UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Rule 14a-101)
Filed by the
Registrant
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Filed by a Party other than the
Registrant
o
Check the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to
Rule 240.14a-12
THOMAS WEISEL PARTNERS GROUP, INC.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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One Montgomery Street
San Francisco, California 94104
November 7,
2007
Dear Shareholder:
After careful consideration, the board of directors of Thomas
Weisel Partners Group, Inc. has unanimously approved the
acquisition by Thomas Weisel Partners Group, Inc. of Westwind
Capital Corporation. If the transaction is completed, Westwind
Capital Corporation common shares and Class A common shares
will be acquired in exchange for an aggregate of $45,000,000 in
cash and 7,009,112 shares of Thomas Weisel Partners common
stock (including shares of a Canadian subsidiary of Thomas
Weisel Partners that are exchangeable for shares of Thomas
Weisel Partners common stock).
You are cordially invited to attend a Special Meeting of
Shareholders of Thomas Weisel Partners Group, Inc., which will
be held on December 14, 2007 at 8:00 a.m., Pacific
time. The meeting will take place at our corporate headquarters
at One Montgomery Street, 35th Floor, San Francisco,
California 94104. At the meeting, we will vote upon the issuance
of shares of Thomas Weisel Partners common stock in connection
with the transaction.
All holders of Thomas Weisel Partners common stock as of
November 6, 2007 will be entitled to vote at the special
meeting. Your vote is very important to us and your shares
should be represented and voted, whether or not you plan to
personally attend the special meeting.
Sincerely,
Thomas W. Weisel
Chairman and Chief Executive Officer
YOUR VOTE IS VERY IMPORTANT.
PLEASE PROMPTLY SUBMIT YOUR PROXY BY TELEPHONE, INTERNET OR
MAIL.
One Montgomery Street
San Francisco, California 94104
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
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Time & Date:
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Friday, December 14, 2007, at 8:00 a.m., Pacific time
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Location:
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One Montgomery Street, 35th Floor, San Francisco,
California (enter at 120 Kearny Street)
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Items of Business:
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1. To consider and vote on a proposal to approve the issuance,
which we refer to in the attached proxy statement as the Thomas
Weisel Partners share issuance, of shares of Thomas Weisel
Partners Group, Inc. common stock (and any shares issuable in
respect of shares of a Canadian subsidiary of Thomas Weisel
Partners that are exchangeable for shares of Thomas Weisel
Partners common stock) as contemplated by the arrangement
agreement, dated as of September 30, 2007, by and among Thomas
Weisel Partners Group, Inc., TWP Acquisition Company (Canada),
Inc., Westwind Capital Corporation and Lionel Conacher, as
shareholders representative, which agreement is attached
as Annex A to the attached proxy statement, and the plan of
arrangement referred to in that agreement, substantially in the
form attached as Annex B to the attached proxy statement.
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2. To conduct any other business that properly comes before the
special meeting and any adjournment or postponement of the
special meeting, including any proposal to adjourn the meeting
to solicit additional proxies in favor of the foregoing proposal.
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Record Date for Voting:
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November 6, 2007
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Inspection of List of
Shareholders of Record:
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A list of the shareholders of record as of November 6, 2007
will be available for inspection during ordinary business hours
at the office of our General Counsel and Secretary, One
Montgomery Street, 37th Floor, San Francisco,
California 94104, from December 4, 2007 to
December 14, 2007, as well as at the special meeting.
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Additional Information:
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Additional information regarding the matters to be acted on at
the special meeting is included in the accompanying proxy
statement.
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By Order of the Board of Directors,
Mark P. Fisher
Secretary
November 7, 2007
One Montgomery Street
San Francisco, California 94104
PROXY STATEMENT
SPECIAL MEETING OF
SHAREHOLDERS
November 7,
2007
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Thomas
Weisel Partners Group, Inc., a Delaware corporation (which we
refer to as Thomas Weisel Partners, the
firm, we, our or
us and when so referring include, as applicable, our
predecessor limited liability company), to be used at our
special meeting of shareholders to be held on Friday,
December 14, 2007, at 8:00 a.m., Pacific time, and at
any adjournments or postponements of the special meeting. This
proxy statement and the accompanying form of proxy is first
being mailed to shareholders of Thomas Weisel Partners on or
about November 9, 2007 and is dated November 7, 2007.
You should not assume that the information contained in this
proxy statement is accurate as of any date other than that date,
and the mailing of this proxy statement to you does not create
any implication to the contrary.
The information concerning Thomas Weisel Partners contained or
incorporated by reference in this proxy statement, including the
attached annexes, has been provided by Thomas Weisel Partners.
The information concerning Westwind Capital Corporation, or
Westwind, contained in this proxy statement, including
Annex D, has been provided to Thomas Weisel Partners by
Westwind. The information concerning Thomas Weisel Partners
after the completion of the combination of the two companies and
the information used to derive the pro forma financial
information has been provided by Thomas Weisel Partners, and is
based in part on information provided to Thomas Weisel Partners
by Westwind.
You should rely only on the information contained or
incorporated by reference in this proxy statement to vote your
securities at the special meeting. No person is authorized to
give any information or to make any representation not contained
in this proxy statement and, if given or made, that information
or representation should not be relied upon as having been
authorized.
TABLE OF
CONTENTS
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Page
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iii
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iii
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1
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4
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79
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82
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84
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84
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84
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84
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Annex A
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Arrangement Agreement
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A-1
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Annex B
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Form of Plan of Arrangement
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B-1
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Annex C
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Opinion of Keefe, Bruyette & Woods, Inc.
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C-1
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Annex D
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Westwind Capital Corporation Financial Statements
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D-1
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ii
REPORTING
CURRENCIES AND ACCOUNTING PRINCIPLES
The financial information regarding Westwind, including
Westwinds audited consolidated financial statements,
Westwinds unaudited consolidated financial statements and
the summaries of those consolidated financial statements,
contained in this proxy statement are reported in Canadian
dollars, unless otherwise indicated, and have been prepared in
accordance with Canadian generally accepted accounting
principles, or Canadian GAAP, which (in the case of the
consolidated financial statements of Westwind) conform in all
material respects to U.S. generally accepted accounting
principles, or U.S. GAAP. See Note 10 of the Westwind
consolidated financial statements set forth in Annex D to
this proxy statement.
The financial information regarding Thomas Weisel Partners,
including Thomas Weisel Partners audited consolidated
financial statements, Thomas Weisel Partners unaudited
financial statements, the summaries of those financial
statements and Thomas Weisel Partners pro forma financial
statements, contained or incorporated by reference in this proxy
statement are reported in U.S. dollars and have been
prepared in accordance with U.S. GAAP.
EXCHANGE
RATE INFORMATION
The following table sets forth exchange rate information
expressed in terms of U.S. dollars per Canadian dollar at
the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York.
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At Period
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Month of
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End
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High
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Low
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November 2007 (through November 6)
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1.0819
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1.0819
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1.0530
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October 2007
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1.0531
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1.0531
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0.9998
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September 2007
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1.0041
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1.0041
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0.9482
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August 2007
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0.9470
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0.9527
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0.9290
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July 2007
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0.9384
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0.9641
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0.9355
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June 2007
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0.9404
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0.9453
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0.9322
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May 2007
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0.9300
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0.9329
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0.8980
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April 2007
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0.9035
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0.9035
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0.8633
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March 2007
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0.8673
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0.8673
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0.8467
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February 2007
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0.8547
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0.8631
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0.8437
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January 2007
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0.8480
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0.8586
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0.8457
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At Period
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Year Ended December 31,
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End
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Average Rate(1)
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High
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Low
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2007 (through November 6)
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1.0819
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0.9291
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1.0819
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0.8437
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2006
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0.8582
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0.8847
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0.9100
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0.8528
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2005
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0.8579
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0.8282
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0.8690
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0.7872
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2004
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0.8310
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0.7719
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0.8493
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0.7158
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2003
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0.7738
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0.7205
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0.7738
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0.6349
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2002
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0.6329
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0.6368
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0.6619
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0.6200
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(1)
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The average of the noon buying rates on the last day of each
month during the period.
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All dollar figures herein, other than financial information of
Westwind, are in U.S. dollars unless otherwise indicated.
iii
QUESTIONS
AND ANSWERS ABOUT THE TRANSACTION AND THE SPECIAL
MEETING
The following questions and answers are intended to address
briefly some commonly asked questions regarding the transactions
contemplated by the arrangement agreement and the special
meeting. These questions and answers may not address all
questions that may be important to you as a Thomas Weisel
Partners shareholder. Please refer to the Summary
beginning on page 4 and the more detailed information
contained elsewhere in this proxy statement, the annexes to this
proxy statement and the documents referred to in this proxy
statement, which you should read carefully. See Additional
Information beginning on page 84.
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Q.
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What is Thomas Weisel Partners proposing?
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A.
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Thomas Weisel Partners is proposing to indirectly acquire all of
Westwinds outstanding shares, with Westwind thereby
becoming an indirect subsidiary of Thomas Weisel Partners. The
transaction will be carried out pursuant to an arrangement
agreement, dated September 30, 2007, or the arrangement
agreement, by and among Thomas Weisel Partners, TWP Acquisition
Company (Canada), Inc., an indirect wholly-owned subsidiary of
Thomas Weisel Partners, or Canadian Sub, Westwind and Lionel
Conacher, as shareholders representative, and the plan of
arrangement under Section 182 of the Ontario Business
Corporations Act, or the OBCA, referred to in the arrangement
agreement. Under the plan of arrangement, Canadian Sub will
acquire all of the outstanding Westwind common shares and
Class A common shares in exchange for an aggregate of
$45,000,000 in cash and 7,009,112 shares of Thomas Weisel
Partners common stock (including exchangeable shares of Canadian
Sub that are exchangeable for shares of Thomas Weisel Partners
common stock, or the exchangeable shares).
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When the term transaction is used throughout this
proxy statement, it refers collectively to the transactions
contemplated by the arrangement agreement and the plan of
arrangement, whereby, among other things, Thomas Weisel Partners
will become, indirectly through its subsidiaries, the sole
beneficial holder of the Westwind common shares and Class A
common shares outstanding after giving effect to the arrangement.
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Q.
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Why am I receiving this proxy statement?
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A.
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We are holding a special meeting of our shareholders in order to
obtain the approval necessary to issue Thomas Weisel Partners
common stock in connection with the transaction (including the
Thomas Weisel Partners common stock that will be delivered upon
exchange of the exchangeable shares).
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Q.
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When do you expect the transaction to be completed?
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A.
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It is currently anticipated that the transaction will close in
January 2008.
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Q.
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When and where is the special meeting?
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A.
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The special meeting will be held on December 14, 2007 at
8:00 a.m., Pacific time, at our corporate headquarters at
One Montgomery Street, 35th Floor, San Francisco,
California 94104.
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Q.
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Who can vote at the special meeting?
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A.
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We have fixed the close of business on November 6, 2007 as
the record date for the special meeting or any postponement or
adjournment thereof, and only holders of record of Thomas Weisel
Partners common stock on the record date are entitled to vote at
the special meeting.
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Q.
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What am I being asked to vote on at the special meeting?
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A.
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You are being asked to consider and vote on a proposal to
approve the issuance of shares of Thomas Weisel Partners common
stock (including the Thomas Weisel Partners common stock that
will be delivered upon exchange of the exchangeable shares) as
contemplated by the arrangement agreement and the plan of
arrangement.
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Q.
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Why are exchangeable shares being offered in the
transaction?
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A.
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The exchangeable share structure is designed to provide an
opportunity for shareholders of Westwind to make a tax election
to defer income tax on certain capital gains otherwise arising
on exchange of their Westwind shares. Each exchangeable share is
substantially the economic equivalent of a share of Thomas
Weisel Partners
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common stock and generally is exchangeable at any time on a
one-for-one basis for a share of Thomas Weisel Partners common
stock. In addition, each holder of an exchangeable share will,
through a trust agreement and Thomas Weisel Partners special
voting preferred stock, effectively have the ability to cast
votes along with holders of Thomas Weisel Partners common stock.
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Q.
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What percentage of the combined company will the shareholders
of Westwind own?
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A.
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Upon completion of the transaction, we estimate that
Westwinds former shareholders will own approximately 21.5%
of the outstanding Thomas Weisel Partners common stock
(including shares issuable upon exchange of exchangeable shares)
based on the number of shares of Thomas Weisel Partners common
stock outstanding on November 6, 2007.
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Q.
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What vote is required for Thomas Weisel Partners
shareholders to approve the proposal?
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A.
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A majority of the votes cast for or
against the proposed Thomas Weisel Partners share
issuance must be voted for the proposal for it to
pass.
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Q.
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How does Thomas Weisel Partners board of directors
recommend that I vote?
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A.
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Our board of directors has unanimously approved the transaction
and unanimously recommends that you vote FOR the
proposal to authorize the Thomas Weisel Partners share issuance.
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Q.
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How do I vote?
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A.
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You may vote by marking, signing and returning the enclosed
proxy card, or you can vote through the Internet or by
telephone. If you properly submit your proxy by any of these
methods and you do not subsequently revoke your proxy, your
shares will be voted in accordance with your instructions. If
you sign your proxy card but do not mark it to give voting
instructions, your shares will be voted as follows:
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FOR the proposal to authorize the Thomas Weisel
Partners share issuance; and
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otherwise in accordance with the judgment of the person voting
the proxy on any other matter properly brought before the
special meeting and any adjournment or postponement thereof,
including any proposal to adjourn the meeting to solicit
additional proxies in favor of the foregoing proposal.
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Q.
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How can I change or revoke my vote?
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A.
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A proxy submitted through the Internet or by telephone may be
revoked by:
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executing a later-dated proxy card that is received
prior to 11:59 p.m., New York City time, on
December 13, 2007;
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subsequently submitting a new proxy through
the Internet or by telephone prior to 11:59 p.m., New York
City time, on December 13, 2007; or
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attending the special meeting and voting in person.
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A proxy submitted by proxy card may be revoked before the vote
is cast by the designated proxy by:
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giving written notice to our Secretary &
General Counsel at One Montgomery Street, 37th Floor,
San Francisco, California 94104;
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subsequently submitting another proxy bearing a
later date; or
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attending the special meeting and voting in person.
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Q.
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If my shares are held in street name by my
broker, bank or other nominee, will my broker, bank or other
nominee vote my shares for me?
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A.
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Your broker, bank or other nominee will only be permitted to
vote your shares if you instruct your broker, bank or other
nominee how to vote. You should follow the procedures provided
by your broker, bank or other nominee regarding the voting of
your shares. If you do not instruct your broker, bank or other
nominee to vote your shares, your shares will not be voted.
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Q.
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What do I do if I receive more than one proxy or set of
voting instructions?
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A.
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If you also hold shares in street name, directly as
a record holder or otherwise, you may receive more than one
proxy and/or set of voting instructions relating to the special
meeting. These should each be voted and/or returned separately
as described elsewhere in this proxy statement in order to
ensure that all of your shares are voted.
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Q.
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Are there risks I should consider in deciding whether to vote
for the Thomas Weisel Partners share issuance?
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A.
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Yes. A number of risk factors that you should consider in
connection with the transaction are described in the section of
this proxy statement entitled Risk Factors beginning
on page 8.
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Q.
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Who can help answer my other questions?
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A.
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If you have additional questions about the transaction, need
assistance in submitting your proxy or voting your shares of
common stock, or need additional copies of the proxy statement
or the enclosed proxy card, please call our Shareholder Services
Department at
(415) 364-2500.
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3
The following summary highlights selected information in this
proxy statement and may not contain all the information that may
be important to you. Accordingly, we encourage you to read
carefully this entire proxy statement, its annexes and the
documents referred to in this proxy statement. Each item in this
summary includes a page reference directing you to a more
complete description of that topic. See Additional
Information beginning on page 84.
Thomas
Weisel Partners Group, Inc.
Thomas Weisel Partners is an investment bank specializing in the
growth sectors of the economy. Thomas Weisel Partners provides
investment banking, brokerage, research and asset management
services tailored to meet the particular needs of our clients.
Thomas Weisel Partners principal executive offices are
located at One Montgomery Street, San Francisco, California
94104 and its telephone number is
(415) 364-2500.
Westwind
Capital Corporation
Westwind is an independent, institutional investment banking
firm focused on growth companies, particularly in the energy and
mining sectors. Westwinds services include investment
banking services, including capital-raising transactions and
mergers and acquisitions advisory services, equity trading and
equity research on Canadian and U.K. publicly-listed companies.
Westwinds registered office is located at 70 York Street,
Toronto, Ontario Canada M5J 1S9, and its telephone number is
(416) 815-0888.
TWP
Acquisition Company (Canada), Inc.
TWP Acquisition Company (Canada), Inc., or Canadian Sub, is an
indirect wholly-owned subsidiary of Thomas Weisel Partners
organized under the Ontario Business Corporations Act on
September 27, 2007 for the sole purpose of participating in
the transaction. Canadian Subs registered office is
located at 199 Bay Street, Suite 5300 Commerce Court West,
Toronto, Ontario Canada M5L 1B9 and its telephone number is
(415) 364-2500.
TWP
Holdings Company (Canada), ULC
TWP Holdings Company (Canada), ULC, or CallRightCo, is a direct
wholly-owned subsidiary of Thomas Weisel Partners, organized
under the laws of the Province of Nova Scotia on
September 28, 2007 for the sole purpose of participating in
this transaction. CallRightCo will hold the call rights related
to the exchangeable shares as well as the voting shares of
Canadian Sub. CallRightCos registered office is located at
Suite 900, 1959 Upper Water Street, P.O. Box 997,
Halifax, Nova Scotia Canada B3J 3N2 and its telephone number is
(415) 364-2500.
The
Transaction (Page 28)
Thomas Weisel Partners, Canadian Sub, Westwind and the
shareholders representative have entered into an
arrangement agreement, dated as of September 30, 2007,
under which Westwind will become an indirect subsidiary of
Thomas Weisel Partners. The arrangement agreement provides that,
subject to the satisfaction of certain conditions, Canadian Sub
will acquire all of the outstanding common shares and
Class A common shares of Westwind.
Westwind shareholders will receive from Canadian Sub for the
Westwind common shares and Class A common shares held by
them an amount in cash and shares of Thomas Weisel Partners
common stock or exchangeable shares equal to their pro rata
portion (based on their ownership of common shares and
Class A common shares of Westwind) of the aggregate of
$45,000,000 in cash and 7,009,112 shares of Thomas Weisel
Partners common stock or exchangeable shares, with holders
generally receiving approximately 70% of the total value to be
received in exchange for their Westwind common shares and
Class A common shares in the form of shares of Thomas
Weisel Partners common stock or exchangeable shares
(representing approximately 0.6628 shares of Thomas Weisel
Partners common stock or exchangeable shares per Westwind common
share or Class A common share based on
10,575,678 Westwind shares outstanding as of
November 6, 2007) and approximately 30% in the
4
form of cash (representing approximately $4.26 per Westwind
common share or Class A common share based on
10,575,678 Westwind shares outstanding as of
November 6, 2007).
The aggregate amount that Westwind shareholders will receive in
exchange for their Westwind common shares and Class A
common shares is $45,000,000 in cash and 7,009,112 shares
of Thomas Weisel Partners common stock (including exchangeable
shares).
Securities
to be Issued by Thomas Weisel Partners and Canadian Sub
(Page 53)
In connection with the transaction, 7,009,112 shares of
Thomas Weisel Partners common stock will be issued (or will be
issuable upon exchange of the exchangeable shares) to the
shareholders of Westwind in exchange for their Westwind shares.
In lieu of receiving shares of Thomas Weisel Partners common
stock, Westwind shareholders will be entitled to receive an
equivalent number of exchangeable shares, which will be
exchangeable for an equal number of shares of Thomas Weisel
Partners common stock. Holders of exchangeable shares will
generally be entitled to dividends substantially equivalent to
any dividends paid on shares of Thomas Weisel Partners common
stock.
The holders of exchangeable shares will receive, through a
special voting share of Thomas Weisel Partners to be issued to a
trustee on behalf of such holders, the benefit of Thomas Weisel
Partners voting rights, entitling the holder of each
exchangeable share to one vote on the same basis and in the same
circumstances as one corresponding share of Thomas Weisel
Partners common stock.
In certain events, Canadian Sub will have a right to redeem the
exchangeable shares in exchange for an equal number of shares of
Thomas Weisel Partners common stock and for cash in the amount
of any declared and unpaid dividends.
The
Special Meeting (Page 24)
We will hold the special meeting on December 14, 2007, at
8:00 a.m., Pacific time, at our corporate offices at One
Montgomery Street, 35th Floor, San Francisco,
California 94104. The close of business on November 6, 2007,
will be the record date for the special meeting. Only Thomas
Weisel Partners shareholders on the record date are entitled to
notice of and to vote at the special meeting. On the record date
there were 25,551,505 shares of Thomas Weisel Partners
common stock outstanding. Each share of Thomas Weisel Partners
common stock will be entitled to one vote on each matter to be
acted upon at the special meeting.
A majority of the votes cast for or
against the proposed Thomas Weisel Partners share
issuance must be voted for the proposal for it to
pass.
Recommendation
of the Board of Directors (Page 30)
Our board of directors has unanimously approved the transaction
and unanimously recommends that Thomas Weisel Partners
shareholders vote FOR the proposal to authorize the
Thomas Weisel Partners share issuance.
Opinion
of Keefe, Bruyette & Woods, Inc.
(Page 31)
Keefe, Bruyette & Woods, Inc., or KBW, rendered its
opinion to the Thomas Weisel Partners board of directors that,
as of September 30, 2007 and based upon and subject to the
matters stated in its opinion, from a financial point of view,
the consideration to be paid by Thomas Weisel Partners to
Westwind shareholders in the arrangement was fair to Thomas
Weisel Partners.
The full text of the written opinion of KBW, dated
September 30, 2007, which sets forth assumptions made,
procedures followed, factors considered and limitations upon the
review undertaken in rendering the opinion, is attached as
Annex C to this proxy statement. Thomas Weisel Partners
shareholders should read this opinion in its entirety. KBW
earned a cash fee from Thomas Weisel Partners for the delivery
of its opinion to the board of directors of Thomas Weisel
Partners.
5
Conditions
to the Arrangement (Page 44)
The completion of the arrangement and the related transactions
is subject to various conditions, including:
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the approval of the Thomas Weisel Partners share issuance by the
requisite number of our shareholders;
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the approval of the Ontario Superior Court of Justice;
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the receipt of necessary regulatory approvals and consents;
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the absence of any law having been enacted or any litigation or
proceeding having been brought by any governmental entity or, if
reasonably likely to succeed, brought by any other party, that
would prevent or prohibit the completion of the arrangement or
the related transactions or would substantially deprive any
party of the anticipated benefits of such transactions;
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Westwinds, Thomas Weisel Partners and Canadian
Subs respective representations and warranties in the
arrangement agreement must be true and correct as of the date of
the arrangement agreement and closing date in the manner
described under The Arrangement Agreement and Related
Agreements Conditions to the Arrangement;
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each of Westwind, Thomas Weisel Partners and Canadian Sub must
have performed in all material respects all obligations required
to be performed by them under the arrangement agreement at or
prior to the closing date; and
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no material adverse effect shall have occurred with respect to
Westwind or Thomas Weisel Partners as described under The
Arrangement Agreement and Related Agreements
Conditions to the Arrangement.
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Regulatory
Matters (Page 37)
Thomas Weisel Partners and Westwind have agreed to apply for and
obtain all regulatory approvals necessary or advisable in
connection with the transactions contemplated by the arrangement
agreement. These regulatory approvals include:
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a determination from the Minister responsible for implementing
the
Investment Canada Act
that the acquisition of control
of Westwind by Thomas Weisel Partners will be of net benefit to
Canada; and
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approvals from the Investment Dealers Association of Canada, the
Financial Industry Regulatory Authority, the United Kingdom
Financial Services Authority, certain provincial securities
commissions, the Toronto Stock Exchange, the Toronto Stock
Exchange Venture Exchange and the New York Stock Exchange, among
others.
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Termination
of the Arrangement Agreement (Page 46)
The arrangement agreement may be terminated by either us or
Westwind, provided that the terminating party is not in material
breach of its obligations, if the arrangement has not been
completed by January 31, 2008, our shareholders do not
authorize the Thomas Weisel Partners share issuance, or any
court or other governmental entity has taken certain steps
restraining, enjoining or otherwise prohibiting completion of
the arrangement that have become final and non-appealable. The
agreement may be terminated by either us or Westwind in the
event of certain breaches of representations, warranties,
covenants or agreements of the other party.
Appraisal
Rights (Page 25)
Thomas Weisel Partners shareholders will not have any appraisal
or dissenters rights associated with the matter we have
scheduled for a vote at the special meeting.
6
Additional
Agreements (Page 48)
In addition to the arrangement agreement, we have entered into
certain other agreements, including the following:
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a shareholders equity agreement, whereby the Westwind
shareholders will be restricted, subject to certain exceptions,
from transferring the shares of Thomas Weisel Partners common
stock and exchangeable shares they receive in connection with
the arrangement until February 7, 2011, and will be subject
to certain covenants relating to non-competition and
non-solicitation of our employees and clients in the event they
are no longer employed by us;
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a pledge agreement, whereby the Westwind shareholders will
pledge to us certain shares of Thomas Weisel Partners common
stock
and/or
exchangeable shares received by them in the transaction, as
security for the liquidated damages provisions in the
shareholders equity agreement as well as the
shareholders indemnification obligations under the
arrangement agreement; and
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an employment agreement with Lionel Conacher, who will become
the President of Thomas Weisel Partners upon the closing of the
transaction.
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Voting
Commitments (Page 47)
Holders of approximately 20% of the outstanding shares of Thomas
Weisel Partners common stock as of November 6, 2007,
including certain of our executive officers, each have entered
into voting commitments with Thomas Weisel Partners. Pursuant to
the voting commitments, the Thomas Weisel Partners shareholders
party to the agreements have agreed, among other things, to vote
all Thomas Weisel Partners shares held by them in favor of the
Thomas Weisel Partners share issuance.
In addition, Westwind shareholders holding more than 67% of the
voting rights attached to the common shares and Class A
common shares, which is sufficient to approve the resolution of
Westwinds shareholders in respect of the arrangement, have
entered into a voting agreement pursuant to which those Westwind
shareholders have agreed, among other things, to vote all
Westwind shares held by them in favor of such resolution.
Pursuant to a resolution in writing dated as of October 5,
2007, Westwinds shareholders have unanimously approved the
arrangement.
7
You should carefully consider the following risk factors,
which we believe are the significant risks related to the
transaction, as well as the other information contained in this
proxy statement, including the attached annexes, in evaluating
whether to approve the Thomas Weisel Partners share issuance.
These risks are not exhaustive. New risks may emerge from time
to time and it is not possible for management to predict all
risk factors, nor can we assess the impact of all factors on the
transaction and our business following the transaction or the
extent to which any factor or combination of factors may cause
actual results to differ materially from those contained in any
forward-looking statements. For further discussion of risk
factors relating to the business of Thomas Weisel Partners,
please see the Risk Factors in our current filings with the SEC,
including our Annual Report on
Form 10-K
for 2006 and our Quarterly Reports on
Form 10-Q
filed thereafter. See Additional Information
beginning on page 84.
Thomas
Weisel Partners and Westwind may experience difficulties,
unexpected costs and delays in integrating their businesses,
business models and cultures and the combined company may not
realize synergies, efficiencies or cost savings from the
transaction.
Thomas Weisel Partners and Westwind have operated and, until the
transaction is completed, will continue to operate,
independently. The success of the combined company following the
completion of the transaction may depend in large part on the
ability to integrate the two companies businesses,
business models and cultures. In the process of integrating
Thomas Weisel Partners and Westwind we may experience
difficulties, unanticipated costs and delays. The challenges
involved in the integration may include:
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the necessity of coordinating geographically disparate
organizations and addressing possible differences in corporate
and regional cultures and management philosophies;
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managing the combined company at geographically separate
locations that employ a significant number of employees;
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integrating and retaining personnel from different companies
while maintaining focus on providing consistent, high-quality
client service;
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integrating information technology systems and resources;
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integrating our accounting system and adjusting our internal
controls to cover Westwinds operations;
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unforeseen expenses or delays associated with the transaction;
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performance shortfalls at one or both of the companies as a
result of the diversion of managements attention to the
transaction; and
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meeting the expectations of clients with respect to the
integration.
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The integration of certain operations, in particular regarding
the two companies research and brokerage businesses,
following the transaction will take time and will require the
dedication of significant management resources, which may
temporarily distract managements attention from the
routine business of the combined company. The acquisition of
Westwind represents our first significant acquisition as a
public company. Employee uncertainty and lack of focus during
the integration process may also disrupt the business of the
combined company.
It is possible that the integration process could result in the
loss of key employees, diversion of each companys
managements attention, the disruption or interruption of,
or the loss of momentum in, each companys ongoing business
or inconsistencies in standards, controls, procedures and
policies, any of which could adversely affect our ability to
maintain relationships with clients and employees or our ability
to achieve the anticipated benefits of the transaction, or could
reduce our earnings or otherwise adversely affect the business
and financial results of the combined company. In addition, the
integration process may strain the combined companys
financial and managerial controls and reporting systems and
procedures. This may result in the diversion of management and
financial resources from the combined companys core
business objectives.
Even if Thomas Weisel Partners and Westwind are able to
integrate such businesses and operations successfully, there can
be no assurance that this integration will result in any
synergies, efficiencies or cost
8
savings or that any of these benefits will be achieved within a
specific time frame. Any of these factors could adversely affect
our business and results of operations.
If we
are unable to integrate Westwind personnel successfully or
retain key Thomas Weisel Partners or Westwind personnel after
the transaction is completed, our business may
suffer.
Our ability to obtain and successfully execute our business
depends upon the personal reputation, judgment, business
generation capabilities and project execution skills of our
senior professionals. Any management disruption or difficulties
in integrating Thomas Weisel Partners and Westwinds
professionals could result in a loss of clients and customers or
revenues from clients and customers and could significantly
affect our business and results of operations.
The success of the transaction will depend in part on our
ability to retain personnel currently employed by Thomas Weisel
Partners and Westwind. It is possible that these employees might
decide not to remain with us while we work to complete the
transaction or after the transaction is completed. If key
employees terminate their employment, or insufficient numbers of
employees are retained to maintain effective operations, the
combined companys business activities might be adversely
affected, managements attention might be diverted from
successfully integrating Westwinds operations to hiring
suitable replacements, and the combined companys business
might suffer. In addition, we might not be able to locate
suitable replacements for any key employees that leave our
company or offer employment to potential replacements on
reasonable terms.
