsidiary of the Company is duly qualified or licensed to do business as a foreign corporation or
other foreign legal entity and is in good standing in each jurisdiction where such qualification is
necessary (except, in the case of good standing, for entities organized under the laws of any
jurisdiction that does not recognize such concept), with such exceptions as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 3.1(b) of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries owns, directly or indirectly, any capital stock or other equity securities or equity
interest of any Person, and neither the Company nor any of its Subsidiaries is subject to any
obligation or requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any other Person.
Section 3.2 Authorization
The Company has all requisite corporate power and corporate authority to execute and deliver
this Agreement, to perform its obligations under this Agreement and, subject to obtaining the
Company Stockholders Approval with respect to the Merger, to consummate the transactions
contemplated thereby. The execution, delivery and performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated hereby have been duly authorized
by the Company, and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated (other than, with
respect to the Merger, obtaining the Company Stockholders Approval). This Agreement constitutes
the legally valid and binding agreement of the Company (assuming due authorization, execution and
delivery of this Agreement by the Purchaser and Merger Sub), enforceable against the Company in
accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting generally the
enforcement of creditors rights and remedies and general principles of equity, including any
limitations on the availability of the remedy of specific performance or injunctive relief
regardless of whether specific performance or injunctive relief is sought in a proceeding at law or
in equity.
Section 3.3 Capitalization and Share Ownership
(a) As of the date of this Agreement, the authorized capital stock of the Company consists of
(i) 100,000,000 shares of Company Common Stock and (ii) 1,000,000 shares of Company Preferred
Stock. As of the date hereof, (A) 23,708,792 shares of Company Common Stock (excluding shares held
by the Company or any of its Subsidiaries, as treasury stock or otherwise, and excluding the
Exchangeable Shares) were issued and outstanding, (B) 500,000 shares of Company Common Stock were
held by the Company and its Subsidiaries, as treasury stock or otherwise, (C) one (1) share of
Company Preferred Stock was issued and outstanding, (D) 1,811,360 Exchangeable Shares that are
exchangeable for an aggregate of 1,811,360 shares of Company Common Stock were issued and
outstanding, (E) 1,350,557 shares of Company Common Stock were reserved for issuance upon exercise
of outstanding Company Stock Options, (F) 743,500 shares of Company Common Stock were reserved for
issuance upon payment of outstanding Company RSUs and (G) 20,958,453 shares of Company Common Stock
A-18
were reserved for issuance pursuant to Company Warrants. All outstanding shares of the Company
Common Stock and the Exchangeable Shares are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock of the Company is entitled to preemptive rights. All
of the shares of the Company Common Stock which may be issued pursuant to the Exchangeable Shares,
Company Stock Options, Company RSUs and Company Warrants will be, when issued in compliance with
the terms of such Exchangeable Shares, Company Stock Options, Company RSUs and Company Warrants, as
applicable, duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive (or similar) rights. Schedule 3.3(a) of the Company Disclosure Schedule
contains a true and complete list, as of the date hereof, of all outstanding options and share
appreciation rights to purchase, and all restricted stock unit awards to receive, Company Common
Stock granted under the Company Option Plan and all other options, warrants or rights to purchase
or receive Company Common Stock or Exchangeable Shares granted by the Company or any of its
Subsidiaries (collectively, the Company Stock Issuance Rights), the number of shares
subject to such Company Stock Issuance Right, the grant dates and exercise prices of each such
Company Stock Issuance Right and the names of the holders thereof. Other than as set forth on
Schedule 3.3(a) of the Company Disclosure Schedule, there are no options, share
appreciation rights, restricted stock unit awards, warrants or other rights to acquire capital
stock, or other equity or voting interests in the Company (including the Exchangeable Shares) or
securities convertible into or exercisable or exchangeable for capital stock or other equity or
voting interests in the Company (including the Exchangeable Shares). There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company and, as of the date hereof, no irrevocable proxies have
been granted with respect to the shares of the Company Common Stock. No Person has any right to
acquire any interest in the business or assets of the Company (including any right of first refusal
or similar right), other than pursuant to this Agreement or pursuant to rights of condemnation or
eminent domain afforded by law. No shares of the Company Common Stock and no Exchangeable Shares
are owned by any Subsidiary of the Company. The Company, the Canadian Subsidiary, 1305699 Alberta
ULC and their respective directors, officers and stockholders will have taken prior to the Closing
all corporate action necessary to authorize and effect the Share Exchange, and the Share Exchange
will be duly and validly consummated in compliance with (A) each of (i) the articles of the
Canadian Subsidiary, (ii) the Voting and Exchange Rights Trust Agreement, dated August 24, 2007, among the Company,
the Canadian Subsidiary and Valiant Trust Company (the Voting and Exchange Agreement), and (iii)
the Support Agreement dated August 24, 2007, among the Company, the Canadian Subsidiary and 1305699
Alberta ULC, and (B) all applicable law, in each case prior to the Closing, such Share Exchange to
be subject to consummation of the Merger. Immediately prior to the consummation of the Merger, the
Company will be the indirect owner of all the issued and outstanding shares of the Canadian
Subsidiary.
(b) Schedule 3.3(b) of the Company Disclosure Schedule sets forth for each Subsidiary
of the Company (i) its authorized share capital and (ii) the number of issued and outstanding
shares of its authorized share capital and the record and beneficial owners thereof. Except as set
forth on Schedule 3.3(b) of the Company Disclosure Schedule, each of the outstanding shares
of capital stock of, or other equity or voting interest in, the Companys Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and all such shares are owned by the
Company, free and clear of all Liens, other than Permitted Liens. There are no
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options, share
appreciation rights, restricted stock unit awards, warrants or other rights to acquire the capital
stock of, or other equity or voting interests in, any of the Companys Subsidiaries or securities
convertible into or exercisable or exchangeable for the capital stock of, or other equity or voting
interests in, any of the Companys Subsidiaries. There are no outstanding obligations of any of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of any of the Companys Subsidiaries and, as of the date hereof, no irrevocable
proxies have been granted with respect to the shares of the capital stock or equity of any of the
Subsidiaries of the Company. No Person has any right to acquire any interest in the business or
assets of any of the Companys Subsidiaries (including any right of first refusal or similar
right), other than pursuant to rights of condemnation or eminent domain afforded by law.
Section 3.4 Indebtedness
Schedule 3.4 of the Company Disclosure Schedule sets forth all of the agreements or
instruments pursuant to which any of the Indebtedness of the Company and its Subsidiaries in the
amount of $50,000 or greater is outstanding, together with the amount outstanding thereunder, in
each case as of the date hereof. The Indebtedness of the Company and its Subsidiaries not set
forth on Schedule 3.4 of the Company Disclosure Schedule do not exceed $250,000 in the
aggregate. Other than as set forth on Schedule 3.4 of the Company Disclosure Schedule, as
of the date hereof and as of immediately prior to the Effective Time, there is no default or event
of default under any such agreement or instrument, and no event has occurred, which, with notice or
lapse of time or both, would be a default or event of default under any such agreement or
instrument which would give the other party the right to accelerate any Indebtedness of the Company
or any of its Subsidiaries. Complete and correct copies of each such agreement or instrument set
forth on Schedule 3.4 of the Company Disclosure Schedule have been delivered or made
available to the Purchaser prior to the date hereof.
Section 3.5 Governmental Authorization; Noncontravention
(a) The execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby
require no consent, approval, authorization or permit of, action by or in respect of, or
filing with or notification to, any Governmental Authority, other than (i) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Company is qualified to do
business, (ii) compliance with any applicable requirements of the HSR Act and other similar filings
under the antitrust or anti-competition Legal Requirements of other foreign countries, (iii)
compliance with any applicable requirements of the Securities Act, the Exchange Act, and any other
applicable securities Legal Requirements, and (iv) any actions or filings the absence of which
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect.
(b) The execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby do not and will not (i)
contravene, conflict with or result in any violation or breach of any provision of the certificate
of incorporation or bylaws (or equivalent organizational documents) of the Company or any of its
Subsidiaries, (ii) assuming compliance with the matters referred to in Section 3.5(a),
contravene, conflict with or result in a violation or breach of any provision of any
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material Legal
Requirement applicable to the Company or any of its Subsidiaries or by which its or their
respective properties or assets are bound or affected, (iii) except as set forth on Schedule
3.5(b) of the Company Disclosure Schedule, require any consent or other action by any Person
(other than as set forth in Section 3.5(a)) under, constitute a default (or an event that,
with or without notice or lapse of time or both, would constitute a default), or cause or permit
the termination, cancellation, acceleration, triggering or other change of any right or obligation
or the loss of any benefit to which the Company or any Subsidiary of the Company is entitled under
any provision of (1) any Material Contract binding upon the Company or any Subsidiary of the
Company, or (2) any material permit, certificate, approval or other similar authorization from a
Governmental Authority held by, or affecting, or relating in any way to, the assets or business of,
the Company or any Subsidiary of the Company, or (iv) result in the creation or imposition of any
Lien on any material asset of the Company or any other Subsidiary of the Company.
Section 3.6 SEC Filings
(a) Since January 1, 2006, the Company has filed on a timely basis all reports, prospectuses,
forms, schedules, proxy statements, registration statements and other similar documents required to
be so filed with the SEC (collectively, and to the extent publicly available, the Company SEC
Reports). A true and complete copy of each of the Company SEC Reports filed prior to the date
hereof and not publicly available on EDGAR has been made available to the Purchaser prior to the
date hereof. No Subsidiary of the Company is required to file any report, prospectus, form,
schedule, proxy statement, registration statement or other similar documents with the SEC.
(b) Except as set forth on Schedule 3.6(b) of the Company Disclosure Schedule, all
Company SEC Reports, as of their respective filing dates (and as of the date of any amendment to
the respective Company SEC Reports), complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(c) Except as set forth on Schedule 3.6(c) of the Company Disclosure Schedule, none of
the Company SEC Reports (including any financial statements included or incorporated by reference
therein), as of their respective filing dates (with respect to filings made under the Exchange Act
) or as of the respective dates upon which such filing became effective (with respect to filings
made under the Securities Act), (and, if amended or superseded prior to the date of this Agreement,
then on the date of such filing), contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading.
(d) Each of the principal executive officers of the Company and the principal financial
officer of the Company (or each former principal executive officer of the Company and each former
principal financial officer of the Company, as applicable) has made all certifications required by
Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and 906 of SOX and the rules and
regulations of the SEC promulgated thereunder with respect to the Company SEC Reports, and to the
knowledge of the signatories thereof, the statements contained in such certifications are true and
correct. For purposes of this Section 3.6(d), principal executive
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officer and principal
financial officer shall have the meanings given to such terms in SOX. Neither the Company nor any
of its Subsidiaries has outstanding, or has arranged any outstanding, extensions of credit to
directors or executive officers within the meaning of Section 402 of SOX.
(e) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to
become a party to, any joint venture, off-balance sheet partnership or any similar contract or
arrangement (including any contract or arrangement relating to any transaction or relationship
between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated
Affiliate, including any structured finance, special purpose or limited purpose entity or Person,
on the other hand or any off-balance sheet arrangements (as defined in Item 303(A) of Regulation
S-K promulgated by the SEC)), where the result, purpose or intended effect of such contract or
arrangement is to avoid disclosure of any material transaction involving, or material liabilities
of, the Company or any of its Subsidiaries in the Companys or such Subsidiarys published
financial statements or other of the Company SEC Reports.
(f) Except as set forth on Schedule 3.6(f) or in the Company SEC Reports filed and publicly
available prior to the date hereof, the Company maintains a system of internal controls over
financial reporting (as defined in Rules 13a-15(F) and 15d-15(F) under the Exchange Act) sufficient
to provide reasonable assurances regarding the reliability of its financial reporting and
preparation of financial statements for external purposes in accordance with GAAP. The Companys
management has disclosed, based on its most recent evaluation, to the Companys outside auditors
and the audit committee of the Companys Board of Directors (x) any significant deficiencies and
material weaknesses in the design or operation of internal control over financial reporting that
are reasonably likely to adversely affect the Companys ability to record, process, summarize and
report financial data and (y) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Companys internal control over financial reporting.
A copy of any such disclosures made by the
Companys management to the Companys outside auditors and the audit committee have been
previously provided to the Purchaser.
(g) Except as set forth on Schedule 3.6(g) or in the Company SEC Reports filed and publicly
available prior to the date hereof, (i) the Company has in place the disclosure controls and
procedures (as defined in Rules 13a-15(E) and 15d-15(E) under the Exchange Act) required in order
for the Chief Executive Officer and Chief Financial Officer of the Company to engage in the review
and evaluation process mandated by the Exchange Act and the rules promulgated thereunder, and (ii)
the Companys disclosure controls and procedures are reasonably designed to ensure that all
information (both financial and non-financial) required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC, and that all such
information is accumulated and communicated to the Companys management as appropriate to allow
timely decisions regarding required disclosure and to make the certifications of the Chief
Executive Officer and Chief Financial Officer of the Company required under the Exchange Act with
respect to such reports.
A-22
(h) Since January 1, 2006, to the Knowledge of the Company (i) neither the Company nor any of
its Subsidiaries nor any director, officer, employee, auditor, accountant or representative of the
Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any
complaint, allegation, assertion or claim, whether written or oral, regarding fraud in the
accounting or auditing practices, procedures, methodologies or methods of the Company or any of its
Subsidiaries or their respective internal accounting controls, including any complaint, allegation,
assertion or claim that the Company or any of its Subsidiaries has engaged in inappropriate
accounting or auditing practices, and (ii) no attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported
evidence of a violation of securities Legal Requirements or a violation of Legal Requirements
relating to fraud against shareholders by the Company or any of its officers, directors, employees
or agents to the Companys Board of Directors (or any committee thereof) or to any director or
officer of the Company, or to the general counsel or equivalent officer of the Company.
Section 3.7 Financial Statements; Undisclosed Liabilities
(a) Company Financial Statements. The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company and its Subsidiaries (including any
related notes and schedules) included in the Company SEC Reports (i) have been prepared in
accordance with past practice and GAAP (except as otherwise stated therein and subject to normal
year end adjustments in the case of any unaudited interim financial statements) applied on a
consistent basis during the periods involved and (B) fairly present in all material respects, in
accordance with GAAP, the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of operations and changes in financial
position for the periods or as of the dates then ended.
(b) Undisclosed Liabilities. Except as set forth on the Companys consolidated balance sheet
at December 31, 2007 included in the Companys Form 10-K for the
year ended December 31, 2007, none of the Company and its Subsidiaries has any liability or
obligation of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, other than (i) liabilities or obligations incurred in the ordinary course of business
consistent with past practices since the date of the most recent balance sheet of the Company
included in the Company SEC Reports filed prior to the date of this Agreement, none of which are or
would reasonably be expected to be, individually or in the aggregate, a material liability or
material obligation, or (ii) liabilities or obligations otherwise set forth on Schedule
3.7(b) of the Company Disclosure Schedule.
Section 3.8 Absence of Certain Changes
Except (i) as disclosed in the Company SEC Reports filed and publicly available prior to the
date hereof, (ii) as set forth on Schedule 3.8, or (iii) as otherwise expressly permitted
by this Agreement, since December 31, 2007 the businesses of Company and each of its Subsidiaries
have been operated in the ordinary course and consistent with past practices and since such date
there has not occurred:
A-23
(a) any Material Adverse Effect or any condition, event or occurrence which would reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect;
(b) any proceeding with respect to a merger, consolidation, liquidation or reorganization of
Company or any of its Subsidiaries other than such proceedings relating to this Agreement;
(c) any declaration, payment or setting aside for payment of any dividend or other
distribution by the Company or any of its Subsidiaries (except to the Company) or any redemption,
purchase or other acquisition by the Company or any of its Subsidiaries of any shares of capital
stock or securities of the Company or any of its Subsidiaries;
(d) any amendment or change to the Companys or any of its Subsidiaries certificate of
incorporation or bylaws (or equivalent organizational documents);
(e) any change by the Company to its accounting methods, practices, policies or principles for
financial accounting or Tax purposes;
(f) any issuance or grant by the Company or any of its Subsidiaries of any rights (including
stock appreciation rights, subscriptions, warrants, puts, calls, preemptive rights and options),
obligation to repurchase or redeem, or any other rights, or other agreements of any kind, relating
to, or the value of which is tied to the value of, any of the outstanding, authorized but not
issued, unauthorized or treasury shares of the capital stock or any other security of the Company
or any of its Subsidiaries;
(g) any split, combination or reclassification of any of the capital stock of the Company or
any of its Subsidiaries or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of the capital stock or other
securities of the Company or any of its Subsidiaries, other than the issuance of Company
Common Stock upon the exercise of Company Stock Options or Company RSUs;
(h) any employment agreement or consulting agreement entered into (or amended or supplemented)
by the Company or any of its Subsidiaries with any Employee or Independent Contractor, or the grant
of any increase in compensation (including employee benefits) of any Employee or Independent
Contractor of the Company or any of its Subsidiaries, except for increases (A) in salary in the
ordinary course of business and consistent with past practice, or (B) as required by any employment
or other agreement, policy or plan in effect as of December 31, 2007;
(i) any increase in or establishment of any bonus, severance or termination pay, deferred
compensation, pension, retirement, profit sharing, stock option or other employee benefit plan, or
any other increase in the compensation payable to any officers or key Employees;
A-24
(j) any amendment to, or modification of, any Company Stock Option or any adoption of, or
amendment to, the Company Option Plan, except as contemplated in this Agreement;
(k) any Indebtedness incurred by the Company or any of its Subsidiaries, or any loans made or
agreed to be made by or to the Company or any of its Subsidiaries, other than in the ordinary
course of business and consistent with past practice;
(l) any entry into any material partnership arrangements, license agreements, joint
development agreements or strategic alliances, or any acquisition of any capital stock or other
ownership interest in any other Person;
(m) any loan made by the Company or any of its Subsidiaries to any officer or director of the
Company or any of its Subsidiaries;
(n) any personal guarantee granted by the Company or any of its Subsidiaries on behalf of any
of the officers or directors of the Company or any of its Subsidiaries;
(o) any damage, destruction or loss, whether or not covered by insurance, to any material
asset of the Company or any of its Subsidiaries;
(p) any Tax election (other than those in the ordinary course of business consistent with past
practice), amendment of any Tax Return, application for any ruling relating to Taxes, any entry
into any closing agreement in respect of Taxes, settlement of any Tax liability, claim or
assessment, or any consent to an extension or waiver of the limitation period applicable to any
claim or assessment in respect of any Taxes;
(q) any revaluation by the Company or any of its Subsidiaries of any material assets of the
Company or any of its Subsidiaries;
(r) the commencement of any lawsuit, or settlement of any existing lawsuit or threatened
claims, other than for the routine collection of bills;
(s) any entry by the Company or any of its Subsidiaries into, or any amendment of, any
collective bargaining agreement (or any memorandum of understanding or other modification of any
collective bargaining agreement); or
(t) any agreement by the Company or any of its Subsidiaries to take any of the actions
described in the foregoing.
