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THE MERGER AGREEMENT

 

The following is a summary of the material terms and conditions of the Merger Agreement. The description in this section and elsewhere in this Information Statement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A and is incorporated by reference into this Information Statement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. We encourage you to read the Merger Agreement carefully and in its entirety because it is the legal document that governs the Merger.

 

Explanatory Note Regarding the Merger Agreement

 

The Merger Agreement is included to provide you with information regarding its terms. Factual disclosures about the Company contained in this Information Statement or in the Company’s public reports filed with the SEC may supplement, update or modify the factual statements about the Company contained in the Merger Agreement. The representations, warranties and covenants made in the Merger Agreement by the Company, Parent and Merger Sub were qualified and subject to important limitations agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations and warranties contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to consummate the Merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement, rather than establishing as facts the matters described therein. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in the disclosure letter that the Company delivered to Parent (“Company Disclosure Letter”) and which disclosures are not reflected in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the Merger Agreement, and such subsequent developments or new information may not be included in this Information Statement.

 

The Merger

 

Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, Merger Sub, a wholly owned subsidiary of Parent, will merge with and into the Company, with the Company continuing as the Surviving Corporation. As a result of the Merger, the separate corporate existence of Merger Sub will cease, and the Company will become a wholly owned subsidiary of Parent. We sometimes refer to the Company after the consummation of the Merger as the Surviving Corporation. The certificate of incorporation and bylaws of the Company will be amended and restated in their entirety by virtue of the Merger to read substantially identically to the certificate of incorporation and bylaws of Merger Sub as in effect immediately prior to the Effective Time. The directors of Merger Sub immediately prior to the Effective Time will be the initial directors of the Surviving Corporation. The officers of the Company immediately prior to the Effective Time will be the initial officers of the Surviving Corporation.

 

Closing and Effective Time

 

The closing of the Merger will occur no later than the 2 ^nd business day following the satisfaction or waiver of all of the closing conditions set forth in the Merger Agreement or at such other date as the parties may agree in writing. The Merger will become effective upon the filing of a certificate of merger with the Delaware Secretary of State or at such subsequent time or date as the parties to the Merger Agreement may agree to in writing. We intend to complete the Merger as promptly as practicable, subject to satisfaction or waiver of the closing conditions. Although we currently expect to complete the Merger on or prior to the end of the second quarter of 2018, we cannot specify when or assure you that all conditions to the Merger will be satisfied or waived.

 

Per Share Merger Consideration

 

At the Effective Time, each issued and outstanding share of Company Common Stock (other than Excluded Shares) will be converted into the right to receive the Per Share Merger Consideration. All shares of Company Common Stock so converted will, at the Effective Time, no longer be outstanding and shall cease to exist, and each holder of such converted shares of Company Common Stock shall cease to have any rights with respect thereto, except for the right to receive the Per Share Merger Consideration.

 

 

Company Warrants

 

Each issued and outstanding vested Company Warrant that has an exercise price per share of Company Common Stock subject to such vested Company Warrant (solely to the extent vested) that is less than the Per Share Merger Consideration, shall be converted into the right to receive, with respect to each such share of Company Common Stock subject to such vested Company Warrant (solely to the extent vested), an amount equal to (x) the Per Share Merger Consideration, minus (y) the exercise price per share of Company Common Stock subject to such vested Company Warrant (solely to the extent vested). As of the Effective Time, all Company Warrants shall no longer be outstanding and shall cease to exist, and each holder of any such Company Warrants shall cease to have any rights with respect thereto, except, solely with respect to the vested Company Warrants contemplated by the foregoing sentence, the right to receive the applicable cash amount set forth in the foregoing sentence, net of withholding taxes and without interest.

 

Payment for the Shares

 

Prior to the Effective Time, Parent will select a Paying Agent for the payment of the Per Share Merger Consideration in respect of the Company Common Stock and, in connection therewith, will enter into an agreement with the Paying Agent in a form reasonably acceptable to the Company. At or promptly following the Effective Time, Parent will deposit, or cause to be deposited, with the Paying Agent the cash necessary to pay for the shares of Company Common Stock converted into the right to receive the Per Share Merger Consideration.

 

As soon as reasonably practicable after the Effective Time, but no later than two business days thereafter, the Surviving Corporation or Parent will cause the Paying Agent to mail to each person who was, immediately prior to the Effective Time, a holder of record of one or more Company Stock Certificates representing outstanding shares of Company Common Stock or Book-Entry Shares, which were converted into the right to receive the Per Share Merger Consideration, a letter of transmittal and instructions advising you how to surrender your Company Stock Certificates and Book-Entry Shares in exchange for the Per Share Merger Consideration.

 

Upon surrender of a Company Stock Certificate to the Paying Agent for cancelation in the case of Company Stock Certificates, or receipt of an “agent’s message” (or such other evidence or instruction of transfer, if any, as the Paying Agent shall reasonably request) in the case of Book-Entry Shares, as applicable, in each case together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Company Stock Certificate or Book-Entry Share shall be entitled to receive in exchange therefor the amount of cash into which the shares of Company Common Stock theretofore represented by such Company Stock Certificate or such Book-Entry Shares shall have been converted pursuant to the Merger Agreement, and any Company Stock Certificate so surrendered shall be canceled. Interest will not be paid or accrue on the cash payable upon surrender of any Company Stock Certificate or Book-Entry Share. YOU SHOULD NOT SURRENDER YOUR SHARES OF COMPANY COMMON STOCK WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR CERTIFICATES TO THE COMPANY.

 

After the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of shares of Company Common Stock that were outstanding immediately prior to the Effective Time.

 

If any cash deposited with the Paying Agent remains undistributed to holders of certificates for six months after the Closing Date, such cash will be delivered to Parent, upon demand. Any former stockholders of the Company entitled to payment of their Per Share Merger Consideration who have not complied with the share certificate exchange procedures in the Merger Agreement may thereafter only look to Parent for its claim to payment of the Per Share Merger Consideration, in each case, without interest thereon.

 

In the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, payment may be made to a person other than the person in whose name the Company Stock Certificate or Book-Entry Share so surrendered is registered only if, in the case of a Company Stock Certificate, if such Company Stock Certificate shall be properly endorsed or otherwise be in proper form for transfer or, in the case of a Book-Entry Share, a proper transfer instruction is presented, and in either case the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Company Common Stock or establish to the satisfaction of Parent that such tax has been paid or is not applicable.

 

 

The letter of transmittal will specify that delivery shall be effected, and risk of loss and title to the Company Stock Certificates shall pass, only upon delivery of the Company Stock Certificates to the Paying Agent, and shall be in such form and have such other provisions as are customary and reasonably acceptable to the Company and Parent. If any Company Stock Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Company Stock Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such reasonable and customary amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Company Stock Certificate, the Paying Agent will deliver in exchange for such lost, stolen or destroyed Company Stock Certificate, the Per Share Merger Consideration.

 

Delisting and Deregistration of Our Common Stock

 

The Company shall cooperate and consult with Parent and take, or cause to be taken, all actions, and do or cause to be done all things, necessary, proper or advisable on its part under applicable laws and (x) the rules and policies of the Toronto Stock Exchange to cause the delisting of the Company and of the Company Common Stock from the Toronto Stock Exchange as promptly as practicable after the Effective Time and the deregistration of the Company Common Stock under the Exchange Act as promptly as practicable after such delisting, (y) the rules and policies of OTC Markets Group to enable the Company Common Stock to no longer be quoted on OTC and (z) National Policy 11-206 of the CSA to cease to be a “reporting issuer” within the meaning of applicable Canadian securities Laws in all provinces of Canada.

 

Directors and Officers; Certificates of Incorporation; Bylaws

 

The directors of Merger Sub immediately prior to the Effective Time will be the directors of the surviving company, until the earlier of the resignation or removal or until their respective successors are duly elected and qualified. The officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.

 

Immediately following the Effective Time, the certificate of incorporation of the Company will be amended to be identical to the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, and, as so amended, will be the certificate of incorporation of the Surviving Corporation. Immediately following the Effective Time, the bylaws of the Surviving Corporation will be the bylaws of Merger Sub as in effect immediately prior to the Effective Time.

 

Treatment   of Company Equity Awards

 

Company Stock Options

 

At the Effective Time, each Company Stock Option, whether vested or unvested, outstanding immediately prior to the Effective Time shall be canceled, with the holder of such Company Stock Option becoming entitled to receive an amount in cash equal to (A) the excess, if any, of (1) the Per Share Merger Consideration minus (2) the exercise price per share of Company Common Stock subject to such Company Stock Option, multiplied by (B) the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time.

 

Each holder of vested Company Stock Options will be entitled to exercise his or her vested options prior to the Effective Time in accordance with the terms of the applicable governing documents, in which case such holder will be treated as a holder of Company Common Stock for purposes of the Merger Agreement.

 

Company Restricted Stock Units

 

At the Effective Time, each Company Restricted Stock Unit, whether vested or unvested, outstanding immediately prior to the Effective Time shall be canceled, with the holder of such Company Restricted Stock Unit becoming entitled to receive an amount in cash equal to (A) the Per Share Merger Consideration multiplied by (B) the number of shares of Company Common Stock subject to such Company Restricted Stock Unit immediately prior to the Effective Time.