Integration
of Westwinds operations with our operations may impair our
ability to achieve the expected benefits of the
transaction.
Following completion of the transaction, we expect to make
changes to certain aspects of Westwinds operations to
integrate Westwinds operations with those of Thomas Weisel
Partners. For example, we expect that we will make changes to
the way in which Westwinds research professionals interact
with its investment banking professionals to conform to Thomas
Weisel Partners policies and procedures in this regard. In
addition, we expect that Westwinds combination with a
larger firm could affect its existing client relationships or
its ability to enter into new client relationships. Any changes
that we make to Westwinds operations, in addition to the
fact that Westwind will be part of a larger organization, could
disrupt Westwinds business and client relationships and
could substantially affect our ability to achieve the expected
benefits of the transaction and our business and results of
operations.
We
could be subject to unknown liabilities of Westwind, which could
cause us to incur substantial financial obligations and harm our
business.
Although the Westwind shareholders will be required to indemnify
us for certain breaches of representations and warranties made
by Westwind in the arrangement agreement, the shareholders
obligation is subject to monetary and time limitations, as
described below in The Arrangement Agreement and Related
Agreements Indemnification
Indemnification by Westwind Shareholders. In addition, if
we are entitled to indemnification by the Westwind shareholders,
it may be costly to enforce those rights
and/or
we
may not be successful in collecting amounts we are entitled to.
If there are liabilities of Westwind of which we are not aware,
we may have little or no recourse against the Westwind
shareholders and may be obligated to bear the costs of those
liabilities. In addition, many of the Westwind shareholders will
continue as employees of the combined company following closing
of the transaction. Accordingly, if an indemnifiable claim does
arise, we may need to weigh the need to be indemnified for that
claim against the potential employee distraction or damage to
employee relations that may result if we were to seek recourse
for that claim.
The
transaction will reduce the voting power to current shareholders
of Thomas Weisel Partners.
Following completion of the transaction, Westwind shareholders
would hold or have the right to direct the voting of
approximately 21.5% of the voting power of our outstanding
shares, based on the number of our shares outstanding on
November 6, 2007. As a result, our existing shareholders
will not exert the same degree of voting
9
power with respect to the combined company that they did with
Thomas Weisel Partners before the consummation of the
acquisition transaction.
Following
completion of the transaction we will be effectively controlled
by our employees, whose interests may differ from those of other
stockholders.
Following the completion of the transaction, our employees will
collectively own approximately 44% of the total shares of common
stock outstanding (including exchangeable shares), based on the
number of our shares outstanding on November 6, 2007. Of
these employees, Thomas W. Weisel will beneficially own
approximately 7.4% of our common stock (including exchangeable
shares) and Lionel Conacher will beneficially own approximately
4.6% of our common stock (including exchangeable shares).
Mr. Weisel and Mr. Conacher, together with the next
eight largest employee shareholders, are expected to
collectively own approximately 22% of our common stock
(including exchangeable shares).
As a result of these shareholdings, our employees will be
effectively able to elect our entire board of directors, control
our management and policies and, in general, determine without
the consent of the other stockholders the outcome of any
corporate transaction or other matter submitted to the
stockholders for approval, including mergers, consolidations and
the sale of all or substantially all of our assets. Our
employees will effectively be able to prevent or cause a change
in control of us. These actions may be taken even if other
stockholders oppose them.
The
transaction is subject to conditions to closing that could
result in the transaction being delayed or not consummated,
which could negatively impact our stock price and future
business and operations. In order to obtain required regulatory
approvals, we may become subject to conditions that we do not
currently anticipate.
The transaction is subject to conditions to closing as set forth
in the arrangement agreement, including obtaining the requisite
Thomas Weisel Partners shareholder approval. If any of the
conditions to the transaction are not satisfied or, where
permissible, not waived, the transaction will not be
consummated. Failure to consummate the transaction could
negatively impact our stock price, future business and
operations, and financial condition. Any delay in the
consummation of the transaction or any uncertainty about the
consummation of the transaction may adversely affect the future
businesses, growth, revenue and results of operations of Thomas
Weisel Partners or the combined company.
The transaction is subject to several U.S. and Canadian
regulatory approvals, as well as other regulatory approvals.
These regulatory approvals may not be received, or may be
received later than anticipated. Regulatory approvals that are
received may impose restrictions or conditions that restrict our
activities or otherwise adversely affect our business and
results of operations.
Following
the acquisition of Westwind, we may become subject to additional
risks relating to Westwinds business.
Following the completion of the transaction, we will become
subject to the risks relating to Westwinds business.
Because the risks and uncertainties facing us may differ from
those facing Westwind, the market price, results of operations
and financial condition of the combined company may be affected
by risks and uncertainties different from those currently
affecting us. These risks include the following:
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Westwinds focus on specific sectors of the
economy.
Westwinds investment banking
business focuses principally on the mining and energy sectors of
the economy. Following completion of the transaction, the
combined companys business will have more exposure to
these sectors than Thomas Weisel Partners business prior
to the transaction. Volatility in the business environment in
these sectors generally, including the related commodities
markets, or in the market for securities of companies within
these sectors, could substantially affect Westwinds
business and results of operations and, following completion of
the transaction, the combined companys business and
results of operations.
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Westwinds focus on Canada.
Westwind
generates a substantial majority of its revenues from
Canadian-based clients. As a result, Westwinds business
and results of operations is highly dependent on the strength
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10
of the Canadian economy. Following the completion of the
transaction, we expect that a significant portion of the
combined companys business will be derived from
Canadian-based clients. Accordingly, our business will be
affected by changes in the Canadian economy and investment
activity in Canada. To the extent that we experience a decline
in business in Canada, due to unfavorable conditions in the
Canadian economy or otherwise, we may not be able to offset
these declines by increases in other aspects of our business and
our financial results could suffer.
In the
event the transaction is completed, we will incur significant
additional expenses in connection with the integration of the
two businesses.
In the event the transaction is completed, we expect to incur
significant additional expenses in connection with the
integration of the two businesses, including integrating
personnel, geographically diverse operations, information
technology systems, accounting systems, customers, and strategic
partners of each company and implementing consistent standards,
policies and procedures and may be subject to write-downs in
assets.
The
pro forma financial statements are presented for illustrative
purposes only and may not be an indication of the combined
companys financial condition or results of operations
following the transaction.
The pro forma financial statements contained in this proxy
statement are presented for illustrative purposes only and may
not be an indication of the combined companys financial
condition or results of operations following the transaction for
several reasons. For example, the pro forma financial statements
have been derived from the historical financial statements of
Thomas Weisel Partners and Westwind and certain adjustments and
assumptions have been made regarding the combined company after
giving effect to the transaction. The information upon which
these adjustments and assumptions have been made is preliminary,
and these kinds of adjustments and assumptions are difficult to
make with complete accuracy. Moreover, the pro forma financial
statements do not reflect all costs that are expected to be
incurred by the combined company in connection with the
transaction. For example, the impact of any incremental costs
incurred in integrating the two companies is not reflected in
the pro forma financial statements. As a result, the actual
financial condition and results of operations of the combined
company following the transaction may not be consistent with, or
evident from, these pro forma financial statements.
In addition, the assumptions used in preparing the pro forma
financial information may not prove to be accurate, and other
factors may affect the combined companys financial
condition or results of operations following the transaction.
Any potential decline in the combined companys financial
condition or results of operations may cause significant
variations in the stock price of the combined company. See the
section entitled Unaudited Pro Forma Financial
Information beginning on page 19.
Our
international activities are subject to political, economic,
legal, operational and other risks that are inherent in
operating in a foreign country and the Westwind transaction will
increase our level of activity outside of the United
States.
In connection with our business activities in India, Europe and,
following the completion of the transaction, Canada, we are
subject to political, economic, legal, operational and other
risks that are inherent in operating in a foreign country,
including risks of possible nationalization, expropriation,
price controls, capital controls, exchange controls and other
restrictive governmental actions, as well as the outbreak of
hostilities. In many countries, the laws and regulations
applicable to the securities and financial services industries
are uncertain and evolving, and it may be difficult for us to
determine the exact requirements of local laws in every market.
Our inability to remain in compliance with local laws in a
particular foreign market could have a significant and negative
effect not only on our businesses in that market but also on our
reputation generally. We are also subject to the enhanced risk
that transactions we structure might not be legally enforceable
in the relevant jurisdictions. Westwinds business is
conducted and its revenues are substantially derived from
activities outside of the United States. Accordingly, following
the transaction, our exposure to risks relating to international
operations will increase significantly.
11
The
transaction will increase our exposure to foreign currency
risk.
Following completion of the Westwind transaction we will hold
assets, incur liabilities, earn revenues and pay expenses in
Canadian dollars. Because our financial statements will continue
to be presented in U.S. dollars, we will be required to
translate assets, liabilities, income and expenses that relate
to our Canadian operations and that are denominated in Canadian
dollars into U.S. dollars at the then-applicable exchange
rates. Consequently, increases and decreases in the value of the
U.S. dollar versus the Canadian dollar will affect the
value of these items in our financial statements, even if their
value has not changed in Canadian dollars and as a result, our
financial results could be more volatile as a result of the
transaction. Although we may enter into transactions to hedge
portions of this foreign currency translation exposure, we will
not be able to eliminate this exposure.
Future
sales of our common stock could cause our stock price to
decline.
Sales of substantial amounts of common stock by our officers,
employees and other stockholders, or the possibility of such
sales, may adversely affect the price of our common stock and
impede our ability to raise capital in the future through the
issuance of equity securities.
The consummation of the transaction will result in the issuance
of an additional 7,009,112 shares of our common stock
(including exchangeable shares). Subject to certain exceptions,
these additional shares of common stock (including exchangeable
shares) will become available for future sale upon the
expiration or the waiver of transfer restrictions or in
accordance with registration rights. See The Arrangement
Agreement and Related Agreements Additional
Agreements Shareholders Equity Agreement
for a discussion of when these additional shares will become
available for future sale.
12
INFORMATION
CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement, and the documents to which we refer you in
this proxy statement, contain forward-looking
statements. In some cases, you can identify these statements by
forward-looking words such as may,
might, will, should,
expect, plan, anticipate,
believe, estimate, predict,
optimistic, potential,
intend or continue, the negative of
these terms and other comparable terminology. These statements
are only predictions based on our current expectations about
future events. There are important factors that could cause our
actual results, level of activity, performance or achievements
to differ materially from the results, level of activity,
performance or achievements expressed or implied by the
forward-looking statements.
Although we believe the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, level of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility
for the accuracy or completeness of any of these forward-looking
statements. You should not rely upon forward-looking statements
as predictions of future events. We are under no duty to update
any of these forward-looking statements after the date of this
proxy statement to conform our prior statements to actual
results or revised expectations.
In addition to other factors and matters contained or
incorporated in this proxy statement, we believe the following
factors could cause actual results to differ materially from
those discussed in the forward-looking statements:
|
|
|
|
|
the inability to close the transaction in a timely manner;
|
|
|
|
the inability to complete the transaction due to the failure to
obtain shareholder approval of the share issuance or the failure
to satisfy other conditions to completion of the transaction,
including required regulatory and court approvals;
|
|
|
|
the failure of the transaction to close for any other reason;
|
|
|
|
our ability to implement the combined companys strategic
initiatives and achieve the expected benefits of the transaction;
|
|
|
|
our ability to integrate successfully Thomas Weisel
Partners and Westwinds operations and retain both
companies professionals;
|
|
|
|
risks that the proposed transaction disrupts current plans;
|
|
|
|
diversion of managements attention from ongoing business
concerns;
|
|
|
|
the effect of the announcement of the transaction on our
business relationships, operating results and business generally;
|
|
|
|
the amount of the costs, fees, expenses and charges related to
the transaction;
|
|
|
|
general competitive, economic, political and market conditions
and fluctuations;
|
and other risks detailed under Risk Factors
beginning on page 8 and in our current filings with
the Securities and Exchange Commission, or the SEC, including
our Annual Report on
Form 10-K
for 2006 and our Quarterly Reports on
Form 10-Q
filed thereafter. See Additional Information.
You should carefully consider the cautionary statements
contained or referred to in this section in connection with any
subsequent written or oral forward-looking statements that may
be issued by us or persons acting on our behalf.
13
SELECTED
FINANCIAL INFORMATION
Selected
Historical Consolidated Financial Information of Thomas Weisel
Partners
Set forth below is the consolidated financial information and
other information of Thomas Weisel Partners as of and for the
years ended December 31, 2006, 2005, 2004, 2003 and 2002
and for the six months ended June 30, 2007 and 2006 (
in
thousands, except per share data
). The selected consolidated
statement of operations data for the years ended
December 31, 2002, 2003, 2004, 2005 and 2006, and the
selected consolidated statement of financial condition data as
of December 31, 2003, 2004, 2005 and 2006, are derived from
the audited consolidated financial statements of Thomas Weisel
Partners Group, Inc. (formerly Thomas Weisel Partners Group
LLC). The selected consolidated statement of operations data for
the six months ended June 30, 2006 and 2007, and the
selected consolidated statement of financial condition data as
of June 30, 2006 and 2007 are derived from the unaudited
condensed consolidated financial statements of Thomas Weisel
Partners Group, Inc. (formerly Thomas Weisel Partners Group
LLC). The selected consolidated statement of financial condition
data as of December 31, 2002 have been derived from
unaudited consolidated financial statements of Thomas Weisel
Partners Group LLC. The information below should be read in
conjunction with Thomas Weisel Partners consolidated
financial statements and the notes to Thomas Weisel
Partners consolidated financial statements and with the
Managements Discussion and Analysis of Financial
Condition and Results of Operations and Risk
Factors sections in Thomas Weisel Partners Annual
Report on
Form 10-K
for 2006 and Thomas Weisel Partners Quarterly Reports on
Form 10-Q
filed thereafter that are incorporated by reference in this
proxy statement. See Additional Information
beginning on page 84.
14
Selected Historical
Consolidated Financial Information of
Thomas Weisel Partners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Six
|
|
|
|
|
|
|
Months Ended June 30,
|
|
|
As of or for the Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
68,897
|
|
|
$
|
64,650
|
|
|
$
|
124,136
|
|
|
$
|
75,300
|
|
|
$
|
84,977
|
|
|
$
|
82,414
|
|
|
$
|
53,670
|
|
Brokerage
|
|
|
55,082
|
|
|
|
64,163
|
|
|
|
123,809
|
|
|
|
138,497
|
|
|
|
154,746
|
|
|
|
139,391
|
|
|
|
172,008
|
|
Asset management
|
|
|
19,997
|
|
|
|
12,335
|
|
|
|
25,752
|
|
|
|
36,693
|
|
|
|
44,009
|
|
|
|
41,598
|
|
|
|
17,792
|
|
Interest income
|
|
|
8,887
|
|
|
|
5,274
|
|
|
|
13,525
|
|
|
|
5,510
|
|
|
|
3,148
|
|
|
|
2,116
|
|
|
|
5,849
|
|
Other revenue
|
|
|
920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
153,783
|
|
|
|
146,422
|
|
|
|
287,222
|
|
|
|
256,000
|
|
|
|
286,880
|
|
|
|
265,519
|
|
|
|
249,319
|
|
Interest expense
|
|
|
(5,355
|
)
|
|
|
(4,712
|
)
|
|
|
(10,905
|
)
|
|
|
(5,114
|
)
|
|
|
(3,470
|
)
|
|
|
(3,615
|
)
|
|
|
(5,634
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
148,428
|
|
|
|
141,710
|
|
|
|
276,317
|
|
|
|
250,886
|
|
|
|
283,410
|
|
|
|
261,904
|
|
|
|
243,685
|
|
Expenses excluding interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
81,385
|
|
|
|
77,334
|
|
|
|
152,195
|
|
|
|
154,163
|
|
|
|
146,078
|
|
|
|
127,184
|
|
|
|
131,486
|
|
Other expenses
|
|
|
47,732
|
|
|
|
49,387
|
|
|
|
97,997
|
|
|
|
101,594
|
|
|
|
112,606
|
|
|
|
122,921
|
|
|
|
168,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses excluding interest
|
|
|
129,117
|
|
|
|
126,721
|
|
|
|
250,192
|
|
|
|
255,757
|
|
|
|
258,684
|
|
|
|
250,105
|
|
|
|
300,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes
|
|
|
19,311
|
|
|
|
14,989
|
|
|
|
26,125
|
|
|
|
(4,871
|
)
|
|
|
24,726
|
|
|
|
11,799
|
|
|
|
(56,541
|
)
|
Provision for taxes (tax benefit)
|
|
|
7,308
|
|
|
|
(9,640
|
)
|
|
|
(8,796
|
)
|
|
|
2,187
|
|
|
|
2,044
|
|
|
|
1,342
|
|
|
|
1,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
12,003
|
|
|
$
|
24,629
|
|
|
$
|
34,921
|
|
|
$
|
(7,058
|
)
|
|
$
|
22,682
|
|
|
$
|
10,457
|
|
|
$
|
(57,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Preferred dividends and accretion
|
|
|
|
|
|
|
(1,608
|
)
|
|
|
(1,608
|
)
|
|
|
(15,654
|
)
|
|
|
(15,761
|
)
|
|
|
(15,380
|
)
|
|
|
(14,520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS AND TO
CLASS A, B AND C SHAREHOLDERS
|
|
$
|
12,003
|
|
|
$
|
23,021
|
|
|
$
|
33,313
|
|
|
$
|
(22,712
|
)
|
|
$
|
6,921
|
|
|
$
|
(4,923
|
)
|
|
$
|
(72,447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Financial Condition Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
578,048
|
|
|
$
|
467,932
|
|
|
$
|
483,189
|
|
|
$
|
312,823
|
|
|
$
|
309,174
|
|
|
$
|
312,606
|
|
|
$
|
325,399
|
|
Total liabilities
|
|
|
293,920
|
|
|
|
214,790
|
|
|
|
216,135
|
|
|
|
199,428
|
|
|
|
178,206
|
|
|
|
182,721
|
|
|
|
197,444
|
|
Total redeemable convertible preference stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
223,792
|
|
|
|
221,635
|
|
|
|
216,624
|
|
|
|
214,070
|
|
Shareholders and members equity (deficit)
|
|
|
284,128
|
|
|
|
253,142
|
|
|
|
267,054
|
|
|
|
(110,397
|
)
|
|
|
(90,667
|
)
|
|
|
(86,739
|
)
|
|
|
(86,115
|
)
|
15
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
December 31, 2006
|
|
|
PRO FORMA, AS ADJUSTED (UNAUDITED)(a)
|
|
|
|
|
Pro forma net revenues(b)
|
|
$
|
276,179
|
|
Pro forma income before tax(b)
|
|
|
25,987
|
|
Pro forma provision or taxes (tax benefit)(c)
|
|
|
(7,363
|
)
|
Pro forma net income(b)(c)
|
|
|
33,350
|
|
Pro forma preferred dividends and accretion
|
|
|
|
|
Pro forma net income attributable to common shareholders(b)(c)
|
|
|
33,350
|
|
Pro forma earnings per share:
|
|
|
|
|
Pro forma basic earnings per share
|
|
$
|
1.39
|
|
Pro forma diluted earnings per share
|
|
$
|
1.34
|
|
Pro forma weighted average shares used in the computation of per
share data:
|
|
|
|
|
Pro forma basic weighted average shares outstanding
|
|
|
23,980
|
|
Pro forma diluted weighted average shares outstanding
|
|
|
24,945
|
|
|
|
|
(a)
|
|
The pro forma, as adjusted amounts depict results we estimate we
would have had during the year ended December 31, 2006 if
the reorganization transactions that we carried out in
connection with our initial public offering to cause Thomas
Weisel Partners Group, Inc., to succeed to the business of
Thomas Weisel Partners Group LLC had taken place on
January 1, 2006, as these amounts change tax expense to
amounts that we estimate we would have paid if we were a
corporation beginning January 1, 2006. Additionally, these
amounts decrease net revenues by the amount of interest expense
on notes payable issued to preferred shareholders upon
consummation of the reorganization transactions. The amounts for
the year ended December 31, 2006 reflect pro forma results
of operations as if these transactions had occurred on
January 1, 2006. See Note 20
Pro Forma, As Adjusted (Unaudited) to our consolidated
financial statements as of and for the twelve months ended
December 31, 2006.
|
|
(b)
|
|
Reflects decrease in net revenues and net income before tax of
$0.1 million for the estimated interest expense for the
notes issued to Class D and D-1 preferred shareholders.
|
|
(c)
|
|
On a pro forma basis, the tax benefit for 2006 was decreased by
the estimated additional tax expense of $1.5 million as if
we were a corporation beginning January 1, 2006. The
additional tax expense is attributable to our applicable tax
rate, a combination of federal, state and local income tax
rates, of 42% applied to our pro forma net income for the period
beginning January 1, 2006 through February 6, 2006.
|
16
Selected
Historical Consolidated Financial Information of
Westwind
Set forth below is the consolidated financial information of
Westwind as of and for the years ended December 31, 2006,
2005, 2004, 2003 and 2002 and for the six months ended
June 30, 2007 and 2006. The selected consolidated statement
of operations data for the years ended December 31, 2002,
2003, 2004, 2005 and 2006, and the selected consolidated
statement of financial condition data as of December 31,
2002, 2003, 2004, 2005 and 2006, are derived from the audited
consolidated financial statements of Westwind. The selected
consolidated statement of operations data for the six months
ended June 30, 2006 and 2007, and the selected consolidated
statement of financial condition data as of June 30, 2006
and 2007 are derived from the unaudited consolidated financial
statements of Westwind. The data below should be read in
conjunction with Westwinds consolidated financial
statements and the notes to Westwinds consolidated
financial statements in Annex D and with the information
set forth in Information About Westwind
Managements Discussion and Analysis of Financial Condition
and Results of Operations. Westwind prepares its financial
statements in accordance with Canadian GAAP, which (in the case
of the consolidated financial statements of Westwind) conform in
all material respects with U.S. GAAP. See Note 10 to
Westwinds historical financial statements in Annex D.
All dollar amounts referred to below are in Canadian dollars.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Six
|
|
|
|
|
|
|
Months Ended June 30,
|
|
|
As of or for the Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking fees and commissions
|
|
$
|
33,693
|
|
|
$
|
16,666
|
|
|
$
|
33,548
|
|
|
$
|
30,603
|
|
|
$
|
21,953
|
|
|
$
|
11,995
|
|
|
$
|
1,557
|
|
Brokerage
|
|
|
9,284
|
|
|
|
7,485
|
|
|
|
14,740
|
|
|
|
8,473
|
|
|
|
7,823
|
|
|
|
8,945
|
|
|
|
89
|
|
Principal trading gains (losses)
|
|
|
3,986
|
|
|
|
4,240
|
|
|
|
8,581
|
|
|
|
1,605
|
|
|
|
(1,347
|
)
|
|
|
(60
|
)
|
|
|
56
|
|
Other
|
|
|
1,050
|
|
|
|
367
|
|
|
|
1,113
|
|
|
|
121
|
|
|
|
320
|
|
|
|
130
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,013
|
|
|
|
28,758
|
|
|
|
57,982
|
|
|
|
40,802
|
|
|
|
28,749
|
|
|
|
21,010
|
|
|
|
1,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees compensation (including discretionary bonus and
founders compensation) and benefits
|
|
|
30,970
|
|
|
|
17,159
|
|
|
|
36,561
|
|
|
|
26,694
|
|
|
|
18,059
|
|
|
|
13,111
|
|
|
|
1,588
|
|
Amortization
|
|
|
245
|
|
|
|
202
|
|
|
|
469
|
|
|
|
373
|
|
|
|
335
|
|
|
|
223
|
|
|
|
28
|
|
Other operating and administrative
|
|
|
6,156
|
|
|
|
5,027
|
|
|
|
10,509
|
|
|
|
8,187
|
|
|
|
6,769
|
|
|
|
4,879
|
|
|
|
1,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes
|
|
|
10,642
|
|
|
|
6,371
|
|
|
|
10,443
|
|
|
|
5,548
|
|
|
|
3,586
|
|
|
|
2,797
|
|
|
|
(1,020
|
)
|
Income taxes (recovery)
|
|
|
3,668
|
|
|
|
2,370
|
|
|
|
3,955
|
|
|
|
2,074
|
|
|
|
1,810
|
|
|
|
691
|
|
|
|
(766
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,974
|
|
|
$
|
4,001
|
|
|
$
|
6,488
|
|
|
$
|
3,474
|
|
|
$
|
1,776
|
|
|
$
|
2,106
|
|
|
$
|
(254
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Financial Condition Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
81,722
|
|
|
$
|
59,136
|
|
|
$
|
53,540
|
|
|
$
|
36,768
|
|
|
$
|
14,599
|
|
|
$
|
16,511
|
|
|
$
|
4,340
|
|
Total liabilities
|
|
|
48,770
|
|
|
|
39,548
|
|
|
|
31,228
|
|
|
|
23,461
|
|
|
|
8,422
|
|
|
|
9,157
|
|
|
|
3,315
|
|
Shareholders equity
|
|
|
32,952
|
|
|
|
19,588
|
|
|
|
22,312
|
|
|
|
13,307
|
|
|
|
6,177
|
|
|
|
7,354
|
|
|
|
1,025
|
|
17
The following table sets forth certain historical per share data
for Thomas Weisel Partners and pro forma combined per share data
after giving effect to the transaction. This data should be read
in conjunction with our consolidated financial statements and
the notes to our consolidated financial statements included in
our Annual Report on
Form 10-K
for 2006 and Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2007, incorporated by
reference herein. See Additional Information. In
addition, this data should be read in conjunction with our
unaudited pro forma condensed combined financial statements
included in this proxy statement (see Unaudited Pro Forma
Financial Information) and Westwinds consolidated
financial statements and notes to consolidated financial
statements attached to this proxy statement as Annex D.
Comparative per share data has not been provided for Westwind as
Westwind is a private company and comparative data on a per
share basis would not be meaningful.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Six Months Ended
|
|
|
|
December 31, 2006
|
|
|
June 30, 2007
|
|
|
Historical Thomas Weisel Partners
|
|
|
|
|
|
|
|
|
Earnings per share (basic)
|
|
$
|
1.39
|
|
|
$
|
0.46
|
|
Earnings per share (diluted)
|
|
$
|
1.34
|
|
|
$
|
0.45
|
|
Basic weighted average shares outstanding
|
|
|
23,980
|
|
|
|
26,184
|
|
Diluted weighted average shares outstanding
|
|
|
24,945
|
|
|
|
26,624
|
|
Book value per share at period end
|
|
$
|
10.37
|
|
|
$
|
11.05
|
|
Dividends per share
|
|
$
|
|
|
|
$
|
|
|
Pro forma Thomas Weisel Partners
|
|
|
|
|
|
|
|
|
Earnings per share (basic)
|
|
$
|
1.01
|
|
|
$
|
0.43
|
|
Earnings per share (diluted)
|
|
$
|
0.98
|
|
|
$
|
0.43
|
|
Basic weighted average shares outstanding
|
|
|
30,989
|
|
|
|
33,193
|
|
Diluted weighted average shares outstanding
|
|
|
31,954
|
|
|
|
33,633
|
|
Book value per share at period end
|
|
$
|
11.44
|
|
|
$
|
11.97
|
|
Dividends per share
|
|
$
|
|
|
|
$
|
|
|
18
UNAUDITED
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated
statement of financial condition as of June 30, 2007 and
the unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 2006 and the six
months ended June 30, 2007 give effect to Thomas Weisel
Partners proposed acquisition of Westwind as if the
acquisition had occurred on June 30, 2007 for the condensed
consolidated statement of financial condition and as of
January 1, 2006 for purposes of the condensed consolidated
statements of operations. The unaudited pro forma condensed
consolidated financial statements are based on historical
financial statements of Thomas Weisel Partners and Westwind,
giving effect to the proposed acquisition applying the
assumptions and adjustments as discussed in the accompanying
notes to the pro forma condensed consolidated financial
statements. The unaudited pro forma condensed consolidated
financial statements should be read in conjunction with the
Annual Report on
Form 10-K
for the year ended December 31, 2006 and Quarterly Reports
on
Form 10-Q
for the three months ended March 31, 2007 and June 30,
2007 for Thomas Weisel Partners, as well as the historical
financial statements of Westwind (attached to this proxy
statement as Annex D).
The unaudited pro forma financial statements were prepared using
the purchase method of accounting with Thomas Weisel Partners
treated as the accounting acquiror. The unaudited pro forma
condensed consolidated financial statements do not purport to be
indicative of the financial position or results of operations
that would have actually been obtained had such transactions
been completed as of the assumed dates and for the periods
presented, or which may be obtained in the future. The pro forma
adjustments are described in the accompanying notes and are
based upon available information and certain assumptions that
management of Thomas Weisel Partners believes are reasonable.
For purposes of preparing this pro forma information, a
preliminary allocation of the transaction consideration has been
made to intangible assets. Net tangible assets were valued at
their respective carrying amounts as management believes that
these amounts approximate their current fair values. These pro
forma adjustments represent Thomas Weisel Partners
preliminary determination of purchase accounting adjustments and
are based upon available information and certain assumptions
that Thomas Weisel Partners management believes to be
reasonable. Consequently, the amounts reflected below are
subject to change and the actual allocation of the purchase
price and the resulting effect on net income from operations may
differ.
Unless otherwise stated, all amounts presented in this section
are in U.S. dollars.