Section 3.9 Licenses
The Company and each of its Subsidiaries, as applicable, holds all licenses, permits,
certificates, approvals or other similar authorizations of all Governmental Authorities necessary
for such entity to own, lease or operate its properties and assets and to conduct its business as
presently conducted (the Licenses), except to the extent failure to hold any such License
would not be material. Each of the material Licenses is valid and in full force and effect and the
Company and each of its Subsidiaries are in material compliance with the terms of the
A-25
Licenses.
None of the Governmental Authorities that has issued any material License has notified the Company
or any of its Subsidiaries (A) of its intent to modify, revoke, terminate or fail to renew any such
material License, now or in the future, or (B) that the Company or any of its Subsidiaries is in
violation of the terms of any such material License and no action has been threatened with respect
thereto. There is not pending any proceeding, application, petition, objection or other pleading
with any Governmental Authority that questions the validity of any of the material Licenses or
which presents a substantial risk that, if accepted or granted, would result in the revocation,
cancellation, suspension or any adverse modification of any of the material Licenses.
Section 3.10 Litigation; Compliance with Laws
(a) Litigation. Except as set forth on Schedule 3.10(a) of the Company Disclosure
Schedule, there is no suit, claim, Action, proceeding (at law or in equity) or investigation
pending or, to the Companys Knowledge, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties or rights before or by any arbitrator, court or
other Governmental Authority that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is subject to
any outstanding judgment, writ, decree, injunction or order of any Governmental Authority or other
arbitrator that would reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. As of the date hereof, there are no Actions pending or, to the Companys
Knowledge, threatened, seeking to or that reasonably would be expected to prevent, hinder, modify,
delay or challenge the transactions contemplated by this Agreement, including the Merger.
Schedule 3.10(a) of the Company Disclosure Schedule identifies all pending litigation to
which the Company is a party, and all proceedings or investigations by a Governmental Authority
which, to the Companys Knowledge, are pending against the Company, as of the date hereof and all
resolved (by settlement or court order)
litigation for the past three years in which the Company or any of its Subsidiaries is or was
a party and which exceeded $100,000 individually or in any related series of payments.
(b) Compliance. Except as set forth on Schedule 3.10(b) of the Company Disclosure
Schedule, as of the date hereof and as of immediately prior to the Effective Time, the Company and
its Subsidiaries are in material compliance with all Legal Requirements applicable to them or their
respective businesses or operations and have not received unresolved notification of any asserted
present or past failure to so comply. Schedule 3.10(b) of the Company Disclosure Schedule
identifies any notifications received by the Company during the past three years of any asserted
present or past failure to comply with any material Legal Requirements.
Section 3.11 Employment Matters
(a) Schedule 3.11(a) of the Company Disclosure Schedule contains a true, complete and
accurate list of the name of each current Employee of the Company and its Subsidiaries, and for
each such Employee, his or her (i) employer; (ii) job title; (iii) current salary or hourly wage
rate; (iv) any incentive, bonus, or commissions arrangement; (v) any other special compensation or
perquisites (e.g. automobile allowance); (vi) total compensation received in 2007; (vii) status as
exempt or non-exempt from applicable overtime Legal
A-26
Requirements; (viii) vacation and/or paid time
off accrual rate; (ix) amount of accrued vacation and/or paid time off; (x) date of hire; and (xi)
status on a leave of absence and, if applicable, the type of leave of absence and the expected date
of return to work.
(b) Except as set forth on Schedule 3.10(a) of the Company Disclosure Schedule, there
is no material claim, Action or charge pending or, to the Knowledge of the Company, threatened
against the Company or any of its Subsidiaries alleging, with respect to any Employee or
Independent Contractor, any violation of any Legal Requirement or contract relating to employment
and employment practices, any violation of OSHA or other similar Legal Requirement, or any
violation of any collective bargaining agreement, any unlawful discrimination, retaliation or
harassment in employment practices or any unfair labor practices before any Governmental Authority
or arbitral body.
(c) No Employees are covered by any collective bargaining agreement with respect to their
employment with the Company or any of its Subsidiaries. Except as set forth on Schedule
3.11(c) of the Company Disclosure Schedule, during the past three (3) years, no labor union or
other organization has (i) filed a petition with the National Labor Relations Board or any other
Governmental Authority seeking certification as the collective bargaining representative of any
Employee; (ii) negotiated or attempted to negotiate a collective bargaining agreement or other
labor union agreement on behalf of any Employees; or (iii) engaged in or, to the Knowledge of the
Company, threatened to engage in any organizing activity with respect to any Employee.
(d) There has been no labor strike, work slowdown, employee lockout or concerted work stoppage
with respect to the business activities of the Company or any of its Subsidiaries during the last
three years and, to the Knowledge of the Company, except as set
forth on Schedule 3.11(d) of the Company Disclosure Schedule, there are no pending or
threatened union organizing efforts, labor strikes, disputes, slow-downs or work stoppages against
the Company or any of its Subsidiaries.
(e) Except as set forth on Schedule 3.10(a) of the Company Disclosure Schedule, to the
Knowledge of the Company, there are no unresolved complaints against the Company or any of its
Subsidiaries issued by, and neither the Company nor any of its Subsidiaries has received notice of
any pending material complaint before, the National Labor Relations Board, the Equal Employment
Opportunity Commission, the Department of Labor or any comparable non-U.S. Governmental Authority.
(f) Except as set forth on Schedule 3.10(b) of the Company Disclosure Schedule, the
Company and its Subsidiaries are and, during the prior three (3) years have been, in material
compliance with all applicable Legal Requirements relating to the employment of labor, including
those related to wages, hours, classification of employees as exempt from overtime compensation,
immigration and naturalization, hiring, equal opportunity, discrimination, harassment, retaliation,
employee privacy, collective bargaining and the payment and withholding of Taxes and other sums as
required by appropriate Governmental Authorities. Except as set forth on Schedule 3.10(a),
the Company and its Subsidiaries have withheld and paid to the appropriate Governmental Authority
or are holding for payment not yet due to such Governmental Authority all amounts required to be
withheld from Employees of the Company or
A-27
any of its Subsidiaries and are not liable for any
arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing.
Except as set forth on Schedule 3.10(b), during the prior three (3) years, the Company and its
Subsidiaries have paid in full to all Employees and Independent Contractors or adequately accrued
for in accordance with GAAP all wages, salaries, commissions, bonuses, benefits and other
compensation due to or on behalf of such Employees and Independent Contractors, and neither the
Company nor any of its Subsidiaries has received notice of any material claim with respect to
payment of wages, salary or overtime pay, or the alleged misclassification of any Employee as
exempt from any Legal Requirement governing overtime compensation or any worker as an independent
contractor rather than as an employee, that has been asserted or is now pending or threatened
before any Governmental Authority with respect to any persons currently or formerly employed or
engaged by the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries
is a party to, or otherwise bound by, any executory consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices. The Company and its
Subsidiaries are and, during the prior three (3) years, have been in compliance with the
requirements of WARN and any similar Legal Requirements and have no liabilities pursuant to WARN,
in each case as determined without regard to any terminations of employment that occur on or after
the Effective Time.
(g) The Company and its Subsidiaries have classified all individuals who perform services for
them correctly under each Benefit Plan, ERISA, the Code and other applicable Legal Requirements as
common law employees, independent contractors or leased employees.
(h) Except as set forth on Schedule 3.11(h) of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to any contract, agreement or
arrangement that (i) restricts the right of the Company or any of its Subsidiaries from
terminating any current Employees employment or Independent Contractors services without cause or
without a specified notice period, (ii) obligates the Company or any of its Subsidiaries to pay or
provide severance payments or benefits to any Employee or Independent Contractor upon termination
of such Employees employment or Independent Contractors services with the Company or any of its
Subsidiaries, or (iii) obligates the Company or any of its Subsidiaries to provide any payment or
benefits to any Employee or Independent Contractor upon a change in control of the Company or any
of its Subsidiaries.
(i) To the Knowledge of the Company, no current management Employee of the Company or any of
its Subsidiaries is a party to an agreement that interferes with or restricts such Employees
ability to engage in the business of the Company or its Subsidiaries.
Section 3.12 Tax Matters
(a) Except as set forth on Schedule 3.12(a) of the Company Disclosure Schedule, (i)
the Company and each of its Subsidiaries has timely filed all Tax Returns (other than tax returns
which if properly prepared and filed would involve an immaterial amount of tax) required to be
filed, and all such Tax Returns are true, correct and complete in all material respects; (ii) the
Company and each of its Subsidiaries has timely paid (or the Company has made adequate reserves
therefor in its financial statements included in the Company SEC Reports) all Taxes which are due
and payable (whether or not shown on such Tax Returns); (iii)
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the Company has made appropriate
accruals in accordance with GAAP in the financial statements included with the latest Company SEC
Reports for all Taxes of the Company or any of its Subsidiaries with respect to any taxable period,
or portion thereof, ending on or prior to the date of the latest Company SEC Reports for which Tax
Returns have not yet been filed, or for which Taxes have been accrued but are not yet due and
owing; (iv) since the date of the latest Company SEC Reports, neither the Company nor any of its
Subsidiaries has incurred any liability for Taxes outside the ordinary course of business or
otherwise inconsistent with past custom and practice; (v) the Company and each of its Subsidiaries
has withheld and paid all Taxes required to be withheld and paid in connection with amounts paid
and owing to any Person; and (vi) the Company and each of its Subsidiaries has properly charged and
collected on all sales, leases and other supplies, including deemed supplies made by it, the amount
of all Taxes which may be imposed by state, provincial or other taxing authorities required to be
collected by the Company and has remitted such Taxes in the form required under applicable law or
has made adequate provisions for the payment of such amounts to the proper Governmental Authority.
(b) Except as set forth on Schedule 3.12(b) of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries has received written notice of any proposed or
determined Tax deficiency or assessment from any Governmental Authority. As of the date hereof,
there are no audits, examinations, requests for information or other administrative proceedings
pending or, to the Knowledge of the Company, threatened with respect to the Company or any of its
Subsidiaries. Except as set forth on Schedule 3.12(b) of the Company Disclosure Schedule,
there are no (i) outstanding agreements or waivers by or with respect to the Company or any of its
Subsidiaries that extend the statutory period of limitations applicable to any Tax Returns or Taxes
for any period and (ii) Liens for Taxes on the assets of
the Company or its Subsidiaries, except for Liens for Taxes not yet due and payable or being
contested in good faith in accordance with appropriate proceedings and for which adequate reserves
have been established in accordance with GAAP. Except as set forth on Schedule 3.12(b) of
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries (i) has entered
into any closing agreements or other agreements with any Governmental Authority relating to the
payment of Taxes by such Party, (ii) is liable for any unpaid Taxes of any Person (other than the
Company and its Subsidiaries) under Treasury Regulations Section 1.1502-6, or any similar provision
of state, local or foreign law, as a transferee or successor, by contract or otherwise, or (iii)
will be required to include any material item of income in, or exclude any material item of
deduction from, taxable income for any taxable period (or portion thereof) ending on or after the
Closing Date as a result of (A) any change in method of accounting under section 481 of the Code
(or any corresponding or similar provision of state, local or foreign income Tax law), (B) deferred
intercompany gains or any excess loss accounts as described in Treasury regulations promulgated
under Section 1502 of the Code (or any corresponding or similar provisions under state, local or
foreign tax law), (C) installment sale or open transaction dispositions made on or prior to the
Closing, (D) any written and legally binding agreement with a Governmental Authority relating to
Taxes, or (E) any prepaid amount received on or prior to the Closing Date. Except as set forth on
Schedule 3.12(b) of the Company Disclosure Schedule, there will be no Tax allocation or Tax
sharing agreement in effect on the Effective Date under which the Company or any of its
Subsidiaries may be liable.
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(c) Except as set forth on Schedule 3.12(c) of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries has been included in any consolidated U.S. federal
income Tax Return or other consolidated, combined, unitary or similar Tax Return under any other
jurisdiction (other than a Tax Return for a group of which the Company or one of its Subsidiaries
was the common parent) for any taxable period for which the statute of limitations has not expired.
Except as set forth on Schedule 3.12(c) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to any indemnification, allocation or sharing
agreement with respect to Taxes that could give rise to a payment or indemnification obligation.
(d) Neither the Company nor any of its Subsidiaries has been a distributing corporation or a
controlled corporation (i) in a distribution intended to qualify under Section 355 of the Code
within the past five years, or (ii) in a distribution which could otherwise constitute part of a
plan or series of related transactions (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger. Neither the Company nor any of its Subsidiaries has made or is
obligated to make any payment that would not be deductible pursuant to Section 162(m) of the Code.
Neither the Company nor any of its Subsidiaries has participated in any reportable transaction as
defined in Treasury Regulation Section 1.6011-4(b)(1).
(e) The Company is not, and has not been at any time during the five year period ending on the
Closing Date, a United States real property holding corporation within the meaning of Section 897
of the Code.
(f) Except as set forth on Schedule 3.12(f) of the Company Disclosure Schedule, all
related party transactions among the Company, its Subsidiaries and their Affiliates
have been, in all respects, on an arms length basis in accordance with Section 482 of the
Code, or any state, local or foreign law equivalent.
(g) Except as set forth on Schedule 3.12(g) of the Company Disclosure Schedule, there
is no limitation on the utilization by the Company or any of its Subsidiaries of their net
operating losses, built-in losses, Tax credits, or similar items under Sections 382, 383, or 384 of
the Code or comparable provisions of foreign, state or local Legal Requirements (other than any
such limitation arising as a result of the consummation of the transactions contemplated by this
Agreement).
(h) There are no circumstances existing which could result in the application to the Company
or any of its Subsidiaries of Sections 78, 80, 80.01, 80.02, 80.03, 80.04 or 160 of the Income Tax
Act (Canada) or any similar provisions of any other applicable Tax legislation. The Company and
each of its Subsidiaries is in compliance in all material respects with section 247 of the Income
Tax Act (Canada) and neither the Company nor any of its Subsidiaries has participated, directly or
indirectly through a partnership in a transaction contemplated in subsection 247(2) of the Income
Tax Act (Canada).
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Section 3.13 Real Property
(a) Neither the Company nor any of its Subsidiaries owns any real property.
(b) Schedule 3.13(b) of the Company Disclosure Schedule lists each real property that
is leased by the Company or any of its Subsidiaries (the Leased Real Property). Each of
the Company and its Subsidiaries hold good and valid leasehold interests in the Leased Real
Property free and clear of all Liens, other than (i) as set forth on Schedule 3.13(b) of the
Company Disclosure Schedule, (ii) Permitted Liens or (iii) Liens encumbering the lessors interest
in the Leased Real Property incurred by the lessor. Each Material Lease under which the Leased
Real Property is held (A) is in full force and effect, and (B) is enforceable against the Company
or its Subsidiary and, to the Knowledge of the Company, against the other party or parties thereto,
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws of general applicability relating to or affecting
creditors rights and to general equity principles. Except as set forth on Schedule
3.13(b) of the Company Disclosure Schedule, (i) no default exists under any Material Lease,
(ii) to the Knowledge of the Company, no default by the landlord exists under any such Material
Lease, (iii) to the Knowledge of the Company, no circumstance exists which, with the giving of
notice, the passage of time or both, is reasonably likely to result in such a default by the
Company or any of its Subsidiaries under any such Material Lease, and (iv) to the Knowledge of the
Company, no circumstance exists which, with the giving of notice, the passage of time or both, is
reasonably likely to result in such a default by the landlord under any such Material Lease.
Complete and correct copies of each lease under which the Leased Real Property is held have been
delivered or made available to the Purchaser prior to the date hereof. Except as set forth on
Schedule 3.13(b) of the Company Disclosure Schedule, there are no existing, or to the
Knowledge of the Company, any threatened or pending litigation or condemnation or eminent domain
proceedings (or proceedings in lieu thereof) affecting the Leased Real Property or any
portion thereof which is subject to a Material Lease. All rents, additional rents, common
area charges, escrow payments or similar charges or payments that are required to be made by the
Company or any of its Subsidiaries under the Material Leases and are due and payable prior to and
including the date of this Agreement have been paid in full without offset, claim or reduction.
Except as set forth on Schedule 3.13(b) of the Company Disclosure Schedule, the
transactions contemplated by this Agreement do not require the consent or approval of, payment of a
fee or penalty to, the landlord thereunder, or give the landlord thereunder the option to terminate
or modify any Material Lease.
(c) There are no contractual or legal restrictions or physical defects that preclude or
restrict, in a manner that, individually and in the aggregate, reasonably could be expected
materially and adversely to affect the ability of the Company or any of its Subsidiaries to use the
Material Leases for the purposes for which it is currently being used by the Company or such
Subsidiary.
(d) The Company and each applicable Subsidiary of the Company has received all approvals of
any Governmental Authority, including building, zoning, administrative, occupational safety and
health authorities, or such other approvals, including licenses and certificates of occupancy,
under any applicable Legal Requirements, required to be
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obtained in connection with the ownership,
use and operation of the Leased Real Property which is subject to a Material Lease for the purposes
for which it is currently being used by the Company or such Subsidiary, except for such, which if
not obtained would not, individually or in the aggregate, materially and adversely interfere with
the use, occupancy or operation thereof.
(e) No portion of the Leased Real Property which is subject to a Material Lease has suffered
any material damage by fire or other casualty in the three (3) years immediately preceding the date
of this Agreement that has not heretofore been repaired and restored to the condition necessary for
the Company or the applicable Subsidiary of the Company to own and operate its business in
accordance with good industry standards.
Section 3.14 Environmental Matters
Except as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect:
(a) The Company and its Subsidiaries are and have been (except for such failures as have been
remedied to the satisfaction of Governmental Authorities having jurisdiction thereof) in compliance
with all Environmental Permits, and the Company and its Subsidiaries are in compliance with all
Environmental Laws;
(b) There is no investigation, suit, claim, action or proceeding pending or, to the Knowledge
of the Company, threatened against the Company or any of its Subsidiaries arising under any
Environmental Law. The Company and its Subsidiaries have not in the last three (3) years received
any notice of noncompliance with any Environmental Law;
(c) Neither the Company nor any of its Subsidiaries is subject to any pending Environmental
Claim or has received notice thereof that has not been fully resolved and, to the Knowledge of the
Company, there are no threatened Environmental Claims against the Company or any of its
Subsidiaries;
(d) Neither the Company nor any of its Subsidiaries has entered into or agreed to any consent
decree, order or agreement under any Environmental Law, and neither the Company nor any of its
Subsidiaries is subject to any judgment, decree or order relating to compliance with any
Environmental Law or to cleanup, remediation or removal of Hazardous Materials under any
Environmental Law or, to the Knowledge of the Company to investigation that reasonably would be
expected to result in a material liability;
(e) Except as set forth on Schedule 3.14(e) of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is subject to any contract that requires it to pay
to, reimburse, guarantee, pledge, defend, indemnify or hold harmless any Person for or against any
environmental liabilities and costs relating to Hazardous Materials;
(f) Neither the Company nor any of its Subsidiaries owns or leases any real property
containing any underground storage tanks, asbestos, equipment using PCBs, underground injection
wells, or septic tanks in which any Hazardous Materials have been disposed;
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(g) Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any
other Person, has released, discharged, placed, stored, buried or dumped any Hazardous Materials
on, beneath or adjacent to the Real Property or any real property formerly owned, operated or
leased by the Company or any of its Subsidiaries that requires investigation, removal, remediation
or corrective action by the Company or any of its Subsidiaries under applicable Environmental Laws;
(h) No employee of the Company or of its Subsidiaries in the course of his or her employment
with the Company or any such Subsidiary has been exposed to any Hazardous Materials in a manner the
Company expects would be likely to give rise to a claim against the Company or any Subsidiary of
the Company;
(i) The Company has made available to Purchaser copies of all environmentally related audits,
studies, reports, analyses and results of investigations performed in the past three (3) years with
respect to currently or previously owned, leased or operated properties that were performed by the
Company, performed at the Companys request or are otherwise in the Companys possession.