 

 

Company Employee Share Purchase Plan

 

Effective as of immediately prior to the Effective Time, the Company Employee Share Purchase Plan (“ESPP”) will terminate, and after the date of the Merger Agreement and prior to the Effective Time, no offering periods or purchase periods will be commenced thereunder. The Company has not implemented the ESPP since its approval by stockholders. Thus, no Per Share Merger Consideration is payable under the ESPP.

 

Withholdings Rights

 

Each of the Surviving Corporation, Parent, the Company and the Paying Agent shall be entitled to deduct and withhold from any payment to be made pursuant to the Merger Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986 or under any provision of state, local or foreign tax law.  Amounts so withheld shall be treated for all purposes of the Merger Agreement as having been paid to the person in respect of which such deduction or withholding was made.

 

Stockholders Seeking Appraisal

 

The Merger Agreement provides that shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by any person who is entitled to demand and properly demands appraisal of such shares of Company Common Stock pursuant to, and who complies in all respects with, Section 262 of the DGCL shall not be converted into the right to receive the Per Share Merger Consideration, but instead shall entitle the holder thereof only to those rights expressly provided by Section 262 of the DGCL; provided , however , that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 of the DGCL, then the right of such holder to receive those rights under Section 262 of the DGCL shall cease and such appraisal shall be deemed to have been converted as of the Effective Time into, and shall represent only the right to receive, the Per Share Merger Consideration. The Company shall give prompt notice to Parent of any demands received by the Company for appraisal of any shares of Company Common Stock, and prior to the Effective Time, Parent shall have the right to participate in and control all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company may not, without the prior written consent of Parent, make, or agree to make, any payment with respect to, or settle or offer to settle, any such demands for appraisal or payment, or purport to waive any person’s failure to timely deliver a written demand for appraisal or to take any other action necessary to exercise appraisal rights under the DGCL.

 

The fair value of shares of Company Common Stock as determined in accordance with Delaware law may be more or less than (or the same as) the Per Share Merger Consideration to be paid to stockholders who choose not to exercise their appraisal rights. Stockholders who wish to exercise appraisal rights must follow specific procedures. Additional details on appraisal rights are described in “ Appraisal Rights ” beginning on page 53 of this Information Statement.

 

Representations and Warranties

 

The Merger Agreement contains a number of representations and warranties made by the Company, Parent and Merger Sub. The statements embodied in those representations and warranties were made for purposes of the contract among the parties and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of that contract. Certain representations and warranties were made as of the date of the Merger Agreement (or other dates specified in the Merger Agreement), may be subject to contractual standards of materiality different from those generally applicable to stockholders or may have been used for the purpose of allocating risk by the parties rather than establishing matters of fact. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts because they are qualified as described above. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the Merger Agreement, and these changes may or may not be fully reflected in the Company’s public disclosures. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Company, Parent and the Merger Sub that is contained in this Information Statement, as well as in the filings that the Company will make and has made with the SEC. The representations and warranties contained in the Merger Agreement may or may not have been accurate as of the date they were made and we make no assertion herein that they are accurate as of the date of this Information Statement.

 

 

In the Merger Agreement, the Company has made a number of representations and warranties that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement or by information in the confidential disclosure schedule we delivered in connection with the Company Disclosure Letter (as may or may not be specifically indicated in the text of the Merger Agreement). These representations and warranties relate to, among other things:

 

·

due organization, valid existence and good standing;

 

·

the Company’s capitalization as of a date certain prior to signing, including the particular number of outstanding shares of Company Common Stock, Company Warrants, Company Stock Options and Company Restricted Stock Units;

 

·

the Company’s subsidiaries and any equity interests outstanding of such subsidiaries;

 

·

authorization to enter into the Merger Agreement (subject to stockholder approval) and to consummate the transactions contemplated thereby, the enforceability of the Merger Agreement against the Company, and the Board’s approval and recommendation;

 

·

consents and approvals required in connection with the Merger Agreement and the consummation of the transactions contemplated thereby;

 

·

timeliness and accuracy of SEC reporting, accuracy of financial statements and no undisclosed liabilities;

 

·

information regarding the Company provided in this Information Statement;

 

·

conduct of business in the ordinary course and the absence of a Company Material Adverse Effect (as defined below) since December 31, 2016 to the date of the Merger Agreement;

 

·

tax matters;

 

·

labor matters and employee benefit plans;

 

·

title to properties and assets;

 

·

material contracts of the Company;

 

·

legal and regulatory proceedings;

 

·

compliance with applicable laws and holding of permits;

 

·

environmental matters;

 

·

intellectual property;

 

·

insurance;

 

·

no broker, finder or financial advisor fees other than with respect to those paid to Needham & Company;

 

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opinion of Needham & Company;

 

·

anti-corruption, sanctions and money-laundering matters;

 

·

affiliate transactions;

 

·

application of takeover laws; and

 

·

the Written Consent.

 

In the Merger Agreement, Parent and Merger Sub have made a number of representations and warranties that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

·

due organization, valid existence and good standing;

 

·

operations of Merger Sub;

 

·

authorization to enter into the Merger Agreement (subject to stockholder approval) and to consummate the transactions contemplated thereby and the enforceability of the Merger Agreement against Parent and Merger Sub;

 

 

·

lack of certain conflicts;

 

·

consents and approvals;

 

·

no broker, finder or financial advisor fees;

 

·

ownership of shares of Company Common Stock; and

 

·

availability of sufficient funds.

 

Company Material Adverse Effect Definition

 

Some of our representations and warranties are qualified by a Company Material Adverse Effect standard. For purposes of the Merger Agreement, “Company Material Adverse Effect” means any event, circumstance, occurrence, fact, condition, development, effect or change that (i) has had, or would reasonably be expected to have, a material adverse effect on the business, assets, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole or (ii) prevents, impairs or materially delays the consummation by the Company of the Merger and the other Transactions or the ability of the Company to perform its obligations under the Merger Agreement; provided , however , that the following events, circumstances, occurrences, facts, conditions, developments, effects or changes shall not be deemed to be a Company Material Adverse Effect:

 

·

general conditions in the industries in which the Company and the Company Subsidiaries operate;

 

·

general economic conditions or securities, credit, financial or other capital markets conditions (including changes generally in prevailing interest rates, currency exchange rates, credit markets and price levels or trading volumes), in each case in the United States or elsewhere in the world;

 

·

any change in applicable Law or GAAP (or interpretation or enforcement thereof);

 

·

the outbreak or escalation of hostilities, any acts of war or terrorism;

 

·

any hurricane, flood or earthquake or other natural disaster; and

 

·

the failure, in and of itself, of the Company to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics before, on or after the date of the Merger Agreement, or changes or prospective changes in the market price or trading volume of Company Common Stock or the credit rating of the Company (it being understood that the underlying facts giving rise or contributing to such failure or change may be taken into account in determining whether there has been a Company Material Adverse Effect if such facts are not otherwise excluded under the definition of Company Material Adverse Effect), except, in the case of any of the five bullets immediately above, if the Company and the Company Subsidiaries, taken as a whole, are disproportionately affected thereby as compared with other participants in the industries in which the Company and the Company Subsidiaries operate.

 

Conduct of the Company’s Business Pending the Merger

 

We have agreed that, from the date of the Merger Agreement until the Effective Time (or the earlier termination of the Merger Agreement), except (i) with Parent’s prior written consent or (ii) as set forth in the Company Disclosure Letter, the Company will, and will cause each of the Company Subsidiaries to, conduct its business in the ordinary course consistent with past practice and, to the extent consistent therewith, use commercially reasonable efforts to preserve its current business organization and preserve its present relationships with customers, suppliers, licensors, licensees, distributors and others having material business dealings with it.