The following sets forth the preliminary purchase price and
purchase price allocation (
amounts in thousands
):
|
|
|
|
|
Purchase Price:
|
|
|
|
|
Cash consideration
|
|
$
|
45,000
|
|
Fair value of estimated Thomas Weisel Partners common stock to
be issued
|
|
|
107,604
|
|
Acquisition related costs
|
|
|
2,240
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
154,844
|
|
|
|
|
|
|
Purchase Price Allocation:
|
|
|
|
|
Net tangible assets
|
|
$
|
20,488
|
|
Goodwill
|
|
|
110,588
|
|
Other intangible assets
|
|
|
40,979
|
|
Deferred taxes on acquired identifiable intangible assets
|
|
|
(17,211
|
)
|
|
|
|
|
|
Total purchase price allocation
|
|
$
|
154,844
|
|
|
|
|
|
|
19
THOMAS
WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
AS OF JUNE 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
|
|
|
|
|
|
|
|
|
|
|
|
|
Weisel
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Partners
|
|
|
Westwind (i)
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except share and per share data)
|
|
|
ASSETS
|
Cash and cash equivalents
|
|
$
|
93,098
|
|
|
$
|
36,775
|
|
|
$
|
(45,000
|
)(a)
|
|
$
|
74,245
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,628
|
)(b)
|
|
|
|
|
Restricted cash and cash required to be segregated under Federal
or other regulations
|
|
|
6,468
|
|
|
|
|
|
|
|
|
|
|
|
6,468
|
|
Securities owned
|
|
|
226,853
|
|
|
|
27,031
|
|
|
|
|
|
|
|
253,884
|
|
Receivable from clearing brokers
|
|
|
36,521
|
|
|
|
5,321
|
|
|
|
|
|
|
|
41,842
|
|
Corporate finance and syndicate receivables, net
|
|
|
24,683
|
|
|
|
3,524
|
|
|
|
|
|
|
|
28,207
|
|
Investments in partnerships and other securities
|
|
|
55,531
|
|
|
|
|
|
|
|
|
|
|
|
55,531
|
|
Other investments
|
|
|
79,449
|
|
|
|
|
|
|
|
|
|
|
|
79,449
|
|
Property and equipment, net
|
|
|
22,383
|
|
|
|
1,780
|
|
|
|
|
|
|
|
24,163
|
|
Receivables from related parties, net
|
|
|
4,313
|
|
|
|
|
|
|
|
|
|
|
|
4,313
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
110,588
|
(c)
|
|
|
110,588
|
|
Other intangible assets
|
|
|
|
|
|
|
|
|
|
|
40,979
|
(c)
|
|
|
40,979
|
|
Deferred tax assets, net of valuation allowance
|
|
|
15,811
|
|
|
|
|
|
|
|
|
|
|
|
15,811
|
|
Other assets, net
|
|
|
12,938
|
|
|
|
946
|
|
|
|
|
|
|
|
13,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
578,048
|
|
|
$
|
75,377
|
|
|
$
|
95,939
|
|
|
$
|
749,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold, but not yet purchased
|
|
$
|
179,289
|
|
|
$
|
2,375
|
|
|
$
|
|
|
|
$
|
181,664
|
|
Accrued compensation
|
|
|
33,953
|
|
|
|
12,265
|
|
|
|
|
|
|
|
46,218
|
|
Accrued expenses and other liabilities
|
|
|
51,171
|
|
|
|
28,551
|
|
|
|
2,240
|
(d)
|
|
|
81,962
|
|
Deferred tax liability
|
|
|
|
|
|
|
1,070
|
|
|
|
17,211
|
(e)
|
|
|
18,281
|
|
Notes payable
|
|
|
29,507
|
|
|
|
|
|
|
|
|
|
|
|
29,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
293,920
|
|
|
|
44,261
|
|
|
|
19,451
|
|
|
|
357,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
258
|
|
|
|
|
|
|
|
70
|
(a)
|
|
|
328
|
|
Share capital
|
|
|
|
|
|
|
13,584
|
|
|
|
(13,584
|
)(f)
|
|
|
|
|
Additional paid-in capital
|
|
|
357,275
|
|
|
|
|
|
|
|
107,534
|
(a)
|
|
|
464,809
|
|
Retained earnings (accumulated deficit)
|
|
|
(73,205
|
)
|
|
|
17,532
|
|
|
|
(10,628
|
)(b)
|
|
|
(73,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(6,904
|
)(f)
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(200
|
)
|
|
|
|
|
|
|
|
|
|
|
(200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
284,128
|
|
|
|
31,116
|
|
|
|
76,488
|
|
|
|
391,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
578,048
|
|
|
$
|
75,377
|
|
|
$
|
95,939
|
|
|
$
|
749,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
THOMAS
WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE
SIX MONTHS ENDED JUNE 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
|
|
|
|
|
|
|
|
|
|
|
|
|
Weisel
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Partners
|
|
|
Westwind (i)
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
68,897
|
|
|
$
|
34,078
|
|
|
$
|
|
|
|
$
|
102,975
|
|
Brokerage
|
|
|
55,082
|
|
|
|
7,343
|
|
|
|
|
|
|
|
62,425
|
|
Asset management
|
|
|
19,997
|
|
|
|
|
|
|
|
|
|
|
|
19,997
|
|
Interest income
|
|
|
8,887
|
|
|
|
949
|
|
|
|
(854
|
)(j)
|
|
|
8,982
|
|
Other revenue
|
|
|
920
|
|
|
|
|
|
|
|
|
|
|
|
920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
153,783
|
|
|
|
42,370
|
|
|
|
(854
|
)
|
|
|
195,299
|
|
Interest expense
|
|
|
(5,355
|
)
|
|
|
|
|
|
|
|
|
|
|
(5,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
148,428
|
|
|
|
42,370
|
|
|
|
(854
|
)
|
|
|
189,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses excluding interest
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
81,385
|
|
|
|
27,315
|
|
|
|
|
|
|
|
108,700
|
|
Brokerage execution, clearance and account administration
|
|
|
9,683
|
|
|
|
1,015
|
|
|
|
|
|
|
|
10,698
|
|
Communications and data processing
|
|
|
9,152
|
|
|
|
490
|
|
|
|
|
|
|
|
9,642
|
|
Depreciation and amortization
|
|
|
3,245
|
|
|
|
216
|
|
|
|
5,640
|
(g)
|
|
|
9,101
|
|
Marketing and promotion
|
|
|
6,655
|
|
|
|
1,348
|
|
|
|
|
|
|
|
8,003
|
|
Occupancy and equipment
|
|
|
8,701
|
|
|
|
634
|
|
|
|
|
|
|
|
9,335
|
|
Other expense
|
|
|
10,296
|
|
|
|
1,966
|
|
|
|
|
|
|
|
12,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses excluding interest
|
|
|
129,117
|
|
|
|
32,984
|
|
|
|
5,640
|
|
|
|
167,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
19,311
|
|
|
|
9,386
|
|
|
|
(6,494
|
)
|
|
|
22,203
|
|
Provision for taxes
|
|
|
7,308
|
|
|
|
3,235
|
|
|
|
(2,727
|
)(h)
|
|
|
7,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
12,003
|
|
|
|
6,151
|
|
|
|
(3,767
|
)
|
|
|
14,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
$
|
0.43
|
|
Diluted earnings per share
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
$
|
0.43
|
|
Weighted average shares used in computation of per share
data
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
26,184
|
|
|
|
|
|
|
|
7,009
|
(a)
|
|
|
33,193
|
|
Diluted weighted average shares outstanding
|
|
|
26,624
|
|
|
|
|
|
|
|
7,009
|
(a)
|
|
|
33,633
|
|
21
THOMAS
WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED DECEMBER 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
|
|
|
|
|
|
|
|
|
|
|
|
|
Weisel
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Partners
|
|
|
Westwind (i)
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
123,809
|
|
|
$
|
37,377
|
|
|
$
|
|
|
|
$
|
161,186
|
|
Brokerage
|
|
|
124,136
|
|
|
|
12,785
|
|
|
|
|
|
|
|
136,921
|
|
Asset management
|
|
|
25,752
|
|
|
|
|
|
|
|
|
|
|
|
25,752
|
|
Interest income
|
|
|
13,525
|
|
|
|
874
|
|
|
|
(1,625
|
)(j)
|
|
|
12,774
|
|
Other revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
287,222
|
|
|
|
51,036
|
|
|
|
(1,625
|
)
|
|
|
336,633
|
|
Interest expense
|
|
|
(10,905
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,905
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
276,317
|
|
|
|
51,036
|
|
|
|
(1,625
|
)
|
|
|
325,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses excluding interest
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
152,195
|
|
|
|
32,249
|
|
|
|
|
|
|
|
184,444
|
|
Brokerage execution, clearance and account administration
|
|
|
22,621
|
|
|
|
1,813
|
|
|
|
|
|
|
|
24,434
|
|
Communications and data processing
|
|
|
16,650
|
|
|
|
756
|
|
|
|
|
|
|
|
17,406
|
|
Depreciation and amortization
|
|
|
8,549
|
|
|
|
414
|
|
|
|
11,460
|
(g)
|
|
|
20,423
|
|
Marketing and promotion
|
|
|
11,545
|
|
|
|
2,424
|
|
|
|
|
|
|
|
13,969
|
|
Occupancy and equipment
|
|
|
17,926
|
|
|
|
1,211
|
|
|
|
|
|
|
|
19,137
|
|
Other expense
|
|
|
20,706
|
|
|
|
2,957
|
|
|
|
|
|
|
|
23,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses excluding interest
|
|
|
250,192
|
|
|
|
41,824
|
|
|
|
11,460
|
|
|
|
303,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
26,125
|
|
|
|
9,212
|
|
|
|
(13,085
|
)
|
|
|
22,252
|
|
Provision for taxes (tax benefit)
|
|
|
(8,796
|
)
|
|
|
3,488
|
|
|
|
(5,495
|
)(h)
|
|
|
(10,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
34,921
|
|
|
|
5,724
|
|
|
|
(7,590
|
)
|
|
|
33,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends and accretion
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class D redeemable convertible shares
|
|
|
(710
|
)
|
|
|
|
|
|
|
|
|
|
|
(710
|
)
|
Class D-1
redeemable convertible shares
|
|
|
(380
|
)
|
|
|
|
|
|
|
|
|
|
|
(380
|
)
|
Accretion of Class C redeemable preference stock
|
|
|
(518
|
)
|
|
|
|
|
|
|
|
|
|
|
(518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders and to
class A, B and C shareholders
|
|
$
|
33,313
|
|
|
$
|
5,724
|
|
|
$
|
(7,590
|
)
|
|
$
|
31,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
|
$
|
1.01
|
|
Diluted earnings per share
|
|
$
|
1.34
|
|
|
|
|
|
|
|
|
|
|
$
|
0.98
|
|
Weighted average shares used in computation of per share
data
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
23,980
|
|
|
|
|
|
|
|
7,009
|
(a)
|
|
|
30,989
|
|
Diluted weighted average shares outstanding
|
|
|
24,945
|
|
|
|
|
|
|
|
7,009
|
(a)
|
|
|
31,954
|
|
22
Notes
to the Unaudited Pro Forma Condensed Consolidated Combined
Financial Statements
(a) The acquisition of Westwind by Thomas Weisel Partners
for a purchase price of (i) $45 million in cash and
(ii) 7,009,112 shares of Thomas Weisel Partners common
stock or exchangeable shares. The fair value of the Thomas
Weisel Partners common stock to be issued was based upon the
average of the closing prices of one share of common stock
during the five trading day period beginning two trading days
prior to the date the transaction was announced.
(b) The arrangement agreement provides for a pre-closing
cash distribution by Westwind to its shareholders of excess
working capital over
agreed-upon
working and regulatory capital amounts, calculated in accordance
with the arrangement agreement. Thomas Weisel Partners
preliminary determination of the amount of this pre-closing cash
distribution is $10.6 million.
(c) To record goodwill and other intangible assets based
upon the estimated purchase price and preliminary allocation.
(d) Acquisition costs accrued for and included in the
purchase price determination.
(e) To record the adjustment for deferred tax liabilities
related to other intangible assets.
(f) The elimination of a shareholder loan, Westwind share
capital and retained earnings.
(g) Reflects the amortization of other intangible assets of
$5.6 million and $11.5 million for the six months
ended June 30, 2007 and the year ended December 31,
2006, respectively. Amortization amounts assume the following
useful lives for each intangible asset:
|
|
|
|
|
Customer Relationships
|
|
|
7.7 years
|
|
Non-Compete Agreements
|
|
|
3.0 years
|
|
Investment Banking Backlog
|
|
|
0.8 years
|
|
The useful lives of other intangible assets represent Thomas
Weisel Partners preliminary determination and are based
upon available information and certain assumptions that Thomas
Weisel Partners management believe to be reasonable.
The following table provides the first five years of estimated
amortization of the other intangible assets based on an
accelerated method of amortization over the respective useful
lives (
in thousands
):
|
|
|
|
|
Year 1
|
|
$
|
11,460
|
|
Year 2
|
|
|
11,280
|
|
Year 3
|
|
|
10,690
|
|
Year 4
|
|
|
2,538
|
|
Year 5
|
|
|
1,840
|
|
|
|
|
|
|
Total
|
|
$
|
37,808
|
|
|
|
|
|
|
(h) To record an income tax impact on the pre-tax pro forma
adjustments at Thomas Weisel Partners statutory tax rate
of 42%.
(i) Westwind financial statements have been converted from
Canadian dollars to U.S. dollars for the pro forma
financial statement presentation. For the unaudited pro forma
condensed consolidated statement of financial condition,
balances were converted based on the exchange rate as of
June 30, 2007 which was 0.9443. For the unaudited pro forma
condensed consolidated statement of operations for the six
months ended June 30, 2007, amounts were converted based on
the average exchange rate for the period from January 1,
2007 to June 30, 2007 which was 0.8820. For the unaudited
pro forma condensed consolidated statement of operations for the
year ended December 31, 2006, amounts were converted based
on the average exchange rate for the period from January 1,
2006 to December 31, 2006 which was 0.8821.
(j) An adjustment to interest income for the estimated
interest amount that would not have been recognized by Thomas
Weisel Partners during the six months ended June 30, 2007
and the year ended December 31, 2006 on the
$45 million cash portion of the transaction consideration.
The weighted average interest rate for the six months ended
June 30, 2007 and the year ended December 31, 2006 is
estimated to be 3.80% and 3.61%, respectively.
23
We are furnishing this proxy statement to all holders of record
of Thomas Weisel Partners common stock in connection with the
solicitation of proxies by the Thomas Weisel Partners board of
directors for use at the special meeting of Thomas Weisel
Partners shareholders to be held on December 14, 2007, and
at any adjournment or postponement thereof.
Thomas Weisel Partners common stock is listed on The
Nasdaq Global Market. The listing rules of The Nasdaq Global
Market require that we obtain shareholder approval prior to
completing any transaction that would result in the issuance of
more than 20% of our outstanding common shares. Under the
proposed acquisition of Westwind, we will issue shares of common
stock (either directly or on exchange of exchangeable shares)
representing, in the aggregate, in excess of 20% of our
outstanding common stock.
Although Thomas Weisel Partners shareholders are not being asked
to vote directly on the arrangement agreement or the plan of
arrangement, the issuance of Thomas Weisel Partners common stock
and the exchangeable shares is necessary in order to complete
the acquisition of Westwind as contemplated by those agreements.
Date,
Time and Place of the Special Meeting
The special meeting will be held on December 14, 2007, at
8:00 a.m., Pacific time, at our corporate offices at One
Montgomery Street,
35
th
Floor,
San Francisco, California 94104.
Purpose
of the Special Meeting
At the special meeting, and any adjournment or postponement
thereof, Thomas Weisel Partners shareholders will be asked:
1. To consider and vote on a proposal to approve the
issuance of shares of Thomas Weisel Partners common stock
(including shares issuable in respect of exchangeable shares) as
contemplated by the arrangement agreement and the plan of
arrangement.
2. To conduct any other business that properly comes before
the special meeting and any adjournment or postponement of the
special meeting, including any proposal to adjourn the meeting
to solicit additional proxies in favor of the foregoing proposal.
Copies of the arrangement agreement and the form of plan of
arrangement are attached to this proxy statement as
Annexes A and B. Thomas Weisel Partners shareholders are
encouraged to read the arrangement agreement, the plan of
arrangement and the other information contained in this proxy
statement, including the annexes, carefully before deciding how
to vote.
We have fixed the close of business on November 6, 2007 as
the record date for the special meeting or any postponement or
adjournment thereof, and only holders of record of Thomas Weisel
Partners common stock on the record date are entitled to vote at
the special meeting. On the record date, there were
25,551,505 shares of Thomas Weisel Partners common stock
outstanding and entitled to vote. Each share of common stock
entitles its holder to one vote on all matters properly coming
before the special meeting.
The holders of a majority of the outstanding shares of Thomas
Weisel Partners common stock on November 6, 2007,
present in person or represented by proxy and entitled to vote,
will constitute a quorum for the transaction of business at the
special meeting. Abstentions and broker non-votes
are treated as present for quorum purposes.
You may vote for, against or
abstain with respect to the proposal to approve the
Thomas Weisel Partners share issuance. A majority of the votes
cast for or against the proposed Thomas
Weisel Partners share issuance
24
must be voted for the proposal for it to pass. An
abstention is not treated as a vote for or
against, and will have no effect on the outcome of
the vote.
Under the rules of the New York Stock Exchange, Inc., member
brokers that do not receive instructions from their customers to
vote do not have discretionary voting authority to vote their
customers shares at the special meeting because the
approval of the Thomas Weisel Partners share issuance is not
considered a routine matter.
Independent
Election Inspector
We have retained Broadridge Financial Solutions to receive and
tabulate the votes in connection with the special meeting. We
have also retained through Broadridge Financial Solutions, an
independent election inspector. The independent election
inspector will certify the election results and perform any
other acts required by the Delaware General Corporation Law.
We are paying for costs associated with the preparation of proxy
materials and solicitation of proxies from our shareholders for
the special meeting. Although there are no formal agreements to
do so, we will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for their reasonable
expenses incurred in sending proxy materials to our shareholders
and beneficial owners of Thomas Weisel Partners common stock in
accordance with applicable rules. In addition to solicitation by
mail, our directors, officers and employees may solicit proxies
in person, by telephone, by fax or by electronic or other means
of communication, but they will not receive special compensation
for such activities.
Voting
of Proxies at the Special Meeting and Revocation of
Proxies
You can vote your shares by marking, signing and returning the
enclosed proxy card, or you can vote through the Internet or by
telephone. If you properly submit your proxy by any of these
methods and you do not subsequently revoke your proxy, your
shares will be voted in accordance with your instructions.
If you sign your proxy card but do not mark it to give voting
instructions, your shares will be voted as follows:
|
|
|
|
|
FOR the proposal to authorize the Thomas Weisel Partners share
issuance; and
|
otherwise in accordance with the judgment of the persons voting
the proxy on any other matter properly brought before the
special meeting and any adjournment or postponement thereof,
including any proposal to adjourn the meeting to solicit
additional proxies in favor of the foregoing proposal.
A proxy submitted through the Internet or by telephone may be
revoked by (i) executing a later-dated proxy card that is
received prior to 11:59 p.m., New York City time, on
December 13, 2007, (ii) subsequently submitting a new
proxy through the Internet or by telephone prior to
11:59 p.m., New York City time, on December 13, 2007
or (iii) attending the special meeting and voting in
person. A proxy submitted by proxy card may be revoked before
the vote is cast by the designated proxy by (i) giving
written notice to our Secretary & General Counsel at
One Montgomery Street, 37th Floor, San Francisco,
California 94104, (ii) subsequently submitting another
proxy bearing a later date or (iii) attending the special
meeting and voting in person. Attending the special meeting
without voting will not revoke your previously submitted proxy.
If you hold shares in street name (that is, through
a bank, broker or other nominee) and would like to attend the
special meeting, you will need to bring an account statement or
other acceptable evidence of ownership of Thomas Weisel Partners
common stock as of the close of business on November 6,
2007, the record date for voting. If you hold shares in
street name, then in order to vote at the special
meeting you will also need to bring a valid legal
proxy, which you can obtain by contacting your account
representative at the bank, broker or nominee through which you
hold your shares.
Dissenters
Appraisal Rights
There are no appraisal or dissenters rights associated
with the matter we have scheduled for a vote at the special
meeting.
25
The board of directors does not currently intend to bring any
other business before the special meeting and, to the knowledge
of the board of directors, no other matters other than those
indicated above are to be brought before the special meeting.
If, however, any other matter properly comes before the special
meeting, the proxy holders will, in their discretion, vote on it
in accordance with their own best judgment.
Independent
Registered Public Accounting Firm
A representative of Deloitte & Touche LLP is expected
to be present at the special meeting, will have the opportunity
to make a statement if he or she desires to do so and will be
available to respond to appropriate questions from shareholders.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE
ENCLOSED PROXY IN THE ACCOMPANYING REPLY ENVELOPE, OR SUBMIT
YOUR PROXY BY TELEPHONE OR THE INTERNET. SHAREHOLDERS WHO ATTEND
THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON.
Questions
and Additional Information
If you have more questions about the transaction or how to
submit your proxy, or if you need additional copies of this
proxy statement or the enclosed proxy card or voting
instructions, please call our Shareholder Services Department at
(415) 364-2500.
26
Thomas
Weisel Partners Group, Inc.
We are an investment bank specializing in the growth sectors of
the economy. Our headquarters are in San Francisco and we
have additional offices in Baltimore, Boston, Chicago,
Cleveland, New York, Portland, Silicon Valley, London and
Mumbai. We provide investment banking, brokerage, research and
asset management services tailored to meet the particular needs
of our clients. We were founded in 1998 by Thomas W. Weisel, who
was Chairman and Chief Executive Officer of Montgomery
Securities for more than 20 years. On February 7,
2006, Thomas Weisel Partners Group, Inc. succeeded to the
business of Thomas Weisel Partners Group LLC and completed an
initial public offering of its common stock.
We have organized our business to focus principally on the
growth sectors of the economy, including the technology,
healthcare and consumer sectors. We believe that this focus
allows us to capitalize on the business opportunities created by
many of the primary drivers of innovation, growth and capital
investment in the U.S. economy.
Our principal executive offices are located at One Montgomery
Street, San Francisco, California 94104 and our telephone
number is
(415) 364-2500.
Westwind
Capital Corporation
Westwind is an independent, institutional investment banking
firm focused on growth companies, particularly in the energy and
mining sectors. Westwinds services include investment
banking services, including capital-raising transactions and
mergers and acquisitions advisory services, equity trading and
equity research on Canadian and U.K. publicly-listed companies.
Westwinds registered office is located at 70 York Street,
Toronto, Ontario Canada M5J 1S9 and its telephone number is
(416) 815-0888.
TWP
Acquisition Company (Canada), Inc.
TWP Acquisition Company (Canada), Inc. is an indirect
wholly-owned subsidiary of Thomas Weisel Partners and is
referred to in this proxy statement as Canadian Sub. Canadian
Sub is a corporation organized under the Ontario Business
Corporations Act on September 27, 2007 for the sole purpose
of participating in the transaction. After the transaction is
completed, Canadian Sub will continue to be an indirect
subsidiary of Thomas Weisel Partners. Canadian Subs
registered office is located at 199 Bay Street, Suite 5300
Commerce Court West, Toronto, Ontario Canada M5L 1B9 and its
telephone number is
(415) 364-2500.
TWP
Holdings Company (Canada), ULC
TWP Holdings Company (Canada), ULC is a direct wholly-owned
subsidiary of Thomas Weisel Partners and is referred to in this
proxy statement as CallRightCo. CallRightCo is an unlimited
liability company formed under the laws of the Province of Nova
Scotia on September 28, 2007 for the sole purpose of
participating in this transaction. CallRightCo will hold the
call rights related to the exchangeable shares as well as the
voting shares of Canadian Sub. After the transaction is
completed, CallRightCo will continue to be a direct wholly-owned
subsidiary of Thomas Weisel Partners. CallRightCos
registered office is located at Suite 900, 1959 Upper Water
Street, P.O. Box 997, Halifax, Nova Scotia Canada B3J
3N2 and its telephone number is
(415) 364-2500.
27
DESCRIPTION
OF THE TRANSACTION
The following is a description of the material aspects of the
transaction, including the arrangement agreement, the plan of
arrangement and certain other agreements to be entered into in
connection with the transaction. The description may not contain
all of the information that is important to you. You should
carefully read this entire document and the other documents
referred to herein for a more complete understanding of the
transaction.
The Thomas Weisel Partners board of directors has unanimously
approved the arrangement agreement. The arrangement agreement
provides that Canadian Sub will acquire all of the Westwind
common shares and Class A common shares, subject to, among
other things:
|
|
|
|
|
approval of the Thomas Weisel Partners share issuance by Thomas
Weisel Partners shareholders; and
|
|
|
|
approval of the arrangement by the Ontario Superior Court of
Justice (Commercial List).
|
The transaction has been unanimously approved by Westwinds
board of directors and Westwinds shareholders. A hearing
before the Ontario Superior Court of Justice (Commercial List)
has been scheduled for November 13, 2007.
As a consequence of the transaction, Westwind will become an
indirect subsidiary of Thomas Weisel Partners. Pursuant to the
transaction, Canadian Sub will acquire all of the outstanding
common shares and Class A common shares of Westwind and
subject to certain exceptions, Westwind shareholders will
receive from Canadian Sub for the Westwind common shares and
Class A common shares held by them an amount in cash and
shares of Thomas Weisel Partners common stock or exchangeable
shares equal to their pro rata portion (based on their ownership
of common shares and Class A shares of Westwind) of the
aggregate of $45,000,000 in cash and 7,009,112 shares of
Thomas Weisel Partners common stock or exchangeable shares, with
holders generally receiving approximately 70% of the total value
to be received in exchange for their Westwind common shares and
Class A common shares in the form of shares of Thomas
Weisel Partners common stock or exchangeable shares
(representing approximately 0.6628 shares of Thomas Weisel
Partners common stock or exchangeable shares per Westwind common
share or Class A common share based on
10,575,678 Westwind shares outstanding as of
November 6, 2007) and approximately 30% in the form of cash
(representing approximately $4.26 per Westwind common share or
Class A common share based on 10,575,678 Westwind
shares outstanding as of November 6, 2007).
Background
of the Transaction
As previously announced, Thomas Weisel Partners strategy
includes selectively pursuing strategic acquisitions as well as
making investments in businesses or products that are
complementary to its core businesses. Accordingly, from time to
time, representatives of Thomas Weisel Partners communicate with
third parties regarding potential acquisition opportunities.
On June 12, 2007, an investment banker in Thomas Weisel
Partners Mergers & Acquisitions group, contacted
Lionel Conacher, Chief Executive Officer of Westwind, and
suggested a meeting between Mr. Conacher and Thomas W.
Weisel, Chairman and Chief Executive Officer of Thomas Weisel
Partners. During the weeks following the initial contact, the
investment banker and Mr. Conacher corresponded with each
other regarding the meeting.
On July 25, 2007, Mr. Weisel and an investment banker
in Thomas Weisel Partners Mergers & Acquisitions
group met with Mr. Conacher in Toronto. They discussed the
businesses of Thomas Weisel Partners and Westwind and the
possibility and potential benefits of combining the Westwind
business with Thomas Weisel Partners.
To facilitate further discussions, Thomas Weisel Partners and
Westwind entered into a confidentiality agreement on
August 10, 2007, covering confidential information related
to Thomas Weisel Partners that it was contemplated would be made
available to Westwind.
On August 13, 2007, Mr. Conacher and Keith Harris,
Chief Financial Officer of Westwind, met with Mr. Weisel
and certain other executive officers and employees of Thomas
Weisel Partners in San Francisco, California. This group
continued their discussions regarding the possibility of
pursuing a transaction between the two firms.
28
On August 27, 2007, officers of Thomas Weisel Partners met
with Messrs. Conacher and Harris, along with additional
members of Westwinds executive team in Toronto. During the
meeting on August 27, 2007, members of Westwinds
executive team made presentations to representatives from Thomas
Weisel Partners regarding Westwinds business and related
matters. On August 28, 2007, representatives from Thomas
Weisel Partners and Westwind, along with a representative from
Thomas Weisel Partners U.S. counsel,
Sullivan & Cromwell LLP, and a representative from
Westwinds counsel, Davies Ward Phillips &
Vineberg LLP, met in Toronto to discuss proposed terms of a
potential transaction.
On August 30, 2007, officers of Thomas Weisel Partners sent
to representatives of Westwind a summary of proposed terms for a
potential transaction. On September 1, 2007, officers of
Westwind delivered comments to the summary of proposed terms,
and during the following week and weekend, representatives of
Thomas Weisel Partners and Westwind and their respective counsel
continued to discuss the matters addressed in the summary of
proposed terms.
On the morning of September 4, 2007, Mr. Conacher met
with certain members of Thomas Weisel Partners board of
directors, along with certain executive officers of Thomas
Weisel Partners, in San Francisco, California. The parties
further discussed Westwinds business, the background and
experience of Mr. Conacher and other Westwind executives
and the potential strategic fit of Westwind with Thomas Weisel
Partners business. During the evening of September 4,
2007, Mr. Conacher had further discussions of this nature
with certain additional members of Thomas Weisel Partners
board of directors, as well as certain executive officers of
Thomas Weisel Partners.
To facilitate discussions regarding the proposed terms, Thomas
Weisel Partners and Westwind entered into a further
confidentiality agreement on September 6, 2007, covering
confidential information related to Westwind that it was
contemplated would be made available to Thomas Weisel Partners
in evaluating a potential combination.
On September 7, 2007, Thomas Weisel Partners and Westwind
concluded discussions regarding the summary of proposed terms,
and counsel for Thomas Weisel Partners delivered initial drafts
of the arrangement agreement, equity and pledge agreements and
plan of arrangement to counsel for Westwind. The parties
continued their due diligence process on September 7, 2007,
when Westwinds electronic dataroom became accessible to
representatives of Thomas Weisel Partners. Between
September 7, 2007 and September 30, 2007, the date of
the signing of the arrangement agreement, representatives of
Thomas Weisel Partners and its advisors and legal counsel
conducted financial, legal and business due diligence on
Westwind.
On September 12, 2007, at a regularly scheduled meeting,
the Thomas Weisel Partners board of directors received reports
from Mr. Weisel and certain other executive officers and
employees of Thomas Weisel Partners regarding the status of the
potential transaction with Westwind.
On September 13, 2007, counsel for Westwind delivered
comments on the draft arrangement agreement previously delivered
on September 7, 2007 to representatives of Thomas Weisel
Partners and its counsel.
On September 14, 2007, Thomas Weisel Partners engaged
Keefe, Bruyette & Woods, Inc. to provide a fairness
opinion regarding the proposed transaction to the Thomas Weisel
Partners board of directors.
From September 15, 2007 to September 29, 2007,
representatives of Thomas Weisel Partners and Westwind and their
respective counsel had numerous telephonic meetings at which
they discussed and negotiated the draft documents for the
proposed transaction.