(j) Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any
other Person acting on its behalf, has disposed of any Hazardous Materials in any disposal facility
that is currently the subject of any investigation, removal, remediation or corrective action under
applicable Environmental Laws.
Section 3.15 Insurance
The Company maintains insurance policies covering the assets, business, equipment, properties,
operations, employees, officers and directors of the Company and its Subsidiaries (collectively,
the Insurance Policies) which are of the type and in amounts which it believes are
reasonably appropriate to conduct its business. All such Insurance Policies are in full force and
effect. The Company has made available to the Purchaser prior to the date hereof copies of all
such Insurance Policies, each of which is set forth on Schedule 3.15 of the Company
Disclosure Schedule. To the Knowledge of the Company, except as set forth on Schedule 3.15
of the Company Disclosure Schedule, there is no material claim by the Company or any of its
Subsidiaries pending under any of the Insurance Policies identified on Schedule 3.15 of the
Company Disclosure Schedule as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds.
Section 3.16 Intellectual Property
(a) Schedule 3.16(a) of the Company Disclosure Schedule contains a true and complete
list of all (A) registrations or applications for registration, in respect of patents, trademarks,
service marks, copyrights and domain names, including the jurisdictions in which each such item of
Intellectual Property has been issued or registered or in which any such application for such
issuance and registration has been filed, owned by the Company or any of its Subsidiaries, and (B)
material unregistered trademarks and service marks owned by the Company or any of its Subsidiaries.
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(b) Schedule 3.16(b) of the Company Disclosure Schedule contains a true and complete
list of (i) all agreements providing for the license of any Third Party Intellectual Property to
which the Company or any of its Subsidiaries is a party; (ii) any material licenses of Intellectual
Property granted by the Company or any of its Subsidiaries to any other Person; and (iii) any
agreement by which the Company or any of its Subsidiaries grants any ownership right or option to
acquire an ownership right in any material Owned Intellectual Property.
(c) All agreements and licenses set forth in Schedule 3.16(b) of the Company
Disclosure Schedule are valid and binding obligations of the Company or its Subsidiaries, are in
full force and effect, and are enforceable against the Company or its Subsidiaries, as applicable,
in accordance with their terms. The Company and its Subsidiaries are not, and to the Knowledge of
the Company, no party to any license, sublicense or other agreement listed in
Schedule 3.16(b) of the Company Disclosure Schedule is, in breach or default, and no event
has occurred which with notice or lapse of time would constitute a breach or default or permit
termination, modification or acceleration of any license, sublicense or other agreement listed in
Schedule 3.16(b) of the Company Disclosure Schedule. Neither the Company nor any of its
Subsidiaries has, in the past three (3) years, sent a written notice of breach or default to any
party to any license, sublicense or other agreement listed in Schedule 3.16(b) of the
Company Disclosure Schedule, except to the extent that such breach or default has not had and
reasonably would not be expected to have, individually or in the aggregate, a Material Adverse
Effect. No Action is pending or, to the Knowledge of the Company, is threatened against the
Company or any of its Subsidiaries that challenges the legality, validity or enforceability of any
license, sublicense or other agreement listed in Schedule 3.16(b) of the Company Disclosure
Schedule.
(d) The Company and its Subsidiaries own or possess adequate licenses or other rights to use
all Company Intellectual Property, free and clear of all Liens other than (i) Permitted Liens, and
(ii) in the case of Third Party Intellectual Property, as set forth in the license or agreement
therefor.
(e) To the Knowledge of the Company, the conduct by the Company and its Subsidiaries of their
respective businesses as currently conducted (including, without limitation, the Companys and its
Subsidiaries offering, sale, license, and performance of their respective products and services),
and the use by the Company or any of its Subsidiaries of the Company Intellectual Property, does
not conflict with, infringe, misappropriate or otherwise violate the Intellectual Property rights
of any other Person. The Company and its Subsidiaries have not received in the past three (3)
years any written notice or other communication of any actual, alleged, possible or potential
infringement, misappropriation, dilution or unlawful use by the Company or any of its Subsidiaries
of, any Intellectual Property or other proprietary asset or rights of any other Person relating to
any Company Intellectual Property or any product or service of the Company or any of its
Subsidiaries. There is no Action instituted, asserted or pending or, to the Knowledge of the
Company, threatened by any Person against the Company or any Subsidiary of the Company nor any
cease and desist or equivalent letter or any other notice of any allegation received by the Company
or any of its Affiliates, (i) challenging or affecting in any material way the rights of the
Company or any of its Subsidiaries in or seeking to deny or restrict the use by the Company or any
Subsidiary of the Company of any Intellectual Property, (ii) alleging that the Companys or its
Subsidiaries offering, sale, license, and performance of
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their respective products and services
infringe, misappropriate or otherwise violate the Intellectual Property right of any third party,
or (iii) alleging that the Third Party Intellectual Property is being licensed or sublicensed in
conflict with the terms of any license or other agreement.
(f) To the Knowledge of the Company, there has been no unauthorized use, disclosure,
infringement, misappropriation or other violation of any Owned Intellectual Property or Third Party
Intellectual Property (exclusively licensed to the Company or any of its Subsidiaries) by any
Person, including any current or former officer, employee, independent contractor, consultant or
any other agent of the Company or any of its Subsidiaries. None of the Company or any of its
Subsidiaries has brought an Action in the past three (3) years alleging infringement, dilution or
misappropriation of any Company Intellectual Property or breach of any license or agreement
involving Intellectual Property against any Person.
(g) The Company or one of its Subsidiaries is the exclusive owner of the entire and
unencumbered right, title and interest in, to and under each asset and right embodied in or by the
Owned Intellectual Property (except (i) for Permitted Liens, (ii) licenses granted by the Company
or any of its Subsidiaries to any Person and (iii) joint ownership interests in immaterial
Intellectual Property). None of the Company or any of its Subsidiaries nor, to the Knowledge of
the Company, any Company Intellectual Property is subject to any Action or outstanding decree,
order, injunction, judgment, ruling or stipulation restricting in any manner
the use, transfer or licensing of the Company Intellectual Property by the Company or any of
its Subsidiaries, or that may affect or impair the validity, use or enforceability of the Company
Intellectual Property. None of the Company or any of its Subsidiaries is subject to any agreement
that restricts the use, transfer or licensing by the Company or any of its Subsidiaries of any
Owned Intellectual Property.
(h) Other than the Owned Intellectual Property and the Third Party Intellectual Property,
there are no other items of Intellectual Property that are material to the conduct of the
respective businesses of the Company and its Subsidiaries as presently conducted. The consummation
of the transactions contemplated by this Agreement will not result in the termination or impairment
of any of the Company Intellectual Property or change the calculation of the payment of royalties
or fees to third parties, except to the extent that any such termination, impairment or payment
reasonably would not be material.
(i) To the Companys Knowledge, all registrations with and applications to Governmental
Authorities in respect of the Owned Intellectual Property are valid and in full force and effect
and enforceable.
(j) The Company and its Subsidiaries have taken commercially reasonable measures to ensure
that all Intellectual Property created by employees, contractors and consultants of the Company or
any of its Subsidiaries (in their respective capacities as such) are Owned Intellectual Property
or, with respect to contractors and consultants, licensed to the Company or its Subsidiaries.
Furthermore, to the extent reasonably necessary to protect the Owned Intellectual Property that is
material to the conduct of the respective businesses of the Company and each of its Subsidiaries,
all employees of the Company and each of its Subsidiaries who are or
were involved in the creation or development of any Intellectual
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Property in the course of performing services for the Company or
any of its Subsidiaries have executed written agreements with the Company or one of its
Subsidiaries to protect the Intellectual Property, and furthermore, to the Knowledge of the
Company, such employees are not in violation or breach of any term of any such written agreement
that would materially impair the value to the Company of such Owned Intellectual Property.
Section 3.17 Employee Benefits
(a) Schedule 3.17(a) of the Company Disclosure Schedule contains a true and complete
list of each Benefit Plan. For each Benefit Plan, the Company has furnished or made available to
the Purchaser a true and complete copy of each Benefit Plan document and where a Benefit Plan is
unwritten, a written description of the material terms thereof, and has delivered or made available
to the Purchaser a true and complete copy of the following: (i) each trust or other funding
arrangement prepared in connection with a Benefit Plan, (ii) each summary plan description and
summary of material modifications (or a description of any material oral communications) provided
by the Company or any of its Subsidiaries to any Employees or Independent Contractors, or other
beneficiaries or their dependents or spouses of the Company or any of its Subsidiaries concerning
the extent of the benefits provided under each Benefit Plan, (iii) the IRS Forms 5500 filed for the
prior three (3) years for each Benefit Plan required to file such report, (iv) the most recently
received IRS determination letter or IRS prototype opinion
letter for each Benefit Plan that has received such IRS determination letter or IRS prototype
opinion letter, (v) the most recently prepared actuarial report or financial statement in
connection with each Benefit Plan required to prepare or distribute such actuarial report or
financial statement and (vi) all material correspondence to or from any Governmental Authority
received in the prior three (3) years. Neither the Company nor any of its Subsidiaries has any
express or implied commitment (x) to create, incur liability with respect to or cause to exist any
other employee benefit plan, program or arrangement, (y) to enter into any contract to provide
compensation or benefits to any individual or (z) to modify, change or terminate any Benefit Plan,
other than with respect to a modification, change or termination required by this Agreement, the
transactions contemplated hereby, including the Merger, or ERISA or the Code or to otherwise comply
with applicable Legal Requirements.
(b) Each Benefit Plan has been operated and administered in material compliance with its terms
and with all applicable Legal Requirements (including but not limited to ERISA and the Code). No
material Action is pending or, to the Knowledge of the Company, threatened, with respect to any
Benefit Plan (other than routine claims for benefits in the ordinary course). No Benefit Plan that
is intended to be qualified under Section 401(a) of the Code is currently participating in or has
participated in the Employee Plans Compliance Resolution System set forth in Rev. Proc. 2006-27.
Except as set forth on Schedule 3.16(b) of the Company Disclosure Schedule, there are no
audits, inquiries or proceedings pending or threatened by the IRS, United States Department of
Labor, or other Governmental Authority with respect to any Benefit Plan.
(c) Neither the Company nor any of its Subsidiaries (including any entity that during the past
six (6) years was a Subsidiary) or any current or former ERISA Affiliate has now or in the past six
(6) years contributed to, sponsored, maintained or had an obligation to
A-36
contribute to (i) a pension
plan (within the meaning of Section 3(2) of ERISA) subject to Section 412 of the Code or Title IV
of ERISA, (ii) a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA),
(iii) a plan subject to Section 413 of the Code, or (iv) a single employer pension plan (within the
meaning of Section 4001(a)(15) of ERISA) for which the Company or any of its Subsidiaries could
incur liability under Section 4063 or 4064 of ERISA.
(d) No liability under Title IV of ERISA has been incurred by the Company, its Subsidiaries or
any ERISA Affiliate that has not been satisfied in full.
(e) The IRS has issued a favorable determination letter (or, in the case of a prototype plan,
an IRS opinion letter) with respect to each of the Benefit Plans that is intended to be qualified
under Section 401 of the Code and the related trust that has not been revoked and that covers the
amendments to the Code effected by the Tax Reform Act of 1986 and all subsequent legislation for
which the IRS will currently issue such a letter, and no amendment to such Benefit Plan has been
adopted since the date of such letter covering such Benefit Plan that would adversely affect such
favorable determination or the Benefit Plan still has a remaining period of time in which to apply
for or receive such letter and to make any amendments necessary to obtain a favorable
determination. To the Knowledge of the Company, no fact or events exists that reasonably would be
expected to result in the revocation of such letter.
(f) With respect to any Benefit Plan, no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) has occurred that reasonably could be expected to
result in any material liability to the Company or any of its Subsidiaries.
(g) All contributions, premiums or payments required to be made with respect to any Benefit
Plan have been made timely or the amount of such contribution, premium or payment is reflected on
the Companys balance sheet included in the Companys Form 10-K for the period ended December 31,
2007.
(h) Schedule 3.17(h) of the Company Disclosure Schedule sets forth any individual
employment, termination, severance, change in control, retention, work for hire or similar
agreement existing prior to the date of this Agreement between the Company or any of its
Subsidiaries, on the one hand, and any officer, general manager or employee of the Company or any
of its Subsidiaries, on the other hand.
(i) None of the payments contemplated by the Benefit Plans would, individually or in the
aggregate, constitute excess parachute payments (as defined in Section 280G of the Code) in
connection with the Merger.
(j) Except to the extent required under ERISA Section 601 et. seq. and Section 4980B of the
Code, none of the Benefit Plans provides for or promises retiree medical, retiree disability or
retiree life insurance benefits to any Employee. The Company and its Subsidiaries have complied
with all applicable healthcare continuation requirements in Section 4980B of the Code and ERISA.
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(k) Each Benefit Plan that is a nonqualified deferred compensation plan (as defined for
purposes of Section 409A(d)(1) of the Code) (1) has been operated since January 1, 2005 in good
faith compliance with Section 409A of the Code and all applicable IRS guidance promulgated
thereunder to the extent such plan is subject to Section 409A of the Code, and (2) as to any such
plan in existence prior to January 1, 2005 and not subject to Section 409A of the Code, has not
been materially modified (within the meaning of IRS Notice 2005-1) at any time after October 3,
2004. No Company Stock Option (whether currently outstanding or previously exercised) is, has been
or would be, as applicable, subject to any tax, penalty or interest under Section 409A of the Code.
(l) Except as set forth on Schedule 3.17(l) of the Company Disclosure Schedule, no
Benefit Plan is maintained outside the jurisdiction of the United States or covers any employee
residing or working outside the United States (any such Benefit Plan, a Foreign Benefit
Plan). With respect to any Foreign Benefit Plans, (A) all Foreign Benefit Plans have been
established, maintained and administered in compliance in all material respects with their terms
and all applicable statutes, laws, ordinances, rules, orders, decrees, judgments, writs, and
regulations of any controlling Governmental Authority, (B) all Foreign Benefit Plans that are
required to be funded are fully funded, and with respect to all other Foreign Benefit Plans,
adequate reserves therefor have been established on the financial statements included in the most
recent Company SEC Report, and (C) no material liability or obligation of the Company or its
Subsidiaries exists with respect to such Foreign Benefit Plans that has not been disclosed on
Schedule 3.17(l) of the Company Disclosure Schedule.
Section 3.18 Material Contracts
(a) Except as disclosed in the Company SEC Reports filed and publicly available prior to the
date hereof and as set forth in Schedule 3.18 of the Company Disclosure Schedule, neither
Company nor any of its Subsidiaries is a party to or bound by:
(i) any material contract (as such term is defined in Item 601(b)(10) of Regulation
S-K of the SEC) with respect to the Company or any of its Subsidiaries;
(ii) any employment or consulting agreement, contract or commitment with any director
or officer of the Company or any of its Subsidiaries that provides for annual compensation
of more than $100,000 or that are not terminable by the Company or any of its Subsidiaries
without providing at least thirty (30) days notice without liability or financial obligation
to the Company or any of its Subsidiaries;
(iii) any agreement or plan, including, without limitation, any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this Agreement
(including the Merger) or the value of any of the benefits of which will be calculated on
the basis of the transactions contemplated by this Agreement;
(iv) any non-competition agreement or any other agreement or obligation which
materially limits or will materially limit the right of the Company
or any of its Subsidiaries to engage in any line of business, to compete with any Person or in any
geographic area, to solicit or hire employees or consultants employed or engaged by any
other Person, or granting any exclusive distribution rights;
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(v) any agreement, contract or commitment in connection with or pursuant to which the
Company or any of its Subsidiaries expects to spend or receive (or is expected to spend or
receive), in the aggregate, more than $500,000 during the current or next fiscal year of the
Company;
(vi) any agreement, contract or commitment currently in force pursuant to which (1) the
Company or any of its Subsidiaries licenses any third party to manufacture or reproduce any
product, service or technology offered by the Company or any of its Subsidiaries, (2) a
third party resells, distributes, or acts as a sales representative for any product, service
or technology offered by the Company or any of its Subsidiaries, excluding agreements with
distributors or sales representatives in the normal course of business that are cancelable
without penalty upon notice of ninety (90) days or less, and substantially in the form
previously provided to Purchaser, and (3) the Company or any of its Subsidiaries engages any
third party to supply any products or perform any services material to the conduct of the
their respective businesses, including without limitation any
long-term supply agreements, installation service subcontracts, and repair service
provider agreements, in each case to the extent such contract is (x) reasonably likely to
involve consideration of more than $500,000 during any fiscal year of the Company and (y) is
not cancelable without penalty upon notice of ninety (90) days;
(vii) any dealer, distributor, joint marketing, alliance, development or other
agreement currently in force under which the Company or any of its Subsidiaries has
continuing material obligations to jointly market any product, technology or service, or any
material agreement pursuant to which the Company or any of its Subsidiaries has continuing
material obligations to jointly develop any Intellectual Property that will not be owned, in
whole or in part, by the Company or any of its Subsidiaries;
(viii) any joint venture, partnership, strategic alliance and business acquisition or
divestiture contracts;
(ix) any agreement, contract or commitment currently in force to provide source code to
any third party, including any escrow agent, for any product or technology that is material
to the Company and its Subsidiaries taken as a whole;
(x) any material contract that involves or is reasonably likely to involve
consideration of more than $250,000 and that otherwise requires consent of or notice to a
third party in the event of or with respect to the transactions contemplated by this
Agreement (including the Merger);
(xi) any contract or agreement relating to the issuance of securities of the Company or
any of its Subsidiaries;
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(xii) any agreement, contract or commitment currently in force relating to the
disposition or acquisition by the Company or any of its Subsidiaries after the date hereof
of assets in excess of $500,000 not in the ordinary course of business or pursuant to which
the Company or any of its Subsidiaries has any material ownership interest in any
corporation, partnership, joint venture or other business enterprise other than another
Subsidiary of the Company;
(xiii) any mortgages, indentures, guarantees, loans or credit agreements, security
agreements or other agreements or instruments evidencing Indebtedness with a value in excess
of $250,000;
(xiv) any agreement of indemnification or any guaranty, other than agreements with the
customers of the Company or any of its Subsidiaries entered into in the ordinary course of
business consistent with past practice;
(xv) any settlement agreement entered into within the three (3) years immediately prior
to the date of this Agreement involving consideration of more than $250,000;
(xvi) any contract that results in any Person holding a material power of attorney from
the Company or any of its Subsidiaries that relates to the Company, any such Subsidiary or
their respective businesses (other than limited powers of attorney granted in the ordinary
course of business consistent with past practice); and
(xvii) any other contracts, whether or not made in the ordinary course of business,
that are material to the Company and its Subsidiaries, taken as a whole, the absence of
which, individually or in the aggregate, reasonably would be expected to result in a
Material Adverse Effect. The contracts, agreements and commitments referred to in clause (i)
through this cause (xvii) are sometimes collectively referred to in this Agreement as the
Material Contracts.