 

In addition, from the date of the Merger Agreement until the Effective Time (or the earlier termination of the Merger Agreement), except (i) with Parent’s prior written consent or (ii) as set forth in the Company Disclosure Letter, the Company has agreed that it will not, and will not permit any of its subsidiaries to:

 

·

(i) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its equity interests, (ii) adjust, split, combine or reclassify any equity interests of the Company or any Company Subsidiary, or (iii) repurchase, redeem or otherwise acquire any equity interests of the Company or any Company Subsidiary, subject to limited exceptions;

 

 

·

accelerate or otherwise take any other action to cause, the vesting of any Company Stock Option or Company Restricted Stock Unit;

 

·

issue, deliver or sell any shares of its capital stock or other voting securities (including voting debt securities) or equity interests, any rights that give any person the right to receive any economic or voting interest of a nature accruing to the holders of Company Common Stock, other than the issuance of Company Common Stock upon the exercise of Company Stock Options or the settlement of Company Restricted Stock Units, in each case in accordance with the terms of the applicable plan, award or instrument as in effect on the date of the Merger Agreement;

 

·

amend, restate, supplement or modify its certificate of incorporation, bylaws or other comparable organizational documents (whether by merger, consolidation or otherwise);

 

·

merge or consolidate itself or any Company Subsidiary with any other person, or restructure, reorganize or completely or partially liquidate or dissolve itself or any Company Subsidiary;

 

·

acquire or agree to acquire any business or any corporation, partnership, limited liability company, joint venture, association or other business organization or division thereof or any other person;

 

·

except as required pursuant to the terms of any Company Benefit Plan or agreement or other written contract in effect on the date of the Merger Agreement, (i) establish, adopt, enter into, terminate or amend, or take any action to accelerate the vesting or payment of any compensation or benefits under, any Company Benefit Plan, Company Benefit Agreement or Collective Bargaining Agreement, (ii) grant to any current or former director, officer, employee, contractor or consultant any increase in compensation, bonus or fringe or other benefits, other than with respect to employees who are not directors or executive officers in the ordinary course of business consistent with past practice, pursuant to the annual merit-based compensation review process, (iii) grant to any current or former director, officer, employee, contractor or consultant any increase in change in control, retention, severance or termination pay, (iv) enter into any employment, consulting, change in control, retention or severance agreement with any current or former director, officer, employee, contractor or consultant, (v) hire or terminate the employment of any officer, employee, contractor or consultant (other than a termination for “cause”), other than with respect to employees, contractors or consultants who are not directors or executive officers in the ordinary course of business consistent with past practice, (vi) commence any offering periods or purchase periods under the ESPP, or (vii) allow any current or former director, officer, employee, contractor or consultant to begin participating in any benefit plan of the Company that provides change in control, severance or termination benefits, regardless of whether the terms of such Company benefit plan or agreement would otherwise allow such current or former director, officer, employee, contractor or consultant to begin participating in such Company benefit plan or agreement; provided , however , that the foregoing clauses (ii), (iii), (iv) and (vii) shall not restrict the Company or any Company Subsidiary from granting to any newly hired or promoted director, officer, employee, contract or consultant any increase in compensation, retention, severance or termination pay, or fringe or other benefits, or from entering into any employment, consulting, retention or severance agreement with any such newly hired or promoted person, in each case, in the ordinary course of business consistent with past practice;

 

·

make any change in financial accounting methods, principles or practices, except as may be required by GAAP or by law;

 

·

sell, lease, license or otherwise dispose of, or pledge, encumber or otherwise subject to any lien, other than certain permitted liens, any properties or assets of the Company and the Company Subsidiaries, except sales, leases or other dispositions of inventory and excess or obsolete properties or assets, or make any revaluation of any material asset, in each case, in the ordinary course of business consistent with past practice;

 

·

acquire any fee interest in real property, or enter into, terminate or amend, modify or waive any material rights claims or benefits under any material leases, licenses or occupancy agreements with respect to the use or occupancy by the Company or any Company Subsidiary of real property;

 

 

·

incur any debt or enter into any arrangement or  make any loans, advances or capital contributions to, or investments in, any other person, other than to or in the Company or any Company Subsidiary in the ordinary course of business consistent with past practice;

 

·

make or agree to make any capital expenditure or expenditures that, together with all other capital expenditures, are in excess of $250,000 in the aggregate;

 

·

(i) make, change or revoke any material tax election, (ii) settle or compromise any audit or proceeding relating to a material amount of taxes, (iii) file any amended tax return reflecting a material amount of taxes, (iv) consent to any extension of or waiver of the limitations period applicable to any tax claim or assessment, (v) make any change in any material tax accounting method, (vi) enter into any closing agreement relating to a material amount of taxes, (vii) change any material tax practice or procedure or (viii) incur any tax liability outside of the ordinary course of business;

 

·

enter into, terminate or modify or amend, or waive or release any material rights, claims or benefits under, any material contract, or any contract that, if existing on the date of the Merger Agreement, would have been a material contract;

 

·

settle, or offer or propose to settle (i) any proceeding against the Company or its directors or officers relating to the Merger Agreement or the transactions contemplated thereby and (ii) without limiting the foregoing clause (i), any proceeding involving or against the Company or any of the Company Subsidiaries other than any proceeding that (A) (x) requires payment by the Company or any of the Company Subsidiaries of cash in amounts that are reflected or reserved against in the most recent consolidated financial statements or (y) to the extent in excess of and/or not covered by clause (ii), does not, individually or in the aggregate, exceed $25,000, and (B) does not involve any injunctive or equitable relief or impose restrictions on the business activities of the Company or any Company Subsidiary;

 

·

sell, transfer, assign, lease, license, sublicense, encumber, abandon, allow to lapse (other than by expiration) or otherwise fail to maintain or grant liens, other than certain permitted liens, on any owned intellectual property, change any rights in or to material Company intellectual property, enter into any material contract related  to intellectual property except under limited circumstances or change, or amend, terminate, change, fail to exercise, waive, release or assign any material right or claim under any material intellectual property contracts;

 

·

enter into a material line of business outside of the business of the Company and the Company Subsidiaries conducted as of the date of the Merger Agreement;

 

·

enter into any contract or arrangement with any affiliate or any Key Stockholder (or any affiliate thereof);

 

·

terminate, amend or fail to comply with any of its obligations or covenants under the Purchase Agreement or enter into any contract or arrangement with any person that would or would reasonably be expected to affect the rights or obligations of the Company or Stillwater Holding Company LLC, or do anything that would reasonably be expected to prevent or delay closing the transactions contemplated by the Purchase Agreement; or

 

·

authorize, commit or agree to take, or adopt any resolutions of the Board in support of any of the actions listed above.

 

Required Stockholder Approval of the Merger

 

Under the Company’s certificate of incorporation and bylaws, as amended to date, any action required or permitted to be taken at a special stockholders’ meeting may be taken without a meeting, without prior notice and without a vote, if the action is taken by persons who would be entitled to vote at a meeting and who hold shares having voting power equal to not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote were present and voted. Under Delaware law and the Company’s certificate of incorporation and bylaws, as amended to date, the adoption of the Merger Agreement by the Company’s stockholders required the affirmative vote or written consent of the stockholders holding a majority of the outstanding shares of Company Common Stock entitled to vote on such matter.

 

 

Following the Board Recommendation, prior to the execution and delivery of the Merger Agreement, the Key Stockholders delivered a signed written consent adopting the Merger Agreement, effective immediately following the execution and delivery of the Merger Agreement. The Key Stockholders include, among others, Charles B. Wang, Nancy Li and other members of the Board and the entities holding shares of Company Common Stock over which such directors have voting and dispositive power. As of the Record Date, the Key Stockholders held 196,905,320 shares of Company Common Stock representing approximately 70.2% of the voting power of all outstanding shares of Company Common Stock. Accordingly, immediately upon the delivery and execution of Merger Agreement on March 26, 2018, the Company’s stockholders approved the adoption of the Merger Agreement in accordance with Section 228 and Section 251 of the DGCL. As a result, no further action by any stockholder of the Company is required under applicable law or the Merger Agreement to adopt the Merger Agreement or approve the transactions contemplated thereby, including the Merger, and the Company is not soliciting your vote for or consent to the adoption of the Merger Agreement and the approval of the transactions contemplated thereby, including the Merger, and the Company will not call a meeting of stockholders for purposes of voting on the adoption of the Merger Agreement and the approval of the transactions contemplated thereby, including the Merger.

 

Federal securities laws state that the Merger may not be consummated until 20 days after the date of mailing of this Information Statement to our stockholders. Therefore, notwithstanding the execution and delivery of the Written Consent, the Merger will not occur until that time has elapsed. We currently expect the Merger to be consummated prior to the end of the second quarter of 2018, subject to certain government regulatory reviews and approvals and the satisfaction or waiver of the other conditions to closing in the Merger Agreement. However, there can be no assurance that the Merger will be consummated in that time period, or at all.

 

This notice and Information Statement shall constitute notice to you from the Company of stockholder action by less than unanimous written consent required by Section 228(e) of the DGCL.

 

Efforts to Complete the Merger

 

Under the Merger Agreement, Parent, Merger Sub and the Company have agreed to:

 

·

use their respective reasonable best efforts to obtain as promptly as practicable any necessary consents, approvals, waivers and authorizations of, actions or nonactions by, and make, as promptly as reasonably practicable, all necessary filings and submissions with, any Governmental Entity or third party necessary to consummate and make effective the Transactions contemplated by the Merger Agreement as promptly as practicable;

 

·

cooperate with each other in (i) determining which filings are required to be made prior to the Effective Time with, and which material consents, approvals, permits, notices or authorizations are required to be obtained prior to the Effective Time from, Governmental Entities or third parties in connection with the execution and delivery of the Merger Agreement and the other documents related to the transaction and consummation of the transactions contemplated hereby and thereby and (ii) making all necessary filings and timely seek all necessary consents, approvals, permits, notices or authorizations;

 

·

use their respective reasonable best efforts to satisfy all the conditions to closing the Merger as promptly as reasonably practicable;

 

·

use their respective reasonable best efforts to take, or cause to be taken, all other actions and do, or cause to be done, and cooperate with each other in order to do, all other things reasonably necessary or appropriate to cause the Closing to occur and to consummate the transactions contemplated hereby as soon as practicable;

 

·

as soon as practicable and in no event later than 10 days after the Effective Time, prepare and file any pre-merger notification required under the HSR Act to be filed with the FTC and the DOJ; and

 

·

promptly provide any supplemental information requested or required by the FTC and the DOJ in connection with such notification in substantial compliance with the HSR Act and other applicable laws.