On September 30, 2007, the Thomas Weisel Partners board of
directors convened a special telephonic meeting to consider the
proposed business combination with Westwind and the terms and
conditions of the arrangement agreement. A representative of
Keefe, Bruyette & Woods, Inc. and a representative of
Sullivan & Cromwell LLP attended the meeting. The
Sullivan & Cromwell LLP representative advised the
board of directors regarding its fiduciary duties in the context
of the transaction that was being presented for approval and
responded to questions regarding the transaction from the Thomas
Weisel Partners board of directors and reviewed in detail with
the board of directors the draft arrangement agreement and
related documents as well as the terms of, and other
documentation for, the proposed transaction. The board members
asked questions of management and counsel regarding the proposed
terms and discussed the merits of the transaction. The Keefe,
Bruyette & Woods, Inc. representative discussed Keefe,
Bruyette & Woods, Inc.s fairness opinion
regarding the transaction and the
29
financial analysis underlying that opinion, and responded to
various questions raised by members of Thomas Weisel
Partners board of directors. Keefe, Bruyette &
Woods, Inc. then delivered its fairness opinion to the Thomas
Weisel Partners board of directors, subsequently confirmed in
writing, that as of September 30, 2007, the proposed
transaction was fair from a financial point of view to Thomas
Weisel Partners. After considering the terms of the proposed
transaction, the Thomas Weisel Partners board of directors
unanimously approved the arrangement agreement, the arrangement
and the other transactions contemplated by the arrangement
agreement and related documents.
Pursuant to a resolution in writing dated as of
September 29, 2007, the board of directors of Westwind
unanimously approved the arrangement agreement and related
transactions.
During the evening on September 30, 2007, representatives
of Thomas Weisel Partners and Westwind executed the arrangement
agreement on substantially the same terms as presented to each
partys board of directors, and the relevant parties
executed the equity agreement, the pledge agreements, the voting
commitments and the employment agreement contemplated by the
arrangement agreement. During the morning on October 1,
2007, Thomas Weisel Partners and Westwind issued a press release
announcing the execution of the arrangement agreement.
Pursuant to a resolution in writing dated as of October 5,
2007, Westwinds shareholders unanimously approved the
arrangement.
Reasons
for the Transaction; Recommendation of the Board of
Directors
The board of directors, at the meeting described above on
September 30, 2007, unanimously (i) determined that
the arrangement agreement and the arrangement are fair to and in
the best interests of Thomas Weisel Partners and its
shareholders, (ii) approved, adopted and declared advisable
the arrangement agreement, the arrangement and the other
transactions contemplated by the arrangement agreement and
authorized the execution and delivery of the arrangement
agreement and (iii) resolved to recommend that the Thomas
Weisel Partners shareholders approve the Thomas Weisel Partners
share issuance and directed that such matter be submitted for
consideration of the Thomas Weisel Partners shareholders at the
special meeting.
In reaching its decision to approve, adopt and declare advisable
the arrangement agreement, the arrangement, and the other
transactions contemplated by the arrangement agreement and to
recommend approval of the Thomas Weisel Partners share issuance
to Thomas Weisel Partners shareholders, our board of directors
consulted with our senior management team, as well as our
internal and outside legal and financial advisors, and
considered a number of factors, including the following material
factors that our board of directors viewed as supporting its
decision to approve and declare advisable the arrangement
agreement, the arrangement and the other transactions
contemplated by the arrangement agreement and to unanimously
recommend approval of the Thomas Weisel Partners share issuance
to our shareholders:
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|
|
|
|
the opinion of Keefe, Bruyette & Woods, Inc., and its
presentation, dated September 30, 2007, to the board as to
the fairness, from a financial point of view and as of the date
of the opinion, to Thomas Weisel Partners of the consideration
to be paid by Thomas Weisel Partners to the Westwind
shareholders in the arrangement, as more fully described below
under the caption Opinion of Keefe,
Bruyette & Woods, Inc.;
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|
|
|
historical information concerning the businesses, prospects,
financial performance and condition, operations, management and
competitive position of Thomas Weisel Partners and Westwind and
industry trends;
|
|
|
|
the anticipated financial condition, results of operations and
businesses of Thomas Weisel Partners and Westwind after giving
effect to the transaction;
|
|
|
|
current financial market conditions and historical market
prices, volatility and trading information with respect to
Thomas Weisel Partners common stock;
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|
the terms and conditions of the arrangement agreement generally,
including the parties representations, warranties and
covenants and the circumstances in which Thomas Weisel Partners
would be entitled to indemnification for breaches of
Westwinds representations, warranties and covenants;
|
30
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|
|
|
|
the terms of Lionel Conachers employment
agreement; and
|
|
|
|
the results of due diligence investigations by management, legal
and other advisors.
|
Our board of directors also considered potentially negative
risks of the transaction, including:
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|
|
|
|
the risk that despite the efforts of Westwind and Thomas Weisel
Partners, key Westwind personnel might not remain employed by
Westwind or, following the closing, the combined company;
|
|
|
|
the risk that potential benefits sought in the transaction may
not be achieved in the expected timeframe or at all;
|
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|
risks associated with Westwinds business;
|
|
|
|
the risk that the satisfaction of the conditions to closing the
transaction might not be accomplished within the expected
timeframe or at all; and
|
|
|
|
the dilution to Thomas Weisel Partners existing
shareholders.
|
The foregoing discussion of the factors considered by our board
of directors is not intended to be exhaustive, but rather
includes the material factors considered by our board of
directors. In reaching its decision to approve, adopt and
declare advisable the arrangement agreement, the arrangement and
the other transactions contemplated by the arrangement agreement
and to recommend approval of the Thomas Weisel Partners share
issuance, our board of directors did not quantify or assign any
relative weights to the factors considered and individual
directors may have given different weights to different factors.
In the event the transaction is not completed for any reason, we
expect to continue to pursue strategic opportunities, including
acquisitions, when appropriate to further expand our business.
Such opportunities could include transactions with Westwind.
Our board of directors unanimously recommends that you vote
FOR the Thomas Weisel Partners share issuance.
Opinion
of Keefe, Bruyette & Woods, Inc.
KBW rendered its opinion to the board of directors of Thomas
Weisel Partners that, as of September 30, 2007, and based
upon and subject to the factors and assumptions set forth
therein, the consideration to be paid to Westwind shareholders
pursuant to the arrangement agreement, was fair, from a
financial point of view, to Thomas Weisel Partners.
The full text of the written opinion of KBW, dated
September 30, 2007, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex C. KBW provided its opinion solely for the
information and assistance of the board of directors of Thomas
Weisel Partners in connection with the consideration to be paid
by Thomas Weisel Partners in the transaction. The KBW opinion is
not a recommendation as to how any holder of Thomas Weisel
Partners common stock should vote with respect to the share
issuance or on any other matter.
In connection with this opinion, KBW reviewed, analyzed and
relied upon material bearing upon the transaction and the
financial and operating condition of Thomas Weisel Partners and
Westwind, including among other things, the following:
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|
|
the arrangement agreement;
|
|
|
|
the Annual Reports to Stockholders of Thomas Weisel Partners for
the two fiscal years ended December 31, 2006 and 2005;
|
|
|
|
the audited financial statements of Westwind for the years ended
December 31, 2006 and 2005;
|
|
|
|
certain interim management reports of Thomas Weisel Partners and
Westwind and certain other communications from Thomas Weisel
Partners and Westwind to their respective stockholders; and
|
31
|
|
|
|
|
other financial information concerning the businesses and
operations of Thomas Weisel Partners and Westwind furnished or
made available to KBW by Thomas Weisel Partners and Westwind for
purposes of KBWs analysis.
|
KBW also held discussions with senior management of Thomas
Weisel Partners and Westwind regarding the past and current
business operations, regulatory relations, financial condition
and future prospects of Thomas Weisel Partners and Westwind and
such other matters as KBW deemed relevant to its inquiry. In
addition, KBW compared certain financial information for Thomas
Weisel Partners and Westwind with similar information for
certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business
combinations in the securities brokerage and investment banking
sector of the financial services industry and performed such
other studies and analyses as KBW considered appropriate.
In conducting the review and arriving at its opinion, KBW relied
upon the accuracy and completeness of all of the financial and
other information either provided to it or publicly available,
and did not independently verify the accuracy or completeness of
any such information. KBW relied upon discussions with
management of Westwind as to the reasonableness and
achievability of the financial and operating forecast (and the
assumptions and bases therefor) provided and assumed that such
forecast reflects the best currently available estimate and
judgment of Westwind. KBWs interaction with Westwind
consisted of a review of documentation made available by
Westwind to Thomas Weisel Partners in connection with due
diligence investigations by Thomas Weisel Partners and its
advisors in respect of Westwind, and due diligence discussions
with certain members of Westwinds senior management. KBW
relied upon published financial forecasts and earnings estimates
for Thomas Weisel Partners and assumed that such forecasts and
projections reflect the best currently available estimates for
Thomas Weisel Partners and that such forecasts and projections
will be realized in the amounts and in the time periods set
forth therein. In rendering the opinion, KBW did not make or
obtain any evaluations or appraisals of the property of Thomas
Weisel Partners or Westwind.
The following is a summary of the material financial analysis
delivered by KBW to the board of directors of Thomas Weisel
Partners in connection with rendering the opinion described
above. The following summary, however, does not purport to be a
complete description of the financial analysis performed by KBW,
nor does the order of analysis described represent relative
importance or weight given to any particular analysis by KBW.
Some of the summaries of the financial analysis include
information presented in tabular format. The tables must be read
together with the full text of each summary and are alone not a
complete description of KBWs financial analysis. Except as
otherwise noted, the following quantitative information, to the
extent that it is based on market data, is based on market data
as it existed on or before September 30, 2007, and is not
necessarily indicative of current market conditions.
32
Discounted
Cash Flow Analysis
KBW calculated the net present value (NPV) of
expected future cash flows to Westwind shareholders assuming it
were to remain independent for a period of five years; it was
assumed that on the fifth anniversary (terminal
year) Westwind would sell 100% of its issued and
outstanding share capital for value equal to the product of 13.6
and estimated 2013 pro forma, after-tax net income (net
income). KBW analyzed the impact on NPV of a range of
annual net income growth rates from 0.0% to 15.0%, analyzed the
impact on NPV of a range of terminal year net income multiples
of 10.6x to 16.6x, and calculated shareholder cash flows using
equity discount rates ranging from 17.7% to 27.7%. In addition,
based on due diligence conversations between certain members of
Westwind and Thomas Weisel Partners management and KBW, KBW
assumed an effective tax rate of 36%, annual dividend payout
ratio of 30%, and a one-time adjustment to shareholders
equity on the fifth anniversary (commensurate with a shareholder
liquidity event) resulting in a one-time dividend to
shareholders. The following table presents the results of this
analysis:
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Acquisition Consideration
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as a Premium/(Discount)
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|
Illustrative per Value
|
|
|
to Implied Discounted
|
|
|
|
Indications ($CAD000)
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|
|
Cash Flow Value
|
|
|
Discount rates of 17.7%-27.7% and terminal P/E multiples of
10.6x-16.6x(a)
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|
$
|
133,541-$283,342
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|
(8.9
|
%)-93.1%
|
Discount rates of 19.7%-27.7% and Net Income growth rates of
0.0%-15.0%(b)
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$
|
108,435-$256,059
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|
(26.1
|
%)-76.6%
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|
(a)
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|
Assumes
2009-2013
growth rate of 11.0%
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(b)
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|
Assumes terminal P/E multiple in 2013 equal to 13.6x projected
earnings
|
Comparable
Company Analysis
KBW reviewed and compared certain financial information for
Westwind to corresponding financial information, including
financial and operating performance ratios and public market
valuation multiples of the following publicly traded
U.S. and Canadian companies:
Publicly traded U.S. comparable companies:
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Jefferies Group, Inc.
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Raymond James Financial, Inc.
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Piper Jaffray Companies
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|
KBW, Inc.
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Stifel Financial Corp.
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Thomas Weisel Partners Group, Inc.
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|
Sanders Morris Harris Group, Inc.
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Cowen Group, Inc.
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JMP Group, Inc.
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Publicly traded Canadian comparable companies:
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|
Canaccord Capital Inc.
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|
GMP Capital Trust
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Although none of the selected companies is directly comparable
to Westwind, the companies included were chosen because they are
publicly traded companies with operations that for purposes of
analysis may be considered similar to certain operations of
Westwind.
33
KBW calculated and compared various financial multiples and
ratios based on financial data provided by Westwind and implied
by the proposed transaction consideration. The multiples and
ratios for each of the selected companies were based on the
closing stock prices as of September 27, 2007, as well as
information obtained from SEC filings, data from SNL Financial
and research estimates from Thomson ONE Analytics.
KBW calculated the selected companies estimated calendar
years 2007 and 2008 price/earnings ratios, price/tangible book
value and actual last twelve months (LTM) and
estimated calendar year 2007 price/revenue ratios and compared
those calculations to the results for Westwind and to the
corresponding valuation multiples implied by the proposed
consideration. The following table presents the results of this
analysis:
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Selected Companies
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Westwind Capital
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|
Ratio(a):
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|
Range
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Median
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Corporation
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|
Price/2007E Earnings
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|
9.3
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x
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U.S. Comparable Companies
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|
14.3x-22.5
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x
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|
|
16.6
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x
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|
|
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|
Canadian Comparable Companies
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|
8.9x-15.6
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x
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|
12.2
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x
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Price/2008E Earnings
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|
7.7
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x
|
U.S. Comparable Companies
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|
10.5x-17.4
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x
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|
14.0
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x
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|
Canadian Comparable Companies
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|
9.2x-16.4
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x
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12.8
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x
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Price/Book Value
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7.5
|
x
|
U.S. Comparable Companies
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|
1.0x-2.4
|
x
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|
1.7
|
x
|
|
|
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|
Canadian Comparable Companies
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|
2.9x-6.2
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x
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|
2.9
|
x
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|
Price/LTM Revenues
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|
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|
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|
1.8
|
x
|
U.S. Comparable Companies
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|
0.7x-2.2
|
x
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|
1.5
|
x
|
|
|
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|
Canadian Comparable Companies
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|
1.2x-2.1
|
x
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|
1.8
|
x
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Price/2007E Revenues
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|
1.6
|
x
|
U.S. Comparable Companies
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|
|
0.7x-2.1
|
x
|
|
|
1.5
|
x
|
|
|
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|
Canadian Comparable Companies
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|
1.1x-2.1
|
x
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|
1.6
|
x
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(a)
|
|
All figures based on data from SNL Financial, Factset
Datasource, Thomson Firstcall estimates and publicly available
filings; P/E ratios based on median Thomson Firstcall earnings
estimates for calendar year.
|
Comparable
Transaction Analysis
KBW analyzed certain information relating to the following
selected transactions in the securities industry since
April 6, 1997:
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Macquarie Bank Ltd./ Orion Financial Inc.
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Jefferies Group Inc./ Putnam Lovell NBF Group Inc.
|
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|
Wachovia Corp./ A.G. Edwards, Inc.
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|
Macquarie Bank Ltd./ Giuliani Partners, LLC
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|
Stifel Financial Corp./ Ryan, Beck & Co. Inc.
|
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|
Merrill Lynch & Co./ Petrie Parkman & Co.
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|
Canaccord Capital, Inc./ Adams Harkness Financial Group
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|
Royal Bank of Canada/ Tucker Anthony Sutro
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|
Regions Financial Corp./ Morgan Keegan, Inc.
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|
Royal Bank of Canada/ Dain Raucher Corp.
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|
First Union Corp./JWGenesis Financial Corp.
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34
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|
MONY Group, Inc./ Advest Group, Inc.
|
|
|
|
Wells Fargo & Co./ Ragen McKenzie Group, Inc.
|
|
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|
Chase Manhattan Corporation (The)/ Hambrecht & Quist
Group
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First Union Corp./EVEREN Capital Corp.
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|
Wachovia Corp./Interstate/Johnson Lane Inc.
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|
PNC Financial Services Group, Inc./ Hilliard-Lyons Inc.
|
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|
BB&T Corp./ Scott & Stringfellow Financial, Inc.
|
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|
KeyCorp/ McDonald & Co. Investments, Inc.
|
|
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|
BankAtlantic Bancorp, Inc./ Ryan, Beck & Co. Inc.
|
|
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|
Dain Raucher Corp./Wessels, Arnold & Henderson
|
|
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|
US Bancorp, Inc./Piper Jaffray Companies, Inc.
|
|
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First Union Corp./Wheat First Butcher Singer Inc.
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|
Bankers Trust Corp./Alex Brown Inc.
|
For each of the selected transactions, KBW calculated and
compared the ratio of the aggregate consideration to the target
companys (i) revenue for the latest twelve months
prior to the announcement; (ii) projected net income; and
(iii) recent shareholders equity (book
value) based on the most recent publicly available
information prior to the transaction announcement. KBW then
compared these ratios to the ratios implied by the proposed
transaction. This analysis is summarized below:
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|
Valuation Multiples at Announcement
|
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Estimated
|
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|
|
|
|
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|
|
Net Income
|
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|
Book Value
|
|
|
LTM Revenue
|
|
|
|
(x)
|
|
|
(x)
|
|
|
(x)
|
|
|
Average
|
|
|
13.7
|
x
|
|
|
2.9
|
x
|
|
|
1.5
|
x
|
Median
|
|
|
13.6
|
x
|
|
|
2.6
|
x
|
|
|
1.2
|
x
|
Multiples implied by announced transaction
|
|
|
9.3
|
x
|
|
|
7.5
|
x
|
|
|
1.8
|
x
|
Pro
Forma Earnings Impact Analysis
KBW analyzed the potential financial impact of the transaction
on the estimated financial performance of Thomas Weisel Partners
for each of the fiscal years ending December 31, 2008
through 2012. To do so, KBW used and relied upon certain
publicly available market data, including KBW earnings estimates
for Thomas Weisel Partners provided to Thomson One Analytics and
certain financial performance and financial condition data for
Westwind provided or made available to KBW by Westwind and
Thomas Weisel Partners for the purposes of KBWs analysis.
KBWs pro forma earnings analysis assumed, among other
factors, (i) that the transaction closing will take place
on December 30, 2007; (ii) that the combined entity
will have an effective corporate income tax rate of 37.0%;
(iii) the inclusion of one-time transaction-related
expenses not expected to recur, including but not limited to
expenses associated with operational integration and fees paid
to advisors and counsel; and (iv) the inclusion of
amortization expenses incurred as a result of the future
amortization of transaction-related intangible assets. As part
of its analysis, KBW also assumed the pre-tax opportunity cost
associated with cash consideration to be 4.9% and that total
transaction charges will be approximately US$2.65 million.
KBW utilized the prevailing exchange rate as of
September 27, 2007 of 0.9982 U.S. dollars per Canadian
dollar.
For each of the fiscal years ending December 31, 2008
through 2012, KBW compared the projected earnings per share of
Thomas Weisel Partners common stock, on a standalone
basis, to the projected earnings per share of the common stock
of the combined companies. Projected earnings per share for
Thomas Weisel Partners common stock were based on KBW
earnings estimates provided to Thomson One Analytics. Projected
earnings for
35
Westwind were based upon due diligence conversations between
certain members of Westwind management and KBW. Based on such
analysis, the proposed transaction would be accretive to Thomas
Weisel Partners stockholders on a cash earnings per share
basis, which excludes costs associated with transaction expenses
and the amortization of intangibles. On a U.S. GAAP basis,
inclusive of transaction expenses and amortization of
intangibles, the transaction would be accretive in years
2009-2012
and is estimated to be approximately 4.7% dilutive in 2008.
The preparation of a fairness opinion is a complex process and
is not necessarily amenable to partial analysis or summary
description. Selecting portions of the analysis or of the
summary set forth above, without considering the analysis as a
whole, could create an incomplete view of the processes
underlying KBWs opinion. In arriving at its fairness
determination, KBW considered the results of its entire analysis
and did not attribute any particular weight to any factor or
analysis considered by it. Rather, KBW made its determination as
to fairness on the basis of its experience and professional
judgment after considering the results of its entire analysis.
No company or transaction used in the above analysis as a
comparison is directly comparable to Westwind or the
contemplated transaction.
KBW prepared this analysis for purposes of providing its opinion
to the board of directors of Thomas Weisel Partners as to the
fairness, from a financial point of view, to Thomas Weisel
Partners of the consideration to be paid by Thomas Weisel
Partners in the transaction.
This analysis does not purport to be an appraisal nor does it
necessarily reflect the prices at which businesses or securities
actually may be sold. Analysis based upon forecasts of future
results is not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested
by this analysis. Because this analysis is inherently subject to
uncertainty, being based upon numerous factors or events beyond
the control of the parties or their respective advisors, none of
Thomas Weisel Partners, Westwind, KBW or any other person
assumes responsibility if future results are materially
different from those forecast.
The consideration was determined through arms-length
negotiations between Thomas Weisel Partners and Westwind and was
approved by the board of directors of Thomas Weisel Partners.
KBW did not provide advice to Thomas Weisel Partners during
these negotiations. Further, KBW did not recommend any specific
amount of consideration to Thomas Weisel Partners or its board
of directors or that any specific amount of consideration
constituted the only appropriate consideration for the
transaction.
As described above, KBWs opinion to the board of directors
of Thomas Weisel Partners was one of many factors taken into
consideration by the board of directors of Thomas Weisel
Partners in determining to approve the arrangement agreement.
The foregoing summary does not purport to be a complete
description of the analysis performed by KBW in connection with
the fairness opinion and is qualified in its entirety by
reference to the written opinion of KBW attached as Annex C.
KBW, as part of its investment banking business, is continually
engaged in the valuation of the securities of financial services
companies in connection with acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for various other
purposes. In addition, KBW has provided certain investment
banking services to Thomas Weisel Partners from time to time,
including having acted as co-lead manager and joint book runner
with respect to the offering by Thomas Weisel Partners of common
stock in Thomas Weisel Partners February 2006 initial
public offering and May 2006 follow-on offering. KBW also may
provide investment banking services to Thomas Weisel Partners in
the future. KBW has acted exclusively for the board of directors
of Thomas Weisel Partners in rendering this fairness opinion and
has received a fee from Thomas Weisel Partners for its services.
Completion
of the Transaction
Under the Ontario Business Corporations Act, the arrangement
requires approval by the Ontario Superior Court of Justice.
Assuming such approval is obtained, and the other conditions to
closing contained in the arrangement agreement are satisfied or
waived, it is anticipated that the following will occur
substantially simultaneously:
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articles of arrangement for Westwind will be filed with the
Director under the OBCA and a certificate of arrangement will be
issued to give effect to the arrangement;
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the voting and exchange trust agreement and the exchangeable
share support agreement will be executed and delivered;
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the certificate of designation, preferences and rights of the
special voting preferred stock of Thomas Weisel Partners will be
filed with the Secretary of State of the State of
Delaware; and
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the various other documents necessary to consummate the
transaction will be executed and delivered.
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The closing of the transaction will take place on the second
business day after the satisfaction or waiver of the last
condition to be satisfied or waived (other than conditions that,
by their terms, cannot be satisfied until the closing date, but
subject to the satisfaction or, where permitted, waiver of those
conditions as of the closing date) or any other time agreed to
in writing by Thomas Weisel Partners and Westwind, acting
reasonably. It is currently anticipated that the transaction
will close in January 2008.
Under the arrangement agreement, Thomas Weisel Partners and
Westwind have both agreed to use their reasonable best efforts
to apply for and obtain all regulatory approvals necessary or
advisable in connection with the transactions contemplated by
the arrangement agreement.
Investment
Canada Act
Under the
Investment Canada Act
, certain transactions
involving the acquisition of control of a Canadian business by a
non-Canadian are subject to review and cannot be implemented
unless the Minister responsible for the
Investment Canada Act
is satisfied that the transaction is likely to be of net
benefit to Canada. If a direct acquisition of a Canadian
business is subject to the review requirement, an application
for review must be filed with the Investment Review Division of
Industry Canada prior to the implementation of the reviewable
transaction. The Minister is then required to determine whether
the transaction is likely to be of net benefit to Canada taking
into account, among other things, certain factors specified in
the
Investment Canada Act
and any plans or written
undertakings given by the applicant. The
Investment Canada
Act
contemplates an initial review period of 45 days
after filing; however, if the Minister has not completed the
review by that date, the Minister may unilaterally extend the
review period by up to 30 days (or a longer period, if
agreed to by the applicant) to permit completion of the review.
The prescribed factors of assessment to be considered by the
Minister include, among other things, the effect of the
investment on the level and nature of economic activity in
Canada (including the effect on employment and utilization of
Canadian products and services and exports), the degree and
significance of participation by Canadians in the acquired
business, the effect of the investment on productivity,
industrial efficiency, technological development, product
innovation and product variety in Canada, the effect of the
investment on competition within any industry in Canada, the
compatibility of the investment with national industrial,
economic and cultural policies (taking into consideration
corresponding provincial policies) and the contribution of the
investment to Canadas ability to compete in world markets.
If the Minister determines that he is not satisfied that a
reviewable transaction is likely to be of net benefit to Canada,
the reviewable transaction may not be implemented.
The acquisition of control of Westwind contemplated by the
transaction is a reviewable transaction. In order to secure the
Ministers approval under the
Investment Canada Act
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it will be necessary for Thomas Weisel Partners to provide its
plans for Westwinds business, and possibly written
commitments, with respect to such matters as employment, the
participation of Canadians in management, opportunities for
synergies and growth and other issues relating to the impact of
the transaction in Canada. Thomas Weisel Partners filed an
application under the
Investment Canada Act
on
October 25, 2007.
Additional
Regulatory Approvals
Investment
Dealers Association of Canada
As a member of the Investment Dealers Association of Canada (a
self-regulatory organization for Canadian registered dealers),
Westwind Partners Inc., a wholly-owned subsidiary of Westwind,
is required to provide notice to
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the Secretary of the Investment Dealers Association and obtain
approval from the Ontario District Council of the Investment
Dealers Association for the various steps relating to our
acquisition of Westwind. Westwind filed a notice and application
for approval with the Investment Dealers Association on
October 19, 2007.
Financial
Industry Regulatory Authority
As a member of the Financial Industry Regulatory Authority, or
FINRA, Westwind Partners (USA) Inc., a wholly-owned subsidiary
of Westwind, is required to file with FINRA an application for
approval of the change of its ownership that will result from
the transaction. On October 24, 2007, Thomas Weisel
Partners, Westwind and Westwind Partners (USA) Inc. submitted a
joint application to FINRA for approval of the change of control
of Westwind Partners (USA) Inc.
United
Kingdom Financial Services Authority
The businesses that a subsidiary of Westwind conducts in the
United Kingdom are regulated by the Financial Services
Authority, or the FSA. Accordingly, we must obtain, and the
transaction is conditioned upon receiving, the approval of the
FSA. On October 19, 2007, the FSA approved the application
submitted by us and Westwind, provided that the transaction is
completed within three months following the date of approval.
In addition to the regulatory approvals discussed above, notices
or approvals also are required to be filed with or obtained from
certain provincial securities commissions (including the Ontario
Securities Commission), the Toronto Stock Exchange, the Toronto
Stock Exchange Venture Exchange and the New York Stock Exchange,
among others. We have also agreed to prepare and file with all
applicable securities commissions or similar securities
regulatory authorities of Canada all necessary applications to
seek exemptions from the prospectus, registration and other
requirements of the applicable securities laws of the relevant
provinces in Canada, for the issuance and resale of Thomas
Weisel Partners common stock and exchangeable shares without,
among other things, qualification with or approval of or the
filing of any document, including any prospectus or similar
document.
38
THE
ARRANGEMENT AGREEMENT AND RELATED AGREEMENTS
This section of the proxy statement describes the material
provisions of the arrangement agreement and related documents. A
copy of the arrangement agreement is attached as Annex A to
this proxy statement and the form of plan of arrangement is
attached as Annex B to this proxy statement.
Under the terms of the arrangement agreement, Westwind will
enter into a plan of arrangement under the OBCA, as a result of
which Westwind will be acquired by Canadian Sub, our
newly-formed and wholly-owned subsidiary. Pursuant to the
transaction, Canadian Sub will acquire all of the outstanding
common shares and Class A common shares of Westwind, and
subject to certain exceptions, the Westwind shareholders will
receive from Canadian Sub for the Westwind common shares and
Class A common shares held by them an amount in cash and
shares of Thomas Weisel Partners common stock or exchangeable
shares equal to their pro rata portion (based on their ownership
of common shares and Class A common shares of Westwind) of
the aggregate of $45,000,000 in cash and 7,009,112 shares
of Thomas Weisel Partners common stock or exchangeable shares,
with holders generally receiving approximately 70% of the total
value to be received in exchange for their Westwind common
shares and Class A common shares in the form of shares of
Thomas Weisel Partners common stock or exchangeable shares
(representing approximately 0.6628 shares of Thomas Weisel
Partners common stock or exchangeable shares per Westwind common
share or Class A common share based on
10,575,678 Westwind shares outstanding as of
November 6, 2007) and approximately 30% in the form of cash
(representing approximately $4.26 per Westwind common share or
Class A common share based on 10,575,678 Westwind
shares outstanding as of November 6, 2007).
Unless otherwise mutually agreed in writing by Westwind and us,
acting reasonably, the closing of the arrangement will take
place on the second business day after the satisfaction or
waiver of the last condition to be satisfied or waived
(described below under Conditions to the
Arrangement) (other than those conditions that, by their
terms, cannot be satisfied until the closing date, but subject
to the satisfaction or, where permitted, fulfillment or waiver
of those conditions as of the closing date) in accordance with
the arrangement agreement.