(b) Except as set forth on Schedule 3.18(b) of the Company Disclosure Schedule, (A)
each of the Material Contracts is valid and in full force and effect in all material respects and
(B) neither the Company nor any of its Subsidiaries has violated any provision of, or committed or
failed to perform any act which, with or without notice, lapse of time or both, would constitute a
material default under the provisions of any such Material Contracts. Except as set forth on
Schedule 3.18(b) of the Company Disclosure Schedule, to the Knowledge of the Company, no
counterparty to any such Material Contracts has violated any provision of, or committed or failed
to perform any act which, with or without notice, lapse of time or both would constitute a default
or other breach under the provisions of, such contracts, agreements and commitments, except for
defaults or breaches which would not reasonably be expected to be material, individually or in the
aggregate. Except as set forth on Schedule 3.18 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to, or otherwise a guarantor of or
liable with respect to, any interest rate, currency or other swap or derivative transaction, other
than any such transactions which are not material to the business of the Company or any of its
Subsidiaries. The Company has delivered or made available to the Purchaser a copy of each Material
Contract prior to the date hereof. Except as set forth on
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Schedule 3.18(b) of the Company
Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries, nor, to the Knowledge of
the Company, any counterparty has waived or failed to enforce any material rights or material
benefits under any Material Contracts, and (ii) to the Knowledge of the Company, there has not
occurred any event giving any counterparty to any such Material Contracts any right of termination,
amendment or cancellation of such Material Contract.
Section 3.19 Affiliate Transaction
Except as disclosed in the Company SEC Reports, no director or officer of the Company or any
of its Subsidiaries or, to the Knowledge of the Company, any employee of the Company or any of its
Subsidiaries has, directly or indirectly, (i) an economic interest in any Person that has furnished
or sold, or furnishes or sells, services or products that the Company or any of its Subsidiaries
furnishes or sells; (ii) an economic interest in any Person that purchases from or sells or
furnishes to, the Company or any of its Subsidiaries, any goods or services; (iii) a beneficial
interest in any Contract disclosed pursuant to Section 3.13, Section 3.16 or
Section 3.18 hereof; or (iv) served as an officer, director, employee or consultant of or
otherwise receives remuneration from, any Person that is, or has engaged in business as, a
competitor,
lessor, lessee, customer or supplier of the Company or any of its Subsidiaries; provided that
ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an economic interest in any Person for purposes of this
Section 3.19. Neither the Company nor any of its Subsidiaries has, in the three (3) years
immediately prior to the date hereof, extended or maintained credit, arranged for the extension of
credit or renewed an extension of credit in the form of a personal loan to or for any director or
executive officer (or equivalent thereof) of the Company or such Subsidiary.
Section 3.20 Board Recommendation
The Board of Directors of the Company, by resolution duly adopted by unanimous vote at a
meeting duly called and held, and at which all directors were present, which resolution has not
subsequently been rescinded or modified in any manner whatsoever, has (i) determined that this
Agreement and the Merger and the other transactions contemplated hereby are fair to and in the best
interests of the stockholders of the Company, (ii) approved and adopted this Agreement and approved
the Merger, (iii) subject to Section 5.5, resolved to recommend that the holders of shares
of the Company Common Stock approve this Agreement and the Merger, and (iv) subject to Section
5.5, directed that adoption of this Agreement and the Merger be submitted to the Companys
stockholders at the Company Stockholders Meeting. The actions described in this Section
3.20 and the favorable recommendation to the Companys stockholders contemplated thereby are
sometimes collectively referred to in this Agreement as the Company Board Recommendation.
Section 3.21 Antitakeover Statutes
Prior to the date hereof, the Board of Directors of the Company has approved the Merger and
such action represents the only action necessary to exempt the Merger and this Agreement and the
transactions contemplated hereby from the restrictions of Section 203 of the DGCL. No other
antitakeover or similar foreign, federal, state or local statute or
regulation applies or purports
to apply to this Agreement, the Merger or any of the other transactions contemplated hereby.
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Section 3.22 Vote Required
The vote of the holders of a majority of the outstanding shares of Company Common Stock
entitled to vote thereon is the only vote of the holder of any class or series of capital stock of
the Company or any of its Subsidiaries necessary to approve the Merger and the transactions
contemplated herein.
Section 3.23 Title to Personal Property; Condition and Sufficiency of Assets
The Company and its Subsidiaries has good and valid title to, or, in the case of leased
personal properties and assets, valid leasehold or subleasehold interests in, all of its material
personal properties and assets used or held for use in the business of the Company and its
Subsidiaries, as reflected in the most recent balance sheet of the Company referred to in
Section 3.7(a) (the Fixed Assets), free and clear of any Liens, except for
Permitted Liens. All of the Fixed Assets are in good operating condition and repair, subject to
normal wear and tear, and are usable in the ordinary course of the business of the Company, except
as would not be material. The Fixed Assets (including leased fixed assets) of the Company are
sufficient to conduct the business of the Company from and after the Effective Time without
interruption and in the ordinary course of business as currently conducted. No Person other than
the Company or any of its Subsidiaries owns any rights or interests in any of the Fixed Assets of
the Company.
Section 3.24 Certain Business Practices
Neither the Company, its Subsidiaries, their Affiliates, nor any other Person acting for or on
behalf of any of the foregoing, has directly or indirectly (i) taken any action which would cause
the Company or any of its Subsidiaries to be in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended, or any rules and regulations thereunder, or any similar
applicable Legal Requirement; (ii) made any contribution, gift, bribe, rebate, payoff, influence
payment, kick-back, or other payment to any Person, private or public, regardless of form, whether
in money, property or services (a) to obtain favorable treatment in securing business, (b) to pay
for favorable treatment for business secured, (c) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company, its Subsidiaries or any of their
Affiliates, or (d) in violation of any Legal Requirement; or (iii) established or maintained any
fund or asset that has not been recorded in the books and records of the Company or the appropriate
Subsidiary of the Company.
Section 3.25 Proxy Statement
Except for information provided by the Purchaser in writing expressly for inclusion therein,
none of the information contained or incorporated by reference in the Proxy Statement will, at the
date it is first mailed to the Companys stockholders or at the time of the Company Stockholders
Meeting or at the time of any amendment or supplement thereof, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they are made, not
misleading.
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Section 3.26 Opinion of Financial Advisor
The Board of Directors of the Company received the opinion of William Blair & Co., to the
effect that, and based upon and subject to the factors and assumptions set forth therein, from a
financial point of view, the Merger Consideration to be offered to the stockholders of the Company
in the Merger is fair to such stockholders, and a copy of the written opinion will be provided to
the Purchaser following the date of this Agreement. The Company has been advised that William
Blair & Co., will consent to a description and inclusion of the opinion in the document required to
be filed with the SEC in connection with the Merger and to references to William Blair & Co., in
such document, provided that any such description and references are approved in advance by William
Blair & Co.
Section 3.27 Finders and Brokers
No broker, finder or investment banker, financial advisor or other Person, other than SMH
Capital, Inc. and William Blair & Co., is entitled to any brokers, finders, financial advisors
or other similar fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company or its Subsidiaries. The
Company has provided the Purchaser with copies of all agreements under which any fees are payable
to SMH Capital, Inc. and William Blair & Co., and all indemnification and other agreements related
to the engagement of SMH Capital, Inc. and William Blair & Co.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND MERGER SUB
The Purchaser and Merger Sub, jointly and severally, hereby represent and warrant to the
Company, except as set forth in the Purchaser Disclosure Schedule delivered by the Purchaser and
Merger Sub to the Company prior to the execution and delivery of this Agreement, which Purchaser
Disclosure Schedule identifies exceptions only by the specific section or subsection of this
Agreement to which each entry relates, which exceptions shall also apply to any other section or
subsection of this Agreement to the extent that it is reasonably apparent that such exceptions are
applicable to any other such section or subsection (the Purchaser Disclosure Schedule):
Section 4.1 Organization and Qualification
Each of the Purchaser and Merger Sub is a corporation duly formed, validly existing and in
good standing under the laws of its jurisdiction of incorporation or organization and has all
requisite corporate power to own, lease and operate its properties and to carry on its business as
currently conducted. Each of the Purchaser and Merger Sub is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
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where such
qualification is necessary, with such exceptions as would not reasonably be expected to have a
material adverse effect on the Purchasers or Merger Subs ability to consummate the transactions
contemplated by this Agreement. Complete and correct copies of each of the Purchasers and Merger
Subs articles or certificate of incorporation and bylaws, all as amended to date, have been
delivered or made available to the Company and no other organizational documents are applicable.
Such articles or certificate of incorporation and bylaws are in full force and effect as of the
date hereof and neither the Purchaser nor Merger Sub is in violation of any of their respective
provisions.
Section 4.2 Authorization
Each of the Purchaser and Merger Sub has all requisite corporate power and corporate authority
to execute and deliver this Agreement and to perform its obligations under this Agreement to which
it is a party and to consummate the transactions contemplated hereby. The execution, delivery and performance by each of the Purchaser and Merger Sub of this
Agreement and the consummation by each of the Purchaser and Merger Sub of the transactions
contemplated hereby have been duly authorized by each of the Purchaser and Merger Sub, and no other
corporate proceedings on the part of the either the Purchaser or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This Agreement
constitutes the legally valid and binding agreement of each of the Purchaser and Merger Sub, as the
case may be (assuming due authorization, execution and delivery of this Agreement by the Company),
enforceable against each of the Purchaser and Merger Sub in accordance with their respective terms,
except as the same may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting generally the enforcement of creditors rights and
remedies and general principles of equity, including any limitations on the availability of the
remedy of specific performance or injunctive relief regardless of whether specific performance or
injunctive relief is sought in a proceeding at law or in equity.
Section 4.3 Capitalization and Share Ownership
The authorized capital stock of Merger Sub consists of 1,000 shares of common stock, par value
$0.01 per share, of which 1000 shares are duly authorized, validly issued and outstanding, fully
paid, nonassessable and owned by the Purchaser free and clear of all Liens. No class of capital
stock of Merger Sub is subject to preemptive (or similar) rights. Merger Sub was formed solely for
the purpose of engaging in a business combination transaction with the Company and has engaged in
no other business activities and has conducted its operations solely as contemplated hereby.
Except as described in the first sentence of this Section 4.3, Merger Sub has not issued
any capital stock or any options, warrants or other rights to acquire capital stock (or securities
convertible into or exercisable or exchangeable for capital stock). Except for this Agreement,
there are no options, warrants or other rights to acquire capital stock or other equity or voting
interests in Merger Sub or securities convertible into or exercisable or exchangeable for capital
stock or other equity or voting interests in Merger Sub. Except for this Agreement, no Person has
any right to acquire any interest in the business or assets of Merger Sub (including any rights of
first refusal or similar right).
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Section 4.4 Governmental Authorization; Noncontravention
(a) The execution, delivery and performance by each of the Purchaser and Merger Sub of this
Agreement and the consummation by each of the Purchaser and Merger Sub of the transactions
contemplated hereby requires no consent, approval, authorization or permit of, action by or in
respect of, or filing with or notification to, any Governmental Authority, other than (i) the
filing of the Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which Merger Sub is
qualified to do business, (ii) compliance with any applicable requirements of the HSR Act and other
similar filings under the antitrust or anti-competition Legal Requirements of other foreign
countries, (iii) compliance with any applicable requirements of the Securities Act, the Exchange
Act, and any other applicable securities Legal Requirements, (iv) such other consents, approvals,
authorizations and notifications as are set forth on Schedule 4.4(a) of the Purchaser
Disclosure Schedule, and (v) any actions or filings the absence of which would not reasonably be
expected
to have, individually or in the aggregate, a material adverse effect on the Purchasers or
Merger Subs ability to consummate the transactions contemplated by this Agreement.
(b) The execution, delivery and performance by each of the Purchaser and Merger Sub of this
Agreement and the consummation by each of the Purchaser and Merger Sub of the transactions
contemplated hereby do not and will not (i) contravene, conflict with or result in any violation or
breach of any provision of the articles or certificate of incorporation or bylaws of either the
Purchaser or Merger Sub, (ii) assuming compliance with the matters referred to in Section
4.4(a), contravene, conflict with or result in a violation or breach of any provision of any
Legal Requirement applicable to the Purchaser or Merger Sub or by which their respective properties
or assets are bound or affected, and (iii) require any consent or other action by any Person (other
than as set forth in Section 4.4(a)) under, constitute a default (or an event that, with or
without notice or lapse of time or both, would constitute a default), or cause or permit the
termination, cancellation, acceleration, triggering or other change of any right or obligation or
the loss of any benefit to which the Purchaser or Merger Sub is entitled under (1) any provision of
any agreement or other instrument binding upon the Purchaser or Merger Sub or (2) any material
permit, certificate, approval or other similar authorization from a Governmental Authority held by,
or affecting, or relating in any way to, the assets or business of the Purchaser or Merger Sub,
other than such exceptions in the case of clauses (1) and (2) as would not be reasonably expected
to have, individually or in the aggregate, a material adverse effect on the Purchasers or Merger
Subs ability to consummate the transactions contemplated by this Agreement.
Section 4.5 Litigation
As of the date hereof, (i) there is no suit, claim, Action, proceeding (at law or in equity)
or investigation pending or, to the Purchasers knowledge, threatened against the Purchaser or
Merger Sub or any of their respective properties or rights before or by any arbitrator, court or
other Governmental Authority, and (ii) neither the Purchaser nor Merger Sub is subject to any
outstanding judgment, writ, decree, injunction or order of any Governmental Authority or other
arbitrator that, in any such case described in clauses (i) and (ii), would reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
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Purchasers or Merger
Subs ability to consummate the transactions contemplated by this Agreement. As of the date
hereof, there are no Actions pending or, to the Purchasers knowledge, threatened, seeking to or
that would reasonably be expected to prevent, hinder, modify, delay or challenge the transactions
contemplated by this Agreement, including the Merger.
Section 4.6 Ownership of Company Common Stock
Neither the Purchaser nor Merger Sub beneficially own, directly or indirectly, any shares of
Company Common Stock or is a party to any agreement, arrangement or understanding (other than this
Agreement) for the purpose of acquiring, holding, voting or disposing of any shares of Company
Common Stock.
Section 4.7 Finders and Brokers
No broker, finder or investment banker, financial advisor or other Person is entitled to any
brokers, finders, financial advisors or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or on behalf of the
Purchaser.
Section 4.8 Sufficient Funds
Purchaser has, and at the Effective Time, will have, funds that are sufficient to consummate
the transactions contemplated hereby and to pay all of Purchasers fees and expenses related to the
transactions contemplated by this Agreement. Purchaser will provide such funds to the Exchange
Agent at or prior to the Effective Time.