 

 

Transaction Litigation

 

Prior to the termination of the Merger Agreement, the Company must promptly advise Parent of any commenced or threatened proceeding of which the Company is aware against the Company or its directors relating to the Merger Agreement or the transactions contemplated thereby and shall keep Parent promptly and reasonably informed regarding any such proceeding.  The Company shall give Parent the opportunity, at Parent’s expense, to participate in the defense or settlement of any such proceeding and shall give due consideration to Parent’s views with respect thereto and no settlement of any such proceeding shall be agreed to without Parent’s prior written consent.

 

Conditions to the Merger

 

The following are some of the conditions that must be satisfied or, where permitted by applicable law, waived before the Merger may be consummated:

 

·

the Company stockholder adoption of the Merger Agreement having been obtained (which occurred when the Key Stockholders delivered the Written Consent on March 26, 2018 (as described in the section entitled “ The Merger Agreement—Required Stockholder Approval of the Merger ”);

 

·

this Information Statement having been mailed to the Company’s stockholders at least 20 days prior to the closing date and the consummation of the Merger;

 

·

any waiting period, as applicable, under the HSR Act, shall have expired or been terminated and all approvals or observance of any waiting or review period required for the consummation of the Merger, which includes the FAS Approval, to the extent required to be obtained or observed at or prior to the Effective Time, shall have been obtained or observed at or prior to the Effective Time; and

 

·

no Governmental Entity having jurisdiction over any of the parties shall have enacted, issued, promulgated, enforced or entered any Law or Order, whether temporary, preliminary or permanent, that prohibits, makes illegal, restrains, enjoins or otherwise prohibits the consummation of the Merger or the other transactions contemplated by the Merger Agreement.

 

The obligation of Parent and Merger Sub to effect the Merger are also subject to the satisfaction or waiver by Parent and Merger Sub of the following conditions:

 

·

certain  representations and warranties of the Company (regarding absence of certain changes or events; takeover statutes; and the Written Consent) shall be true and correct in all respects, in each case, as of the Effective Time as though made at the Effective Time (except to the extent such representation or warranty expressly relates to a specified date, in which case on and as of such specified date);

 

·

certain representations and warranties of the Company (regarding capitalization and brokers) shall be true and correct in all respects, in each case, as of date of the Merger Agreement and as of the Closing Date as though made on the Closing Date (except to the extent such representation or warranty expressly relates to a specified date, in which case on and as of such specified date), other than de minimis inaccuracies;

 

·

certain  representations and warranties of the Company (regarding organization, standing, and power; authority, execution and delivery and enforceability; and affiliate transactions) shall be true and correct in all material respects as of the date of the Merger Agreement and as of the Closing Date as though made on the Closing Date (except to the extent such representation or warranty expressly relates to a specified date, in which case on and as of such specified date);

 

·

all other representations and warranties of the Company shall be true and correct (disregarding all qualifications or limitations as to “materiality”, “Company Material Adverse Effect” and words of similar import set forth therein) as of the date of the date of the Merger Agreement and as of the Closing Date as though made on the Closing Date (except to the extent such representation or warranty expressly relates to a specified date, in which case on and as of such specified date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect;

 

·

the Company shall have performed or complied in all material respects with its obligations required to be performed or complied with by it under the Merger Agreement by the time of the Closing;

 

·

Parent having received a certificate, dated as of the Closing Date, signed by a duly elected officer of Parent certifying satisfaction of each of the above conditions;

 

 

·

since the date of the Merger Agreement, there shall not have occurred (or be occurring) any event, circumstance, occurrence, fact, condition, development, effect or change that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; and

 

·

the closing of the transactions contemplated by the Purchase Agreement shall have been consummated, without giving effect to any amendment, modification or waiver of any terms of the Purchase Agreement other than with the prior written consent of Parent.

 

The Company’s obligation to effect the Merger is further subject to the satisfaction or waiver by the Company of the following conditions:

 

·

the representations and warranties of Parent and Merger Sub shall be true and correct (disregarding all qualifications or limitations as to “materiality”, “Parent Material Adverse Effect” and words of similar import set forth therein) as of the date of the Merger Agreement and as of the Closing Date as though made on the Closing Date (except to the extent such representation or warranty expressly relates to a specified date, in which case on and as of such specified date), subject to specified exceptions;

 

·

Parent and Merger Sub shall have performed or complied with in all material respects all covenants and agreements required to be performed or complied with by them under the Merger Agreement at or prior to the Effective Time; and

 

·

the Company having received a certificate, dated as of the date of the Effective Time, signed by a duly elected officer of Parent certifying satisfaction of each of the above conditions.

 

No Solicitation of Acquisition Proposals; No Change of the Board Recommendation

 

Beginning on the date of the Merger Agreement, the Company, the Company’s subsidiaries and its and their respective representatives must:

 

·

immediately cease and terminate any solicitation, encouragement, discussions or negotiations with any persons with respect to an Acquisition Proposal or a potential Acquisition Proposal;

 

·

terminate access to any physical or electronic data rooms related to a possible Acquisition Proposal (other than a data room utilized solely by Parent, its affiliates and their respective representatives and not any third person); and

 

·

request that any such person and its representatives promptly return or destroy all confidential information concerning Company and the Company Subsidiaries theretofore furnished thereto by or on behalf of the Company or any Company Subsidiary, and destroy all analyses and other materials prepared by or on behalf of such person that contain, reflect or analyze such information.

 

From the date of the Merger Agreement until the Effective Time or, if earlier, the termination of the Merger Agreement, the Company, the Company’s subsidiaries and its and their respective representatives are not permitted to, directly or indirectly:

 

·

solicit, initiate, knowingly facilitate or knowingly encourage (including by way of furnishing non-public information or responding to any communication) any inquiries regarding, or the making, announcement or submission of any proposal or offer that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal;

 

·

conduct or engage in, enter into, continue or otherwise participate in any discussions or negotiations with, or furnish any information or data to, any person that is seeking to make, has made or, to the knowledge of Company, is considering making an Acquisition Proposal  or otherwise take such actions in connection with or for the purpose of encouraging or facilitating an Acquisition Proposal;

 

·

knowingly cooperate with, assist, or participate in any effort by, any person (or any representative of a person) that has made, is seeking to make, has informed the Company of any intention to make, or has publicly announced an intention to make, any proposal that constitutes, or would reasonably be expected to lead to, any Acquisition Proposal;

 

·

approve, endorse or recommend any Acquisition Proposal; or

 

·

enter into any letter of intent, agreement or agreement in principle, memorandum of understanding, or other similar agreement relating to or providing for any Acquisition Proposal or an acquisition agreement, merger agreement or similar definitive agreement providing for or with respect to any Acquisition Proposal.

 

 

Furthermore, neither the Board nor any committee thereof is permitted to:

 

·

fail to make the Board Recommendation;

 

·

change, qualify, withhold, withdraw or modify, or publicly propose to change, qualify, withhold, withdraw or modify in a manner adverse to Parent or Merger Sub, the Board Recommendation;

 

·

take any formal action or make any recommendation or public statement in connection with a tender offer or exchange offer;

 

·

fail to recommend against acceptance of any tender offer or exchange offer within 10 business days of the commencement of such offer;

 

·

adopt, approve, endorse or recommend, or publicly propose to approve or recommend to the stockholders of the Company an Acquisition Proposal;

 

·

agree to take any of the foregoing actions ;

 

·

authorize, cause or permit the Company or any Company Subsidiary to enter into any letter of intent, agreement or agreement in principle, memorandum of understanding, or other similar agreement relating to or providing for any Acquisition Proposal or an acquisition agreement, merger agreement or similar definitive agreement providing for or with respect to any Acquisition Proposal; or

 

·

grant any waiver, amendment or release under any standstill or similar agreement with respect to any Equity Interests of the Company or any Company Subsidiary, any confidentiality agreement or Takeover Statute.

 

If the Company, the Company’s subsidiaries or its or their respective representatives or the Board, as the case may be, take any of the above detailed actions, such action would constitute a breach of the Merger Agreement.

 

From the date of the Merger Agreement until the Effective Time or, if earlier, the termination of the Merger Agreement, Company must notify Parent as promptly as reasonably practicable (but in any event within twenty-four (24) hours) in the event that Company, its subsidiaries, affiliates or its or any of their respective representatives receives (i) an Acquisition Proposal or any amendment thereto or (ii) any request for discussions or negotiations, any request for access to the properties or books and records of the Company or any Company Subsidiary of which the Company or any Company Subsidiary or any of their respective Representatives is or has become aware, or any request for information relating to the Company or any Company Subsidiary, in each case, by any Person that could reasonably be expected to be considering making an Acquisition Proposal.