Representations
and Warranties
The arrangement agreement contains representations and
warranties made by Westwind that are subject, in some cases, to
specified exceptions and qualifications contained in the
arrangement agreement or the disclosure schedules delivered in
connection therewith. The representations and warranties relate
to, among other things:
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due organization, valid existence, good standing and power and
authority to carry on the businesses of Westwind and its
subsidiaries;
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the capitalization and the ownership of Westwind and its
subsidiaries;
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the authorization of the arrangement agreement by Westwind;
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the enforceability of the arrangement agreement against Westwind;
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the arrangement and other transactions contemplated by the
arrangement agreement not conflicting with the organizational
documents or certain contracts of Westwind and its subsidiaries
or applicable laws;
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governmental and regulatory filings, consents and approvals
required in connection with the arrangement and other
transactions contemplated by the arrangement agreement;
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the accuracy of Westwinds financial statements and the
maintenance and accuracy of the books and records of Westwind
and its subsidiaries;
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the absence of certain undisclosed liabilities of Westwind or
its subsidiaries;
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the absence of certain changes or events involving Westwind or
its subsidiaries since December 31, 2006;
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taxes and tax matters relating to Westwind and its subsidiaries;
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the registrations of Westwind and its subsidiaries and employees
as a broker-dealer, registered representative or a sales person
with regulatory and governmental entities and other permits and
governmental licenses required by Westwind or its subsidiaries
for the conduct of their businesses;
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compliance with laws and regulatory matters by Westwind and its
subsidiaries;
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real property matters involving Westwind and its subsidiaries;
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intellectual property and information technology matters
involving Westwind and its subsidiaries;
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certain contracts of Westwind and its subsidiaries;
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litigation involving Westwind and its subsidiaries;
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employee benefit plans of Westwind and its subsidiaries;
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labor and employment matters relating to Westwind and its
subsidiaries;
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environmental matters relating to Westwind and its subsidiaries;
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insurance policies of Westwind and its subsidiaries;
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the absence of bribes, kickbacks or similar payments made on
behalf of Westwind or its subsidiaries;
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related party transactions; and
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brokers and finders fees.
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We and Canadian Sub also made representations and warranties in
the arrangement agreement that are subject, in some cases, to
specified exceptions and qualifications contained in the
arrangement agreement. These representations and warranties
relate to, among other things:
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due organization, valid existence, good standing and power and
authority to carry on the businesses of Thomas Weisel Partners
and Canadian Sub;
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our authorization of the arrangement agreement;
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our capitalization and the capitalization of Canadian Sub;
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the shares of Thomas Weisel Partners common stock and
exchangeable shares proposed to be issued in connection with the
transaction;
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the enforceability of the arrangement agreement against us and
Canadian Sub;
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governmental and regulatory filings, consents and approvals
required in connection with the arrangement and other
transactions contemplated by the arrangement agreement;
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the arrangement and other transactions contemplated by the
arrangement agreement not conflicting with the organizational
documents or certain contracts of us and our subsidiaries or
applicable laws;
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our SEC filings since December 31, 2006, including
financial statements, and the accuracy of the information
contained therein;
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matters relating to disclosure controls and procedures and
internal control over financial reporting;
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our financial ability to satisfy our obligation to pay the cash
portion of the consideration pursuant to the arrangement
agreement; and
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litigation involving us and our subsidiaries.
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The representations and warranties contained in the arrangement
agreement are complicated and not easily summarized. You are
urged to read carefully Articles III and IV of the
arrangement agreement attached hereto as Annex A.
Conduct of the Business of Westwind and Thomas Weisel Partners
Pending the Completion of the Arrangement
Under the arrangement agreement, Westwind has agreed that,
subject to certain exceptions in the arrangement agreement and
the disclosure schedules delivered in connection with the
arrangement agreement, following the date of the arrangement
agreement and prior to the effective time of the arrangement,
unless we approve in writing (which determination may not be
unreasonably delayed), Westwind and its subsidiaries will:
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conduct their businesses in the ordinary and usual
course; and
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to the extent consistent with Westwinds ordinary and usual
course of business, use commercially reasonable efforts to
preserve their business organizations intact, maintain existing
relations and goodwill with governmental entities, clients,
customers, suppliers, distributors, creditors, lessors,
employees and business associates and keep available the
services of their present employees and agents.
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Westwind has also agreed that during the same time period,
subject to certain exceptions or unless we otherwise agree in
writing (which determination may not be unreasonably delayed),
it will comply with certain specific restrictions relating to
the operation of its and its subsidiaries businesses,
including restrictions relating to the following, among other
things:
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changing its or its subsidiaries organizational documents;
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merging or reorganizing Westwind or its subsidiaries;
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acquiring assets;
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issuing, selling or otherwise disposing of equity securities of
Westwind or its subsidiaries;
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creating or incurring material liens on its or its
subsidiaries assets;
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making loans to or investments in any person or entity;
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reclassifying, splitting, combining, subdividing, redeeming,
purchasing or otherwise acquiring equity securities of Westwind
or its subsidiaries;
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incurring indebtedness;
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entering into, amending or terminating material contracts;
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making changes to accounting policies other than as required by
Canadian GAAP;
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making any tax elections or settling any material tax claims;
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selling, leasing or disposing of certain assets;
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paying dividends (other than certain pre-closing dividends
Westwind is permitted to make in respect of distributable cash,
calculated pursuant to the arrangement agreement);
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granting severance or termination payments or making changes in
benefit plans, compensation methodology or other matters
relating to employee benefits;
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exercising broker warrants other than in the ordinary course of
business, although with respect to all broker warrants granted
by each issuer, up to one-third of the broker warrants may be
exercised at any time (taking into account portions of a broker
warrant that have been exercised prior to the date of the
arrangement agreement), up to one-third may be exercised only
after reasonable consultation with us and up to one third may be
exercised only with our consent, though those warrants that
would expire on or before January 31, 2008 may be
exercised without our consent; and
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settling litigation or similar matters.
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We have agreed that, during the same time period, we and
Canadian Sub will, and will cause our subsidiaries to, except as
contemplated by the arrangement agreement or as otherwise
approved by Westwind (which determination may not be
unreasonably delayed):
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not take any action, refrain from taking any action (subject to
commercially reasonable efforts) or permit any action to be
taken or not taken inconsistent with the arrangement agreement
or that would reasonably be expected to significantly impede the
consummation of the arrangement;
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refrain from entering into any transaction or making any other
decisions that would be expected to result in a material adverse
effect with respect to us;
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not completely or partially liquidate or wind up;
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not reclassify, split, combine, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of our equity
securities in a manner that would materially affect the
consideration to be received by Westwinds shareholders in
connection with the arrangement;
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not issue our equity securities in a transaction where the
issuance would require shareholder approval;
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not declare or pay dividends or make other distributions to our
shareholders other than in the ordinary course consistent with
past practice;
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not take any action that would result in any of the conditions
to the arrangement set forth in the arrangement agreement not
being satisfied; and
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not terminate or waive any of the voting commitments certain of
our shareholders have entered into with us, as described in
Voting Commitments.
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We have also agreed that, during the same time period, we and
Canadian Sub will use reasonable best efforts to satisfy the
conditions precedent to our obligations under the arrangement
agreement and to take all other action and do all other things
necessary, proper or advisable under all applicable laws to
complete the arrangement and the transactions contemplated by
the arrangement agreement, and pay all expenses incidental
thereto, including using our reasonable best efforts to:
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obtain all necessary regulatory approvals and any other waivers,
consents and approvals required to be obtained from other
parties;
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effect all necessary registrations and filings and submissions
of information in connection with the arrangement requested by
governmental entities or under provincial or state securities or
blue sky laws; and
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oppose, lift or rescind any injunction or other order or action
seeking to stop or otherwise adversely affecting the ability of
the parties to consummate the arrangement,
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provided that we are not obligated to make any sale or
disposition or enter into any agreement or arrangement that
would have a material adverse effect with respect to us.
We have also agreed to consult in good faith with Westwind prior
to:
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merging, consolidating, restructuring, reorganizing or otherwise
entering into any agreement or arrangement imposing material
changes or restrictions on our assets, operations or
businesses; or
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acquiring assets outside of the ordinary course of business from
any other person or entity with an aggregate value or purchase
price in excess of $2 million in any transaction or series
of related transactions.
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We and Westwind also have agreed to use commercially reasonable
efforts and cooperate in good faith with each other and the
Westwind shareholders to effect the transaction on a
tax-efficient basis for us, Westwind and Westwind shareholders.
However, we will not be required to agree to or implement any
amendments, modifications or changes to the extent that, in our
good faith judgment the implementation of such amendments,
modifications or
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changes would result in any direct or indirect incremental costs
or liability to us other than incidental costs related to the
implementation that are not in the aggregate material.
Westwind has agreed that it and its subsidiaries will not, and
their respective officers and directors will not, and Westwind
will use its reasonable best efforts to instruct and cause its
and its subsidiaries representatives not to, directly or
indirectly:
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initiate, solicit or encourage inquiries or the making of any
proposal or offer that constitutes, or could reasonably be
expected to lead to, an acquisition proposal;
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engage in, continue or otherwise participate in any discussion
or negotiation regarding any acquisition proposal or provide
non-public information to any person relating to an acquisition
proposal; or
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otherwise facilitate any effort or attempt by any person to make
an acquisition proposal.
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Westwind has also agreed that its board of directors will not:
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withhold, withdraw, qualify or modify (or publicly propose or
resolve to withhold, withdraw, qualify or modify), in a manner
that is reasonably likely to adversely affect the consummation
of the arrangement on the terms and conditions set forth in the
arrangement agreement, its recommendation to Westwinds
shareholders that the shareholders approve the arrangement
resolution; or
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except if the arrangement agreement is terminated in accordance
with its terms, cause or permit Westwind to enter into any
letter of intent, memorandum of understanding, agreement in
principle, acquisition agreement, arrangement agreement or other
agreement relating to any acquisition proposal.
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Under the arrangement agreement, an acquisition proposal is:
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any proposal or offer with respect to a merger, joint venture,
partnership, consolidation, dissolution, liquidation, tender
offer, recapitalization, reorganization, share exchange,
business combination or similar transaction involving Westwind
or any of its subsidiaries; and
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any proposal or offer to acquire in any manner, directly or
indirectly, 20% or more of the total voting power of any class
of equity securities of Westwind or any of its subsidiaries, or
20% or more of the consolidated total assets (including equity
securities of its subsidiaries) of Westwind,
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in each case, other than the transactions contemplated by the
arrangement agreement.
We and Westwind have agreed to cooperate and use reasonable best
efforts to take all actions and do all things, reasonably
necessary, proper or advisable to complete the arrangement and
the other transactions contemplated by the arrangement agreement
as soon as practicable, including preparing and filing as
promptly as possible all documentation to effect all necessary
notices, reports and other filings and to obtain as promptly as
practicable all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any
third party or governmental entity in order to consummate the
arrangement or any of the other transactions contemplated by the
arrangement agreement.
Pursuant to the arrangement agreement, we and Westwind have
agreed with each other to use commercially reasonable efforts as
to certain matters regarding the integration of the two
companies operations as well as the transition of the
timing and manner of cash bonus payments and equity compensation
grants to a manner that is consistent with our compensation
policies.
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Conditions
to the Arrangement
Our obligations and the obligations of Westwind to effect the
arrangement are subject to the satisfaction or waiver at or
prior to the closing of the following conditions:
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the approval of the arrangement resolution by the requisite
number of shareholders of Westwind (which approval was obtained
by unanimous written resolution dated as of October 5,
2007);
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the approval by the requisite number of our shareholders of the
Thomas Weisel Partners share issuance;
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the approval of the arrangement by the Ontario Superior Court of
Justice in a form satisfactory to us and Westwind, acting
reasonably;
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the receipt by us of a determination or deemed approval by the
Minister of Industry that the transactions contemplated under
the arrangement agreement are of net benefit to
Canada for purposes of the
Investment Canada Act
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the receipt of any required regulatory consents, including those
from the Financial Industry Regulatory Authority, the Investment
Dealers Association of Canada and the Financial Services
Authority without the imposition of any term, condition or
consequence other than those contemplated by the arrangement
agreement and the completion of the arrangement, and except
where the failure to make or obtain such consent would not put
the combined operations of us, Westwind and each of our
respective subsidiaries at a material competitive disadvantage
by comparison with competitors in the jurisdictions in which we
or they have significant operations; and
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no governmental entity having enacted any law that is in effect
that, nor any material suit, action or proceeding having been
instituted in which a governmental entity or another person or
entity is seeking an order that if successful, would restrain,
enjoin or otherwise prohibit the consummation of the arrangement
or the other transactions contemplated by the arrangement
agreement or that would substantially deprive a party of the
anticipated benefits of the transactions contemplated by the
arrangement agreement and that, in the case of a suit, action or
proceeding brought or initiated by a person or entity other than
a governmental entity, would be reasonably likely to succeed on
the legal and factual merits.
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Our obligations and the obligations of Canadian Sub to effect
the arrangement are also subject to the satisfaction or waiver
by us at or prior to the closing of the following additional
conditions, among others:
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Westwinds representations and warranties set forth in the
arrangement agreement that are qualified by reference to a
material adverse effect and Westwinds representations and
warranties set forth in the arrangement agreement pertaining to
organization, good standing, qualification, capital structure
and corporate authority and approval shall be true and correct
as of the date of the arrangement agreement and as of the
closing date as though made on and as of such date (except to
the extent that any such representation and warranty expressly
speaks as of the date of the agreement or an earlier date, in
which case such representation and warranty must be correct as
of such date);
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all of Westwinds other representations and warranties set
forth in the arrangement agreement that are not qualified by
reference to a material adverse effect with respect to Westwind
(other than those described above) shall be true and correct as
of the date of the arrangement agreement and as of the closing
date as though made on and as of such date (except to the extent
that any such representation and warranty expressly speaks as of
the date of the agreement or an earlier date, in which case such
representation and warranty must be correct as of such date),
unless the failure of such warranties to be so true and correct
(considered without regard to any materiality qualifiers
therein) would be expected to have a material adverse effect
with respect to Westwind;
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Westwind shall have performed in all material respects its
obligations under the arrangement agreement and the plan of
arrangement at or prior to the closing date;
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there shall not have occurred a material adverse effect with
respect to Westwind;
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Westwind shall have obtained the consent of the landlord under
its headquarters lease as well as the consent or approval of
each person or entity whose consent or approval is required
under any other contract to which Westwind or any of its
subsidiaries is a party, except for those other contracts for
which the failure to obtain such consent or approval would not
be expected to result in a material adverse effect with respect
to Westwind;
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the receipt of certain legal opinions from counsel to Westwind;
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the shareholders equity agreement, pledge agreements and
employment agreement with Lionel Conacher shall have been
entered into with all of the parties thereto and to the extent
previously entered into, shall not have been breached (unless
cured on or before the closing date); and
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an outstanding loan from Westwind to a corporation held by
certain of Westwinds shareholders shall have been repaid
or repurchased or the two companies shall have been amalgamated.
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Westwinds obligation to effect the arrangement is also
subject to the satisfaction or waiver at or prior to the closing
of the following additional conditions, among others:
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our representations and warranties (and those of Canadian Sub)
set forth in the arrangement agreement shall be true and correct
in all material respects as of the date of the arrangement
agreement and as of the closing date as though made on such date
(except to the extent that any such representation and warranty
expressly speaks as of the date of the agreement or an earlier
date, in which case such representation and warranty must be
true and correct as of such date);
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we and Canadian Sub shall have performed in all material
respects all obligations required to be performed by us or by
Canadian Sub under the arrangement agreement at or prior to the
closing date;
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there shall not have occurred a material adverse effect with
respect to us;
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the receipt of certain legal opinions from our counsel;
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the exchangeable share support and voting and exchange trust
agreements shall have been entered into with all of the parties
thereto; and
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we shall have entered into the shareholders equity
agreement and the pledge agreements or, to the extent entered
into prior to closing, we shall not have breached those
agreements (unless cured on or before the closing date).
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Determination
of Material Adverse Effect
Under the arrangement agreement, a material adverse effect is
any result, occurrence, change, event, violation, inaccuracy,
circumstance, fact or effect that individually or in the
aggregate with any such other effects (regardless of whether or
not such effect constitutes a breach of any representation or
warranty in the arrangement agreement), is or would reasonably
be expected to:
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be material and adverse to the assets, liabilities, financial
condition, business or results of operations of such entity and
its subsidiaries, taken as a whole, except any such effect
(i) resulting from any change in applicable law,
(ii) resulting from any change in global, national or
regional political conditions or in general economic, business,
regulatory, political or market conditions or in national or
global financial or capital markets, (iii) resulting from
any change affecting generally the investment banking industry
in the United States or Canada, (iv) resulting from any
natural disaster, (v) relating to a change in the market
trading price or trading volume of shares of that person, other
than as a result of a material adverse effect and
(vi) resulting from the public announcement or pendency of
the transactions contemplated by the arrangement agreement;
provided that with respect to clauses (ii), (iii) and (iv),
such matter does not have a materially disproportionate effect
on such entity and its subsidiaries, taken as a whole, relative
to other comparable companies and entities operating in the
industries in which the entity
and/or
its
subsidiaries operate; or
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prevent, materially delay or materially impair the consummation
of the transactions contemplated by the arrangement agreement.
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We and Westwind may agree to terminate the arrangement agreement
without completing the arrangement at any time prior to the
closing.
The arrangement agreement also may be terminated as follows:
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by either us or Westwind, if the party seeking to terminate the
arrangement agreement is not in material breach of its
obligations under the arrangement agreement, and if:
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the arrangement has not been completed by January 31, 2008,
or the termination date;
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our shareholders do not approve the Thomas Weisel Partners share
issuance; or
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any court or other governmental entity has enacted, issued,
promulgated, enforced or entered any law or order that is in
effect, which permanently restrains, enjoins or otherwise
prohibits the consummation of the arrangement and has become
final and non-appealable;
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at any time prior to closing, we have breached any
representation, warranty, covenant or agreement made by us or
Canadian Sub in the arrangement agreement, or if any such
representation or warranty shall have become untrue after
September 30, 2007, such that the conditions to the
obligations of Westwind as discussed above under
Conditions to the Arrangement would not
be satisfied and such breach or condition is not curable, or if
curable, is not cured, before the earlier of thirty days after
written notice thereof or January 31, 2008;
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at any time prior to closing, Westwind has breached any
representation, warranty, covenant or agreement made by it in
the arrangement agreement, or if any such representation or
warranty shall have become untrue after September 30, 2007,
such that the conditions to our obligations as discussed above
under Conditions to the Arrangement
would not be satisfied and such breach or condition is not
curable, or if curable, is not cured, before the earlier of
thirty days after written notice thereof or January 31,
2008.
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Indemnification
by Westwind Shareholders
The shareholders of Westwind have agreed to indemnify us and our
officers, directors, employees, agents and affiliates from any
loss, liability, damage or expense arising out of or resulting
from:
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any breach of any representation or warranty (without giving
effect to any materiality or material adverse effect qualifiers
contained in the representation or warranty) of Westwind or its
shareholders contained in the arrangement agreement or in any
certificate delivered in connection with the agreement;
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any breach of any covenant, agreement or obligation of Westwind
contained in the arrangement agreement to the extent such
covenant, agreement or obligation is required to be performed by
Westwind on or prior to the closing;
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a shortfall in the working capital and regulatory capital of
Westwind at closing below an
agreed-upon
amount, which we collectively refer to as a working and
regulatory capital shortfall; or
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any breach by a shareholder of any representation or warranty
contained in the letter of transmittal from such shareholder (we
refer to these breaches and the working and regulatory capital
shortfall as excluded losses).
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This right to indemnification generally survives for
12 months following the closing of the transaction. With
respect to breaches of the representations and warranties
relating to organization, good standing, qualification, capital
structure and corporate authority and approval and
shareholders breaches of representations and warranties
made in the letter of transmittal, the indemnification right
survives indefinitely, and with respect to breaches of the
representations and warranties relating to taxes, employee
benefit plans and environmental matters, this indemnification
right survives until the expiration of the applicable statute of
limitations.
The obligation of Westwinds shareholders to indemnify us
in connection with a breach of any representation, warranty,
covenant, agreement or obligation contained in the arrangement
agreement is subject to certain limitations. In particular, we
will not be indemnified until the aggregate losses in respect of
all matters that could be the subject of indemnification exceed
$1,500,000, in which case such indemnification liability
commences from the first dollar of losses. The indemnification
liability of each Westwind shareholder is subject to a cap of
25% of the aggregate consideration paid by us to such
shareholder pursuant to the arrangement agreement. In addition,
we will not be entitled to indemnification unless the aggregate
losses suffered or incurred with respect to such matter (taken
together with losses resulting from the same or substantially
similar set of circumstances, acts or occurrences) exceeds
$50,000. The dollar amount limits described above do not apply
to indemnification with respect to excluded losses. In addition
to these limitations, no Westwind shareholder will be obligated
to indemnify us for losses, other than excluded losses, that,
when taken together with any liquidated damages paid by that
shareholder as described under Additional
Agreements Shareholders Equity
Agreement, exceed 50% of the total consideration paid to
that shareholder under the transaction.
Until the first anniversary of the closing and other than in the
case of a Westwind shareholder receiving only cash, the Westwind
shareholders indemnification obligations will be supported
by a pledge of shares of Thomas Weisel Partners common stock and
exchangeable shares representing 25% of the total consideration
paid to each Westwind shareholder receiving shares under the
transaction.
Indemnification
by Thomas Weisel Partners
We have agreed to indemnify the Westwind shareholders from any
loss, liability, damage or expense arising out of or resulting
from:
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any breach by us or Canadian Sub of any representation or
warranty (without giving effect to any materiality or material
adverse effect qualifiers contained in the representation or
warranty) contained in the arrangement agreement or in any
certificate delivered in connection with the agreement; or
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any breach of any covenant, agreement or obligation of us or
Canadian Sub contained in the arrangement agreement to the
extent such covenant, agreement or obligation is required to be
performed by us or Canadian Sub on or prior to the closing.
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This right to indemnification survives for 12 months
following closing.
Contemporaneously with the execution of the arrangement
agreement, Thomas Weisel Partners and certain Westwind
shareholders holding a number of common shares and Class A
common shares sufficient to approve the arrangement resolution
have entered into a voting agreement. Pursuant to the voting
agreement, the Westwind shareholders party to the agreement have
agreed, among other things, to vote all Westwind shares held by
them in favor of the arrangement resolution and against any
amalgamation, merger, consolidation, sale of assets,
recapitalization or other business combination involving
Westwind (other than the arrangement) or any sale of capital
stock by Westwind exceeding 1% of the capital stock of Westwind
or any other action or agreement that could reasonably be
expected to result in the prevention or material delay of the
completion of the transactions contemplated by the arrangement
agreement.
Holders of approximately 20% of the outstanding shares of Thomas
Weisel Partners common stock as of November 6, 2007,
including certain of our executive officers, each have entered
into voting commitments with Thomas Weisel Partners. Pursuant to
the voting commitments, the Thomas Weisel Partners shareholders
party to the
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commitments have agreed, among other things, to vote all Thomas
Weisel Partners shares held by them in favor of the Thomas
Weisel Partners share issuance.
Shareholders
Equity Agreement
Persons and Shares Covered.
We have entered
into a shareholders equity agreement with all of the
shareholders of Westwind. The shares covered by the
shareholders equity agreement will include all shares of
Thomas Weisel Partners common stock and all exchangeable shares
acquired by shareholders of Westwind in exchange for the shares
of Westwind that they currently hold and shares received by
those Westwind shareholders (directly or indirectly) in exchange
for or in respect of their shares of Thomas Weisel Partners
common stock upon exchange of their exchangeable shares. The
shares of Thomas Weisel Partners common stock and exchangeable
shares covered by the shareholders equity agreement are
referred to as covered shares. In this section, Westwind
shareholders refers to those shareholders party to the
shareholders equity agreement.
Transfer Restrictions.
Except as described
below, each Westwind shareholder has agreed, among other things,
to maintain sole beneficial ownership of and not to transfer his
or her covered shares until February 7, 2011.
Exceptions to Transfer Restrictions.
Parties
to the shareholders equity agreement generally would be
able to transfer their shares pursuant to demand registration
rights described below under Demand
Registration Rights beginning after February 7, 2009,
subject to the requirement that from February 7, 2009 until
February 7, 2010, no more than 1,401,822 shares of
Thomas Weisel Partners common stock may be sold and from
February 7, 2010 to February 7, 2011, no more than
1,401,822 shares may be sold (less the number of shares
sold during the preceding one year period), which we refer to as
the public offering limitation. In addition, if we register any
securities for sale in an underwritten public offering, each
Westwind shareholder would have piggyback registration
rights that would provide each such shareholder the right
to include covered shares consisting of Thomas Weisel Partners
common stock in the registration, subject to specified
exceptions. In addition to customary cutbacks as well as the
public offering limitation set forth above, the Westwind
shareholder would not be entitled to transfer more than twenty
percent of his, her or its covered shares during the twelve
month period following the closing date of the transaction.
Our Underwritten Offering Committee, currently composed of
Thomas Weisel, David Baylor and Mark Fisher, may, acting
reasonably, approve requests by a Westwind shareholder to
transfer covered shares to certain permitted transferees such as
family members, family trusts or corporations and certain
charitable organizations;
provided
that these transferees
will be subject to the same transfer restrictions under the
shareholders equity agreement. Following the closing of
the transaction, so long as shareholders subject to the
shareholders equity agreement hold more than 15% of the
shares of Thomas Weisel Partners common stock and exchangeable
shares issued in connection with the transaction, Lionel
Conacher, or any successor shareholders representative
under the arrangement agreement, will be a member of our
Underwritten Offering Committee.
In addition, upon the termination of a Westwind
shareholders employment due to his or her death or
disability, such Westwind shareholder or his or her heirs or
estate will be permitted to sell covered shares in compliance
with applicable securities laws, regardless of when such
termination of employment occurred.
Notwithstanding the exceptions to transfer described above,
transfer restrictions will not terminate with respect to covered
shares that have been pledged to us as security in connection
with the shareholder covenants described below until those
shareholder covenants expire.
All transfer restrictions applicable to a Westwind shareholder
under the shareholders equity agreement terminate upon a
change in control of us.
Compliance with Securities Laws.
In addition
to the restrictions set forth above, Westwind shareholders will
need to comply with applicable securities laws in connection
with any transfer of Thomas Weisel Partners common stock or
exchangeable shares covered by the shareholders equity
agreement.
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Dividends.
To the extent dividends are paid on
covered shares while the Westwind shareholder remains subject to
the transfer restrictions of the shareholders equity
agreement, the Westwind shareholder will be entitled to such
dividends.
Voting.
Each Westwind shareholder is entitled
to full voting rights with respect to his or her covered shares.
Confidentiality.
Each Westwind shareholder is
required to protect and use confidential information
in accordance with the restrictions placed by us on its use and
disclosure.
Noncompetition.
Each Westwind shareholder has
agreed that during his or her employment period and during his
or her applicable post-termination non-compete and non-solicit
period, which is described below, he or she may not:
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form, or acquire a 5% or greater ownership, voting or profit
participation interest in, any competitive enterprise; or
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associate with any competitive enterprise and in connection with
such association engage in, or directly or indirectly manage or
supervise personnel engaged in, any activity (i) which is
similar or substantially related to any activity in which that
shareholder was engaged, in whole or in part, at our firm,
(ii) for which that shareholder had direct or indirect
managerial or supervisory responsibility at our firm or
(iii) which calls for the application of the same or
similar specialized knowledge or skills as those utilized by
that shareholder in his or her activities at our firm, at any
time during the one-year period immediately prior to the date of
termination (or, in the case of an action taken during the
employment period, during the one-year period immediately prior
to that action).
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When we refer to a competitive enterprise, we are
referring to any business enterprise that engages in, or owns or
controls a significant interest in any entity that engages in,
financial services such as investment banking, public or private
finance, financial advisory services, private investing,
merchant banking, asset or hedge fund management, securities
brokerage, sales, lending, custody, clearance, settlement or
trading.
A Westwind shareholders applicable post-termination
non-compete and non-solicit period will range from
36 months to 12 months following the date the Westwind
shareholder ceases to be employed by us (with each shareholder
required to give 90 days notice of termination), with
the exact length of the period determined by the relative
seniority of the Westwind shareholder and his or her equity
ownership interest in Westwind prior to the transaction, as well
as the length of the period that has elapsed since the closing
of the transaction.
Nonsolicitation.
Each Westwind shareholder
also has agreed that during his or her employment period and the
applicable post-termination non-compete and non-solicit period,
he or she may not, directly or indirectly, in any manner:
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solicit any client with whom that Westwind shareholder worked,
or whose identity became known to him or her in connection with
his or her employment with our firm, to transact business with a
competitive enterprise or reduce or refrain from doing any
business with our firm;
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interfere with or damage any relationship between our firm and
any client or prospective client; or
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solicit any of our employees to resign, apply for, or accept
employment with, any competitive enterprise.
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Transfer of Client Relationships.
Each
Westwind shareholder is required, upon termination of his or her
employment, to take all actions and do all things reasonably
requested by us during a
90-day
cooperation period to maintain for us the business, goodwill and
business relationships with our clients with which he or she
worked.
Liquidated Damages.
In the case of any breach
of the confidentiality, noncompetition or nonsolicitation
provisions or the provisions related to the transfer of client
relationships during the term of the agreement, the breaching
Westwind shareholder will be liable for liquidated damages. The
liquidated damages amount for each Westwind shareholder will be
equal to 50% of the total amount of consideration paid to that
Westwind shareholder in exchange for his, her or its Westwind
shares, less any amount paid to us by that Westwind shareholder
in connection with that shareholders indemnification
obligation under the arrangement agreement, other than for
certain excluded losses under the arrangement agreement. The
liquidated damages obligation of each Westwind
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shareholder generally is secured by Thomas Weisel Partners
common stock and exchangeable shares representing 50% of the
total amount of consideration received by that Westwind
shareholder in respect of his or her Westwind shares in
connection with the transaction.
Severance.
The shareholders equity
agreement provides that if we terminate a Westwind shareholder
without cause, as defined in the shareholders equity
agreement, we would be obligated to pay the shareholder, in a
lump sum, an amount equal to the excess, if any, of (A) the
product of (x) the amount of base salary and bonus paid to
that shareholder for the twelve months ending before notice of
termination and (y) the number of years comprising the
then-applicable post-termination and non-compete and non-solicit
period and (z) 0.5, over (B) any severance amounts to
which the shareholder is otherwise entitled either pursuant to
an employment agreement, firm policy or applicable law.
Demand Registration Rights.
The
shareholders equity agreement will provide for demand
registration rights. Under those rights, at any time following
February 7, 2009, a Westwind shareholder party to the
agreement will be entitled to require us to effect the
registration of all or a portion of that shareholders
registrable securities (generally shares of Thomas Weisel
Partners common stock issued to a Westwind shareholder in
exchange for his, her or its Westwind shares (including shares
issuable upon exchange of exchangeable shares) but not including
those shares of Thomas Weisel Partners common stock that have
been sold pursuant to an effective registration statement or
that have been sold pursuant to Rules 145 or 144 under the
Securities Act of 1933, as amended, or that may be sold pursuant
to Rule 145(d)(3) or Rule 144(k)). We will not be
obligated to effect a demand registration unless, among other
things, the total number of shares of registrable securities
requested to be included in the demand registration is equal to
or greater than 15% of the total number of shares of Thomas
Weisel Partners common stock (including shares deliverable upon
exchange of exchangeable shares) issued in connection with the
transaction.