Section 4.9 Information Supplied
None of the information supplied in writing by Purchaser or Merger Sub for inclusion in the
Proxy Statement will, at the date it is first mailed to the Companys stockholders or at the time
of the Company Stockholders Meeting or at the time of any amendment or supplement thereof, contain
any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
ARTICLE V
PRE-CLOSING COVENANTS AND ADDITIONAL AGREEMENTS
Section 5.1 Conduct of Business
(a) During the period from the date of this Agreement and to the earlier of the Effective Time
or the Termination Date, except as specifically contemplated or permitted by this Agreement
(including pursuant to Section 5.5) or with the prior written consent of the Purchaser, the
Company shall use commercially reasonable efforts, and shall cause its Subsidiaries to use
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commercially reasonable efforts, to carry on their respective businesses in the ordinary course
consistent with past practice, use their respective commercially reasonable efforts to preserve
intact their assets, present business organizations, lines of business, rights and franchises and
their relationships with customers, suppliers, Employees, Independent Contractors and others having
business dealings with them, and comply with all applicable Legal Requirements. In addition, and
without limiting the generality of the foregoing, except (i) as specifically permitted or required
by this Agreement (including pursuant to Section 5.5), (ii) as set forth in Schedule
5.1 of the Company Disclosure Schedule, (iii) as required by applicable Legal Requirements, or
(iv) unless the Purchaser expressly consents in writing in advance, the Company will not, and will
cause each of its Subsidiaries not to:
(i) (1) amend, modify, terminate or enter into any Material Contract or other material
transaction except, with respect to Material Contracts or material transactions other than
those evidencing or relating to Indebtedness, for non-substantive amendments or
modifications in the ordinary course of business consistent with past practice, or (2)
waive, release or assign any material rights or claims under any Material Contract except,
with respect to Material Contracts other than those evidencing Indebtedness, in the ordinary
course of business consistent with past practice;
(ii) (1) abandon, sell, assign or grant any security interest in or to any material
Owned Intellectual Property, Third Party Intellectual Property or Third Party Intellectual
Property Agreement, (2) grant to any third party any license, sublicense or covenant not to
sue with respect to any material Owned Intellectual Property or Third Party Intellectual
Property, other than to customers in the ordinary course of business consistent with past
practice, (3) other than in the ordinary course of business consistent with past practice,
develop, create or invent any material Intellectual Property jointly with any third party
(other than under an agreement that has been disclosed to the Purchaser prior to the date
hereof), (4) voluntarily disclose, or authorize any disclosure of, any confidential Owned
Intellectual Property, unless such Owned Intellectual Property is subject to a
confidentiality or non-disclosure covenant protecting against further disclosure thereof or
(5) amend, modify or terminate any material Third Party Intellectual Property Agreement,
except for non-substantive amendments or modifications in the ordinary course of business
consistent with past practice;
(iii) sell, lease, license, mortgage, encumber or otherwise dispose of or subject to a
Lien (other than a Permitted Lien) any assets of the Company or any of its Subsidiaries, or
any interests therein, except for the disposition of assets in the ordinary course of
business consistent with past practice that do not, in the aggregate, exceed $250,000
(measured by the higher of the book value of all such assets sold or the proceeds from the
sale thereof);
(iv) amend or propose to amend its or any of its Subsidiaries certificate of
incorporation or bylaws (or equivalent organizational documents);
(v) split, combine, subdivide, reclassify, redeem, purchase or otherwise acquire any
shares of its capital stock or other equity interests or declare, set aside, make or pay any
dividend or other distribution (whether in cash, stock or property or any
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combination
thereof), in respect of its or its Subsidiaries capital stock, or redeem, repurchase or
otherwise acquire or offer to redeem, repurchase or otherwise acquire any of its securities
or any securities of the Company or any of its Subsidiaries, except for (1) dividends paid
by any Subsidiary that is, directly or indirectly, wholly owned by the Company and (2) stock
issuances made in connection with the exercise of any option, stock appreciation right or
restricted stock unit award under the Company Option Plan or exercise of any outstanding
Company Warrants;
(vi) issue, deliver, sell, encumber or otherwise dispose of or subject to a Lien, or
authorize the issuance, delivery, sale, encumbrance or disposition of, or Lien on any
shares of its capital stock of any class or other equity interests or any securities
convertible into or exercisable for, or any rights, warrants or options to acquire, any such
capital stock or other equity interests, other than the issuance of shares of the Company
Common Stock upon the exercise of the Company Stock Options or Company RSUs outstanding as
of the date hereof in accordance with their present terms and the issuance of shares of the
Company Common Stock upon the exercise of the Company Warrants outstanding as of the date
hereof in accordance with their present terms;
(vii) except as required by applicable Legal Requirements or the terms of any Benefit
Plan in effect as of the date hereof (1) increase benefits under any Benefit Plan, (2)
increase funding under any Benefit Plan, (3) establish, adopt, enter into, amend (other than
any amendment that would result in a reduction in the costs of such Benefit Plan) or
terminate any Benefit Plan or any plan, agreement, program, policy, trust, fund or other
arrangement that would be a Benefit Plan if it were in existence as of the date of this
Agreement, (4) grant or agree to grant any increase in the rates of salaries or compensation
payable to any Employee or Independent Contractor, (5) loan any money to any Employee or
Independent Contractor of the Company, (6) grant any awards under any Benefit Plan
(including the grant of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock or the removal of existing
restrictions in any awards made thereunder) or take any action to accelerate the vesting or
payment of any compensation or benefit under any Benefit Plan, except for acceleration of
vesting of Company Stock Options or Company RSUs as required under the Company Option Plan,
(7) take any action that could give rise to severance benefits payable to any Employee or
Independent Contractor of the Company or its Subsidiaries, including as a result of
consummation of any of the transactions contemplated by this Agreement, or (8) hire any new
employee or consultant with an annual compensation level in excess of $100,000 or who is
eligible to earn or is paid a bonus in excess of $25,000;
(viii) acquire or agree to acquire by merging or consolidating with, or by purchasing
any equity interest in or a material portion or the assets of, or by any other manner, any
business or any corporation, partnership, association or other business organization or
division thereof having a value in excess of $250,000, or otherwise acquire or agree to
acquire any assets having a value in excess of $250,000;
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(ix) enter into any material partnership arrangements; joint development agreements or
strategic alliances, other than in the ordinary course of business consistent with past
practice;
(x) repurchase or incur, or agree to repurchase or incur, any Indebtedness in excess of
$250,000;
(xi) pay, discharge or satisfy any material claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise) for an amount in excess of
$250,000 or $500,000 in the aggregate, other than pursuant to agreements contemplating such
payment, discharge or satisfaction entered into prior to the date hereof;
(xii) settle or compromise any litigation, investigation, arbitration, proceeding or
claim (whether or not commenced prior to the date of this Agreement) in the individual
amount of $250,000 or $500,000 in the aggregate, other than settlements or compromises of
litigation where the amount paid (after giving effect to insurance proceeds actually
received) in settlement or compromise does not exceed the Companys reserves on its books;
(xiii) commence any lawsuit, other than (1) for the routine collection of bills, or (2)
in such cases where the Company in good faith determines that failure to commence suit would
result in the material impairment of a valuable aspect of the business of the Company or any
of its Subsidiaries; provided that the Company shall consult with the Purchaser prior to the
filing of such a suit;
(xiv) make or change any Tax election, amend any Tax Return, apply for any rulings
relating to Taxes, enter into any closing agreement in respect of Taxes, settle any Tax
liability, claim or assessment in excess of amounts reserved therefor in the latest Company
SEC Reports, consent to an extension or waiver of the limitation period applicable to any
claim or assessment in respect of any Taxes, file any late Tax Return or file any Tax Return
that is not the ordinary course of business;
(xv) except as may be required as a result of a change in law or in GAAP, change any of
the accounting methods, practices, policies or principles for financial accounting or Tax
purposes;
(xvi) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the Company or any
of its Subsidiaries (other than the Merger);
(xvii) adopt or enter into any collective bargaining agreement or other labor union
contract;
(xviii) make any material changes to the insurance on its and its Subsidiaries assets
without the Purchasers prior written consent, which consent shall not be unreasonably
delayed or withheld;
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(xix) amend, modify, fail to perform its obligations under or terminate a Material
Lease, except for non-substantive amendments or modifications in the ordinary course of
business consistent with past practice, or effectuate a plant closing or mass layoff, as
those terms are defined in WARN or other similar Legal Requirements (determined without
regard to terminations of employment occurring on or after the Effective Time);
(xx) make any individual or series of related payments outside the ordinary course of
business in excess of $100,000;
(xxi) fail to make in a timely manner any filings with the SEC required under the
Securities Act or the Exchange Act or the respective rules and regulations promulgated
thereunder;
(xxii) change any of the material terms pursuant to which its products or services are
generally sold or marketed, other than negotiation of individual contracts or purchase or
service orders in the ordinary course of business consistent with past practice;
(xxiii) enter into new lines of business (other than in accordance with business plans
of the Company or any of its Subsidiaries that have been disclosed to the Purchaser prior to
the date of this Agreement or discontinuations of products scheduled as of the date of this
Agreement) or cease to engage in any material line of business in which the Company or any
of its Subsidiaries is engaged as of the date of this Agreement; or
(xxiv) authorize any of, or commit or agree to take any of, the foregoing actions.
(b) Notwithstanding the foregoing, the Company shall not be restricted from taking any action
with respect to any contract or agreement between the Company or its Subsidiaries and the Purchaser
or its Affiliates. The foregoing shall not apply to any Tax filings.
Section 5.2 Preparation of the Proxy Statement
(a) As promptly as reasonably practicable following the execution of this Agreement, the
Company shall prepare and file the Proxy Statement with the SEC. Thereafter, the Company shall use
its reasonable best efforts to have the Proxy Statement cleared by the SEC and to be mailed to its
stockholders as promptly as reasonably practicable; provided, however, the Company shall not be
required to mail the definitive Proxy Statement to the Companys stockholders prior to the No-Shop
Period Start Date. Each of the Purchaser and Merger Sub shall furnish all information concerning
its participation in the Merger transaction and itself and its Subsidiaries to the Company as may
be reasonably requested in connection with the Merger transaction and the preparation, filing and
distribution of the Proxy Statement. The Company shall cause the Proxy Statement to comply as to
form and substance in all material respects with the applicable requirements of (i) the Exchange
Act, including Sections 14(A) and 14(D) thereof and the respective regulations promulgated
thereunder and (ii) the DGCL. Prior to filing or mailing the Proxy Statement, any related proxy
materials or any amendment or supplement thereto, the Company shall provide the Purchaser and its
advisors with a reasonable opportunity to review and comment on the material to be filed or mailed
and shall make all changes to such material as reasonably may be requested by the Purchaser.
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(b) The Proxy Statement shall include the Company Board Recommendation, except only as
otherwise permitted by Section 5.5 of this Agreement.
(c) The Company shall notify the Purchaser promptly following receipt of any comments from the
SEC and of any request by the SEC for amendments or supplements to the Proxy Statement and shall
supply the Purchaser with copies of all correspondence with the SEC, as promptly as practicable,
with respect to the Proxy Statement. The Parties shall
cooperate in good faith in preparing and filing the Proxy Statement and any amendments or
supplements thereto and in responding to any requests for additional information and comments from
the SEC or the staff thereof. The Company shall provide the Purchaser and its advisors with a
reasonable opportunity to review and comment on any proposed response (written or oral) to any such
comment or request for information and shall make all changes to such responses as reasonably may
be requested by the Purchaser.
(d) If, at any time after the mailing of the definitive Proxy Statement and prior to the
Company Stockholders Meeting, any event should occur that results in the Proxy Statement containing
an untrue statement of a material fact or omitting to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which
they are made, not misleading, or that otherwise should be described in an amendment or supplement
to the Proxy Statement, the Company and the Purchaser shall promptly notify each other of the
occurrence of such event and then promptly prepare, file and clear with the SEC such amendment or
supplement and the Company shall, as may be required by the SEC, mail to its stockholders each such
amendment or supplement.
Section 5.3 Access to Information
Throughout the period from the date of this Agreement to the earlier of the Effective Time or
the Termination Date, the Company shall, and shall cause each of its Subsidiaries to, afford to the
Purchaser and its officers, employees, counsel, financial advisors and other representatives
prompt, reasonable access during normal business hours to all of the Companys and its
Subsidiaries properties, books, contracts, commitments, personnel and records and, during such
period, the Company shall, and shall cause each of its Subsidiaries to, furnish as promptly as
practicable to the Purchaser such information concerning the Companys and its Subsidiaries
businesses, properties, financial condition, operations and personnel as the Purchaser may from
time to time reasonably request, including the status of any stockholder litigation; provided that
the Company may restrict the foregoing access to the extent that any law, rule or regulation of any
Governmental Authority applicable to the Company or its Subsidiaries requires that the Company or
its Subsidiaries restrict access to any properties or information. Any such investigation by the
Purchaser shall not affect the representations or warranties of the Company contained in this
Agreement. The Purchaser will hold any information provided under this Section 5.3 in
confidence to the extent required by, and in accordance with, the provisions of the Confidentiality
Agreement.
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Section 5.4 Company Stockholders Meeting
Unless this Agreement has been terminated pursuant to Section 9.1, the Company shall
establish a record date for and shall cause a meeting of its stockholders to be duly called and
held as soon as reasonably practicable for the purpose of voting on the approval and adoption of
this Agreement, the Merger and the related transactions (such meeting, the Company
Stockholders Meeting). In connection with the Company Stockholders Meeting, the Company,
acting through its Board of Directors, will, subject to Section 5.5(e), (i) recommend the
approval and adoption of this Agreement, the Merger and the other transactions contemplated hereby,
and (ii) otherwise comply with all Legal Requirements applicable to such meeting.
Section 5.5 Acquisition Proposals
(a) During the period beginning on the date of this Agreement and continuing until 12:01 a.m.
(New York City time) on the 31st day following the date of this Agreement (the No-Shop
Period Start Date), the Company and its Subsidiaries and their respective officers, directors,
employees, investment bankers, attorneys, accountants, consultants or other agents, advisors or
representatives (such Persons, together with the Subsidiaries of the Company, collectively, the
Representatives) shall have the right to directly or indirectly: (i) initiate, solicit,
facilitate and encourage Acquisition Proposals, including by way of providing access to non-public
information to any other Person (or Persons) pursuant to a confidentiality and standstill agreement
between any such Person and the Company on terms no less restrictive with respect to such Person
than those contained in the Confidentiality Agreement (it being understood that such
confidentiality and standstill agreement and any related agreements shall not include any provision
calling for any exclusive right to negotiate with such Person or otherwise having the effect of
prohibiting the Company from satisfying its obligations under this Agreement in full or in part);
provided that the Company (A) gives written notice to the Purchaser of its intent to enter into a
confidentiality and standstill agreement with any such Person, which notice shall include the
identity of such Person, (B) shall comply with Section 5.5(d) with respect to any
Acquisition Proposal received by the Company and (C) shall promptly make available to the Purchaser
and Merger Sub any material non-public information concerning the Company or its Subsidiaries that
is made available to any Person given such access which was not previously made available to
Purchaser and Merger Sub; and (ii) enter into and maintain or continue discussions or negotiations
with respect to Acquisition Proposals or otherwise cooperate with or assist or participate in, or
facilitate any inquiries, proposals, discussions or negotiations regarding an Acquisition Proposal.
(b) Except as permitted by the following provisions of this Section 5.5, from the
No-Shop Period Start Date until the earlier of the Effective Time or the Termination Date, the
Company will not, and will cause its Representatives not to, directly or indirectly:
(i) solicit, initiate or encourage any Acquisition Proposal, or engage in any
discussions or negotiations regarding an Acquisition Proposal;
(ii) disclose any non-public information relating to the Company or any of its
Subsidiaries, or their businesses, assets, liabilities or prospects
or afford access to the properties, books or records of the Company or any of its Subsidiaries to, any Person
regarding an Acquisition Proposal; or
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(iii) enter into any letter of intent, agreement in principle, acquisition agreement or
similar agreement relating to an Acquisition Proposal;
provided that, prior to obtaining the Company Stockholders Approval, the Company may negotiate or
otherwise engage in discussions with, and furnish non-public information relating to the Company or
any of its Subsidiaries, or their businesses, assets, liabilities or prospects or afford access to
the properties, books or records of the Company or any of its Subsidiaries to, any Person (a
Third Party) who delivers an unsolicited written bona fide Acquisition Proposal (x)
that did not result from a breach by the Company or any of the Representatives, after the
commencement of the No-Shop Period Start Date, of the terms of this Section 5.5(b), (y)
that the Board of Directors of the Company determines in good faith (after consulting with its
existing financial advisor), by resolution duly adopted, that such proposal or offer constitutes,
or could reasonably be expected to lead to, a Superior Proposal, and (z) with respect to which the
Board of Directors of the Company determines in good faith (after consultation with the Companys
outside counsel), by resolution duly adopted, that the failure to take such action would be
inconsistent with the fiduciary duties of the Companys Board of Directors under applicable Legal
Requirements; provided further that the Company may furnish non-public information to a Third Party
only after the Company (1) gives written notice to the Purchaser of its intent to furnish
information or enter into discussions with such Third Party prior to taking any such action, which
notice shall include the identity of the Third Party making such written Acquisition Proposal and a
copy of such written Acquisition Proposal (and the Company shall thereafter provide the Purchaser
within one (1) Business Day with copies or reasonably detailed summaries of any additional written
or oral materials, proposals or amendments received that relate to such written Acquisition
Proposal), (2) obtains from such Third Party an executed confidentiality and standstill agreement
on terms no less restrictive with respect to such Third Party than those contained in the
Confidentiality Agreement (it being understood that such confidentiality agreement and standstill
agreement and any related agreements shall not include any provision calling for any exclusive
right to negotiate with such Third Party or otherwise having the effect of prohibiting the Company
from satisfying its obligations under this Agreement in full or in part), and (3) provides or makes
available to the Purchaser correct and complete copies of any non-public information to be provided
or made available to such Third Party.
Superior Proposal means any bona fide, written Acquisition Proposal not solicited in
breach of Section 5.5 from a Third Party that (i) is for more than fifty percent (50%) of
the voting power of the Company or fifty percent (50%) of the consolidated assets of the Company,
(ii) a majority of the entire Board of Directors of the Company determines in good faith (after
consultation with its financial advisor and outside legal counsel), taking into account the Person
making the Acquisition Proposal and the likelihood and timing of consummation (including the
financial, legal, regulatory and other aspects of the Acquisition Proposal deemed relevant by the
Board of Directors of the Company in good faith), would result in a transaction that is superior
from a financial point of view to the Companys stockholders than the Merger, including, to the
extent received, any proposed alterations of the terms of this Agreement proposed by the Purchaser
in response to such Superior Proposal, and (iii) is not subject
to any material contingency,
including any contingency related to financing, unless, in the good faith judgment of the Board of
Directors of the Company, such contingency is reasonably capable of being satisfied by such Third
Party within a reasonable period of time.
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(c) The parties agree that, notwithstanding the commencement of the obligations of the Company
under Section 5.5(b) on the No-Shop Period Start Date, the Company may continue to engage
in the activities described in Section 5.5(a) with respect to an Acquisition Proposal
submitted by an Excluded Party prior to the No-Shop Period Start Date, including with respect to
any amended or revised proposal submitted by such Excluded Party on or after the No-Shop Period
Start Date; provided that the Company has complied with its obligations under Section
5.5(a). For purposes hereof, Excluded Party means any Person or
group of Persons from whom the Company or any of the Representatives has received an
Acquisition Proposal after the execution of this Agreement and prior to the No-Shop Period Start
Date that, prior to the No-Shop Period Start Date, the Board of Directors of the Company determines
in good faith that such Acquisition Proposal constitutes a Superior Proposal. Notwithstanding
anything contained in this Section 5.5 to the contrary, any Excluded Party shall cease to
be an Excluded Party for all purposes under this Agreement immediately at such time as the
Acquisition Proposal made by such Person is withdrawn, is terminated or expires or fails to satisfy
the requirements of Section 5.5(c). At the No-Shop Period Start Date, the Company shall,
and shall cause its Representatives to, immediately cease and cause to be terminated any
solicitation, encouragement, discussion or negotiation with any Person (other than with respect to
Excluded Parties) conducted theretofore by the Company or its Representatives with respect to any
Acquisition Proposal and use its (and will cause its Representatives to use their) reasonable best
efforts to cause to be returned or destroyed all confidential information provided or made
available to such Person.
(d) The Company will notify the Purchaser and Merger Sub promptly (but in no event later than
one (1) Business Day) after receipt by the Company (or any of its Representatives) of (i) any
Acquisition Proposal (and any additional written or oral materials, proposals or amendments
received that relate to such Acquisition Proposal), or (ii) any communication with the Company or
request for information relating to the Company (including non-public information) or for access to
the properties, books or records of the Company by any Person that could reasonably be expected to
lead to an Acquisition Proposal. Such notice shall include the identity of the Third Party making
such Acquisition Proposal and a copy or reasonably detailed summary of such Acquisition Proposal
(and copies or reasonably detailed summaries of any additional written or oral materials, proposals
or amendments received that relate to such Acquisition Proposal).
(e) In the event that prior to obtaining the Company Stockholders Approval, the Board of
Directors of the Company determines in good faith, by resolution duly adopted after consultation
with its existing financial advisor and outside counsel, that the failure to withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to the Purchaser and Merger Sub, the
Company Board Recommendation (a Change in the Company Recommendation) is inconsistent
with the fiduciary duties of the Companys Board of Directors under applicable Legal Requirements,
then the Companys Board of Directors may make a Change in the Company Recommendation. If after
considering an Acquisition Proposal, but
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prior to obtaining the Company Stockholders Approval, the
Companys Board of Directors determines that an Acquisition Proposal received pursuant to
Sections 5.5(a) or 5.5(b) hereof constitutes a Superior Proposal, the Company may
enter into a definitive agreement to implement such Superior Proposal (in the form previously
provided to the Purchaser below), but only (1) after providing written notice to the Purchaser (a
Notice of Superior Proposal) advising the Purchaser that the Companys Board of Directors
has received a Superior Proposal, identifying the Third Party making such Superior Proposal and
indicating that the Companys Board of Directors intends to effect a Change in the Company
Recommendation, accompanied by a copy of the definitive agreement proposed to be entered into with
such Third Party, (2) if the Purchaser does not within three (3) Business Days after the
Purchasers receipt of the Notice of Superior Proposal, make an offer that is at least as favorable
to the Companys stockholders from a
financial point of view (as determined in good faith by the Companys Board of Directors) as
such Superior Proposal, and (3) if simultaneously with executing such definitive agreement the
Company (x) terminates this Agreement and (y) pays the Termination Fee and the Purchaser Expenses
to the Purchaser.