 

For the purposes of the Merger Agreement, “Acquisition Proposal” means any inquiry, proposal, indication of interest or offer from any person or group, other than Parent or Merger Sub or any of their respective subsidiaries, relating to:

 

·

any direct or indirect acquisition or purchase, in a single transaction or a series of related transactions, of (A) 15% or more of the assets (including capital stock of the Company Subsidiaries) of the Company and Company Subsidiaries, taken as a whole, or (B) 15% or more of the aggregate voting power of the capital stock, or of any class of capital stock, of the Company, or

 

·

any tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution, binding share exchange or similar transaction involving the Company that, if consummated, would result in any person or group (or the shareholders of any person) owning, directly or indirectly, 15% or more of the aggregate voting power of the capital stock, or of any class of capital stock, of the Company or of the surviving entity or the resulting direct or indirect parent of the Company or such surviving entity.

 

 

Termination of the Merger Agreement

 

The Merger Agreement may be terminated and abandoned at any time prior to the Effective Time:

 

·

by mutual written consent of Parent, Merger Sub and the Company;

 

·

by either Parent or the Company, if the Effective Time has not occurred on or before the Outside Date, except that (i) if all but certain specified conditions to closing the Merger are satisfied, then the Outside Date shall automatically be extended by a period of 90 calendar days and (ii) the right of Parent or the Company to terminate the Merger Agreement pursuant to the following shall not be available to such party if the failure to consummate the Merger is the result of a material breach of the Merger Agreement by such party;

 

·

by either the Company or Parent, if any Legal Restraint permanently preventing or prohibiting the consummation of the Merger shall be in effect and shall have become final and non-appealable; provided that the party seeking to terminate the Merger Agreement shall have complied with its certain specified obligations of such party in respect of any such Legal Restraint;

 

·

by Parent, if the Company breaches or fails to perform any of its representations, warranties or covenants contained in the Merger Agreement, which breach or failure to perform (i) would give rise to the failure of certain closing conditions applicable to Parent and Merger Sub set forth in the Merger Agreement not to be satisfied, and (ii) cannot or has not been cured prior to the earlier of 30 days after the giving of written notice to the Company of such breach and the Outside Date, provided that neither Parent or Merger Sub is then not in material breach of any representation, warranty or covenant under the Merger Agreement that would cause certain closing conditions not to be satisfied;

 

·

by Parent, (i) of the Board shall have effected a Company Adverse Recommendation Change, (ii) the Company shall have entered into, or publicly announced its intention to enter into, a Company Acquisition Agreement, (iii) the Company breaches or fails to perform certain of its obligations or (iv) the Company or the Board (or any committee thereof) shall have publicly announced its intention to do any of the foregoing; and

 

·

by Company, if Parent or Merger Sub breaches or fails to perform any of its representations, warranties or covenants contained in the Merger Agreement, which breach or failure to perform (i) would cause certain closing conditions applicable to the Company set forth in the Merger Agreement not to be satisfied, and (ii) cannot or has not been cured prior to the earlier of 30 days after the giving of written notice to Parent and/or Merger Sub of such breach and the Outside Date, provided that the Company is then not in material breach of any representation, warranty or covenant under the Merger Agreement that would cause certain closing conditions not to be satisfied .

 

Effect of Termination: Termination Fees

 

If the Merger Agreement is terminated in accordance with the terms thereof, the Merger Agreement shall become void and of no effect without liability of any party to the other party. Notwithstanding the foregoing, to the extent that any termination of the Merger Agreement results from the willful and material breach by a party of any representation or warranty set forth in the Merger Agreement or from the willful and material breach by a party of any covenant set forth in the Merger Agreement, then such party shall be liable for any damages incurred or suffered by the other party as a result of such willful and material breach.

 

Notwithstanding the preceding paragraph, if, after the execution of the Merger Agreement, (i) an Acquisition Proposal shall have been publicly disclosed or otherwise made or communicated to the Company or the Board (or any committee thereof) or made directly to the stockholders of Company, (ii) the Merger Agreement is terminated by the Company or Parent pursuant to the second or fifth bullet point in the preceding section entitled “ Termination of the Merger Agreement ” and (iii) within twelve (12) months of the date the Merger Agreement is terminated, the Company enters into a definitive agreement with respect to an Acquisition Proposal or consummates an Acquisition Proposal, then the Company shall pay to Parent, or as otherwise directed by Parent, the Termination Fee (as defined below) by wire transfer of immediately available funds concurrently with the earlier of entering into a definitive agreement with respect to an Acquisition Proposal or consummating an Acquisition Proposal.

 

The “Termination Fee” equals $6,220,000, representing approximately 2.5% of the equity value of the Merger; provided that if the Company fails to promptly pay the Termination Fee when due, and if Parent or Merger Sub commences an action in order to obtain such payment that results in a judgment against the Company, then the Company shall pay to Parent, together with the Termination Fee, (i) interest on the Termination Fee, as applicable, from the date the Termination Fee was required to be paid through the date of payment at a rate per annum equal to the prime rate as published in the Wall Street Journal, Eastern Edition, in effect on the date the Termination Fee was required to be paid and (ii) any out-of-pocket fees, costs and expenses (including reasonable legal fees) of Parent.

 

 

Indemnification, Expenses, Exculpation and Insurance

 

From and after the Effective Time, Parent shall cause the Surviving Corporation to fulfill and honor in all respects the obligations of the Company and Company Subsidiaries pursuant to (i) each indemnification agreement in effect between the Company or any Company Subsidiary and any individual who at the Effective Time is, or at any time prior to the Effective Time was, a Company Indemnified Party made available to Parent and (ii) any indemnification provision and any exculpation provision set forth in the Company Charter or Company Bylaws as in effect on the date of the Merger Agreement, in each case, of clauses (i) and (ii), to the fullest extent permitted under applicable Law.  From the Effective Time through the sixth (6 ^th ) anniversary of the date on which the Effective Time occurs, the certificate of incorporation and bylaws of the Surviving Corporation must contain, and Parent shall cause the certificate of incorporation and bylaws of the Surviving Corporation to so contain, provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of each Company Indemnified Party than are set forth in the Company Charter or Company Bylaws as in effect on the date of the Merger Agreement.

Prior to the Closing, the Company agreed to purchase a “tail” or “runoff” officers’ and directors’ liability insurance policy in respect of acts or omissions occurring prior to the Effective Time covering each such person currently covered by the Company’s officers’ and directors’ liability insurance policy on terms with respect to coverage, deductibles and amounts no less favorable than those of such policy in effect on the date of the Merger Agreement for the six (6) year period following the Closing and at a price not to exceed 250% of the Current Premium, and if such premiums for such insurance would at any time exceed 250% of the Current Premium, then Parent or the Surviving Corporation are obligated to cause to be maintained policies of insurance which, in the Surviving Corporation’s good faith determination, provide the maximum coverage available at an annual premium equal to 250% of the Current Premium. 

 

Employee Matters

 

For a period of one year following the Effective Time, Parent or the Surviving Corporation will provide to each individual who is employed by the Company or any Company Subsidiary immediately prior to the Effective Time (each, a “Company Employee”) total cash compensation that is substantially comparable in the aggregate (excluding any value attributable to equity-based compensation) to those provided to such Company Employee by the Company or the Company Subsidiaries immediately prior to the Effective Time and severance and other employee benefits that are substantially comparable in the aggregate to those provided to such Company Employee by the Company or the Company Subsidiaries immediately prior to the Effective Time.

 

With respect to any and all plans of Parent or the Surviving Corporation, including any “employee benefit plan” as defined in Section 3(3) of ERISA, maintained by Parent or its Subsidiaries (including any vacation, paid time-off and severance plans), for all purposes, including determining eligibility to participate, level of benefits, vesting, benefit accruals and early retirement subsidies, each Company Employee’s service with the Company or any Company Subsidiaries shall be treated as service with Parent or any of their respective Subsidiaries, without duplication. With respect to any welfare plan maintained by Parent or any of its subsidiaries in which any Company Employee is eligible to participate after the Effective Time, Parent shall, and shall cause the Surviving Corporation to, and shall use commercially reasonable efforts to cause any of their applicable respective third party insurance providers to, (i) waive all limitations as to preexisting conditions and exclusions and waiting periods and actively-at-work requirements with respect to participation and coverage requirements applicable to such employees and their eligible dependents and beneficiaries, to the extent such limitations were waived, satisfied or did not apply to such employees or eligible dependents or beneficiaries under the corresponding welfare Company Benefit Plan in which such employees participated immediately prior to the Effective Time and (ii) provide Company Employees and their eligible dependents and beneficiaries with credit for any co-payments and deductibles paid prior to the Effective Time in satisfying any analogous deductible or out-of-pocket maximum requirements to the extent applicable under any such plan.

 

If directed in writing by Parent at least 10 business days prior to the Closing Date, the Company shall use commercially reasonable efforts to amend the Company’s 401(k) plan (the “Company 401(k) Plan”) to provide that account balances of Company Employees who participate in the Company 401(k) Plan be fully and immediately vested and nonforfeitable as of the Closing Date, and immediately prior to the Closing, the Company shall use commercially reasonable efforts to terminate or cause the termination of the Company 401(k) Plan in compliance with applicable Law.