We are not required to effect more than three registrations in
response to these demand registration rights under the agreement
in any twelve month period. In addition, we are not obligated to
effect a demand registration within 120 days of a piggyback
registration effected pursuant to the agreement or a demand
registration effected pursuant to our partners equity
agreement. We may postpone the filing of a registration
statement for up to 90 days if our board of directors
determines that it is not in our best interest to disclose any
material non-public information or a significant business
opportunity or if, prior to receiving a demand registration
request, we have determined to proceed with a public offering.
We generally will pay expenses, except for underwriters
discounts and commissions, incurred in connection with the
registration rights under the shareholders equity
agreement.
Only those shareholders that (x) continue to be actively
engaged in the business of our firm, (y) that have suffered
a termination of employment by the firm without cause or
resulting from a disability or (z) are permitted
transferees will be entitled to registration rights.
We have also agreed to use our reasonable best efforts to effect
the registration under the Securities Act of 1933, as amended,
of the common shares issuable upon exchange of the exchangeable
shares. In particular, we have agreed that on or before the
later of 45 days following the closing of the transactions
or 10 business days following the date that we file our annual
report on
Form 10-K
for the year ended December 31, 2007, we must file a
registration statement with the SEC covering the shares of
common stock delivered upon exchange of the exchangeable shares,
subject to our ability to defer the filing up to 60 days if
our board of directors determines that it is not in our best
interest to disclose any material non-public information or a
significant business opportunity. Each shareholder receiving
exchangeable shares has or will agree that it may not exercise
its exchange, redemption or similar rights with respect to its
exchangeable shares at any time when the exchangeable share
registration statement is not effective,
provided
that we
must maintain the effectiveness of the exchangeable share
registration statement for a minimum of at least 180 days
in each annual period beginning February 7, 2009.
Term and Amendment.
The shareholders
equity agreement will be in effect until the later of the fifth
anniversary of the closing of the transaction and the date that
is six months following the date on which all of the
exchangeable shares have been exchanged for Thomas Weisel
Partners common stock. A Westwind shareholder seeking a waiver
from the shareholders equity agreement generally requires
our consent, and the shareholders equity agreement may be
amended only with approval of our board of directors.
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Pledge
Agreement
Each of the Westwind shareholders that will receive exchangeable
shares or shares of Thomas Weisel Partners common stock in the
transaction has entered into a pledge agreement with us that
will secure the liquidated damages provisions in the
shareholders equity agreement and the indemnification
obligations under the arrangement agreement by a pledge of an
amount of shares of Thomas Weisel Partners common stock or
exchangeable shares equal to 50% of the total value of the
consideration to be received by that shareholder in exchange for
his or her Westwind common shares and Class A common
shares. These pledges of Thomas Weisel Partners common stock
and/or
exchangeable shares will terminate on the earliest to occur of:
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the death of the relevant shareholder;
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the expiration of the applicable non-compete and non-solicit
period described above;
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payment in cash or other satisfaction by the shareholder of all
liquidated damages; or
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February 7, 2011;
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provided that no shares will be released from the pledge before
the first anniversary of the closing of the transaction.
The liquidated damages provisions in the shareholders
equity agreement are in addition to the forfeiture of any
equity-based awards that may occur as a result of the breach of
any non-competition or non-solicitation provisions contained in
those awards. The liquidated damages and pledge arrangements do
not preclude us from seeking any injunctive relief to which we
may be entitled for a breach of the confidentiality,
non-competition, non-solicitation or transfer of client
relationship provisions in the case of a willful or intentional
breach that causes material harm to us.
We have entered into an employment agreement with Lionel
Conacher, who will become our President and a member of our
Executive Committee upon the closing of the transaction. The
agreement provides for a transition period, which will last
between 6 and 24 months, during which Mr. Conacher
will oversee the integration of Thomas Weisel Partners and
Westwind and will have responsibility for Thomas Weisel
Partners Canadian and European operations. Following the
transition period, Mr. Conacher will have all of the
duties, responsibilities and authority normally attendant to the
office of President.
Mr. Conacher will be entitled to a base salary of $200,000,
which may be increased (but not decreased) annually.
Mr. Conacher also will be awarded an annual bonus to be
paid in a form consistent with the other members of our
Executive Committee. Any bonus that Mr. Conacher receives
during the transition period described above will be not less
than $200,000 per month. Mr. Conacher will also be entitled
to participate in Thomas Weisel Partners equity incentive plans,
employee retirement and welfare benefit plans, among other
benefits.
The employment agreement also provides for certain payments and
benefits in connection with any termination of
Mr. Conachers employment. Under the agreement,
Mr. Conacher will be employed for an initial employment
term (ending on December 31, 2009) and, in the absence
of a termination of Mr. Conachers employment, for
subsequent two-year employment terms thereafter. Either we or
Mr. Conacher may terminate his employment with us at any
time for any reason, or for no reason, subject to
90 days advance written notice in most cases.
If Mr. Conachers employment is terminated by us
without Cause or by Mr. Conacher for Good
Reason (each as defined in his employment agreement),
Mr. Conacher will be entitled to receive a lump sum payment
from us equal to the sum of the following amounts:
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two years base salary;
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unpaid base salary for periods prior to the date of termination,
and payment for any accrued but unused vacation days, any unpaid
expense reimbursements, any unpaid but vested bonus and any
other vested or accrued but unpaid compensation and
benefits; and
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a bonus payment equal to the product of (A) the average of
the bonuses paid or payable to Mr. Conacher for the two
fiscal years ending before notice of termination is given and
(B) a multiplier equal to (i) if the termination
notice occurs on or prior to December 31, 2009, two and
(ii) if the termination notice occurs on or after
January 1, 2010, a fraction, the numerator of which is
equal to the number of days remaining under his current
employment term (but in no event less than 365) and the
denominator of which is 365. In calculating
Mr. Conachers historic bonus, his bonus for 2006 and
2007 will be deemed to be $1,500,000 and $3,000,000,
respectively.
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Payment by us of the above amounts generally would be subject to
the condition that Mr. Conacher execute and deliver to us a
release of claims that released us, our affiliates, and each of
our members (and any of their respective past or present
officers, directors, employees or agents) from any and all
liabilities to Mr. Conacher.
In addition, if Mr. Conachers employment is
terminated by us without Cause or by
Mr. Conacher for Good Reason, Mr. Conacher
would be entitled to (i) full vesting and immediate payment
of all outstanding stock options, restricted stock, restricted
stock units and other equity-based awards, with stock options
remaining exercisable for a period of 12 months after the
end of his employment (or, if earlier, until they would have
expired but for his termination), and (ii) continued
participation for himself, his spouse and his dependents in our
employee benefit and welfare plans for 24 months following
the date of termination (or, to the extent not permitted,
payments outside such plans with the same after-tax effect).
If Mr. Conachers employment is terminated by us for
Cause or by Mr. Conacher without Good
Reason or if his employment terminates as a result of his
death or disability, Mr. Conacher will be entitled to
receive his unpaid base salary for periods prior to the date of
termination, and payment for any accrued but unused vacation
days, any unpaid expense reimbursements, any unpaid but vested
bonus and any other vested or accrued but unpaid compensation
and benefits.
52
DESCRIPTION
OF THOMAS WEISEL PARTNERS CAPITAL STOCK
The following description of Thomas Weisel Partners common stock
and preferred stock and the relevant provisions of our
certificate of incorporation and by-laws are summaries thereof.
Copies of our certificate of incorporation and by-laws have been
filed with the SEC. See Additional Information.
Our authorized capital stock consists of 100,000,000 shares
of common stock, par value $0.01 per share, and
10,000,000 shares of preferred stock, par value $0.01 per
share.
As of November 6, 2007, there were 25,551,505 shares
of common stock outstanding.
The holders of common stock are entitled to one vote per share
on all matters to be voted upon by the stockholders and do not
have cumulative voting rights. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of
common stock are entitled to receive ratably such dividends, if
any, as may be declared from time to time by the board of
directors out of funds legally available therefor. In the event
of our liquidation, dissolution or winding up, the holders of
common stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior
distribution rights of preferred stock, if any, then
outstanding. The common stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and
non-assessable. As of November 6, 2007, there were
approximately 115 record holders of our common stock.
General
The Thomas Weisel Partners board of directors has the authority
to issue preferred stock in one or more classes or series and to
fix the designations, powers, preferences and rights, and the
qualifications, limitations or restrictions thereof including
dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any class or
series, without further vote or action by the stockholders. The
issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of us without
further action by the stockholders and may adversely affect the
voting and other rights of the holders of common stock.
Special
Voting Preferred Stock
The share of special voting preferred stock will be authorized
for issuance pursuant to the arrangement agreement and, pursuant
to the arrangement, the share of special voting preferred stock
will be issued to the trustee appointed under the voting and
exchange trust agreement. The share of special voting preferred
stock will have a par value of $0.01 per share. Except as
otherwise required by law or our certificate of incorporation,
the share of special voting preferred stock will be entitled to
a number of votes equal to the number of outstanding Canadian
Sub exchangeable shares from time to time not owned by Thomas
Weisel Partners or any person directly or indirectly controlled
by or under common control with Thomas Weisel Partners, which
votes may be exercised for the election of directors and on all
other matters submitted to a vote of Thomas Weisel Partners
shareholders. The holders of Thomas Weisel Partners common stock
and the holder of the share of special voting preferred stock
will vote together as a single class on all matters, except to
the extent voting as a separate class is required by applicable
law. The holder of the share of special voting preferred stock
will not be entitled to receive dividends from Thomas Weisel
Partners and, in the event of any liquidation, dissolution or
winding-up
of Thomas Weisel Partners, will not be entitled to receive any
assets of the company. At such time as there are no exchangeable
shares outstanding not owned by Thomas Weisel Partners or any
person directly or indirectly controlled by or under common
control with Thomas Weisel Partners, and there are no shares of
stock, debt, options or other agreements of Canadian Sub that
could give rise to the issuance of any exchangeable shares to
any person (other than Thomas Weisel Partners or any person
directly or indirectly controlled by or under common control
with Thomas Weisel Partners), the share of
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special voting preferred stock will be cancelled and retired
without further action of Thomas Weisel Partners, its board of
directors or its shareholders and without the payment of any
consideration in exchange for such cancellation. See
Description of Exchangeable Shares and Related
Agreements Description of Exchangeable
Shares Voting, Dividend and Liquidation Rights of
Holders of Exchangeable Shares; Withholding Rights.
Section 203
of the Delaware General Corporation Law
We are subject to the business combination
provisions of Section 203 of the Delaware General
Corporation Law. In general, such provisions prohibit a publicly
held Delaware corporation from engaging in various
business combination transactions with any
interested stockholder for a period of three years after the
date of the transaction in which the person became an interested
stockholder, unless
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the transaction is approved by the board of directors prior to
the date the interested stockholder obtained such status;
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upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the stockholder
owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced; or
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on or subsequent to such date, the business combination is
approved by the board of directors and authorized at an annual
or special meeting of stockholders by the affirmative vote of at
least
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2
/
3
%
of the outstanding voting stock which is not owned by the
interested stockholder.
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A business combination is defined to include
mergers, asset sales and other transactions resulting in
financial benefit to a stockholder. In general, an
interested stockholder is a person who, together
with affiliates and associates, owns (or within three years, did
own) 15% or more of a corporations voting stock. The
statute could prohibit or delay mergers or other takeover or
change in control attempts with respect to us and, accordingly,
may discourage attempts to acquire us even though such a
transaction may offer our shareholders the opportunity to sell
their stock at a price above the prevailing market price.
Certain
Anti-Takeover Matters
Our charter and by-laws include a number of provisions that may
have the effect of encouraging persons considering unsolicited
tender offers or other unilateral takeover proposals to
negotiate with the board of directors rather than pursue
non-negotiated takeover attempts. These provisions include:
Advance
Notice Requirements
Our by-laws establish advance notice procedures with regard to
stockholder proposals relating to the nomination of candidates
for election as directors or new business to be brought before
meetings of Thomas Weisel Partners stockholders. These
procedures provide that notice of such stockholder proposals
must be timely and given in writing to our Secretary prior to
the meeting at which the action is to be taken. Generally, to be
timely, notice must be received at our principal executive
offices not less than 90 days nor more than 120 days
prior to the anniversary date of the annual meeting for the
preceding year. The notice must contain certain information
specified in the by-laws.
No
Written Consent of Stockholders
Our charter requires all stockholder actions to be taken by a
vote of the stockholders at an annual or special meeting, and
does not permit Thomas Weisel Partners stockholders to act by
written consent without a meeting.
Preferred
Stock
Our charter provides for 10,000,000 authorized shares of
preferred stock. The existence of authorized but unissued shares
of preferred stock may enable the board of directors to render
more difficult or to discourage an attempt to obtain control of
Thomas Weisel Partners by means of a merger, tender offer, proxy
contest or otherwise.
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For example, if in the due exercise of its fiduciary
obligations, the board of directors were to determine that a
takeover proposal is not in our best interests, the board of
directors could cause shares of preferred stock to be issued
without stockholder approval in one or more private offerings or
other transactions that might dilute the voting or other rights
of the proposed acquiror or insurgent stockholder or stockholder
group. In this regard, the charter grants our board of directors
broad power to establish the rights and preferences of
authorized and unissued shares of preferred stock. The issuance
of shares of preferred stock could decrease the amount of
earnings and assets available for distribution to holders of
shares of common stock. The issuance may also adversely affect
the rights and powers, including voting rights, of such holders
and may have the effect of delaying, deterring or preventing a
change in control of Thomas Weisel Partners.
Limitation
of Liability and Indemnification Matters
Our certificate of incorporation provides that a director of
Thomas Weisel Partners will not be liable to Thomas Weisel
Partners or Thomas Weisel Partners shareholders for monetary
damages for breach of fiduciary duty as a director, except in
certain cases where liability is mandated by the Delaware
General Corporation Law. Our certificate of incorporation also
provides for indemnification, to the fullest extent permitted by
law, by us of any person made or threatened to be made a party
to, or who is involved in, any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person is or was our director or officer, or at Thomas Weisel
Partners request, serves or served as a director or
officer of any other enterprise, against all expenses,
liabilities, losses and claims actually incurred or suffered by
such person in connection with the action, suit or proceeding.
Our certificate of incorporation also provides that, to the
extent authorized from time to time by the board of directors,
we may provide indemnification to any one or more employees and
other agents of Thomas Weisel Partners to the extent and effect
determined by the board of directors to be appropriate and
authorized by the Delaware General Corporation Law. Our
certificate of incorporation also permits us to purchase and
maintain insurance for the foregoing and we expect to maintain
such insurance.
Thomas Weisel Partners common stock is listed on The Nasdaq
Global Market under the symbol TWPG.
Transfer
Agent and Registrar
The transfer agent and registrar for Thomas Weisel Partners
common stock is Mellon Investor Services LLC.
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DESCRIPTION
OF EXCHANGEABLE SHARES AND RELATED AGREEMENTS
This section of the proxy statement describes the material
provisions of the exchangeable shares and the agreements
relating to the exchangeable shares.
Description
of Exchangeable Shares
The exchangeable shares will be issued by Canadian Sub. The
exchangeable shares will be substantially the economic
equivalent of shares of Thomas Weisel Partners common stock that
a Westwind shareholder would have received if the holder had
elected to receive shares of Thomas Weisel Partners common
stock. Holders of exchangeable shares will also receive, through
a voting trust, the benefit of certain voting rights, entitling
the holder to one vote on the same basis and in the same
circumstances as one corresponding share of Thomas Weisel
Partners common stock.
The exchangeable shares will be exchangeable at any time, at the
option of the holder on a one-for-one basis for corresponding
shares of Thomas Weisel Partners common stock, subject to the
agreement of the holders in the shareholders equity
agreement not to exercise their exchange, redemption or similar
rights unless a registration statement pursuant to the
Securities Act of 1933, as amended, with respect to the shares
of Thomas Weisel Partners common stock to be delivered upon
exchange of the exchangeable shares is effective. As part of the
arrangement, Thomas Weisel Partners, Canadian Sub and a trustee
will enter into the voting and exchange trust agreement under
which the trustee will be granted specified rights and will
agree to specified obligations for the benefit of the holders of
exchangeable shares. In addition, Thomas Weisel Partners,
CallRightCo and Canadian Sub will enter into the exchangeable
share support agreement, under which, among other things, Thomas
Weisel Partners will agree to support the obligations of
Canadian Sub and CallRightCo with respect to the exchangeable
shares.
Optional
Retraction, Redemption and Call Rights; Purchase for
Cancellation
Optional Retraction of Exchangeable Shares.
A
holder of exchangeable shares will be entitled at any time to
require Canadian Sub to redeem, subject to CallRightCos
overriding call right and subject to the covenants in the
shareholders equity agreement, any or all of its
exchangeable shares for a price per exchangeable share of one
share of Thomas Weisel Partners common stock and (provided that
the holder holds the exchangeable share on the applicable
dividend record date), on the payment date for any declared and
unpaid dividends, an amount in cash equal to such dividends on
that exchangeable share.
In order to exercise this right, a holder must deliver to
Canadian Sub at its registered office or at an office of
Canadian Subs transfer agent, among other things, a
written retraction request and the certificates representing the
exchangeable shares to be redeemed. The holder must state in its
request the business day on which it desires Canadian Sub to
redeem its exchangeable shares, which business day must be 10 to
15 business days after Canadian Sub receives the holders
request. If the holder fails to specify a business day in its
request, the retraction date will be the 15th business day
after the request is received by Canadian Sub.
If the holder exercises this retraction right to require that
Canadian Sub redeem any of its exchangeable shares, CallRightCo
will have an overriding retraction call right, which is
CallRightCos right to purchase all but not less than all
of those exchangeable shares for a price per exchangeable share
of one share of corresponding Thomas Weisel Partners common
stock and (provided that it holds the exchangeable share on the
applicable dividend record date), on the payment date for any
declared and unpaid dividends, an amount in cash equal to such
dividends on that exchangeable share. Upon receipt of a
retraction request, Canadian Sub will immediately notify
CallRightCo, which must then advise Canadian Sub within two
business days as to whether it will exercise its retraction call
right. If CallRightCo does not so notify Canadian Sub, Canadian
Sub will notify the holder as soon as possible thereafter that
CallRightCo will not exercise its retraction call right. If
CallRightCo advises Canadian Sub that CallRightCo will exercise
its retraction call right within the two business day period,
then, the retraction request will be considered only to be an
offer by the holder to sell the shares identified in its
retraction request to CallRightCo in accordance with
CallRightCos retraction call right.
A holder may revoke its retraction request, in writing, at any
time prior to the close of business one business day before the
contemplated date of retraction, in which case the exchangeable
shares identified in the retraction
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request will not be purchased by CallRightCo or redeemed by
Canadian Sub. Unless a holder revokes its retraction request,
the shares identified in the retraction request will be redeemed
by Canadian Sub or purchased by CallRightCo, as the case may be,
and Canadian Sub or CallRightCo, as the case may be, will send
the holder (i) a certificate representing the aggregate
number of corresponding shares of Thomas Weisel Partners common
stock, and (ii) on the payment date therefor, a check in an
amount equal to the amount of the declared and unpaid dividends,
if any, on the retracted or purchased exchangeable shares, less
any amounts withheld on account of tax required to be deducted
and withheld therefrom.
If, as a result of solvency requirements or other provisions of
applicable law, Canadian Sub believes it is not permitted to
redeem all exchangeable shares identified in a retraction
request, and CallRightCo has not exercised its retraction call
right, Canadian Sub will redeem only those exchangeable shares
tendered by the holder (rounded down to a whole number of
shares) as would be permissible. In addition, if the holder does
not revoke its retraction request, the retraction request will
constitute notice from the holder to the trustee to exercise its
exchange right under the voting and exchange trust agreement and
the trustee, on its behalf, will require Thomas Weisel Partners
to purchase any exchangeable shares on the retraction date set
forth in the retraction request.
Redemption of Exchangeable Shares.
On the
redemption date for the exchangeable shares, Canadian Sub will,
subject to CallRightCos redemption call right and
applicable law, redeem all of the then outstanding exchangeable
shares for a price per exchangeable share of one share of Thomas
Weisel Partners common stock and (provided the holder holds the
exchangeable share on the applicable dividend record date) an
amount in cash equal to the declared and unpaid dividends, if
any, on that exchangeable share. Canadian Sub will provide the
registered holders of exchangeable shares with at least
60 days prior written notice of the proposed redemption of
the exchangeable shares by Canadian Sub or the purchase of the
exchangeable shares by CallRightCo under the redemption call
right described below.
CallRightCo will have an overriding right to purchase on the
redemption date all of the outstanding exchangeable shares
(other than those held by Thomas Weisel Partners and its
affiliates) for a price per exchangeable share of one share of
Thomas Weisel Partners common stock and an amount in cash equal
to the declared and unpaid dividends, if any, on that
exchangeable share held by a holder on any dividend record date
that occurred prior to the date of purchase of such share by
CallRightCo.
To exercise this redemption call right, CallRightCo must notify
the transfer agent and Canadian Sub of CallRightCos
intention to exercise this right at least 60 days before
the redemption date. The transfer agent will notify the
exchangeable shareholders as to whether or not CallRightCo has
exercised its redemption call right after the expiry of the
period during which CallRightCo can exercise its redemption call
right. If CallRightCo exercises its redemption call right, it
will purchase on the redemption date all of the exchangeable
shares then outstanding (other than those held by Thomas Weisel
Partners and its affiliates).
The redemption date means the date upon which a
change of control of Thomas Weisel Partners occurs. If at any
time there are outstanding fewer than 10% of the number of
exchangeable shares issued pursuant to the transaction (subject
to adjustment for subdivisions or consolidations or stock
dividends and the like), then the board of directors of Canadian
Sub may accelerate the redemption day upon at least
90 days prior written notice to the registered
holders of exchangeable shares and the trustee under the voting
and exchange trust agreement.
On or after the redemption date, upon a holders delivery
of the certificates representing the exchangeable shares and the
other documents as may be required to an office of the transfer
agent or the registered office of Thomas Weisel Partners,
Canadian Sub or CallRightCo will deliver, for each exchangeable
share, one corresponding share of Thomas Weisel Partners common
stock and, provided a holder holds the exchangeable shares on
the applicable dividend record date, a check in an amount equal
to the amount of the declared and unpaid dividends, if any, on
those exchangeable shares, less any amounts withheld on account
of tax required to be deducted and withheld therefrom by
Canadian Sub.
Purchase for Cancellation.
Subject to
applicable law, Canadian Sub may at any time and from time to
time purchase for cancellation all or any part of the
outstanding exchangeable shares on such terms and conditions as
may mutually be agreed by a holder of exchangeable shares and
Canadian Sub.
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Voting,
Dividend and Liquidation Rights of Holders of Exchangeable
Shares; Withholding Rights
As part of the arrangement, Thomas Weisel Partners, Canadian Sub
and the trustee will enter into the voting and exchange trust
agreement.
Voting Rights with Respect to Canadian
Sub.
Except as required by law and under the
exchangeable share provisions, the holders of exchangeable
shares are not entitled as such to receive notice of, attend or
vote at any meeting of shareholders of Canadian Sub. See
Amendment and Approval. However, the
holders of exchangeable shares are entitled to notice of
meetings of shareholders of Canadian Sub called for the purpose
of authorizing the dissolution of Canadian Sub or the sale,
lease or exchange of all or substantially all of the property of
Canadian Sub.
Voting Rights with Respect to Thomas Weisel
Partners.
Under the voting and exchange trust
agreement, Thomas Weisel Partners will issue one share of
special voting preferred stock to the trustee for the benefit of
the holders (other than Thomas Weisel Partners and its
affiliates) of exchangeable shares. The share of special voting
preferred stock will have the number of votes, which may be cast
at any meeting at which Thomas Weisel Partners common
stockholders are entitled to vote, equal to the then outstanding
number of exchangeable shares of the relevant class (other than
exchangeable shares held by Thomas Weisel Partners and its
affiliates).
Each exchangeable shareholder (other than Thomas Weisel Partners
and its affiliates) on the record date for any meeting at which
Thomas Weisel Partners common stockholders are entitled to vote
will be entitled to instruct the trustee to exercise one of the
votes attached to the share of special voting preferred stock
for each exchangeable share held by the exchangeable
shareholder. The trustee will exercise (either by proxy or in
person) each vote attached to the share of special voting
preferred stock only as directed by the relevant exchangeable
shareholder and, in the absence of instructions from an
exchangeable shareholder as to voting, will not exercise those
votes. An exchangeable shareholder may, upon instructing the
trustee, obtain a proxy from the trustee entitling the
exchangeable shareholder to vote directly at the relevant
meeting the votes attached to the share of special voting
preferred stock to which the exchangeable shareholder is
entitled.
The trustee will forward to the holders of exchangeable shares
the notice of each meeting at which the holders of shares of
Thomas Weisel Partners common stock are entitled to vote,
together with the related meeting materials and a statement as
to the manner in which the holder may instruct the trustee to
exercise the votes attaching to the share of special voting
preferred stock. The trustee will also send to the holders of
exchangeable shares copies of all information statements,
interim and annual financial statements, reports and other
materials sent by Thomas Weisel Partners to the holders of
shares of Thomas Weisel Partners common stock. The trustee will
also send to the holders of exchangeable shares of the relevant
class all materials sent by third parties to the holders of
shares of Thomas Weisel Partners common stock (if received or
known to have been received by Thomas Weisel Partners),
including dissident proxy circulars and tender and exchange
offer circulars, as soon as reasonably practicable after the
materials are delivered to the trustee.
Dividend Rights.
A holder of exchangeable
shares will be entitled to receive, subject to applicable law,
dividends as follows:
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in the case of a cash dividend declared on a share of Thomas
Weisel Partners common stock, in an amount in cash for each
exchangeable share corresponding to the cash dividend declared
on each share of Thomas Weisel Partners common stock in
U.S. dollars;
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in the case of a stock dividend declared on a share of Thomas
Weisel Partners common stock to be paid in shares of Thomas
Weisel Partners common stock, in the number of exchangeable
shares for each exchangeable share that is equal to the number
of shares of Thomas Weisel Partners common stock to be paid on
each share of Thomas Weisel Partners common stock, unless in
lieu of such stock dividend Canadian Sub elects to effect a
corresponding and contemporaneous and economically equivalent
(as determined by the Canadian Sub board of directors)
subdivision of the outstanding exchangeable shares; or
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in the case of a dividend declared on a share of Thomas Weisel
Partners common stock in any other type of property, in the type
and amount of property as is the same or economically equivalent
(as determined by
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Canadian Subs board of directors) to the type and amount
of property declared as a dividend on each share of Thomas
Weisel Partners common stock.
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Subject to applicable law, the declaration date, record date and
payment date for dividends on the exchangeable shares will be
the same as the relevant date for the dividends on the shares of
Thomas Weisel Partners common stock.
Withholding Rights on Dividends.
Canadian Sub
will be entitled to deduct and withhold from any dividends
otherwise payable to a holder of exchangeable shares any amount
required to be deducted or withheld under the
Income Tax
Act
(Canada), the United States Internal Revenue Code of
1986, as amended, or any provision of provincial, state, local
or foreign tax law. Any amounts so withheld and paid to a taxing
authority will be treated for all purposes as having been paid
to that holder of exchangeable shares. To the extent that the
amount so required or permitted to be deducted or withheld from
any payment to a holder exceeds the cash portion of the amount
otherwise payable to a holder, Canadian Sub may sell or
otherwise dispose of a portion of the consideration as is
necessary to provide sufficient funds to Canadian Sub to enable
it to comply with the deduction or withholding requirement or
entitlement. Canadian Sub must notify the holder of the sale and
remit to the holder any unapplied balance of the net proceeds of
that sale. Any holder of exchangeable shares claiming an
over-withholding is limited to an action against the applicable
government agencies for refund and waives any claim or right of
action against Canadian Sub on account of the withholding.
Certificates.
At any time that exchangeable
shares are retracted, redeemed, purchased for cancellation,
exchanged, sold or otherwise disposed of to Canadian Sub, at a
time when the holder thereof is a person who is a non-resident
of Canada for purposes of the
Income Tax Act
(Canada),
such holder must provide to Canadian Sub (or any acquiror in its
place) a certificate issued pursuant to subsection 116(2) or
116(4) of the
Income Tax Act
(Canada) and must covenant
that he or she will comply with section 116 of the
Income Tax Act
(Canada) and indemnify Canadian Sub (or
any acquiror in its place) for any liability arising thereunder.
Liquidation Rights with Respect to Canadian
Sub.
In the event of the liquidation, dissolution
or winding up of Canadian Sub or other distribution of the
assets of Canadian Sub among its shareholders for the purpose of
winding up its affairs, the holder will have, subject to
applicable law and CallRightCos overriding liquidation
call right, preferential rights to receive from Canadian Sub for
each exchangeable share held, a share of Thomas Weisel Partners
common stock plus, provided that the holder held the
exchangeable share on the applicable dividend record date, the
amount of all declared and unpaid dividends, if any, on that
exchangeable share. Upon the occurrence of a liquidation,
dissolution or
winding-up,
CallRightCo will have an overriding liquidation call right to
purchase all of the outstanding exchangeable shares (other than
exchangeable shares held by Thomas Weisel Partners and its
affiliates) from the holder on the liquidation date for the same
consideration per share.
Upon the occurrence and during the continuance of an
insolvency event (as defined in the following
paragraph), the holder will be entitled to instruct the trustee
under the voting and exchange trust agreement to exercise the
exchange right with respect to any or all of the exchangeable
shares the holder holds, and require Thomas Weisel Partners to
purchase these shares. As soon as practicable following the
occurrence of an insolvency event or any event which may, with
the passage of time
and/or
the
giving of notice, become an insolvency event, Canadian Sub and
Thomas Weisel Partners must, under the voting and exchange trust
agreement, give written notice to the trustee. As soon as
practicable after receiving notice, the trustee will notify the
holder of the insolvency event and will advise the holder of its
rights with respect to the exchange right. The purchase price
payable by Thomas Weisel Partners for each exchangeable share
purchased under the exchange right will be equal to one share of
Thomas Weisel Partners common stock plus (provided that the
holder holds the exchangeable share on the applicable dividend
record date) an amount in cash equal to any declared and unpaid
dividends on that exchangeable share, less any amount withheld
on account of tax.