(f) Nothing contained in this Section 5.5 shall prevent the Company from taking and
disclosing to the stockholders of the Company a position with respect to an Acquisition Proposal by
a Third Party to the extent required by Rule 14e-2 and Rule 14d-9 under the Exchange Act or making
such disclosure to the Company stockholders if, in the good faith judgment of the Companys Board
of Directors (after consulting with its outside legal counsel) failure to so disclose would be
inconsistent with applicable Legal Requirements; provided, that in connection therewith neither the
Company nor the Companys Board of Directors nor any committee thereof shall, except as
specifically permitted in Section 5.5(e), make a Change in the Company Recommendation.
Section 5.6 Reasonable Efforts; Consents
Subject to the terms and conditions of this Agreement, each of the Parties shall, and shall
cause their respective Subsidiaries to, use their commercially reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the
other Parties in doing, all things necessary, proper or advisable to consummate and make effective,
in the most expeditious manner practicable, the Merger and the other transactions contemplated by
this Agreement, including (i) the obtaining of any necessary consent, authorization, order or
approval of, or any exemption by, any Governmental Authority and/or any other public or private
third party which is required to be obtained by such Party or any of its Subsidiaries in connection
with the Merger and the other transactions contemplated by this Agreement and the making or
obtaining of all necessary filings and registrations with respect thereto, including filings under
the HSR Act, if required, (ii) the execution and delivery of any additional instruments necessary
to consummate the transactions contemplated by, and to fully carry out the purposes of, this
Agreement, and (iii) the taking of all acts necessary to cause the conditions of the Closing to be
satisfied as promptly as practicable and the taking of all actions necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable to this Agreement,
the Merger or any other transactions contemplated by this Agreement.
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Section 5.7 Employee Benefits
(a) For a period of twelve (12) months following the Effective Time, the Purchaser shall
provide, or shall require the Surviving Corporation to provide, active employees of the Surviving
Corporation and its Subsidiaries with employee benefits that are not materially less favorable in
the aggregate than those provided by the Company or its Subsidiaries to its employees as of
immediately prior to the Effective Time; provided that in no event shall the Purchaser or the
Surviving Corporation be obligated to continue, provide or otherwise take into account any Benefit
Plan that relates to equity interests or that is an equity-based arrangement; and provided,
further, that nothing herein shall be construed to mean that the Purchaser or the Surviving
Corporation cannot amend or terminate any particular Benefit Plan or any other
employee benefit, compensation or incentive plan, policy or arrangement so long as the
requirements of this Section 5.7 and applicable Legal Requirements are otherwise satisfied.
Nothing in the foregoing shall be construed to cancel or impair existing contractual obligations
of the Company or its Subsidiaries to any Employee in effect immediately prior to the Effective
Time.
(b) With respect to any employee benefit plans of the Purchaser in which the employees of the
Surviving Corporation or its Subsidiaries participate subsequent to the Effective Time, the
Purchaser shall, or shall cause the Surviving Corporation or its Subsidiaries to (i) with respect
to Purchasers medical, dental and vision plans, waive all limitations as to pre-existing condition
exclusions or other limitations or eligibility waiting periods applicable to such employees to the
same extent as Purchaser would with respect to other transferred employees (or, with respect to any
insured plan, to request that the insurance company waive such limitations), provided that the
employee comply with plan administration requirements, and (ii) recognize all service of the
employees of the Company or its Subsidiaries with such entity for purposes of eligibility to
participate and vesting (but not benefit service), under any employee benefit plan of the Purchaser
in which such employees may be eligible to participate after the Effective Time; provided, however,
that no such service recognition shall result in any duplication of benefits.
(c) Nothing in this Agreement shall confer upon any Person any right to continued employment
with the Purchaser or the Surviving Corporation, nor shall anything herein interfere with the right
of the Purchaser or the Surviving Corporation to terminate the employment or services of any Person
at any time following the Effective Date, with or without cause, or to restrict any of the
Purchaser, the Surviving Corporation or any of their Affiliates in modifying any of the terms and
conditions of the employment or service relationship of any Person following the Effective Date.
Except as set forth in Section 5.9, nothing in this Agreement, express or implied, shall
confer upon any Employee (or any of their respective beneficiaries or alternate payees) any rights
or remedies under or by reason of this Agreement. Nothing contained in this Agreement (including,
without limitation, this Section 5.7) shall (i) amend, or be deemed to amend, any Benefit
Plan of the Company or its Subsidiaries; (ii) provide any Person not a party to this Agreement with
any right, benefit or remedy with regard to any Benefit Plan of the Company or its Subsidiaries or
a right to enforce any provision of this Agreement; or (iii) limit in any way the Purchasers or
the Surviving Corporations ability to amend or terminate any Benefit Plan of the Company or its
Subsidiaries at any time pursuant to the terms of such Benefit Plans.
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Section 5.8 Control of Other Partys Business
Nothing contained in this Agreement shall give the Purchaser or Merger Sub, directly or
indirectly, the right to control or direct the Companys operations prior to the Effective Time.
Nothing contained in this Agreement shall give the Company, directly or indirectly, the right to
control or direct the Purchasers or Merger Subs operations prior to the Effective Time. Prior to
the Effective Time, each of the Parties shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over their respective operations.
Section 5.9 Directors and Officers Indemnification and Insurance
(a) The Purchaser and Merger Sub agree that all rights to exculpation and indemnification for
acts or omissions occurring at or prior to the Effective Time, whether asserted or claimed prior
to, at or after the Effective Time (including any matters arising in connection with the Merger and
the other transactions contemplated by this Agreement), now existing in favor of the current or
former directors, officers or employees, as the case may be, of the Company or its Subsidiaries
(such Persons, the Indemnified Parties), as provided in their respective certificates of
incorporation or bylaws (or comparable organization documents) or in any indemnification agreement
between the Company or any of its Subsidiaries and an Indemnified Party, in each case as in effect
on the date of this Agreement, shall survive the Merger and shall continue in full force and
effect. The Surviving Corporation shall (and the Purchaser shall cause the Surviving Corporation
to) indemnify, defend and hold harmless, and advance expenses to Indemnified Parties with respect
to all acts or omissions by them in their capacities as such at any time prior to the Effective
Time, to the fullest extent required by: (i) the certificate of incorporation or by-laws (or
equivalent organizational documents) of the Company or any of its Subsidiaries as in effect on the
date of this Agreement; and (ii) any indemnification agreements between the Company or any of its
Subsidiaries and any Indemnified Party, in each case as in effect on the date of this Agreement.
(b) The Purchaser and the Surviving Corporation shall cause to be maintained for a period of
at least six (6) years after the Effective Time coverage under the Companys directors and
officers liability insurance policies as in effect on the date hereof for acts or omissions
occurring prior to the Effective Time (D&O Insurance); provided that (i) the Purchaser
may substitute therefor policies with a reputable insurer of comparable credit quality of
substantially similar coverage and amounts containing terms no less advantageous in the aggregate
to the Indemnified Parties, (ii) if the existing D&O Insurance expires or is canceled during such
period, the Purchaser and the Surviving Corporation will use their commercially reasonable efforts
to obtain substantially similar D&O Insurance from a reputable insurer of comparable credit
quality, (iii) in no event shall the Purchaser or the Surviving Corporation be required to expend
more than 250% of the last annual premiums paid by the Company immediately prior to the Effective
Time (the Maximum Premium Amount) to maintain or procure D&O Insurance pursuant to this
Section 5.9 and (iv) if the premiums of such D&O Insurance would exceed the Maximum Premium
Amount, the Purchaser or the Surviving
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Corporation shall obtain a policy with the greatest coverage
reasonably available for a cost not exceeding the Maximum Premium Amount. In lieu of the foregoing,
the Purchaser may, or may cause the Surviving Corporation to, purchase six (6) year tail coverage
covering acts or omissions prior to the Effective Time on terms not materially less favorable to
any director, officer or employee to the existing policy of the Company as in effect on the date
hereof. Premiums for such tail coverage shall not exceed the Maximum Premium Amount.
(c) The provisions of this Section 5.9 shall survive consummation of the Merger and
expressly are intended to benefit each of the Indemnified Parties. The rights of each Indemnified
Party hereunder shall be in addition to, and not in limitation of, any other rights such
Indemnified Party may have under any other indemnification arrangement.
(d) In the event the Surviving Corporation or any of their respective successors or assigns
(i) consolidates with or merges into any other person and shall not be the continuing or surviving
corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then and in either case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation shall assume the obligations in this
Section 5.9.
(e) The Surviving Corporation shall pay all reasonable costs and expenses, including
reasonable attorneys fees, that may be incurred by any Indemnified Party in successfully enforcing
the indemnity and other obligations set forth in this Section 5.9.
Section 5.10 Public Statement and Press Releases
Each of the Parties agrees that it shall not, without the prior written consent of the other
Parties, make any press release or other public statement concerning this Agreement or the
transactions contemplated hereby; provided, however, that (i) the Parties shall mutually agree upon
their respective initial press releases regarding the execution of this Agreement and the
transactions contemplated hereby, (ii) nothing in this Section 5.10 shall be deemed to
prohibit any party hereto from making any disclosure which is consistent in all material respects
with the press releases issued by either Party pursuant to clause (i) or, (iii) nothing in this
Section 5.10 shall be deemed to prohibit any party hereto from making any disclosure which
its counsel deems necessary in order to fulfill such Partys disclosure obligations imposed by
Legal Requirement or the rules of any national securities exchange or automated quotation system,
so long as the disclosing Party consults with the other Parties prior to such disclosure and
considers in good faith the other Parties considerations with respect to such disclosure.
Section 5.11 Notice Obligations
From the date of this Agreement until the Effective Time, each of the Parties will give prompt
notice to the other Parties of:
(a) the occurrence, or non-occurrence, of any event, the occurrence or non-occurrence of which
would reasonably be expected to cause any representation or warranty of such Party contained in
this Agreement to be untrue or inaccurate, in each case at any time from and after the date of this
Agreement until the Effective Time; and
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(b) any failure to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by such Party under this Agreement.
No notification pursuant to this Section 5.11 will be deemed to amend or supplement
the Company Disclosure Schedule, prevent or cure any misrepresentation, breach of warranty or
breach of covenant, or limit or otherwise affect any rights or remedies available to the Party
receiving notice, including pursuant to Article IX.
Section 5.12 Certain Actions and Proceedings
The Company shall (a) advise the Purchaser promptly of the assertion or purported assertion of
any Action instituted against the Company or any of its Subsidiaries (or any of their respective
directors or officers) or threatened by any Governmental Authority or any Person (other than the
Company or any of its Subsidiaries) to restrain or prohibit or otherwise oppose the Merger, this
Agreement, the Voting Agreement or the transactions contemplated hereby or thereby, or to seek
damages or a discovery order in connection therewith, (b) give the Purchaser a reasonable
opportunity to consult in the response to and defense of any such Action, and (c) subject to
Section 5.5, use its reasonable best efforts to defend any such Actions. The Purchaser
shall cooperate with the Company in its efforts to defend such Actions, provided that any request
from the Company for such cooperation is reasonable.
Section 5.13 Monthly Financial Statements
The Company will provide to the Purchaser a true and complete copy of each of the Companys
unaudited monthly financial statements for the period beginning March 1, 2008, through the Closing,
which monthly financial statements shall be prepared in good faith (i) from the books and records
of the Company and its Subsidiaries and (ii) except that such monthly financial statements do not
include footnote disclosures as required by GAAP and are subject to (A) normal year end adjustments
consistent with past practice, which adjustments shall not be material in the aggregate and (B)
changes in deferred tax (and related tax expense) amounts, in accordance with GAAP consistently
applied throughout the periods covered thereby, except for changes, if any, required by GAAP.
Section 5.14 Pre-Acquisition Reorganization
The Company shall, and shall cause each of its Subsidiaries, to take such actions prior to the
Effective Time (each, a Pre-Acquisition Reorganization Activity) if and in the manner the
Purchaser and/or Merger Sub request, to be completed on or prior to the Closing Date, provided that
the Pre-Acquisition Reorganization Activity is not prejudicial to the Company, its Subsidiaries, or
the shareholders thereof, and does not require the approval or consent of the holders of
Exchangeable Shares. No such actions requested by the Purchaser and/or Merger Sub shall, if taken
as requested, be considered to constitute a breach of the representations or warranties or
covenants hereunder. Without limiting the foregoing, a Pre-Acquisition Reorganization Activity
may include a capitalization, transfer or cancellation of any intercompany debt requested to be
capitalized, transferred or cancelled by Purchaser and/or Merger Sub, and the Company shall
cooperate with Purchaser and Merger Sub in calculating the tax basis in any Subsidiary identified
by Purchaser and/or Merger Sub.
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ARTICLE VI
CONDITIONS TO EACH PARTYS OBLIGATIONS
The respective obligations of each Party to this Agreement to effect the Merger and complete
the other transactions provided for herein are subject to the
fulfillment (or waiver by the Parties) at or prior to the Effective Time of the following conditions (provided that a
Party may not rely on the failure of any condition to be satisfied if such failure was caused by
such Partys failure to use commercially reasonable efforts to consummate the Merger and the other
transactions contemplated by this Agreement):
Section 6.1 Company Stockholders Approval
The Company Stockholders Approval shall have been obtained in accordance with applicable
Legal Requirements, the certificate of incorporation and bylaws of the Company and the provisions
of this Agreement.
Section 6.2 Legal Prohibition
No Legal Prohibition shall have been enacted and be in effect.
Section 6.3 Receipt of Government Consents
All consents, approvals, authorizations, qualifications and orders of any Governmental
Authority set forth on Schedule 6.3 of the Company Disclosure Schedule shall have been
obtained and evidence thereof, in form reasonably satisfactory to the Parties, shall have been
delivered to the Parties and shall be in full force and effect as of the Closing and any waiting
period (and any extension thereof) under the HSR Act or other similar filings under the antitrust
or anti-competition Legal Requirements of other foreign countries shall have expired.
ARTICLE VII
CONDITIONS OF THE PURCHASERS AND MERGER SUBS OBLIGATIONS
The obligations of the Purchaser and Merger Sub to effect the Merger and complete the other
transactions provided for in this Agreement are subject to the fulfillment (or waiver by the
Purchaser or Merger Sub) at or prior to the Effective Time of the following conditions:
Section 7.1 Receipt of Third Party Consents
All consents, approvals and authorizations listed on Schedule 7.1 of the Company
Disclosure Schedule shall have been obtained and evidence thereof, in form reasonably satisfactory
to the Purchaser, shall have been delivered to the Purchaser and shall be in full force and effect
as of the Closing.
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Section 7.2 Performance by Company
The Company shall have performed in all material respects all of its agreements and covenants
contained in this Agreement required to be performed by it at or prior to the Effective Time.
Section 7.3 Truth of Representations and Warranties
Each of the representations and warranties of the Company contained in this Agreement (i) if
specifically qualified by materiality, Material Adverse Effect or other similar terms shall be true
and complete as so qualified and (ii) if not qualified by materiality, Material Adverse Effect or
other similar terms, shall be true and complete in all material respects, in each such case on and
as of the date hereof and as of the Closing Date, with the same effect as if then made (except
where any such representation or warranty is as of a specific earlier date, in which event it shall
remain true and complete (as qualified) as of such earlier date), except as to both clauses (i) and
(ii) for any failure to be so true (without giving effect to any limitation as to materiality or
Material Adverse Effect set forth therein) that has not had and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
Section 7.4 Companys Closing Certificate
The Company shall have delivered to the Purchaser at Closing an officers certificate of the
Company, solely in such capacity on the behalf of the Company, certifying (i) as to the incumbency
and signatures of the officers of the Company who executed this Agreement, (ii) as to the adoption
of resolutions of the Board of Directors of the Company being correct, complete and in full force
and effect on the Closing Date (though not necessarily dated as of the Closing Date), authorizing
(A) the execution and delivery of this Agreement, and (B) the performance of the obligations of the
Company hereunder, (iii) as to the Companys bylaws and all amendments thereto as being correct,
complete and in full force and effect on the Closing Date and (iv) that the conditions to the
Purchasers obligations to consummate the transactions contemplated by this Agreement set forth in
Sections 7.2 and 7.3 have been satisfied.
Section 7.5 No Material Adverse Effect
Since the date of this Agreement there shall not have been or occurred any Material Adverse
Effect.
Section 7.6 Restraint
There is no pending suit, action or proceeding by any Governmental Authority challenging the
consummation of the Merger or otherwise seeking to impose material limitations on the ability of
Purchaser to hold full rights of ownership of any securities of the Company, seeking to impose
material limitations on the ability of Purchaser to effectively control and operate the business
and assets of the Company and its Subsidiaries, seeking to obtain damages arising out of the Merger
or seeking to compel Purchaser to divest or hold separate any significant portion of the business,
assets or property of the Company (a Restraint).
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Section 7.7 FIRPTA Certificate
On or prior to the Effective Time, the Company shall deliver to the Purchaser a properly
executed statement in a form reasonably acceptable to Purchaser for purposes of satisfying the
Purchasers obligations under Treasury Regulation Section 1.1445-2(c)(3).
Section 7.8 Exchangeable Shares
No Exchangeable Shares shall have been issued after the date of this Agreement and all of the
Exchangeable Shares which are issued and outstanding as of the date of this Agreement shall have
been exchanged immediately prior to the Closing for Company Common Stock by way of exercise by
1305699 Alberta ULC of the redemption call right in the articles of the Canadian Subsidiary.
ARTICLE VIII
CONDITIONS OF COMPANYS OBLIGATIONS
The obligations of the Company to effect the Merger and complete the other transactions
provided for in this Agreement are subject to the fulfillment (or waiver by the Company) at or
prior to the Effective Time of the following conditions:
Section 8.1 Performance by the Purchaser and Merger Sub
The Purchaser and Merger Sub shall have performed in all material respects all of their
respective agreements and covenants contained in this Agreement required to be performed by such
Party at or prior to the Effective Time, including the deposit of the Merger Consideration into the
Exchange Fund.
Section 8.2 Truth of Representations and Warranties
Each of the representations and warranties of the Purchaser and Merger Sub contained in this
Agreement (i) if specifically qualified by materiality, material adverse effect or other similar
terms shall be true and complete as so qualified and (ii) if not qualified by materiality, material
adverse effect or other similar terms shall be true and complete in all material respects, in each
such case on and as of the date hereof and as of the Closing Date, with the same effect as if then
made (except where any such representation or warranty is as of a specific earlier date, in which
event it shall remain true and correct (as qualified) as of such earlier date), except with respect
to both clauses (i) and (ii) for any failure to be so true (without giving effect to any limitation
as to materiality or material adverse effect set forth therein) that has not had and would not
reasonably be expected to have, individually or in the aggregate, a material adverse effect on the
Purchasers or the Merger Subs ability to consummate the transactions contemplated by this
Agreement.