 

With respect to any Company Employees whose principal place of employment is outside of the United States, the above-listed obligations shall be modified to the extent necessary to comply with applicable laws of the foreign countries.

 

 

Section 16 Matters

 

The Company will make all reasonable efforts to cause any dispositions of the Company’s equity interests (including derivative securities) in connection with the Merger Agreement by each individual who is a director or officer of the Company subject to Section 16 of the Exchange Act, to be exempt under Rule 16b-3 under the Exchange Act.

 

Assignment

 

Neither the Merger Agreement nor any of the rights, interests or obligations under the Merger Agreement may be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, except that Parent and Merger Sub may assign any of their respective rights, interests and obligations under the Merger Agreement to any affiliate of Parent without the consent of any other party hereto, but no such assignment shall relieve Parent or Merger Sub of any of its obligations under the Merger Agreement. Any purported assignment without such consent shall be void. Subject to the preceding sentences, the Merger Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

 

Specific Performance

 

The Merger Agreement provides that irreparable damage would occur if any of the provisions of the Merger Agreement were not performed in accordance with its specific terms or were otherwise breached and that monetary damages, even if available, would not be an adequate remedy therefor. Accordingly, the parties to the Merger Agreement are entitled to seek an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement, this being in addition to any other remedy at law or in equity, and the parties to the Merger Agreement shall not be required to prove actual damages. 

 

Modification or Amendment

 

No amendments to the Merger Agreement can be made after the Merger Agreement has been executed without further stockholder approval and no amendment shall be made to the Merger Agreement after the Effective Time. The Merger Agreement may not be amended except in writing. Any agreement on the part of a party to any extension or waiver with respect to the Merger Agreement shall be valid only if set forth in an instrument in writing signed on behalf of such party.

 

Fees and Expenses

 

Except as otherwise provided in the Merger Agreement, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such fees or expenses, whether or not the Merger is consummated.

 

Governing Law

 

The Merger Agreement is governed by Delaware law.

 

Jurisdiction

 

The parties agreed to irrevocably and unconditionally submit to personal jurisdiction of the federal courts of the United States of America located in the State of Delaware and the Court of Chancery of the State of Delaware.

 

No Third - Party Beneficiaries

 

The Merger Agreement is not intended to and does not confer upon any person, other than the parties to the Merger Agreement and, as to certain provisions, the financing sources, any rights, remedies, obligations or liabilities under or by reason of the Merger Agreement, other than expressly set forth in the Merger Agreement and described under “ The Merger Agreement—Indemnification, Expenses, Exculpation and Insurance ”.

 

 

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

 

The following discussion is a summary of the material United States federal income tax consequences to holders of Company Common Stock whose shares are converted to cash in the Merger. This summary does not address any tax consequences of the Merger arising under the laws of any state, local or foreign jurisdiction or United States federal laws other than United States federal income tax laws. This discussion is based on the Code, applicable United States Treasury Regulations, published positions of the Internal Revenue Service (the “IRS”), court decisions and other applicable authorities, all as currently in effect as of the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect). This discussion does not address all aspects of United States federal income taxation that may be applicable to holders of Company Common Stock in light of their particular circumstances or holders of Company Common Stock subject to special treatment under United States federal income tax law, such as:

 

·

entities treated as partnerships for U.S. federal income tax purposes, S corporations or other pass-through entities;

 

·

holders who hold Company Common Stock as part of a straddle, hedging transaction, synthetic security, conversion transaction or other integrated investment or risk reduction transaction;

 

·

U.S. holders whose functional currency is not the U.S. dollar;

 

·

U.S. expatriates or former long-term residents of the U.S.;

 

·

holders who acquired Company Common Stock through the exercise of employee stock options or otherwise as compensation;

 

·

holders subject to the U. S. alternative minimum tax;

 

·

holders who exercised Company Warrants;

 

·

banks, insurance companies and other financial institutions;

 

·

regulated investment companies;

 

·

real estate investment trusts;

 

·

tax-exempt organizations;

 

·

brokers or dealers in securities or foreign currencies; and

 

·

traders in securities that elect mark-to-market treatment.

 

Holders of Company Common Stock should consult their own tax advisors to determine the particular tax consequences to them of the receipt of cash in exchange for shares of the Company Common Stock pursuant to the Merger (including the application and effect of any U.S. state, local or foreign income and other tax laws).

 

If a partnership (including any entity or arrangement treated as a partnership or other owner of a pass-through entity for U. S. federal income tax purposes) holds common stock, the tax treatment of a partner in the partnership or other pass-through entity generally will depend upon the status of the partner and the activities of the partnership. Partners in a partnership or other pass-through entity holding shares of the Company Common Stock should consult their tax advisors regarding the tax consequences of the Merger.

 

This discussion applies only to holders that hold their shares of Company Common Stock as a capital asset within the meaning of Section 1221 of the Code.

 

Tax Consequences of the Merger to U.S. Holders

 

The term “U.S. holder” means a beneficial owner of Company Common Stock that is, in each case for U.S. federal income tax purposes:

 

·

a citizen or individual resident of the United States;

 

 

·

a corporation or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof or the District of Columbia or any entity otherwise treated as a domestic corporation under the Code;

 

·

a trust if it (i) is subject to the primary supervision of a court within the United States and one or more United States persons (as defined under the Code) have the authority to control all substantial decisions of the trust, or (ii) has a valid election in effect under applicable U. S. Treasury Regulations to be treated as a United States person; or

 

·

an estate that is subject to United States federal income tax on its income regardless of its source.

 

The exchange of shares of Company Common Stock for cash in the Merger will generally be a taxable transaction to U.S. holders. In general, a U.S. holder of Company Common Stock are converted to cash in the Merger will recognize capital gain or loss for United States federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before deduction of any applicable withholding taxes) with respect to such shares and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis will generally equal the price the U.S. holder paid for such shares. Gain or loss will be determined separately for each block of Company Common Stock (i.e., shares of common stock acquired at the same cost in a single transaction) owned by a U.S. holder. Such gain or loss will generally be treated as long-term capital gain or loss if the U.S. holder’s holding period for the Company Common Stock exceeds one year at the time of the consummation of the Merger. Long-term capital gains of non-corporate U.S. holders are generally subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations. Capital gains recognized by certain individuals, trusts and estates also may be subject to a 3.8% federal Medicare contribution tax.

 

Tax Consequences of the Merger to Non-U.S. Holders

 

The term “non-U.S. holder” means a beneficial owner of Company Common Stock that is not a U.S. holder (or a partnership or other pass-through entity).

 

Subject to the discussion below under “— Backup Withholding ,” any gain realized by a non-U.S. holder upon the exchange of shares of Company Common Stock for cash in the Merger will not be subject to U.S. federal income tax unless:

 

·

such non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the consummation of the Merger and certain other conditions are met, in which case such non-U.S. holder may be subject to a 30% U.S. federal income tax (or a reduced rate under an applicable income tax treaty) on such non-U.S. holder’s gain net of certain U.S. source losses; or

 

·

the gain is effectively connected with a U.S. trade or business of such non-U.S. holder (and, if an applicable income tax treaty so provides, is attributable to a permanent establishment maintained by such non-U.S. holder in the United States), in which case such non-U.S. holder generally will be taxed in the same manner as a U.S. holder (as described above), except that if such non-U.S. holder is a foreign corporation, an additional branch profits tax may apply at a rate of 30% (or a reduced rate under an applicable income tax treaty).

 

Backup Withholding

 

A holder (or beneficial owner) may be subject to information reporting and backup withholding at a rate of 24% on any cash payments such holder receives in exchange for the Company Common Stock in the Merger. However, a holder (or beneficial owner) generally will not be subject to backup withholding if:

 

·

in the case of a U.S. holder who is not exempt (as described below), such U.S. holder furnishes a correct taxpayer identification number, certifies that it is not subject to backup withholding on a duly completed IRS Form W-9  included in the letter of transmittal and otherwise complies with all the applicable requirements of the backup withholding rules; or

 

·

such holder provides proof that it is otherwise exempt from backup withholding (including, in the case of a corporation, by providing a duly completed IRS Form W-9 claiming exempt status or, in the case of a non-U.S. holder, by providing a duly completed applicable IRS Form W-8 claiming foreign status).

 

 

 

SUPPORT AGREEMENTS

 

The following summary describes certain material provisions of the Support Agreements and is qualified in its entirety by reference to the form of the Support Agreements, a copy of which is attached to this Information Statement as Annex E and which is incorporated by reference into this Information Statement. This summary may not contain all of the information about the Support Agreements that is important to you. We encourage you to read the form of the Support Agreements carefully and in its entirety.

 

Background

 

Parent and Merger Sub have entered into the Support Agreements with the Key Stockholders, who as of March 26, 2018 owned in the aggregate 196,905,320 shares of Company Common Stock, constituting approximately 70.2% of the voting power of the outstanding shares of Company Common Stock, pursuant to which the Key Stockholders have agreed, on the terms and subject to the conditions set forth in the Support Agreements, to vote all their shares of Company Common Stock in favor of adoption of the Merger Agreement, approval of the Merger and the other transactions contemplated thereby. Concurrently with execution of the Support Agreements, the Key Stockholders executed and delivered the Written Consent.