An insolvency event means:
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the institution by Canadian Sub of any proceeding to be
adjudicated a bankrupt or insolvent or to be wound up, or the
consent of Canadian Sub to the institution of bankruptcy,
insolvency or
winding-up
proceedings against it;
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the filing of a petition, answer or consent seeking dissolution
or
winding-up
under any bankruptcy, insolvency or analogous laws, including
the
Companies Creditors Arrangement Act
(Canada)
and the
Bankruptcy and Insolvency Act
(Canada), and
Canadian Subs failure to contest in good faith the
proceedings commenced in respect of Canadian Sub within
30 days of becoming aware of the proceedings, or the
consent by Canadian Sub to the filing of the petition or to the
appointment of a receiver;
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the making by Canadian Sub of a general assignment for the
benefit of creditors, or the admission in writing by Canadian
Sub of its inability to pay its debts generally as they come
due; or
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Canadian Sub not being permitted, under solvency requirements or
other provisions of applicable law, to redeem any retracted
exchangeable shares under the exchangeable share provisions.
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In addition, if, as a result of solvency requirements or other
provisions of applicable law, Canadian Sub is not permitted to
redeem all exchangeable shares identified in a retraction
request, and CallRightCo has not exercised its retraction call
right, then the retraction request will constitute notice from
the exchangeable shareholder to the trustee to exercise its
exchange right under the voting and exchange trust agreement and
the trustee, on the holders behalf, will require Thomas
Weisel Partners to purchase any exchangeable shares on the
retraction date set forth in the retraction request.
Liquidation Rights with Respect to Thomas Weisel
Partners.
In order for the holders of
exchangeable shares to participate on a pro rata basis with the
holders of shares of Thomas Weisel Partners common stock, on the
fifth business day prior to the effective date of a Thomas
Weisel Partners liquidation event (a specified event relating to
the voluntary or involuntary liquidation, dissolution,
winding-up
or other distribution of the assets of Thomas Weisel Partners
among its shareholders for the purpose of winding up its
affairs), each exchangeable share (other than those held by
Thomas Weisel Partners and its affiliates) will automatically be
exchanged for a share of Thomas Weisel Partners common stock
plus (provided that the exchangeable shareholder holds the
exchangeable share on the applicable dividend record date) an
amount in cash equal to any declared and unpaid dividends on
that exchangeable share, less any amount withheld on account of
tax. Upon the holders request and surrender of
exchangeable share certificates, duly endorsed in blank and
accompanied by those instruments of transfer that Thomas Weisel
Partners may reasonably require, Thomas Weisel Partners will
deliver to the exchangeable shareholder certificates
representing an equivalent number of shares of Thomas Weisel
Partners common stock, plus on the payment date therefor, a
check for the amount of those dividends, if any, on the
exchangeable shares exchanged by the holder under the automatic
exchange right, less any amount withheld on account of tax.
Ranking
The exchangeable shares will rank senior to the common shares of
Canadian Sub and any other shares of Canadian Sub ranking junior
to the exchangeable shares with respect to the distribution of
assets in the event of the liquidation, dissolution or
winding-up
of Canadian Sub, whether voluntary or involuntary, or any other
distribution of the assets of Canadian Sub, among its
shareholders for the purpose of winding up its affairs.
Restrictions
on Canadian Sub
Canadian Sub may not take the following actions without the
approval of the holders of exchangeable shares:
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pay any dividends on common shares of Canadian Sub or any other
shares ranking junior to the exchangeable shares with respect to
the payment of dividends, other than stock dividends payable in
common shares of Canadian Sub or any other shares ranking junior
to the exchangeable shares, as the case may be;
|
|
|
|
redeem, purchase or make any capital distribution in respect of
common shares of Canadian Sub or any other shares ranking junior
to the exchangeable shares with respect to the payment of
dividends;
|
|
|
|
redeem or purchase any other Canadian Sub shares ranking equally
with the exchangeable shares with respect to the payment of
dividends or on any liquidation distribution; or
|
60
|
|
|
|
|
issue any exchangeable shares or any other shares of Canadian
Sub ranking equally with, or superior to, the exchangeable
shares with respect to the payment of dividends or on any
liquidation distribution, other than by way of stock dividends
to the holders of the exchangeable shares.
|
These restrictions will not apply at any time when the dividends
on the outstanding exchangeable shares corresponding to
dividends declared and paid on the shares of Thomas Weisel
Partners common stock have been declared and paid in full.
Amendment
and Approval
The rights, privileges, restrictions and conditions attaching to
the exchangeable shares may be added to, changed or removed only
with the approval of the requisite holders of the exchangeable
shares. Any approval or consent to be given by the holders of a
class of exchangeable shares will be deemed to have been
sufficiently given if given in accordance with applicable law
subject to a minimum requirement that the approval be evidenced
by a resolution passed by not less than
66
2
/
3
%
of the votes cast on that resolution at a meeting of the holders
of exchangeable shares of the class duly called and held at
which a quorum of holders of at least 50% of the then
outstanding exchangeable shares of the class (other than in
respect of exchangeable shares held by Thomas Weisel Partners or
its affiliates) are present or represented by proxy or by a
written resolution signed by holders of two-thirds of the
outstanding exchangeable shares. In the event that no quorum is
present at that meeting within one-half hour after the time
appointed for the meeting, then the meeting will be adjourned to
the place and time (not less than five days later) as may be
designated by the chairman of the meeting. At that adjourned
meeting, the holders of exchangeable shares present or
represented by proxy may transact the business for which the
meeting was originally called and a resolution passed at the
meeting by the affirmative vote of not less than
66
2
/
3
%
of the votes cast on the resolution (other than in respect of
exchangeable shares held by Thomas Weisel Partners or its
affiliates) will constitute the approval or consent of the
holders of exchangeable shares.
Exchangeable
Share Support Agreement
The exchangeable share support agreement will provide that for
so long as any exchangeable shares (other than exchangeable
shares owned by Thomas Weisel Partners or its affiliates) remain
outstanding:
|
|
|
|
|
Thomas Weisel Partners will not declare or pay dividends on the
shares of Thomas Weisel Partners common stock unless Canadian
Sub simultaneously declares or pays, as the case may be, an
equivalent dividend on the exchangeable shares and subject to
certain limitations, Canadian Sub has sufficient money or other
assets or authorized but unissued securities available to enable
the due declaration and the due and punctual payment, in
accordance with applicable law, of such dividend, or if the
dividend is a stock dividend, Canadian Sub effects, in lieu of
that dividend, an economically equivalent subdivision of the
exchangeable shares;
|
|
|
|
Thomas Weisel Partners will advise Canadian Sub sufficiently in
advance of the declaration of any dividend on the Thomas Weisel
Partners common stock and take all action reasonably necessary,
in cooperation with Canadian Sub, to ensure that the respective
declaration date, record date and payment date for dividends on
the exchangeable shares are the same as that for the dividend on
the Thomas Weisel Partners common stock;
|
|
|
|
Thomas Weisel Partners will take all actions and do all things
reasonably necessary or desirable to enable and permit Canadian
Sub, in accordance with applicable law to perform its
obligations arising upon the liquidation, dissolution or
winding-up
or any other distribution of the assets of Canadian Sub among
its shareholders for the purpose of
winding-up
its affairs or in the event of a retraction demand by a holder
of exchangeable shares or a redemption of exchangeable shares on
the redemption date, as the case may be, including all actions
and things that are reasonably necessary or desirable to enable
and permit Canadian Sub to deliver shares of Thomas Weisel
Partners common stock to the holders of exchangeable shares
where obligated to do so;
|
|
|
|
Thomas Weisel Partners will take all actions and do all things
reasonably necessary or desirable to enable and permit
CallRightCo, in accordance with applicable law, to perform its
obligations arising upon the exercise by it of its overriding
call rights, including all actions and things as are reasonably
necessary or
|
61
|
|
|
|
|
desirable to enable CallRightCo to deliver shares of Thomas
Weisel Partners common stock to the holders of exchangeable
shares where obligated to do so; and
|
|
|
|
|
|
Thomas Weisel Partners will not, and will ensure that
CallRightCo does not, exercise its vote as a shareholder to
initiate the voluntary liquidation, dissolution or
winding-up
of Canadian Sub or any other distribution of the assets of
Canadian Sub among its shareholders for the purpose of winding
up its affairs nor take any action or omit to take any action
that is designed to result in the liquidation, dissolution or
winding-up
of Canadian Sub or any other distribution of the assets of
Canadian Sub among its shareholders for the purpose of winding
up its affairs.
|
The exchangeable share support agreement will also provide that,
so long as any exchangeable shares (other than those held by
Thomas Weisel Partners or its affiliates) are outstanding,
Thomas Weisel Partners will not, without the prior approval of
Canadian Sub and the holders of the exchangeable shares:
|
|
|
|
|
issue or distribute to the holders of all or substantially all
the then outstanding shares of Thomas Weisel Partners common
stock:
|
|
|
|
|
|
shares of Thomas Weisel Partners common stock (or securities
exchangeable for or convertible into or carrying rights to
acquire shares of Thomas Weisel Partners common stock) by way of
stock dividend or other distribution (other than to holders of
shares of Thomas Weisel Partners common stock who exercise an
option to receive those securities in lieu of receiving a cash
dividend);
|
|
|
|
rights, options or warrants to subscribe for or purchase any
shares of Thomas Weisel Partners common stock (or securities
exchangeable for or convertible into or carrying rights to
acquire shares of Thomas Weisel Partners common stock);
|
|
|
|
other securities of Thomas Weisel Partners;
|
|
|
|
evidences of indebtedness of Thomas Weisel Partners;
|
|
|
|
any other rights, options or warrants; or
|
|
|
|
assets of Thomas Weisel Partners,
|
unless the economic equivalent on a per share basis of such
rights, options, securities, shares, evidences of indebtedness
or other assets is issued or distributed simultaneously to
holders of exchangeable shares, or
|
|
|
|
|
subdivide, redivide, reduce, consolidate, combine or otherwise
change the then outstanding shares of Thomas Weisel Partners
common stock into a different number of shares of Thomas Weisel
Partners common stock; or
|
|
|
|
reclassify or otherwise change the shares of Thomas Weisel
Partners common stock or effect an amalgamation, merger,
reorganization or other transaction affecting shares of Thomas
Weisel Partners common stock,
|
unless the same or an economically equivalent change is
simultaneously made to, or in, the rights of the holders of
exchangeable shares.
Thomas Weisel Partners will ensure that the record date for any
of the foregoing events (or the effective date if there is no
record date) is not less than five business days after the date
that Thomas Weisel Partners declares or announces the event. The
board of directors of Canadian Sub will determine, in good faith
and in its sole discretion with assistance of such reputable and
qualified financial
and/or
other
advisors as the board may deem appropriate, economic
equivalence for these purposes, and its determination will
be conclusive and binding. The exchangeable share support
agreement sets forth certain factors to be considered by the
board of Canadian Sub in making this determination.
In the event that a tender offer, share exchange offer, issuer
bid, take-over bid or similar transaction with respect to shares
of Thomas Weisel Partners common stock is proposed by Thomas
Weisel Partners or is proposed to Thomas Weisel Partners or its
shareholders and is recommended by Thomas Weisel Partners
board of directors, or is otherwise effected or is to be
effected with the consent or approval of Thomas Weisel
Partners board of directors,
62
Thomas Weisel Partners must use its reasonable efforts
expeditiously and in good faith to take all such actions as are
reasonably necessary to enable and permit holders of
exchangeable shares to participate in the transaction to the
same extent and on an economically equivalent basis as the
holders of shares of Thomas Weisel Partners common stock,
without discrimination.
In addition, subject to limited exceptions, Thomas Weisel
Partners will not consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer,
sale, lease or otherwise) whereby all or substantially all of
its undertaking, property and assets would become the property
of any other person or, in the case of a merger, of the
continuing corporation unless, among other things, the
transaction is, to the satisfaction of trustee under the voting
and exchange trust agreement, acting reasonably, and in the
opinion of counsel to trustee, on such terms and conditions as
substantially to preserve and not to impair in any material
respect any of the rights of the holders of exchangeable shares.
Thomas Weisel Partners will also agree that without the prior
approval of Canadian Sub and the holders of the exchangeable
shares so long as any exchangeable shares are owned by any
person other than Thomas Weisel Partners or its affiliates,
Thomas Weisel Partners will remain the direct or indirect
beneficial owner of all of the issued and outstanding voting
shares of Canadian Sub and CallRightCo.
Thomas Weisel Partners will agree under the exchangeable share
support agreement not to exercise any voting rights attached to
the exchangeable shares owned by it or any of its affiliates on
any matter considered at meetings of holders of exchangeable
shares.
Canadian Sub is required to notify Thomas Weisel Partners and
CallRightCo of the occurrence of certain events, such as the
liquidation, dissolution or
winding-up
of Canadian Sub, and Canadian Subs receipt of a retraction
request from a holder of exchangeable shares.
With the exception of administrative changes for the purpose of
adding covenants for the protection of Canadian Sub or the
holders of exchangeable shares, making certain necessary or
desirable provisions or modifications or curing ambiguities or
clerical errors (in each case provided that the board of
directors of each of Thomas Weisel Partners, Canadian Sub and
CallRightCo are of the opinion, after consultation with their
respective counsel, that the amendments are not prejudicial to
the interests of the holders of exchangeable shares), the
exchangeable share support agreement may not be amended without
the approval of the holders of exchangeable shares as set forth
under Description of Exchangeable
Shares Amendment and Approval.
63
INFORMATION
ABOUT WESTWIND
The following discussion should be read in conjunction with
the consolidated financial statements of Westwind and the
related notes attached as Annex D to this proxy statement.
This discussion contains forward-looking statements reflecting
current expectations of Westwinds management. Actual
results and the timing of events may differ significantly from
those projected in forward-looking statements due to a number of
factors, including those set forth in Risk Factors
beginning on page 8 of this proxy statement. All
dollar amounts referred to in this section are in Canadian
dollars.
Overview
Westwind is an independent, institutional investment banking
firm that was co-founded in 2002 by Lionel Conacher, its
Chief Executive Officer and President, and David Beatty, its
Deputy Chairman. Westwinds services include equity
research on Canadian and United Kingdom listed companies, equity
trading and corporate finance advice on mergers and
acquisitions, financings and restructuring transactions.
Westwind focuses on growth companies in the mining, energy,
technology, media and entertainment, real estate and special
situations sectors.
For the six months ended June 30, 2007, Westwind had
revenues of $48 million and for the twelve months ended
December 31, 2006, Westwind had revenues of
$58 million. Westwind has offices in Toronto, Calgary,
Montreal and London, England. Westwind has a total of
108 employees, including a total of 78 professionals across
each of its three business lines. Westwind is a privately-held
company and its stock is not traded on any stock exchange or
other stock market.
Principal
Business Lines
Investment
Banking
Westwinds investment banking business provides merger and
acquisition advisory services and corporate finance services.
Westwind has advised clients in a variety of merger and
acquisition transactions, including buyers and sellers in many
industries and with respect to amalgamations, tender offers,
hostile takeovers, defence tactics, spinoffs, minority buy-ins
and special situations. In the public equity market, Westwind
has raised capital for Canadian, United Kingdom, Australian and
U.S. companies in a wide range of industries and on both an
agency and an underwritten basis. Westwind has also arranged
capital in early-stage venture capital, private equity and
mezzanine transactions.
Westwind has 26 investment banking professionals (16 in Toronto,
3 in Calgary and 7 in London, England).
Institutional
Equities
Westwind has sales and trading professionals in each of its
offices. The institutional equities business of Westwind is
conducted by 12 professionals in sales and 10 in trading. The
institutional equities business involves Westwind acting as
agent on behalf of institutional investors in Canada, the United
States and the United Kingdom in the purchase and sale of
publicly traded securities listed primarily on Canadian stock
exchanges.
Research
The research analysis provided by Westwind helps its clients
make informed decisions about the investment potential of a
company or a sector. Westwinds investment research is
based on risk assessment of the key variables for investment
decision making. The research analysts at Westwind combine
investigative field research, forensic accounting, cross border
comparisons and valuations in their analysis.
Westwinds research department has 15 analysts and 9
associates who cover over 120 companies in 6 different
sectors. Westwinds principal sectors of analyst coverage
are mining and energy which together account for approximately
70% of the companies that Westwinds research services
cover.
64
Competitive
Landscape
Westwind primarily competes with other investment dealers in the
Canadian capital markets, some of which are affiliated with
chartered banks and some of which, like Westwind, are
independent. Generally, the investment dealers that participate
in the Canadian capital markets fall into one of two broad
categories: full-service investment dealers and specialized
investment dealers.
Following the acquisitions over the last twenty years by the
major Canadian chartered banks of previously independent
investment dealers and the subsequent growth of those businesses
through further acquisitions, there has been a decline in Canada
in the number of full service investment dealers and a strategic
shift toward product specialization. The specialized investment
dealers have developed significant presence in the Canadian
capital markets through strategies that include: developing
strong relationships with institutional clients; targeting small
or mid-cap issuers that may be under-serviced by larger dealers
and continuing to provide them with products and services as the
companies grow; packaging new services and products to meet
changing client and customer demands; and specializing in
particular industries or sectors.
Full-Service
Investment Dealers
Full-service or integrated firms offer their institutional and
retail clients a full range of products and services. The
full-service firms are generally large organizations, many of
which, since the removal in 1987 of restrictions on ownership of
investment dealers by financial institutions, are now owned by
the largest Canadian chartered banks. These investment dealers
represent a large portion of the Canadian capital markets
industry.
Specialized
Investment Dealers
Specialized investment dealers, such as Westwind, offer a
variety, although not a full range, of products and services to
their clients. Most of the specialized investment dealers that
participate in the Canadian market do so by targeting selected
industries or clientele.
Some of these specialized investment dealers started as
organizations that offered limited products and services and
expanded into other products and services as the organizations
grew and expanded with their clients while others have chosen to
remain focused on their respective target markets.
Westwind
To strengthen its competitive position, Westwind seeks to build
long-term relationships with growth companies by providing a
range of services through the many stages of their development.
Westwind attempts to maintain these relationships as these
companies grow and mature through equity and debt offerings,
institutional brokerage and strategic advisory services.
Westwind further seeks to strengthen its competitive position by
developing strong relationships with key sources of capital
including institutional clients and the venture capital/private
equity communities in its target sectors. Westwind also seeks to
strengthen its competitive position in its sales and research
divisions by focusing on delivering high-level client service,
including through attempting to be a trusted advisor and not
merely a financial intermediary.
Regulation
Westwind is subject to extensive regulation in Canada, the
United States, the United Kingdom and elsewhere. As a matter of
public policy, regulatory bodies in Canada and the rest of the
world are charged with safeguarding the integrity of the
securities and other financial markets and with protecting the
interests of customers participating in those markets.
Westwind generally operates in Canada under the securities
legislation of each of the provinces and territories in Canada,
the Universal Market Integrity Rules of Market
Regulation Services Inc., and the general by-laws, rules
and policies of the stock exchanges of which an investment
dealer is a member and of the Investment Dealers Association of
Canada. In addition, Westwind is subject to United States
federal securities laws as administered by the SEC and state
securities and other regulators having regulatory or oversight
authority in the United States, and to
65
the securities and regulatory regime administered in the United
Kingdom by the United Kingdom Financial Services Authority.
Westwind is subject to regulations that cover various aspects of
the securities business, including sales methods, trade
practices, use and safekeeping of funds and securities, capital
structure, record-keeping, conflicts of interest and the conduct
of directors, officers and employees. The various governmental
agencies and self-regulatory organizations having jurisdiction
over Westwind are empowered to conduct administrative
proceedings that can result in censure, fine, the issuance of
cease-and-desist
orders or the suspension or expulsion of an investment dealer or
its directors, officers or employees.
Westwind is also subject to rules respecting the maintenance of
minimum net capital. Compliance with net capital requirements of
self-regulatory organizations can limit Westwinds
operations and also restrict its ability to withdraw capital
from its regulated affiliates, which in turn can limit its
ability to repay debt or pay dividends.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Westwinds businesses are managed as a single operating
unit and revenues are generated by providing financial services
that include investment banking, brokerage and research.
Westwind takes a comprehensive approach in providing these
services to growth companies in its target sectors of mining,
energy, technology, media and entertainment, real estate and
special situations. Westwind is exposed to volatility and trends
in the general securities market and the economy and is
specifically exposed to volatility and trends in its target
sectors. Consequently, Westwinds net income and revenues
are subject to fluctuations reflecting the effect of many
factors, including general economic conditions, securities
market conditions, the level and volatility of interest rates
and equity prices, competitive conditions and the size, volume
and timing of transactions. These and other factors can affect
Westwinds volume of new securities issuances, mergers and
acquisitions advisory activity, the stability and liquidity of
securities market and the ability of issuers to perform on their
obligations. A decrease in the volume of new securities
issuances and mergers and acquisitions generally results in
lower revenues from investment banking and, to a lesser extent,
reduced principal trading transactions. A reduced volume of
securities transactions and reduced market liquidity generally
results in lower revenues from principal trading transactions
and agency commissions. In periods of reduced commissions and
principal trading or investment banking activity, profitability
may be adversely affected because certain expenses remain
relatively fixed.
66
The consolidated financial statements of Westwind have been
prepared in accordance with Canadian generally accepted
accounting principles, which conform in all material respects
with U.S. GAAP as applied to the consolidated financial
statements of Westwind. See Note 10 to the consolidated
financial statements for the six month periods ended
June 30, 2007 and 2006 and the years ended
December 31, 2006, 2005 and 2004. The following table
provides a summary of the results of operations of Westwind for
the years ended December 31, 2006, 2005 and 2004 (
in
thousands, except percentages)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31
|
|
|
2005-2006
|
|
|
2004-2005
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
% Change
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
33,548
|
|
|
$
|
30,603
|
|
|
$
|
21,953
|
|
|
|
9.6
|
%
|
|
|
39.4
|
%
|
Agency commissions
|
|
|
14,740
|
|
|
|
8,474
|
|
|
|
7,823
|
|
|
|
73.9
|
|
|
|
8.3
|
|
Principal trading gains (losses)
|
|
|
8,581
|
|
|
|
1,605
|
|
|
|
(1,347
|
)
|
|
|
434.6
|
|
|
|
n/a
|
|
Interest and other income
|
|
|
1,113
|
|
|
|
121
|
|
|
|
320
|
|
|
|
819.8
|
|
|
|
(62.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
57,982
|
|
|
|
40,803
|
|
|
|
28,749
|
|
|
|
42.1
|
|
|
|
41.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
36,561
|
|
|
|
26,694
|
|
|
|
16,919
|
|
|
|
37.0
|
|
|
|
57.8
|
|
Brokerage execution, clearance and account administration
|
|
|
2,055
|
|
|
|
1,416
|
|
|
|
1,247
|
|
|
|
45.1
|
|
|
|
13.6
|
|
Communications and data processing
|
|
|
858
|
|
|
|
737
|
|
|
|
490
|
|
|
|
16.4
|
|
|
|
50.4
|
|
Depreciation and amortization
|
|
|
469
|
|
|
|
373
|
|
|
|
335
|
|
|
|
25.7
|
|
|
|
11.3
|
|
Marketing and promotion
|
|
|
2,748
|
|
|
|
1,563
|
|
|
|
840
|
|
|
|
75.8
|
|
|
|
86.1
|
|
Occupancy and equipment
|
|
|
1,373
|
|
|
|
1,325
|
|
|
|
852
|
|
|
|
3.6
|
|
|
|
55.5
|
|
Office and other
|
|
|
3,475
|
|
|
|
3,147
|
|
|
|
3,340
|
|
|
|
10.4
|
|
|
|
(5.8
|
)
|
Founders compensation
|
|
|
|
|
|
|
|
|
|
|
1,140
|
|
|
|
n/a
|
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
47,539
|
|
|
|
35,255
|
|
|
|
25,163
|
|
|
|
34.8
|
|
|
|
40.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
10,443
|
|
|
|
5,548
|
|
|
|
3,586
|
|
|
|
88.2
|
|
|
|
54.7
|
|
Provision for income taxes
|
|
|
3,955
|
|
|
|
2,074
|
|
|
|
1,810
|
|
|
|
90.7
|
|
|
|
14.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,488
|
|
|
$
|
3,474
|
|
|
$
|
1,776
|
|
|
|
86.8
|
%
|
|
|
95.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison
of Twelve Month Periods Ended December 31, 2006, 2005 and
2004
Results
of Operations
Westwinds results of operations are closely related to the
performance of the Canadian capital markets, which depend on a
number of market factors, including market conditions and
valuations for companies in the mining, energy, technology,
media and entertainment, real estate and special situations
sectors, as well as general securities market conditions in
Canada and the rest of the world. Trends in the securities
markets are also affected by general economic trends, including
fluctuations in interest rates, flows of funds into and out of
the markets and other conditions. In addition to these market
factors, Westwinds revenues from period to period are
substantially affected by the timing of transactions in which
Westwind is involved. Fees for many of the services provided by
Westwind are earned only upon the completion of a transaction.
Accordingly, Westwinds results of operations in any
individual year or quarter may be affected significantly by
whether and when significant transactions are completed.
67
Revenues
The following table sets forth Westwinds revenues for the
years ended December 31, 2006, 2005 and 2004, both in
dollar amounts and as a percentage of revenues for these periods
(in thousands, except percentages)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31
|
|
|
2005-2006
|
|
|
2004-2005
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
% Change
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
33,548
|
|
|
$
|
30,603
|
|
|
$
|
21,953
|
|
|
|
9.6
|
%
|
|
|
39.4
|
%
|
Agency commissions
|
|
|
14,740
|
|
|
|
8,474
|
|
|
|
7,823
|
|
|
|
74.0
|
|
|
|
8.3
|
|
Principal trading gains (losses)
|
|
|
8,581
|
|
|
|
1,605
|
|
|
|
(1,347
|
)
|
|
|
434.6
|
|
|
|
n/a
|
|
Interest and other income
|
|
|
1,113
|
|
|
|
121
|
|
|
|
320
|
|
|
|
819.8
|
|
|
|
(62.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
57,982
|
|
|
$
|
40,803
|
|
|
$
|
28,749
|
|
|
|
42.1
|
%
|
|
|
41.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking fees
|
|
|
57.9
|
%
|
|
|
75.0
|
%
|
|
|
76.4
|
%
|
|
|
|
|
|
|
|
|
Agency commissions
|
|
|
25.4
|
|
|
|
20.8
|
|
|
|
27.2
|
|
|
|
|
|
|
|
|
|
Principal trading gains (losses)
|
|
|
14.8
|
|
|
|
3.9
|
|
|
|
(4.7
|
)
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
1.9
|
|
|
|
0.3
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Banking Revenues
Westwinds investment banking revenues include
(i) management fees, underwriting fees, selling concessions
and agency placement fees earned through participation in public
offerings and private placements of equity and convertible debt
securities and (ii) fees earned as strategic advisor in
mergers and acquisitions and similar transactions. Underwriting
fees include both cash commissions as well as broker warrants to
purchase securities at the same price as those sold in the
underwriting. The term of these broker warrants varies from
twelve months to two years. The realized and unrealized
gains on broker warrants, which only occur when the price of the
underlying security increases above the price at which the
securities were issued, are included in principal trading gains.
Investment banking revenues are typically recognized at the
completion of each transaction. Investment banking revenues have
and likely will continue to vary significantly between periods.
Investment banking revenues may be affected by the overall level
of capital raising activity in the marketplace and, in
particular, in Westwinds target sectors, although there is
not always a correlation between Westwinds activity and
that of the market as a whole.
2006 versus 2005.
Investment banking revenues
of $33.5 million (2005 $30.5 million)
consist of revenue from capital raising activities of
$30.7 million (2005 $25.7 million) and
revenue from advisory activities of $2.8 million in 2006
(2005 $4.9 million). Investment banking
revenues increased $2.9 million in 2006 from 2005. This
increase was the result of closing 132 investment banking
transactions during 2006, compared to 87 during 2005,
offset, in part, by a decrease in the average size of strategic
advisory transactions, as described below.
Capital raising revenue accounted for 91.6% of Westwinds
investment banking revenue in 2006 compared to 84.0% in 2005.
Westwinds capital raising revenue increased
$5.0 million to $30.7 million in 2006 compared to
$25.7 million in 2005. This increase was primarily the
result of closing 96 capital raising transactions during 2006,
compared to 63 during 2005, an increase of 52.4%.
Strategic advisory revenue accounted for 8.4% of Westwinds
total investment banking revenue in 2006 compared to 16.0% in
2005. Strategic advisory revenue decreased $2.1 million to
$2.8 million in 2006 compared to $4.9 million in 2005.
This decrease was primarily the result of a decrease in the
average size of strategic advisory transactions.
68
2005 versus 2004.
Investment banking revenue
increased $8.6 million in 2005 from the $21.9 million
generated in 2004. This increase was the result of closing 87
investment banking transactions during 2005, compared to 49
during 2004, an increase of 77.6%.
Capital raising revenue accounted for 84.0% of Westwinds
investment banking revenue in 2005 compared to 81.8% in 2004.
Westwinds capital raising revenue increased
$7.8 million to $25.7 million in 2005 compared to
$18.0 million in 2004. This increase was primarily the
result of closing 63 capital raising transactions during 2005,
compared to 33 during 2004, an increase of 90.9%, resulting in
large part from Westwinds efforts to grow its business.
Strategic advisory revenue accounted for 16.0% of
Westwinds total investment banking revenue in 2005
compared to 18.2% in 2004. Strategic advisory revenue increased
$899,000 to $4.9 million in 2005 compared to
$4.0 million in 2004.
Agency
Commissions
Westwinds agency commissions revenue includes commissions
paid by customers from brokerage transactions in equity
securities. The volume of agency commissions revenue is affected
by market volatility, activity, account coverage and liquidity
as well as competitive pressures from other securities firms.
The concentration in agency commissions revenue among
Westwinds ten largest brokerage clients was 26.4% in 2006,
while in 2005 and 2004 it was 25.2% and 34.9%, respectively.
2006 versus 2005.