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Section 8.3 Purchasers Closing Certificate
The Purchaser shall deliver to the Company at Closing an officers certificate of the
Purchaser, solely in such capacity on the behalf of the Purchaser, certifying (i) as to the
incumbency and signatures of the officers of the Purchaser and Merger Sub who execute this
Agreement, (ii) as to the adoption of resolutions of the Board of Directors of the Purchaser and
Merger Sub being correct, complete and in full force and effect on the Closing Date (though not
necessarily dated as of the Closing Date), authorizing (A) the execution and delivery of this
Agreement, and (B) the performance of the obligations of the Purchaser and Merger Sub
hereunder, (iii) as to the Purchasers and Merger Subs bylaws and all amendments thereto being
correct, complete and in full force and effect on the Closing Date and (iv) that the conditions to
the Companys obligations to consummate the transactions contemplated by this Agreement set forth
in Sections 8.1 and 8.2 with respect to the Purchaser and Merger Sub have been
satisfied.
ARTICLE IX
TERMINATION
Section 9.1 Termination
This Agreement may be terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after receipt of Company Stockholders Approval (any such date,
the Termination Date):
(a) by the mutual written agreement of the Company and the Purchaser;
(b) by either the Company or the Purchaser upon written notice to the other Party:
(i) if the Merger has not been consummated on or before September 30, 2008 (such date,
as it may be extended as set forth below, the End Date); provided that the right
to terminate this Agreement pursuant to this Section 9.1(b)(i) shall not be
available to a Party whose breach of any provision of this Agreement results in the failure
of the Merger to be consummated by the End Date;
(ii) after the date of this Agreement, if any Governmental Authority (including any
federal or state court of competent jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order that prevents or prohibits consummation of the Merger or any of
the other material transactions contemplated in this Agreement (a Legal
Prohibition), in any case that is in effect, final and non-appealable;
(iii) if the Company Stockholders Approval shall not have been obtained following a
vote at the Company Stockholders Meeting (or any adjournment or postponement thereof); or
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(iv) if any Restraint shall be in effect and shall have become final and
non-appealable;
(c) by the Purchaser upon written notice to the Company:
(i) if at any time after a Change in the Company Recommendation or if the Board of
Directors of the Company shall have (A) approved or recommended or announced a neutral
position with respect to any Acquisition Proposal or (B) failed to reaffirm its
recommendation of this Agreement and the Merger within five (5) Business
Days of being requested by the Purchaser to do so, or (C) resolved to do any of the
foregoing;
(ii) if any of the Companys (A) representations and warranties shall have been
inaccurate as of the date of this Agreement, such that the condition set forth in
Section 7.3 would not be satisfied, or (B) representations and warranties become
inaccurate as of a date subsequent to the date of this Agreement (as if made on such
subsequent date), such that the condition set forth in Section 7.3 would not be
satisfied, or (C) covenants contained in this Agreement shall have been breached, such that
the condition set forth in Section 7.2 would not be satisfied; provided that no such
inaccuracy or breach under the foregoing clauses shall give rise to a right to terminate,
unless such inaccuracy or breach cannot be or is not cured within thirty (30) days of notice
of such inaccuracy or breach from the Purchaser (or, if sooner, the date prior to the End
Date);
(d) by Company upon written notice to the Purchaser:
(i) in accordance with the terms and subject to the conditions of
Section 5.5(e); provided that such termination under this clause (d)(i) shall not be
effective until the Company has tendered payment of the fees and expenses required pursuant
to Section 9.3(c); or
(ii) if any of the Purchasers or Merger Subs (A) representations and warranties
shall have been inaccurate as of the date of this Agreement, such that the condition set
forth in Section 8.2 would not be satisfied, or (B) representations and warranties
become inaccurate as of a date subsequent to the date of this Agreement (as if made on such
subsequent date), such that the condition set forth in Section 8.2 would not be
satisfied, or (C) covenants contained in this Agreement shall have been breached, such that
the condition set forth in Section 8.1 would not be satisfied; provided that no such
inaccuracy or breach under the foregoing clauses shall give rise to a right to terminate,
unless such inaccuracy or breach cannot be or is not cured within thirty (30) days of notice
of such inaccuracy or breach from the Company (or, if sooner, the date prior to the End
Date).
Section 9.2 Effect of Termination
If this Agreement is terminated pursuant to Section 9.1, this Agreement shall become
void and of no effect without liability of any Party (or any stockholder, director, officer,
employee, agent, consultant or representative of such Party) to the other Parties hereto, except
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that (i) the agreements contained in Sections 9.2 and 9.3 and Article X of
this Agreement and in the Confidentiality Agreement shall survive the termination hereof, and (ii)
no such termination shall relieve any Party of any liability or damages resulting from any willful
breach by such Party of this Agreement. If this Agreement is terminated by a Party because of
breach of this Agreement by another Party or because one or more of the conditions to the
terminating Partys obligations under this Agreement is not satisfied as a result of the other
Partys failure to comply with its obligations under this Agreement, the terminating Partys right
to pursue all legal remedies will survive such termination unimpaired.
Section 9.3 Fee and Expenses
(a) Except as otherwise provided in this Section 9.3, all costs, fees and expenses
incurred in connection with this Agreement, the Merger and the other transactions contemplated by
this Agreement shall be paid by the Party incurring such cost, fee or expense whether or not the
Merger is consummated.
(b) If this Agreement is terminated pursuant to Section 9.1(c)(i), then the Company
shall pay to the Purchaser in cash within one (1) Business Day after such termination (i) a
termination fee of $500,000 (the Termination Fee) and (ii) the Purchasers expenses in respect of
this Agreement, the Voting Agreement and all of the respective transactions contemplated thereby,
including the Merger, which for purposes of this Agreement shall be deemed to be an amount equal to
$2,000,000 (the Purchaser Expenses).
(c) If this Agreement is terminated by the Company pursuant to Section 9.1(d)(i), then
the Company shall pay to the Purchaser the Termination Fee and the Purchaser Expenses concurrent
with such termination.
(d) If this Agreement is terminated pursuant to Sections 9.1(b)(i),
9.1(b)(iii), or 9.1(c)(ii), and (1) after the date hereof and prior to such
termination, a Third Party has made or delivered an Acquisition Proposal and (2) within twelve (12)
months of any such termination, either (A) the Company or any of its Subsidiaries enters into any
letter of intent, agreement in principle, acquisition agreement or other similar arrangement with
any Third Party with respect to, or consummates, an Acquisition Proposal, or (B) if neither the
Company nor any of its Subsidiaries has entered into an agreement or other arrangement contemplated
in Section 9.3(d)(2)(A) and any Third Party commences a tender offer or exchange offer
that, if consummated, would result in the acquisition by such Third Party, or any Affiliate
thereof, making the tender or exchange offer of fifty percent (50%) or more of the Company Common
Stock, then in either case the Company shall pay to the Purchaser the Termination Fee and the
Purchaser Expenses (x) on the date of the agreement in respect of the Acquisition Proposal or, if
earlier, consummation of the transaction in respect of the Acquisition Proposal contemplated by
Section 9.3(d)(2)(A), or (y) within one (1) Business Day after the closing of the tender or
exchange offer contemplated by Section 9.3(d)(2)(B).
(e) Any payment of the Termination Fee or Purchaser Expenses shall be made by wire transfer of
immediately available funds. If the Company fails to pay the Termination Fee or Purchaser Expenses
at the times provided above, it shall pay the costs and expenses of the Purchaser (including
reasonable legal fees and expenses) in connection with any action,
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including the prosecution of any
lawsuit or other legal action, taken to collect payment, together with interest on the amount of
any unpaid fee or expenses at the publicly announced prime rate of Citibank, N.A. in New York City
from the date such fee or expenses was required to be paid to the date it is paid; provided,
however, that the Company shall not pay such costs and expenses of the Purchaser and the Purchaser
shall instead pay to the Company the costs and expenses of the Company (including reasonable legal
fees and expenses) incurred in connection with such action if the Purchasers claim against the
Company in such legal action does not prevail.
(f) The Company acknowledges that the agreements contained in this Section 9.3 are an
integral part of the transactions contemplated by this Agreement and that, without these
agreements, the Purchaser would not have entered into this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1 Amendments, Waivers
Subject to applicable law, this Agreement may only be amended pursuant to a written agreement
executed by all the Parties, and no waiver of compliance with any provision or condition of this
Agreement and no consent provided for in this Agreement shall be effective unless evidenced by a
written instrument executed by each Party against whom such waiver or consent is to be effective;
provided, however, that after adoption of this Agreement by the stockholders of the Company, no
amendment or waiver of this Agreement shall be effective that by law requires further approval of
the stockholders of the Company unless the required approval is obtained. No waiver of any term or
provision of this Agreement shall be construed as a further or continuing waiver of such term or
provision or any other term or provision.
Section 10.2 Entire Agreement
This Agreement, the Confidentiality Agreement, the Company Disclosure Schedule and the
Purchaser Disclosure Schedule to this Agreement constitute the entire agreement of all the Parties
and supersedes any and all prior and contemporaneous agreements, memoranda, arrangements and
understandings, both written and oral, between the Parties, or either of them, with respect to the
subject matter hereof. No representation, warranty, promise, inducement or statement of intention
has been made by any Party which is not contained in this Agreement or Schedules to this Agreement
and no Party shall be bound by, or be liable for, any alleged representation, promise, inducement
or statement of intention not contained herein or therein. All Schedules to this Agreement are
expressly made a part of, and incorporated by reference into, this Agreement.
Section 10.3 Binding Effect; Assignment
This Agreement shall be binding upon and inure to the benefit of and be enforceable by the
Parties and their respective successors and permitted assigns. No Party to this Agreement may
assign its rights or delegate its obligations under this Agreement, whether by operation of law or
otherwise, to any other Person without the express prior written
consent of the other Parties
hereto; provided that Merger Sub may assign its rights under this Agreement to another subsidiary
or Affiliate of Purchaser. Any such assignment or transfer made without the prior written consent
of the other Parties hereto shall be null and void.
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Section 10.4 Headings; Certain Construction Rules
The Article, Section and paragraph headings and the table of contents contained in this
Agreement are for reference purposes only and do not form a part of this Agreement and do
not in any way modify, interpret or construe the intentions of the Parties. As used in this
Agreement, unless otherwise provided to the contrary, (a) all references to days or months shall be
deemed references to calendar days or months and (b) any reference to a Section or Article
shall be deemed to refer to a section or article of this Agreement or a schedule to this Agreement.
The words hereof, herein and hereunder and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.
Whenever the words include, includes or including are used in this Agreement, they shall be
deemed to be followed by the words without limitation. Unless otherwise specifically provided for
herein, the term or shall not be deemed to be exclusive.
Section 10.5 Notices
All notices, requests, claims, demands and other communications hereunder shall be in writing
and shall be deemed to have been duly given to a Party if delivered in person or sent by overnight
delivery (providing proof of delivery) to the Parties at the following addresses (or at such other
address for a Party as shall be specified by like notice) on the date of delivery, or if by
facsimile, upon confirmation of receipt:
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If to the Purchaser or
Merger Sub
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DirecTV, Inc.
1211 Avenue of the Americas |
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New York, NY 10036 |
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Attention: J. William Little |
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Telephone: 212-462-5037 |
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Telecopier: 212-462-5083 |
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With a copy (which shall
not constitute notice) to:
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OMelveny & Myers LLP
400 South Hope St.
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Los Angeles, CA 90071 |
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Attention: John A. Laco, Esq. and Christine
Tam, Esq. |
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Telephone: 213-430-6544 and 213-430-6499 |
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Telecopier: 213-430-6407 |
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If to the Company:
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180 Connect Inc. |
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6501 East Belleview Ave. |
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Suite 500 |
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Englewood, CO 80111 |
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Attention: Peter Giacalone |
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Telephone: 303-395-6084 |
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Telecopier: 888-628-7909 |
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With a copy (which shall
not constitute notice)
to:
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McDermott, Will & Emery, LLP
340 Madison Ave.
New York, NY 10173
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Attention: Mark S. Selinger, Esq. |
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Telephone: 212-547-5438 |
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Telecopier: 212-547-5444 |
Section 10.6 Governing Law
This Agreement shall be governed by and construed and enforced in accordance with the laws of
the State of Delaware, without giving effect to the conflicts of law provisions thereof. Each of
the Parties hereto irrevocably and unconditionally agrees to be subject to, and hereby consents and
submits to, the jurisdiction of federal and state courts in the State of Delaware for the purposes
of any suit, action or other proceeding arising out of this Agreement or any of the transactions
contemplated hereby.
Section 10.7 Further Actions
At any time and from time to time after the Closing, each Party hereto shall, at its own
expense (except as otherwise provided herein), take such actions and execute and deliver such
documents as may be reasonably necessary to effectuate the purposes of this Agreement.
Section 10.8 Gender, Tense, Etc.
Where the context or construction requires, all words applied in the plural shall be deemed to
have been used in the singular, and vice versa; the masculine shall include the feminine and
neuter, and vice versa; and the present tense shall include the past and future tense, and vice
versa.
Section 10.9 Severability
If any provision or any part of any provision of this Agreement shall be void or unenforceable
for any reason whatsoever, then such provision shall be stricken and of no force and effect.
However, unless such stricken provision goes to the essence of the consideration bargained for by a
Party, the remaining provisions of this Agreement shall continue in full force and effect and, to
the extent required, shall be modified to preserve their validity. Upon such determination that
any term or other provision or any part of any provision is void or unenforceable, the Parties
shall negotiate in good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
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Section 10.10 No Third Party Rights
Other than Section 5.9, which is intended to benefit the Indemnified Parties, nothing
in this Agreement, whether express or implied, is intended to or shall confer any rights, benefits
or remedies under or by reason of this Agreement on any Persons other than the Parties and their
respective successors and permitted assigns, except to the extent necessary to enforce the
provisions of Section 5.9, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third Persons to any Party, nor shall any provisions
give any third Persons any right or subrogation over or action against any Party.
Section 10.11 Non-Survival
None of the representations, warranties, covenants and other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for
those covenants, agreements and other provisions contained in this Agreement that by their terms
continue to apply or are to be performed in whole or in part after the Effective Time.
Section 10.12 Counterparts
To facilitate execution, this Agreement may be executed in any number of counterparts
(including by facsimile transmission), each of which shall be deemed to be an original, but all of
which together shall constitute one binding agreement on the Parties, notwithstanding that not all
Parties are signatories to the same counterpart.
Section 10.13 Specific Performance
The Parties agree that irreparable damage would occur in the event any of the provisions of
this Agreement were not performed in accordance with the terms hereof and that the Parties are
entitled to specific performance of the terms hereof in addition to any other remedies at law or in
equity.
Section 10.14 Waiver of Jury Trial
Each Party waives any right to a trial by jury in any Action to enforce or defend any right
under this Agreement or any amendment, instrument, document or agreement delivered, or which in the
future may be delivered, in connection with this Agreement and agrees that any Action shall be
tried before a court and not before a jury.
[Signatures on following page.]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above
written.
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DIRECTV ENTERPRISES, LLC
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By: |
/s/
J. William Little |
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Name: |
J. William Little |
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Title: |
Senior Vice President |
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DTV HSP MERGER SUB, INC.
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By: |
/s/
J. William Little |
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Name: |
J. William Little |
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Title: |
Senior Vice President |
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180 CONNECT INC.
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By: |
/s/
Peter Giacalone |
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Name: |
Peter Giacalone |
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Title: |
Chief Executive Officer |
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S-1
Annex B
VOTING AGREEMENT
THIS VOTING AGREEMENT (this AGREEMENT), dated as of April , 2008, by and between DirecTV
Enterprises, LLC, a Delaware limited liability company (the Purchaser) and (the
Stockholder).
W I T N E S S E T H:
WHEREAS, concurrently herewith, Purchaser, DTV HSP Merger Sub, Inc., a Delaware corporation
(Merger Sub), and 180 Connect Inc., a Delaware corporation (the Company) are entering into an
Agreement and Plan of Merger (as such agreement may hereafter be amended from time to time, the
Merger Agreement);
WHEREAS,
the Stockholder is the beneficial owner of shares of Company Common Stock [and
shares of Exchangeable Shares] (collectively, the Shares);
WHEREAS, approval of the Merger Agreement by the Companys stockholders is
required in order to consummate the Merger;
WHEREAS, the board of directors of the Company has, prior to the execution of this Agreement,
by resolution duly adopted by unanimous vote at a meeting duly called and held and at which all
directors were present, which resolution has not subsequently been rescinded or modified in any
manner whatsoever, (i) determined that the Merger Agreement and the Merger are fair and in the best
interests of the stockholders of the Company, (ii) approved the Merger Agreement and the
transactions contemplated thereby, including the Merger, and (iii) has resolved to recommend that
its stockholders approve the Merger Agreement and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises, representations,
warranties, respective covenants and agreements of the parties contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of
the parties hereto, the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS. Terms used in this Agreement and not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Merger Agreement.
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ARTICLE II
VOTING AGREEMENT
Section 2.1 GRANT OF PROXY; AGREEMENT TO VOTE. Upon the terms and subject to the conditions
hereof, the Stockholder hereby grants to the Purchaser with respect to the Shares and any shares of
Company Common Stock acquired by the Stockholder after the date hereof, an irrevocable proxy to
vote, at any meeting of the Companys stockholders, or in connection with any written consent of
the Companys stockholders, in which the Merger Agreement and the Merger or any Acquisition
Proposal is to be voted on (i) in favor of the approval of the Merger Agreement and the Merger and
(ii) against any Acquisition Proposal, other than the Merger (the Proxy). The Stockholder
further agrees to cause all Shares owned by such Stockholder, in addition to any shares of Company
Common Stock acquired by Stockholder after the date hereof, to be voted in accordance with the
Proxy. This Proxy is coupled with an interest and until this Agreement is terminated pursuant to
Section 5.1 hereof is irrevocable. Upon the execution of this Agreement by the Stockholder, the
Stockholder hereby revokes any and all other proxies (other than the Proxy) given by such
Stockholder with respect to the subject matter hereof. The Stockholder acknowledges receipt and
review of a copy of the Merger Agreement. Except as otherwise permitted by Section 4.1(a) below,
the Stockholder agrees not to enter into any agreement or commitment with any Person, the effect of
which would be inconsistent with or violative of the provisions and agreements contained in this
Article II, and the Stockholder shall execute any documents or certificates evidencing the Proxy as
the Purchaser may reasonably request.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. The Stockholder represents and
warrants to the Purchaser that (i) the Stockholder is the record and direct or indirect beneficial
owner of the Shares, (ii) this Agreement has been duly executed and delivered by the Stockholder,
and (iii) this Agreement constitutes the valid and binding agreement of the Stockholder,
enforceable against the Stockholder in accordance with its terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
similar laws relating to or affecting creditors rights generally and general equitable principles
(whether considered in a proceeding in equity or at law), in each case now or hereafter in effect.
Section 3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser represents and
warrants to the Stockholder that (i) this Agreement has been duly executed and delivered by a duly
authorized officer of the Purchaser, and (ii) this Agreement constitutes the valid and binding
agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and similar laws relating to or affecting creditors rights generally
and general equitable principles (whether considered in a proceeding in equity or at law), in each
case now or hereafter in effect.