 

Support   Covenants

 

Each of the Key Stockholders also agreed, while the Support Agreements remain in effect and subject to certain exceptions, to take the following actions with respect to their shares of Company Common Stock:

 

·

to vote in favor of adopting the Merger Agreement and the transactions contemplated thereby, including the Merger, to the extent that such matters are submitted for a vote at any meeting or are the subject of any written consent;

 

·

to vote against and not to consent to:

 

o

any Acquisition Proposal and any transactions contemplated thereby;

 

o

any action that, if so taken, would or would reasonably be expected to result in (1) a breach by the Company of any covenant, representation, warranty or other obligations of the Company set forth in the Merger Agreement, or (2) in the failure of any of the conditions to the obligations of Parent or Merger Sub to consummate the Merger and the other transactions contemplated by the Merger Agreement; or

 

o

any agreement, amendment, supplement, modification or restatement or other action or failure to act, to the extent such agreement, amendment, supplement, modification or restatement or other action or failure to act is intended or would reasonably be expected to prevent, interfere with, impair or delay the consummation of the Merger or the Transactions; and

 

·

not to enter into any agreement or commitment with any person the effect of which would violate, or prevent, impair or delay such Key Stockholder from performing such Key Stockholder’s obligations under, the provisions of its Support Agreement.

 

Standstill Covenants

 

The Key Stockholders are restricted, during the term of the Support Agreements, from:

 

·

selling, transferring, exchanging, gifting, tendering, pledging, encumbering, assigning or otherwise disposing of any shares of the Company Common Stock it beneficially owns or entering into a contract, option or other agreement to do so;

 

·

placing any such shares in a voting trust, granting any proxies with respect to such shares or entering into a voting agreement, power of attorney or voting trust with respect to such shares;

 

·

acquiring, offering to acquire or agreeing to acquire any material assets of the Company or any of its subsidiaries;

 

 

·

voting any security of the Company not to adopt the Merger Agreement or approve any other matter that if approved would reasonably be expected to prevent, interfere with or impair or delay the consummation of the Merger;

 

·

making any public announcement with respect to, or submit a proposal for, or offer for (with or without conditions) any extraordinary transaction involving the Company or the Company Subsidiaries;

 

·

forming, joining or in any way participating in a “group” (as defined in Section 13(d)(3) under the Exchange Act) in connection with any of the actions described in the immediately preceding five bullet points; and

 

·

agreeing (whether or not in writing) to take any of the actions referred to in the immediately preceding six bullet points.

 

Non-Solicitation   Obligations

 

From the effective date of his/her Support Agreement each Key Stockholder:

 

·

shall terminate all soliciting activities, discussions, negotiations, agreements or arrangements by or on behalf of such Key Stockholder with any person (other than the Company, Parent, Merger Sub or their respective representatives) regarding any proposal, expression of interest, request for information, or other communication that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal;

 

·

shall not, and shall cause its representatives not to, directly or indirectly:

 

o

participate in any discussions or negotiations with, or furnish any information or data to, any person that is seeking to make, has made or, to the knowledge of the Key Stockholder, is considering making an Acquisition Proposal or otherwise take such actions in connection with or for the purpose of encouraging or facilitating an Acquisition Proposal;

 

o

solicit, initiate, knowingly facilitate or knowingly encourage any inquiries regarding, or the making, announcement or submission of any proposal or offer that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal;

 

o

enter into any agreement with respect to an Acquisition Proposal, or approve, endorse or recommend any Acquisition Proposal; or

 

o

knowingly cooperate with, assist, or participate in any effort by, any person that has any intention to make, or would reasonably be expected to lead to, any Acquisition Proposal;

 

·

shall immediately notify Parent or its representatives in writing of such Key Stockholder’s receipt of any Acquisition Proposal or request for negotiations, and provide Parent with copies of all documents and other written communications received by such Key Stockholder setting forth the terms and conditions of such Acquisition Proposal; and

 

·

shall keep Parent informed on a reasonably prompt and current basis (in any event within twenty-four (24) hours) of the status of any such Acquisition Proposal received by such Key Stockholder (including the content and status of all material discussions and communications in respect thereof and any change or proposed change to the terms thereof).

 

Termination

 

The Support Agreements shall terminate, without further action by any of the parties hereto, immediately upon the earliest to occur of:

 

·

the termination of the Support Agreements by mutual written consent of Parent and each of the Key Stockholders;

 

·

the termination of the Merger Agreement in accordance with its terms; and

 

·

the consummation of the Merger.

 

 

APPRAISAL RIGHTS

The discussion of the provisions set forth below is not a complete summary regarding your appraisal rights under Delaware law and is qualified in its entirety by reference to the full text of Section 262 of the DGCL which is attached to this Information Statement as Annex C. Stockholders intending to exercise appraisal rights should carefully review Annex C in its entirety. Failure to follow any of the statutory procedures set forth in Section 262 of the DGCL may result in a loss of appraisal rights.

If you comply with the applicable statutory procedures of Section 262 of the DGCL, you may be entitled to appraisal rights under Section 262 of the DGCL. To exercise and perfect appraisal rights, a record holder of shares of Company Common Stock must follow the statutory procedures required by Section 262 of the DGCL.

Section 262 of the DGCL is reprinted in its entirety as  Annex C  to this Information Statement. Set forth below is a summary description of Section 262 of the DGCL. The following is intended as a brief summary of the material provisions of statutory procedures required to be followed by a stockholder to perfect appraisal rights under Section 262 of the DGCL. This summary, however, is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by reference to the full text of Section 262 of the DGCL, which is attached to this Information Statement as  Annex C . All references in Section 262 of the DGCL and this summary to “stockholder” are to the record holder of the shares of Company Common Stock as to which appraisal rights are asserted. Failure to comply with the procedures set forth in Section 262 of the DGCL may result in the loss of appraisal rights.

Under the DGCL, holders of shares of Company Common Stock who did not consent to the adoption of the Merger Agreement, who submit a demand for appraisal rights and follow the other procedures set forth in Section 262 of the DGCL and who do not thereafter withdraw their demand for appraisal of such shares or otherwise lose their appraisal rights, will be entitled to have their shares appraised by the Court, and to receive payment in cash of the “fair value” of those shares, together with interest, if any, to be paid upon the amount determined to be “fair value,” but exclusive of any element of value arising from the accomplishment or expectation of the Merger.

Under Section 262 of the DGCL, where a merger is approved by stockholders acting by written consent in lieu of a meeting of the stockholders, then, either the constituent corporation before the effective date of the merger, or the surviving corporation within ten 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 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 Section 262 of the DGCL. For purposes of determining the stockholders entitled to receive the notice required under Section 262 of the DGCL, each constituent corporation may fix in advance, a record date that shall not be more than ten days prior to the date notice is given, provided, that if the notice is given on or after the effective date of the merger, the record date shall be such effective date. If no record date is fixed in advance 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. This Information Statement constitutes such notice to the holders of shares of Company Common Stock as of March 26, 2018, the date fixed as the record date for such notice, and Section 262 of the DGCL is attached to this Information Statement as  Annex C . Any stockholder who wishes to exercise such appraisal rights or who wishes to preserve his, her or its right to do so should review the following discussion and  Annex C  carefully, because failure to timely and properly comply with the procedures specified may result in the loss of appraisal rights under the DGCL.

Holders of shares of Company Common Stock who desire to exercise their appraisal rights must submit to the Company a written demand for appraisal of their shares of Company Common Stock no later than 20 days after the date of mailing of this Information Statement (which includes the notice of written consent and appraisal rights), or ________, 2018. A demand for appraisal will be sufficient if it reasonably informs the Company of the identity of the stockholder and that such stockholder intends thereby to demand appraisal of such stockholder’s shares of Company Common Stock. If you wish to exercise your appraisal rights in respect of your shares of Company Common Stock, you must continue to hold such shares of Company Common Stock through the Effective Time. A stockholder who is the record holder of shares of Company Common Stock on the date the written demand for appraisal is made, but who thereafter transfers such shares prior to the Effective Time, will lose any right to appraisal in respect of such shares.

 

 

All written demands for appraisal of shares of Company Common Stock must be mailed or delivered to:

NeuLion, Inc. 
1600 Old Country Rd. 
Plainview, NY 11803 
Attention: Alexander G. Arato

Only a holder of record of shares of Company Common Stock is entitled to demand an appraisal of the shares registered in that holder’s name. Accordingly, to be effective, a demand for appraisal by a stockholder of shares of Company Common Stock (a) must be executed by, or in the name of, the record stockholder, fully and correctly, as the stockholder’s name appears on the stockholder’s stock certificate(s) (or, in the case of uncertificated shares, in the transfer agent’s records), (b) should specify the stockholder’s mailing address and the number of shares registered in the stockholder’s name, and (c) must state that the person intends thereby to demand appraisal of the stockholder’s shares in connection with the Merger. The demand cannot be made by the beneficial owner if he, she or it is not the record holder of the shares of Company Common Stock. The beneficial holder must, in such cases, have the registered owner, such as a bank, brokerage firm, trust or other nominee, submit the required demand in respect of those shares of Company Common Stock.  If you hold your shares of Company Common Stock through a bank, brokerage firm, trust or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm, trust or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the bank, brokerage firm, trust or the other nominee.  A person having a beneficial interest in shares held of record in the name of another person, such as a broker, bank, trust or other nominee, must act promptly to cause the record holder to follow properly and in a timely manner the steps necessary to perfect appraisal rights in accordance with Section 262 of the DGCL.