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ARTICLE IV
COVENANTS
Section 4.1 COVENANTS OF THE STOCKHOLDER. The Stockholder covenants and agrees with the
Purchaser that, during the period commencing on the date hereof and ending on the date this
Agreement is terminated under Article V hereof:
(a) The Stockholder shall not sell, transfer, pledge, or dispose of any Shares or offer to
make such a sale, transfer, pledge or disposition (collectively, Transfer) to any Person,
provided that this Section 4.1(a) shall not prohibit a Transfer of Shares by the Stockholder (x)(i)
if Stockholder is an individual, to any member of Stockholders immediate family or to a trust for
the benefit of Stockholder or any member of Stockholders immediate family, (ii) upon the death of
Stockholder, or (iii) if Stockholder is a partnership or limited liability company, to one or more
partners or members of Stockholder or to an affiliated corporation under common control with
Stockholder; provided that a Transfer referred to in Subsections 4.1(a)(x)(i)-(iii) shall be
permitted only if, as a precondition to such Transfer, the transferee agrees in a writing,
reasonably satisfactory in form and substance to Purchaser, to be bound by the terms of this
Agreement; or (y) immediately prior to the Effective Time. For the avoidance of doubt, this
Agreement does not restrict Stockholder from committing or entering into any agreement to Transfer
any Shares to any Person; provided that the Transfer of such Shares occurs no earlier than
immediately prior to the Effective Time and in no event may the voting rights be Transferred prior
to such Transfer of Shares.
(b) The Stockholder waives, and agrees not to exercise or assert, any applicable appraisal
rights under Section 262 of the Delaware General Corporation Law in connection with the Merger.
(c) The Stockholder shall execute and deliver such other documents and instruments and take
such further actions as are necessary in order to ensure that the Purchaser receives the benefit of
this Agreement.
ARTICLE V
TERMINATION
Section 5.1 TERMINATION. This Agreement shall terminate and be of no further force or effect
upon the earliest to occur of (i) the mutual written consent of the Purchaser and the Stockholder,
(ii) the Effective Time, or (iii) the termination of the Merger Agreement in accordance with its
terms.
Section 5.2 EFFECT OF TERMINATION. In the event of any termination of this Agreement, this
Agreement (other than Sections 6.1 through 6.11, inclusive) shall become void and of no effect with
no liability on the part of any party hereto; provided that no such termination shall relieve any
party hereto from liability for any breach of this Agreement prior to such termination.
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ARTICLE VI
GENERAL
Section 6.1 NOTICES. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given to a party if delivered
in person or sent by overnight delivery (providing proof of delivery) to the party at the following
addresses (or at such other address for a party as shall be specified by like notice) on the date
of delivery, or if by facsimile, upon confirmation of receipt:
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If to the Purchaser:
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c/o DirecTV Group, Inc. |
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1211 Avenue of the Americas |
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New York, NY 10036 |
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Attention: J. William Little |
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Telephone: 212-462-5037 |
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Facsimile: 212-462-5083 |
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With a copy
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OMelveny & Myers LLP |
(which shall not
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400 S. Hope St. |
constitute notice) to:
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Los Angeles, CA 90071 |
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Attention: John A. Laco, Esq. and Christine Tam, Esq. |
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Telephone: 213-430-6544 and 213-430-6499 |
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Facsimile: 213-430-6407 |
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If to the Stockholder:
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c/o 180 Connect Inc. |
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6501 East Belleview Avenue |
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Suite 500 |
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Englewood, Colorado 80111 |
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Attention: Kyle M. Hall |
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Telephone: 303.395.6000 |
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Telecopier: 888.628.7909 |
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With a copy
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McDermott, Will & Emery, LLP |
(which shall not
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340 Madison Ave. |
constitute notice) to:
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New York, NY 10173 |
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Attention: Mark S. Selinger, Esq. |
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Telephone: 212-547-5438 |
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Facsimile: 212-547-5444 |
Section 6.2 NO THIRD-PARTY BENEFICIARIES. Nothing in this Agreement, whether express or
implied, is intended to or shall confer any rights, benefits or remedies under or by reason of this
Agreement on any Persons other than the parties and their respective successors and permitted
assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or
liability of any third Persons to any party, nor shall any provisions give any third Persons any
right or subrogation over or action against any party.
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Section 6.3 NO OWNERSHIP INTEREST. Nothing contained in this Agreement shall be deemed to
vest in Purchaser or Merger Sub any direct or indirect ownership or incidence
of ownership of or with respect to any Shares. All rights, ownership and economic benefits of and
relating to the Shares shall remain vested in and belong to the Stockholder, and neither Purchaser
nor Merger Sub shall have authority to direct the Stockholder in the voting or disposition of any
of the Shares, except as otherwise provided herein.
Section 6.4 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without giving effect to the conflicts of law
provisions thereof. Each of the parties hereto irrevocably and unconditionally agrees to be
subject to, and hereby consents and submits to, the jurisdiction of federal and state courts in the
State of Delaware for the purposes of any suit, action or other proceeding arising out of this
Agreement or any of the transactions contemplated hereby. Each party waives any right to a trial
by jury in any action to enforce or defend any right under this Agreement or any amendment,
instrument, document or agreement delivered, or which in the future may be delivered, in connection
with this Agreement and agrees that any action shall be tried before a court and not before a jury.
Section 6.5 ASSIGNMENT; SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties and their respective successors and permitted assigns.
No party to this Agreement may assign its rights or delegate its obligations under this Agreement,
whether by operation of law or otherwise, to any other Person without the express prior written
consent of the other party hereto. Any such assignment or transfer made without the prior written
consent of the other party hereto shall be null and void.
Section 6.6 AMENDMENTS; WAIVERS. Subject to applicable law, this Agreement may only be
amended pursuant to a written agreement executed by all the parties, and no waiver of compliance
with any provision or condition of this Agreement and no consent provided for in this Agreement
shall be effective unless evidenced by a written instrument executed by the party against whom such
waiver or consent is to be effective. No waiver of any term or provision of this Agreement shall
be construed as a further or continuing waiver of such term or provision or any other term or
provision.
Section 6.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of all the
parties and supersedes any and all prior and contemporaneous agreements, memoranda, arrangements
and understandings, both written and oral, between the parties, or either of them, with respect to
the subject matter hereof. No representation, warranty, promise, inducement or statement of
intention has been made by any party which is not contained in this Agreement and no party shall be
bound by, or be liable for, any alleged representation, promise, inducement or statement of
intention not contained herein or therein.
Section 6.8 COUNTERPARTS. To facilitate execution, this Agreement may be executed in any
number of counterparts (including by facsimile transmission), each of which shall be deemed to be
an original, but all of which together shall constitute one binding agreement on the parties,
notwithstanding that not all parties are signatories to the same counterpart.
B-5
Section 6.9 SPECIFIC PERFORMANCE. The parties agree that irreparable
damage would occur in the event any of the provisions of this Agreement were not performed in
accordance with the terms hereof and that the parties are entitled to specific performance of the
terms hereof in addition to any other remedies at law or in equity.
Section 6.10 STOCKHOLDER CAPACITY. By executing and delivering this Agreement, the
Stockholder makes no agreement or understanding herein in his or her capacity or actions as a
director, officer or employee of the Company. The Stockholder is signing and entering into this
Agreement solely in his or her capacity as the beneficial owner of the Shares, and nothing herein
shall limit or affect in any way any actions that may be hereafter taken by him or her in his or
her capacity as an employee, officer or director of the Company or in any other capacity. Nothing
contained in this Agreement will restrict, limit, prohibit or preclude the Stockholder from
exercising his or her fiduciary duties as an officer or director of the Company under applicable
law.
Section 6.11 HEADINGS; CONSTRUCTION. The Article, Section and paragraph headings contained in
this Agreement are for reference purposes only and do not form a part of this Agreement and do not
in any way modify, interpret or construe the intentions of the parties. As used in this Agreement,
unless otherwise provided to the contrary, (a) all references to days or months shall be deemed
references to calendar days or months and (b) any reference to a Section or Article shall be
deemed to refer to a section or article of this Agreement. The words hereof, herein and
hereunder and words of similar import referring to this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Whenever the words include,
includes or including are used in this Agreement, they shall be deemed to be followed by the
words without limitation. Unless otherwise specifically provided for herein, the term or shall
not be deemed to be exclusive.
[Remainder of page intentionally left blank.]
B-6
IN WITNESS WHEREOF, the parties have duly executed this Voting Agreement as of the date first
above written.
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DIRECTV ENTERPRISES, LLC
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By: |
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Name: |
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Title: |
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STOCKHOLDER:
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B-7
ANNEX C
April 17, 2008
Special Committee of the Board of Directors
180 Connect Inc.
135 Crossways Park Drive
Woodbury, NY 11797
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of view, to the holders
of the outstanding common shares (collectively the Stockholders) of 180 Connect Inc. (the
Company) of the consideration proposed to be paid to the Stockholders pursuant to the
Agreement and Plan of Merger distributed to William Blair on April 17, 2008 (the Merger
Agreement) by and among DirecTV Enterprises, LLC (DirecTV), DirecTV Merger Sub, a wholly-owned
subsidiary of DirecTV (Merger Sub), and the Company. Pursuant to the terms of and subject to the
conditions set forth in the Merger Agreement, the Company will be merged into Merger Sub (the
Merger) and each share of common stock of the Company, $.0001 par value per share, will be
converted into the right to receive $1.80 per share in cash (the Merger Consideration) proposed
to be paid to the Stockholders pursuant to the Merger Agreement.
We are familiar with the Company, having provided certain investment banking services to the
Company from time to time, including advisory services and the rendering of an opinion as to the
fairness to common stockholders of 180 Connect Inc. (a Canadian corporation prior to the merger
with AVP (the Predecessor Company)) from a financial point of view of the exchange ratio related
to the merger of 180 Connect Inc. and Ad.Venture Partners (AVP) consummated on August 24, 2007.
In connection with the preparation of our opinion herein, we have examined: (a) a draft of the
Merger Agreement distributed to William Blair on April 17, 2008; (b) certain audited historical
financial statements of the Predecessor Company for the three years ended December 31, 2006; (c)
audited financial statements of the Company for the three years ended December 31, 2007; (d)
certain internal business, operating and financial information and forecasts of the Company for the
fiscal years 2008 to 2012 (the Forecasts), prepared by the senior management of the Company; (e)
information regarding publicly available financial terms of certain other business combinations we
deemed relevant; (f) the financial position and operating results of the Company compared with
those of certain other publicly traded companies we deemed relevant; (g) current and historical
market prices and trading volumes of the common stock of the Company; and (h) certain other
publicly available information on the Company. We have also held discussions with members of the
senior management of the Company to discuss the foregoing, have considered other matters which we
have deemed relevant to our inquiry and
have taken into account such accepted financial and investment banking procedures and
considerations as we have deemed relevant.
C-1
In rendering our opinion, we have assumed and relied, without independent verification but with
your approval and agreement, upon the accuracy, completeness and fair presentation of all the
information examined by or otherwise reviewed or discussed with us for purposes of this opinion
including without limitation the Forecasts provided by senior management. Our opinion is
conditional upon such accuracy, completeness and fair presentation. We have not made or obtained
an independent valuation or appraisal of the assets, liabilities or solvency of the Company, and
our opinion should not be construed as such. We have been advised by the senior management of the
Company that the Forecasts examined by us have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the senior management of the Company. In that
regard, we have assumed, with your consent, that (i) the Forecasts will be achieved in the amounts
and at the times contemplated thereby, and (ii) all material assets and liabilities (contingent or
otherwise) of the Company are as set forth in the Companys financial statements or other
information made available to us. We express no opinion with respect to the Forecasts or the
estimates and judgments on which they are based. We were not asked to consider, and our opinion
does not address, the relative merits of the Merger as compared to any alternative business
strategies that might exist for the Company or the effect of any other transaction in which the
Company might engage. We were similarly not engaged to review any legal, tax or accounting aspects
of the merger. Our opinion herein is based upon economic, market, financial and other conditions
existing on, and other information disclosed to us as of, the date of this letter. It should be
understood that, although subsequent developments may affect this opinion, we do not have any
obligation to update, revise or reaffirm this opinion. We have relied as to all legal matters on
advice of counsel to the Company, and have assumed that the Merger will be consummated on the terms
described in the Merger Agreement, without any amendment, waiver or modification of any material
terms or conditions by the Company. We have assumed that the Merger Agreement that is executed by
the Company will conform to the draft of the Merger Agreement, and that the Merger will be
consummated on the terms described in the Merger Agreement, without any amendment, waiver or
modification of any material terms or conditions by the Company.
William Blair & Company has been engaged in the investment banking business since 1935. We
continually undertake the valuation of investment securities in connection with public offerings,
private placements, business combinations, estate and gift tax valuations and similar transactions.
In the ordinary course of our business, we may from time to time trade the securities of the
Company for our own account and for the accounts of customers, and accordingly may at any time hold
a long or short position in such securities. We represented 180 Connect (the predecessor company)
in its merger with Ad.Venture Partners and received a fee for our investment banking services in
connection with that transaction. We have also acted as the investment banker to the Company in
connection with the Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon consummation of the Merger. In addition, the Company has
agreed to indemnify us against certain liabilities arising out of our engagement.
C-2
Our investment banking services and our opinion were provided for the use and benefit of the
Special Committee of the Board of Directors of the Company in connection with its consideration of
the transaction contemplated by the Merger Agreement. Our opinion is limited to the fairness, from
a financial point of view, to the Stockholders of the Merger Consideration in connection with the
Merger, and we do not address the merits of the underlying decision by the Company to engage in the
Merger and this opinion does not constitute a recommendation to any shareholder as to how such
shareholder should vote with respect to the proposed Merger. It is understood that this letter may
not be disclosed or otherwise referred to without prior written consent, except that the opinion
may be included in its entirety in a proxy statement mailed to the Stockholders by the Company with
respect to the Merger. This opinion has been approved by our Fairness Opinion Committee.
Based upon and subject to the foregoing, it is our opinion as investment bankers that, as of the
date hereof, the Merger Consideration is fair, from a financial point of view, to the Stockholders.
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Very truly yours,
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(signed) William Blair & Company, L.L.C.
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WILLIAM BLAIR & COMPANY, L.L.C. |
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C-3
Annex D
Section 262 of the General Corporation Law of the State of Delaware
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of stock on the date of
the making of a demand pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or consolidation, who has
otherwise complied with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be
entitled to an appraisal by the Court of Chancery of the fair value of the stockholders shares of
stock under the circumstances described in subsections (b) and (c) of this section. As used in this
section, the word stockholder means a holder of record of stock in a stock corporation and also a
member of record of a nonstock corporation; the words stock and share mean and include what is
ordinarily meant by those words and also membership or membership interest of a member of a
nonstock corporation; and the words depository receipt mean a receipt or other instrument issued
by a depository representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of stock of a
constituent corporation in a merger or consolidation to be effected pursuant to § 251 (other than a
merger effected pursuant to § 251(g) of this title), § 252, § 254, § 257, § 258, § 263 or § 264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall be available for the
shares of any class or series of stock, which stock, or depository receipts in respect thereof, at
the record date fixed to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i)
listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require for its approval the vote
of the stockholders of the surviving corporation as provided in subsection (f) of § 251 of this
title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section
shall be available for the shares of any class or series of stock of a constituent corporation if
the holders thereof are required by the terms of an agreement of merger or consolidation pursuant
to §§ 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in respect thereof, which
shares of stock (or depository receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national securities exchange or held
of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional
shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger
effected under § 253 of this title is not owned by the parent corporation immediately prior to the
merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that appraisal rights
under this section shall be available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any merger or consolidation in which
the corporation is a constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a provision, the procedures
of this section, including those set forth in subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are provided under this
section is to be submitted for approval at a meeting of stockholders, the corporation, not less
than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of
the constituent corporations, and shall include in such notice a copy of this section. Each
stockholder electing to demand the appraisal of such stockholders shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand
D-1
will be sufficient if it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of such stockholders shares. A
proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand as herein provided. Within 10
days after the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who has complied with
this subsection and has not voted in favor of or consented to the merger or consolidation of the
date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to § 228 or § 253 of this title, then
either a constituent corporation before the effective date of the merger or consolidation or the
surviving or resulting corporation within 10 days thereafter shall notify each of the holders of
any class or series of stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and shall include in
such notice a copy of this section. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the effective date of the
merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the
date of mailing of such notice, demand in writing from the surviving or resulting corporation the
appraisal of such holders shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of such holders shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation notifying each of the
holders of any class or series of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded appraisal of such holders shares in
accordance with this subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such effective date. If no record date is
fixed and the notice is given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the surviving or
resulting corporation or any stockholder who has complied with subsections (a) and (d) of this
section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery demanding a determination of the value of
the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after
the effective date of the merger or consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw
such stockholders demand for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d) of this section
hereof, upon written request, shall be entitled to receive from the corporation surviving the
merger or resulting from the consolidation a statement setting forth the aggregate number of shares
not voted in favor of the merger or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after such stockholders written request for such a
statement is received by the surviving or resulting corporation or within 10 days after expiration
of the period for delivery of demands for appraisal under subsection (d) of this section hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be
made upon the surviving or resulting corporation, which shall within 20 days after such service
file in the office of the Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded payment for their shares
and with whom agreements as to the value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the surviving or resulting corporation,
the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the hearing of such
petition by registered or certified mail to the surviving or resulting corporation and to the
stockholders shown on the list at the addresses therein stated. Such notice shall also be given by
1 or more publications at least 1 week before the day of the hearing, in a
newspaper of general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and by publication shall
be approved by the Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
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(g) At the hearing on such petition, the Court shall determine the stockholders who have
complied with this section and who have become entitled to appraisal rights. The Court may require
the stockholders who have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery for notation thereon
of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such stockholder.
(h) After the Court determines the stockholders entitled to an appraisal, the appraisal
proceeding shall be conducted in accordance with the rules of the Court of Chancery, including any
rules specifically governing appraisal proceedings. Through such proceeding the Court shall
determine the fair value of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation, together with interest, if any, to be
paid upon the amount determined to be the fair value. In determining such fair value, the Court
shall take into account all relevant factors. Unless the Court in its discretion determines
otherwise for good cause shown, interest from the effective date of the merger through the date of
payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal
Reserve discount rate (including any surcharge) as established from time to time during the period
between the effective date of the merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior
to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of
this section and who has submitted such stockholders certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together with
interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock
forthwith, and the case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Courts decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as
the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may
order all or a portion of the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no stockholder who has
demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote
such stock for any purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that if no petition for
an appraisal shall be filed within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such
stockholders demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as provided in subsection
(e) of this section or thereafter with the written approval of the corporation, then the right of
such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right of any stockholder who has not
commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms offered upon the merger or consolidation
within 60 days after the effective date of the merger or consolidation, as set forth in subsection
(e) of this section.
(l) The shares of the surviving or resulting corporation to which the shares of such objecting
stockholders would have been converted had they assented to the merger or consolidation shall have
the status of authorized and unissued shares of the surviving or resulting corporation.
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