If shares of Company Common Stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made by the fiduciary in that capacity. 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, the demand should be executed by or for all joint owners. An authorized agent, including an authorized 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 or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner. A record owner, such as a bank, brokerage firm, trust or other nominee, who holds shares of Company Common Stock as a nominee for others, may exercise his, her or its right of appraisal with respect to the shares of Company Common Stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares of Company Common Stock as to which appraisal is sought. Where no number of shares of Company Common Stock is expressly mentioned, the demand will be presumed to cover all shares of Company Common Stock held in the name of the record owner. If you hold shares of Company Common Stock through a broker who in turn holds the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares of Company Common Stock must be made by or on behalf of the depository nominee and must identify the depository nominee as record holder.

On or within ten days after the Effective Time, the Company, as the Surviving Corporation in the Merger, must give written notice that the Merger has become effective to each of the Company’s stockholders, provided that if such notice is sent more than 20 days following the sending of this notice, such notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded an appraisal of such holder’s shares in accordance with Section 262 of the DGCL. At any time within 60 days after the Effective Time, any stockholder who has demanded an appraisal, but has not commenced an appraisal proceeding or joined a proceeding as a named party may withdraw the demand and accept the Per Share Merger Consideration for that stockholder’s shares of Company Common Stock by delivering to the Surviving Corporation a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written approval of the Surviving Corporation. Unless the demand is properly withdrawn by the stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party within 60 days after the Effective Time, no appraisal proceeding in the Court will be dismissed as to any stockholder without the approval of the Court, with such approval conditioned upon such terms as the Court deems just. If the Surviving Corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s right to appraisal in accordance with the proviso in the immediately preceding sentence, if the Court does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value of such stockholder’s shares as determined in any such appraisal proceeding, which value could be less than, equal to or more than the Merger Consideration.

 

 

Within 120 days after the Effective Time, but not thereafter, either the Surviving Corporation or any stockholder who has complied with the requirements of Section 262 of the DGCL and is entitled to appraisal rights under Section 262 of the DGCL may commence an appraisal proceeding by filing a petition in the Court demanding a determination of the fair value of the shares of Company Common Stock held by all stockholders entitled to appraisal. Upon the filing of the petition by a stockholder, service of a copy of such petition shall be made upon the Surviving Corporation. The Surviving Corporation has no obligation to file such a petition, has no present intention to file a petition and holders of shares of Company Common Stock should not assume that the Surviving Corporation will file a petition.

Accordingly, it is the obligation of the holders of shares of Company Common Stock to initiate all necessary action to perfect their appraisal rights in respect of shares of Company Common Stock within the time prescribed in Section 262 of the DGCL and the failure of a stockholder to file such a petition within the period specified in Section 262 of the DGCL could result in a loss of such stockholder’s appraisal rights. In addition, within 120 days after the Effective Time, any stockholder who has properly complied with the requirements of Section 262 of the DGCL will be entitled to receive from the Surviving Corporation, upon written request, a statement setting forth the aggregate number of shares of Company Common Stock not voted in favor of the Merger Agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within ten days after such written request has been received by the Surviving Corporation, or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later. A person who is the beneficial owner of shares of Company Common Stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal or request from the Surviving Corporation such statement.

If a petition for appraisal is duly filed by a stockholder or beneficial owner and a copy of the petition is delivered to the Surviving Corporation, then the Surviving Corporation will be obligated, within 20 days after receiving service of a copy of the petition, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares of Company Common Stock and with whom agreements as to the value of their shares of Company Common Stock have not been reached by the Surviving Corporation. After notice to stockholders who have demanded appraisal, if such notice is ordered by the Court, the Court is empowered to conduct a hearing upon the petition and to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to the appraisal rights provided by Section 262 of the DGCL. The Court may require stockholders who hold stock represented by certificates and who have demanded payment for their shares of Company Common Stock to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings, and if any stockholder fails to comply with that direction, the Court may dismiss the proceedings as to that stockholder. In addition, the Court will dismiss appraisal proceedings as to all shares of capital stock of the Company if, immediately before the Effective Time, such shares were listed on a national securities exchange unless (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of capital stock of the Company eligible for appraisal or (2) the value of the consideration provided in the Merger for such total number of shares entitled to appraisal exceeds $1 million. Upon application by the Surviving 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. After determination of the stockholders entitled to appraisal of their shares of Company Common Stock, the appraisal proceeding shall be conducted in accordance with the rules of the Court, including any rules specifically governing appraisal proceedings. Through such proceeding the Court will determine the fair value of the shares of Company Common Stock, as of the Effective Time after taking into account all relevant factors exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. When the fair value has been determined, the Court will direct the payment of such value upon surrender of the certificates representing shares of Company Common Stock, in the case of holders of shares represented by certificates, and forthwith, in the case of holders of uncertificated shares. Unless the Court in its discretion determines otherwise for good cause shown, interest from the Effective Time 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 Time and the date of payment of the judgment.

 

 

You should be aware that an investment banking opinion as to the fairness from a financial point of view of the consideration to be received in a sale transaction, such as the Merger, is not an opinion as to fair value under Section 262 of the DGCL.  Although we believe that the Per Share Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Court and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Per Share Merger Consideration.  Moreover, we do not anticipate offering more than the Per Share Merger Consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262 of the DGCL, the “fair value” of a share of Company Common Stock is less than the Per Share Merger Consideration. In determining “fair value,” the Court is required to take into account all relevant factors. In  Weinberger v. UOP, Inc. , the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which were known or which could be ascertained as of the date of the merger which throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In  Cede & Co. v. Technicolor, Inc. , the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In  Weinberger , the Delaware Supreme Court also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” In addition, the Courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting stockholder’s exclusive remedy.

Costs of the appraisal proceeding (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Court and imposed upon the parties participating in the appraisal proceeding by the Court, as it deems equitable in the circumstances. Upon the 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 used in the appraisal proceeding, to be charged pro rata against the value of all shares of Company Common Stock entitled to appraisal. Any stockholder who demanded appraisal rights will not, after the Effective Time, be entitled to vote shares of Company Common Stock subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares of Company Common Stock, other than with respect to payment of a dividend or distribution as of a record date prior to the Effective Time. If no petition for appraisal is filed within 120 days after the Effective Time, or if the stockholder otherwise fails to perfect, successfully withdraws or loses such holder’s right to appraisal, then the right of that stockholder to appraisal will cease and that stockholder’s shares of Company Common Stock will be deemed to have been converted at the Effective Time into the right to receive the Per Share Merger Consideration. A stockholder will fail to perfect, or effectively lose, the right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time. In addition, as indicated above, a stockholder may withdraw his, her or its demand for appraisal in accordance with Section 262 of the DGCL at any time within 60 days after the Effective Time (or thereafter with the written approval of the Company) and accept the Per Share Merger Consideration offered pursuant to the Merger Agreement. Once a petition for appraisal has been filed with the Court, however, the appraisal proceeding may not be dismissed as to any stockholder of the Company without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, that such restriction shall not affect the right of any stockholder who has not commenced an appraisal proceeding or proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the Per Share Merger Consideration, within 60 days after the Effective Time. Failure to comply with all of the procedures set forth in Section 262 of the DGCL may result in the loss of a stockholder’s statutory appraisal rights.
    

In view of the complexity of Section 262 of the DGCL, the Company’s stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors . To the extent that there are any inconsistencies between the foregoing summary and Section 262 of the DGCL, the DGCL shall govern.

 

 

 

The closing sale price of the Company Common Stock on the TSX on March 23, 2018, which was the last trading day prior to the announcement of the Merger Agreement, was CDN$ 0.50. On __, 2018, the last practicable trading day before the date of this Information Statement, the closing price of the common stock on the TSX was $__. As of such date, there were _______ shares of Company Common Stock issued and outstanding.

 

As of __, 2018, the Company had approximately [__] holders of record of Common Stock. The number of holders is based upon the actual number of holders registered in our records at such date and excludes holders of shares in “street name” or persons, partnerships, associations, corporations or other entities identified in security positions listings maintained by depositary trust companies.

 

We have not declared or paid cash dividends on the Company Common Stock during the periods indicated above. Under the terms of the Merger Agreement, during the period from the date of the Merger Agreement until the Effective Time or earlier termination of the Merger Agreement, the Company is prohibited from declaring, setting aside or paying any dividend or distribution on any shares of our capital stock or any equity interests or obligations convertible into or exchangeable for any shares of our capital stock or equity interests.

 

 

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