Agency commissions revenue
increased $6.2 million in 2006 to $14.7 million
compared to $8.5 million in 2005 representing an increase
of 73.9%. The increase was primarily attributable to higher
revenue from Westwinds Canadian institutional business due
to an increase in the average daily volume of shares traded for
clients, combined with the addition of employees to allow for
greater coverage of institutional accounts. According to TSX
Group Inc., the total volume of securities traded in 2006 on the
Toronto Stock Exchange and TSX Venture Exchange increased by 40%
over 2005 (119.7 billion securities in 2006 versus
85.7 billion securities in 2005). In addition, the total
value of securities traded in 2006 on Toronto Stock Exchange and
TSX Venture Exchange increased by 33% over 2005
($1,449.4 billion in 2006 versus $1,090.9 billion in
2005), according to TSX Group Inc.
2005 versus 2004.
Agency commissions revenue
increased $650,000 in 2005 to $8.5 million from
$7.8 million for the year ended December 31, 2004. The
increase was primarily attributable to the full year benefit of
Westwinds U.S. operations.
Principal
Trading Gains (Losses)
Revenue from principal trading include trading gains and losses
which result from facilitation trading activities and from the
recognition of realized and unrealized gains on broker warrants
received as part of the compensation for investment banking
activities. The exercise price of broker warrants is the price
at which the underlying security was issued as part of an
investment banking transaction. The timing of the exercise of
broker warrants is based on the trading price of the underlying
security in relation to the exercise price and on the liquidity
of the security.
2006 versus 2005.
Principal trading revenue
increased $7.0 million in 2006 to $8.6 million
compared to $1.6 million in 2005. The increase was
attributable to higher revenue recognized on broker warrants as
a result of the buoyant market conditions for the sectors in
which Westwind operates. Principal trading gains are comprised
of gains on broker warrants of $8.8 million
(2005 $1.4 million) and principal trading gains
of $1.0 million (2005 $1.0 million),
diminished by facilitation losses of $1.2 million
(2005 $0.8 million).
2005 versus 2004.
Principal trading revenue
increased $3.0 million in 2005 to $1.6 million
compared to loss of $1.3 million in 2004. This increase was
attributable to a reduction in the trading losses incurred in
facilitation trading activities in 2004. Principal trading gains
are comprised of gains on broker warrants of $1.4 million
(2004 $1.6 million) and principal trading gains
of $1.0 million (2004 $0.3 million loss),
diminished by facilitation losses of $0.8 million
(2004 $2.6 million).
69
Operating
Expenses Excluding Interest
The following table sets forth information relating to
Westwinds operating expenses and average number of
employees for the years ended December 31, 2006, 2005 and
2004
(in thousands, except percentages and number of
employees)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31
|
|
|
2005-2006
|
|
|
2004-2005
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
% Change
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
36,561
|
|
|
$
|
26,694
|
|
|
$
|
18,059
|
|
|
|
37.0
|
%
|
|
|
47.8
|
%
|
Non-compensation expenses
|
|
|
10,978
|
|
|
|
8,561
|
|
|
|
7,104
|
|
|
|
28.2
|
|
|
|
20.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
$
|
47,539
|
|
|
$
|
35,255
|
|
|
$
|
25,163
|
|
|
|
34.8
|
%
|
|
|
40.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees compensation and benefits
|
|
$
|
14,312
|
|
|
$
|
10,288
|
|
|
$
|
5,447
|
|
|
|
39.1
|
%
|
|
|
88.9
|
%
|
Discretionary bonus
|
|
|
22,249
|
|
|
|
16,406
|
|
|
|
11,472
|
|
|
|
35.6
|
|
|
|
43.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Founders compensation
|
|
|
|
|
|
|
|
|
|
|
1,140
|
|
|
|
n/a
|
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total compensation, benefits and founders compensation
|
|
$
|
36,561
|
|
|
$
|
26,694
|
|
|
$
|
18,059
|
|
|
|
37.0
|
%
|
|
|
47.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
63.1
|
%
|
|
|
65.4
|
%
|
|
|
62.8
|
%
|
|
|
|
|
|
|
|
|
Non-compensation expenses
|
|
|
18.9
|
|
|
|
21.0
|
|
|
|
24.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
82.0
|
%
|
|
|
86.4
|
%
|
|
|
87.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of employees
|
|
|
97
|
|
|
|
86
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
Compensation
and Benefits Expense
Compensation and benefits expenses to secure the services of
Westwinds employees have been the largest component of
Westwinds expenses. Compensation and benefits expense
includes salaries, bonuses, commissions, benefits, employment
taxes and other employee costs. Westwind has a discretionary
bonus plan based on a combination of firm and individual
performance. Particularly for Westwinds senior
professionals, these bonuses make up a large portion of total
compensation. Accruals are made for the estimated amount of
payments under this bonus plan over the applicable service
period. Bonuses are generally paid quarterly, one month
following the end of the quarter.
Westwind has grown significantly since its inception in
mid-2002. In connection with the hiring of professionals to
support this growth, compensation expense is often incurred
prior to the associated projected generation of additional
revenues from such hiring. As such, its compensation and
benefits expense as a percentage of revenues has been higher
than the industry average.
2006 versus 2005.
Compensation and benefits
expense increased $9.9 million in 2006 from 2005. The
increase was primarily due to higher bonus accruals resulting
from the increased revenues combined with the hiring of
additional employees to support increased business activity.
Compensation and benefits expense, as a percentage of revenues
decreased to 63.1% in 2006 from 65.4% in 2005.
2005 versus 2004.
Compensation and benefits
expense increased $8.6 million in 2005 from 2004. The
increase was primarily due to higher bonus and commission
accruals resulting from the increased revenues combined with the
hiring of additional employees to support the increased business
activity. Compensation and benefits expense, as a percentage of
revenues decreased slightly to 65.4% in 2005 from 62.8% in 2004.
The founders compensation expense in 2004 of
$1.1 million was to recognize the cost of issuance of
shares under a share purchase option to the founders of Westwind.
70
Non-Compensation
Expenses
Westwinds non-compensation expenses include brokerage
execution, clearance and account administration, communications
and data processing, depreciation and amortization, marketing
and promotion, occupancy and equipment and other expenses.
2006 versus 2005.
Non-compensation expenses
increased $2.4 million in 2006 from 2005. The overall
increase in non-compensation expenses was due in part to
marketing and promotion expenditures increasing
$1.2 million in 2006. In addition, brokerage execution,
clearance and account administration increased $0.6 million
due to higher share volume. Finally, office and other expense
increased $0.3 million due to increased professional
services. All other categories account, in aggregate, for the
remaining $0.3 million increase.
Overall, non-compensation expenses as a percentage of revenues
decreased to 18.9% in 2006 compared to 21.0% in 2005.
2005 versus 2004.
Non-compensation expenses
increased $1.5 million in 2005 from 2004. The overall
increase in non-compensation expenses was primarily due to
marketing and promotion expenditures increasing
$0.7 million in 2005. In addition, occupancy and equipment
expenses increased $0.5 million as a result of the
establishment of the London, U.K. office. Finally, communication
and data processing expenses increased $0.2 million due to
significant expansion of intra-office communication systems and
individual employee communication systems.
Overall, non-compensation expenses as a percentage of revenues
decreased to 21.0% in 2005 from 24.7% in 2004.
Provision
for Income Taxes
Westwind and its subsidiaries are subject to federal, provincial
and state income tax in the three countries in which it operates.
2006 versus 2005.
Income tax expense in 2006
was $4.0 million compared to $2.1 million in 2005 due
to the higher amount of income. The future income tax expense in
2006 was $0.7 million compared to $56,000 in 2005. This
significant increase in the future income tax expense was
related to the income tax expense associated with the
recognition of revenue on unrealized gains associated with
unexercised broker warrants. Westwinds effective income
tax rate for 2006 was 37.9% of income before income taxes
compared to 37.4% in 2005. The effective income tax rate will be
affected by the different rates in effect in the countries in
which Westwind operates.
2005 versus 2004.
Income tax expense in 2005
was $2.1 million compared to $1.8 million in 2004. The
effective income tax rate for 2005 was 37.4% compared to 50.5%
in 2004. In 2004, $1.1 million of founders
compensation expense was not deductible for income tax purposes
and this had a 12.2% adverse impact on the effective income tax
rate.
71
Comparison
of Six Month Periods Ending June 30, 2007 and
2006
The following table provides a summary of the results of
Westwinds operations (
in thousands, except
percentages
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
33,693
|
|
|
$
|
16,666
|
|
|
|
102.2
|
%
|
Agency commissions
|
|
|
9,284
|
|
|
|
7,486
|
|
|
|
24.0
|
|
Principal trading gains (losses)
|
|
|
3,986
|
|
|
|
4,240
|
|
|
|
(6.0
|
)
|
Interest and other income
|
|
|
1,050
|
|
|
|
366
|
|
|
|
186.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
48,013
|
|
|
|
28,758
|
|
|
|
67.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
30,970
|
|
|
|
17,158
|
|
|
|
80.5
|
|
Brokerage execution, clearance and account administration
|
|
|
1,151
|
|
|
|
986
|
|
|
|
16.7
|
|
Communications and data processing
|
|
|
555
|
|
|
|
423
|
|
|
|
31.2
|
|
Depreciation and amortization
|
|
|
246
|
|
|
|
202
|
|
|
|
21.8
|
|
Marketing and promotion
|
|
|
1,528
|
|
|
|
1,278
|
|
|
|
19.6
|
|
Occupancy and equipment
|
|
|
718
|
|
|
|
668
|
|
|
|
7.5
|
|
Office and other
|
|
|
2,203
|
|
|
|
1,672
|
|
|
|
31.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
37,371
|
|
|
|
22,387
|
|
|
|
66.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
10,642
|
|
|
|
6,371
|
|
|
|
67.0
|
|
Provision for income taxes
|
|
|
3,668
|
|
|
|
2,370
|
|
|
|
54.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,974
|
|
|
$
|
4,001
|
|
|
|
74.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
The following table sets forth Westwinds revenues for the
six months ended June 30, 2007 and 2006, both in dollar
amounts and as a percentage of revenues for these periods
(in
thousands, except percentages)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30
|
|
|
2006-2007
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
33,693
|
|
|
$
|
16,666
|
|
|
|
102.2
|
%
|
Agency commissions
|
|
|
9,284
|
|
|
|
7,486
|
|
|
|
24.0
|
|
Principal trading gains
|
|
|
3,986
|
|
|
|
4,240
|
|
|
|
(6.0
|
)
|
Interest and other income
|
|
|
1,050
|
|
|
|
366
|
|
|
|
186.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
48,013
|
|
|
|
28,758
|
|
|
|
67.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking fees
|
|
|
70.2
|
%
|
|
|
58.0
|
%
|
|
|
|
|
Agency commissions
|
|
|
19.3
|
|
|
|
26.0
|
|
|
|
|
|
Principal trading gains (losses)
|
|
|
8.3
|
|
|
|
14.7
|
|
|
|
|
|
Interest and other income
|
|
|
2.2
|
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
Investment
Banking Revenue
Six Months Ended June 30, 2007 versus Six Months Ended
June 30, 2006.
Investment banking revenue
increased $17.0 million in the first six months of 2007 as
compared to the same period in 2006. This increase was the
result of closing 84 investment banking transactions during the
first six months of 2007, compared to 71 during same period in
2006 as well as an increase in the average revenue per
transaction. The increase in the average revenue per transaction
was primarily attributable to an increase in the average size of
the capital raising transactions in which Westwind participated,
as well as Westwind participating as a book- and lead-manager in
a higher percentage of the transactions in which Westwind was
engaged. Westwinds ability to handle larger transactions
has grown as the capital of Westwind has grown. During the first
six months of 2006, Westwind was involved in three capital
raising transactions in which the fee earned was over
$1 million, and averaged over $1.2 million. During the
first half of 2007, Westwind was involved in seven capital
raising transactions in which the fee earned was over
$1 million, and averaged over $2.3 million. One
transaction in 2007 resulted in total fees of over
$7.2 million.
Capital raising revenue accounted for 88.3% of investment
banking revenue in the first half of 2007 compared to 91.9% in
the same period of 2006. Westwinds capital raising revenue
increased $14.4 million to $29.8 million in the first
half of 2007 compared to $15.3 million in the same period
in 2006, an increase of 94.8%. This increase was in part due to
the closing of 60 capital raising transactions during the first
half of 2007, compared to 53 during the first six months of
2006, but was principally caused by a 72% increase in the
average revenue per transaction. Favourable market conditions
for Westwinds target sectors, and in particular, the
mining and energy sectors, resulted in an increased number of
new securities issuances and an increase in the average size of
the transactions completed.
Strategic advisory revenue accounted for 11.7% of
Westwinds total investment banking revenue in the
first six months of 2007 compared to 8.1% in the same
period of 2006. Strategic advisory revenue increased
$2.6 million to $3.9 million in the first half of 2007
compared to $1.3 million in same period in 2006. This
increase was the result of an increase in the number of
transactions closing combined with an increase in the average
size of strategic advisory transactions closed during the first
half of 2007. Westwinds targets sectors of mining and
energy were very active during the first six months of 2007
which was the reason for the increases described above.
Agency
Commissions
Westwinds agency commissions revenue includes
commissions paid by customers from brokerage transactions in
equity securities.
The concentration in agency commissions revenue among
Westwinds ten largest brokerage clients was 34.0% during
the first six months of 2007 compared to 26.4% and 25.2% in the
years ended December 31, 2006 and 2005, respectively.
Six Months Ended June 30, 2007 versus Six Months Ended
June 30, 2006.
Agency commissions
revenue increased $1.8 million, or 24.0%, in the first half
of 2007 to $9.3 million compared to $7.5 million in
the same period of 2006. The increase was primarily attributable
to higher revenue from Westwinds Canadian and
U.S. institutional businesses due to an increase in the
average daily volume of shares traded for clients, consistent
with an overall increase in trading volume in the Canadian and
other equity markets, combined with the benefit of increased
client coverage resulting from the increased number of employees.
Principal
Trading Gains (Losses)
Revenue from principal trading include the recognition of
realized and unrealized gains on broker warrants received as
part of the compensation for investment banking activities and
trading gains and losses from facilitation trading activities.
Six Months Ended June 30, 2007 versus Six Months Ended
June 30, 2006.
Principal trading revenue
decreased $254,000 in the six months ended June 30, 2007 to
$4.0 million compared to $4.2 million in the same
period of 2006. The decrease was attributable to higher
facilitation trading costs to support the increased agency
commissions revenue generated during the first six months of
2007 compared to 2006. Principal trading gains for
73
the six months ended June 30, 2007 are comprised of gains
on broker warrants of $4.5 million (six months ended
June 30, 2006 $4.4 million) and principal
trading gains of $0.6 million (six months ended
June 30, 2006 $0.5 million), diminished by
facilitation losses of $1.1 million (six months ended
June 30, 2006 $0.7 million).
Operating
Expenses Excluding Interest
The following table sets forth information relating to
Westwinds operating expenses and average number of
employees for the six months ended June 30, 2007 and 2006
(in thousands, except percentages and number of
employees)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30
|
|
|
2006-2007
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees compensation and benefits
|
|
$
|
7,376
|
|
|
$
|
6,295
|
|
|
|
17.2
|
%
|
Discretionary bonus
|
|
|
23,594
|
|
|
|
10,863
|
|
|
|
117.2
|
|
Compensation and benefits
|
|
|
30,970
|
|
|
|
17,158
|
|
|
|
80.5
|
|
Non-compensation expenses
|
|
|
6,401
|
|
|
|
5,229
|
|
|
|
22.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
37,371
|
|
|
|
22,387
|
|
|
|
66.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
64.5
|
%
|
|
|
59.7
|
%
|
|
|
|
|
Non-compensation expenses
|
|
|
13.3
|
|
|
|
18.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
77.8
|
%
|
|
|
77.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of employees
|
|
|
110
|
|
|
|
96
|
|
|
|
|
|
Compensation
and Benefits Expense
Six Months Ended June 30, 2007 versus Six Months Ended
June 30, 2006.
Compensation and benefits
expense increased $13.8 million in the first six months of
2007 from the same period of 2006. The increase was primarily
due to higher bonus accruals resulting from the increased
revenues combined with the hiring of additional employees to
support increased business activity. In addition, the amount of
compensation and benefits expense includes $0.8 million
paid by Westwind to its employee shareholders. Compensation and
benefits expense, as a percentage of revenues increased to 64.5%
in the first six months of 2007 from 59.7% in the same period of
2006. The increase in employees to support the increased
activity combined with the shareholder distribution has driven
up the percentage of compensation and benefits expense as a
percentage of revenues.
Non-Compensation
Expenses
Six Months Ended June 30, 2007 versus Six Months Ended
June 30, 2006.
Non-compensation expenses
increased $1.2 million in the first six months of 2007 from
the same period of 2006, an increase of 22.4%. The increase
occurred in all expense categories to support the growth in
revenues. Overall, non-compensation expenses as a percentage of
revenues decreased to 13.3% in the first half of 2007 compared
to 18.2% in the same period of 2006.
Provision
for Income Taxes
Six Months Ended June 30, 2007 versus Six Months Ended
June 30, 2006.
Income tax expense in the
first six months of 2007 was $3.7 million
compared to $2.4 million in the same period of 2006 due to
the higher amount of income. The effective income tax rate for
2007 decreased to 34.5% of income before income taxes compared
to 37.2% in the same period of 2006 due to the recognition of a
loss carryforward benefit in the UK operations. Westwinds
effective income tax rate will be affected by the different
rates in effect in the three jurisdictions in which Westwind
operates.
74
Liquidity
and Capital Resources
Westwind has historically satisfied its capital and liquidity
requirements through capital raised from its partners and
employee shareholders, cash generated from operations and
available credit from market sources. In addition, Westwind has
access to liquidity within its securities inventory classified
as trading securities and securities sold short.
Since inception, Westwind has not paid dividends on its common
shares. Funds generated by the business were re-invested to
support the growth of the business. Westwind did pay dividends
on outstanding preferred shares during this period.
The timing of bonus payments to employees may significantly
affect Westwinds cash position and liquidity from period
to period. While employees are generally paid salaries
semi-monthly during the year, bonus payments, which make up a
substantial portion of total compensation, are generally paid
quarterly, one month following the end of the quarter.
Westwind Partners Inc., Westwinds registered Investment
Dealer in Canada, is subject to the capital requirements of the
Investment Dealers Association of Canada. The capital
requirements of the Investment Dealers Association provide for
limitations on capital withdrawal if certain minimum
requirements are not met. At December 31, 2006, 2005 and
2004, Westwind Partners Inc. had risk adjusted capital of
$8.6 million, $6.0 million and $2.7 million
respectively. At June 30, 2007, Westwind Partners Inc. had
risk adjusted capital of $18.9 million. Westwind Partners
(USA) Inc., Westwinds U.S. broker-dealer is a member
in FINRA (Financial Industry Regulatory Authority) and is
registered with the SEC. As such, Westwind Partners (USA) Inc.
is subject to the net capital requirements of the FINRA and the
SECs uniform net capital rule. FINRA and SEC regulations
also provide that equity capital may not be withdrawn or cash
dividends paid if certain minimum net capital requirements are
not met. At December 31, 2006, 2005 and 2004, Westwind
Partners (USA) Inc. had excess net capital of US$24,000,
US$173,000 and US$35,600, respectively. At June 30, 2007,
Westwind Partners (USA) Inc. had excess net capital of
US$1.4 million. Westwind Partners (UK) Limited, is a
Westwind subsidiary that has been registered with the Financial
Services Authority since November 2005. As such, Westwind
Partners (UK) Limited is subject to certain financial resources
requirements that restrict the amount of equity capital that may
be withdrawn or cash dividends paid. Westwind Partners (UK)
Limited had financial resources under the Financial Services
Authority at December 31, 2006 and 2005 of £305,000
and £565,000, respectively. Westwind Partners (UK) Limited
had financial resources under the Financial Services Authority
at June 30, 2007 of £1.0 million. Risk adjusted
capital and regulatory net capital requirements change based on
certain investment and underwriting activities. Westwind
provides capital to its subsidiaries as required to ensure
compliance with regulations and to conduct business operations.
Due to the nature of Westwinds investment banking and
brokerage businesses, liquidity is of critical importance to
Westwind. Accordingly, Westwind regularly monitors its liquidity
position, including its cash and net capital positions. Westwind
believes that its current level of equity capital will be
adequate to meet its liquidity and regulatory capital
requirements for the next 12 months.
The following table provides a summary of contractual
obligations as of December 31, 2006, which consist of
operating lease obligations, and within that category consist
principally of future minimum annual lease payments
(in
thousands)
:
|
|
|
|
|
2007
|
|
$
|
1,246
|
|
2008
|
|
|
789
|
|
2009
|
|
|
159
|
|
2010
|
|
|
139
|
|
2011 and thereafter
|
|
|
139
|
|
75
The following table provides a summary of contractual
obligations as of June 30, 2007, which consist of operating
lease obligations, and within that category consist principally
of future minimum annual lease payments
(in thousands)
:
|
|
|
|
|
2007
|
|
$
|
758
|
|
2008
|
|
|
1,213
|
|
2009
|
|
|
534
|
|
2010
|
|
|
612
|
|
2011 and thereafter
|
|
|
1,825
|
|
During the six month period ended June 30, 2007, Westwind
entered into a new six-year lease for expanded office space in
Calgary, Alberta.
Cash
Flows
Westwind was initially capitalized by their employee
shareholders. Cash invested by additional employees combined
with the net income generated by Westwind, has continued to be
the principal source of cash for Westwind. Westwind principally
uses its cash flow to finance its operations including meeting
capital requirements for underwriting commitments and for
principal trading inventories.
2006 versus 2005.
At December 31, 2006,
cash and cash equivalents amounted to $17.3 million, a
decrease of $2.1 million from December 31, 2005.
Operating activities used $3.6 million of cash during 2006,
primarily due to an increase in trading securities held at
December 31, 2006 of $7.5 million and other working
capital items of 2.6 million diminished by net income of
$6.5 million.
Investing activities used $0.7 million of cash during 2006
for the purchase of furniture and fixtures, computer equipment
and artwork.
Financing activities provided $2.2 million of cash,
including cash proceeds received from issuance of
common shares of $2.8 million partially offset by
$0.3 million for the repurchase of common shares from
employees and $0.3 million for the redemption of preferred
shares.
2005 versus 2004.
At December 31, 2005,
cash and cash equivalents amounted to $19.3 million, an
increase of $11.0 million from December 31, 2004.
Operating activities generated $8.3 million of cash
primarily due to a decrease in non-cash working capital as a
result of the significant increase in accounts payable in line
with the growth in activity, combined with $3.5 million of
net income.
Investing activities generated $0.8 million due to the
$1.4 million partial repayment of the related party
shareholder loan partially offset by capital expenditures of
$0.6 million.
Financing activities generated $1.9 million due to the
issuance of shares of $2.4 million partially offset by the
redemption of preferred shares combined with the dividends on
the preferred shares of $0.5 million.
Six Months Ended June 30, 2007 versus Six Months Ended
June 30, 2006.
At June 30, 2007, cash
and cash equivalents amounted to $38.9 million, an increase
of $21.7 million from December 31, 2006. At
June 30, 2006, cash and cash equivalents amounted to
$20.5 million, an increase of $1.2 million from
December 31, 2005.
During the six months ended June 30, 2007, operating
activities generated $18.5 million of cash during the
first six months of 2007, due to a reduction in
working capital of $11.4 million combined with the net
earnings of $7.0 million generated. This reduction in
working capital was the result of a significant increase in the
amount of syndicate payables in accounts payable and accrued
liabilities due to the growth in the number of investment
banking engagements in which Westwind was the lead and further
due to the increase in current income tax liability as a result
of the higher income. During the six months ended June 30,
2006, operating activities used $0.5 million. This use of
capital was the result of a buildup of working capital to
support the increased activity diminished by $4.0 million
of net income for the period.
76
Investing activities used $0.5 million of cash during the
period ended June 30, 2007 for the purchase of furniture
and fixtures, computer equipment and artwork. During the same
period in 2006, investing activities used $0.2 million for
the purchase of furniture, fixtures and equipment.
Financing activities provided $3.6 million of cash during
the six month period ended June 30, 2007 from the issuance
of common shares of $3.7 million diminished by
$0.1 million for the repurchase of common shares. During
the period ended June 30, 2006, financing activities
generated $1.9 million due to the issuance of common shares
of $2.3 million diminished by share repurchases and
redemptions of $0.4 million.
Related
Party Transaction
In 2004, Westwind lent $5.6 million to 1619372 Ontario
Inc., a company owned by four Westwind shareholders, to
partially fund 1619372 Ontario Inc.s purchase of
3,565,725 shares of Westwind from former shareholders.
Under the terms of the loan agreement, 1619372 Ontario Inc. is
obligated to pay, to Westwind, 100% of the proceeds received on
the resale of these shares to reduce the loan. As at the end of
December 31, 2006, the loan had been reduced by
$2.9 million to $2.7 million. As at June 30,
2007, the amount outstanding under this loan was
$2.6 million. The loan amount outstanding has been deducted
from shareholders equity. The related party loan has no
fixed repayment term and no interest obligation but it must be
repaid in the event of a take-over offer being made for all of
the outstanding shares of Westwind. Prior to the closing of
Westwinds acquisition by Thomas Weisel Partners, this
outstanding loan will be repaid or the two companies will be
amalgamated.
Critical
Accounting Policies and Estimates
The preparation of financial statements in conformity with
Canadian generally accepted accounting principles requires
management to make estimates and assumptions about future events
that affect the amounts reported in the consolidated financial
statements and the related notes. Actual results could differ
significantly from those estimates. Westwinds management
believes that the following discussion addresses Westwinds
most critical accounting policies, which are those that are most
important to the presentation of its financial condition and
results of operations and require managements most
difficult, subjective and complex judgments.
Fair
Value of Financial Instruments
Trading Securities and Securities sold
short in the consolidated balance sheets consist of
financial instruments carried at fair value or amounts that
approximate fair value, with related unrealized gains or losses
recognized in Westwinds results of operations. The use of
fair value to measure these financial instruments, with related
unrealized gains and losses recognized immediately in
Westwinds results of operations, is fundamental to
Westwinds consolidated financial statements and is one of
its most critical accounting policies. The fair value of a
financial instrument is the amount at which the instrument could
be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale.
Financial instruments Westwind owns (long positions) are marked
to bid prices and instruments it has sold but not yet purchased
(short positions) are marked to offer prices. If liquidating a
position is reasonably expected to affect its prevailing market
price, Westwinds valuation is adjusted generally based on
market evidence or predetermined policies. In certain
circumstances, such as for highly illiquid positions and for
shares restricted from trading due to hold periods required by
securities legislation, managements estimates are used to
determine this adjustment.
Allowance
for Doubtful Accounts
Investment banking fees and commission receivables include
corporate finance and syndicate receivables relating to its
investment banking or advisory engagements. Westwind generally
has a receivable due from clearing broker in connection with the
clearing of its brokerage transactions. Westwind is required to
indemnify the clearing broker for any losses as a result of a
customers nonperformance. In addition, Westwind records an
allowance for doubtful accounts on revenue receivables on a
specific identification basis. Management continually evaluates
Westwinds receivables for collectibility and possible
write-off by examining the facts and circumstances surrounding
each specific case where a loss is deemed a possibility.
77
Legal and
Other Contingent Liabilities
Westwind is not currently the subject of any material legal
claims. If a legal claim or threatened legal claim is received,
Westwinds management, after consultation with counsel and
consideration of facts currently known by management, would
record any estimated losses in accordance with Canadian
generally accepted accounting principles. The determination of
these reserve amounts would require significant judgment on the
part of management and the ultimate liability may be materially
different. In making these determinations, Westwind would
consider many factors, including, but not limited to, the loss
and damages sought by the plaintiff or claimant, the basis and
validity of the claim, the likelihood of successful defense
against the claim and the potential for, and magnitude of,
damages or settlements from such pending and potential
complaints, legal actions, arbitrations, investigations and
proceedings, and fines and penalties or orders from regulatory
agencies.
If a potential adverse contingency should become probable or
resolved for an amount in excess of the established reserves
during any period, the results of operations in that period and,
in some cases, succeeding periods could be materially adversely
affected.
Recently
Issued Accounting Pronouncements
In 2005, the Canadian Institute of Chartered Accountants, or
CICA, released three new accounting pronouncements related to
financial instruments and hedging. The new guidance consists of
three new Handbook Sections: CICA Handbook Section 3855,
Financial Instruments Recognition and
Measurement
, CICA Handbook Section 3865,
Hedges
and CICA Handbook Section 1530,
Comprehensive Income
. These new standards
became effective as of January 1, 2007. The adoption of
these new accounting standards did not have a material effect on
the consolidated financial statements of Westwind.
Financial
Instruments Recognition and Measurement
This section establishes standards for the recognition and
measurement of financial instruments including non-financial
derivatives. All financial instruments must be classified as one
of the following categories: held for trading, held to maturity,
loans and receivables and available for sale assets. The section
also provides guidance for recognition and timing of
transactions and related costs, impairments, interest income and
expense. The financial assets categorized as held for trading
are measured at fair value with unrealized gains and losses
recognized in net income. Available for sale financial assets
are measured at fair value with unrealized gains and losses
recognized in other comprehensive income. The financial assets
classified as loans and receivables and held to maturity are
measured at amortized cost.
Hedges
This standard sets out the criteria of when hedge accounting is
applied and how it is applied. It provides the option of
designating qualifying transactions as hedges for accounting
purposes. The qualifying hedging relationships include fair
value hedges, cash flow hedges and hedges of foreign currency
exposures of net investments in self-sustaining foreign
operations. The changes in the fair value of the hedging
derivatives will be recognized in net income or other
comprehensive income depending on the nature of the hedging
relationships. Any gains and losses resulting from any
ineffectiveness in hedging relationships are recognized in net
income immediately.
Comprehensive
Income
This section establishes standards for the reporting and
disclosure of other comprehensive income in a new category,
Accumulated Comprehensive Income, which will be added the
shareholders equity on the consolidated balance sheet.
Comprehensive income includes all changes in equity during the
period except those resulting from investments by shareholders
and distributions to shareholders. The major components included
in Accumulated Comprehensive Income will be unrealized gains and
losses on financial assets classified as available for sale and
unrealized foreign exchange gains and losses arising on
translation of the financial statements of self-sustaining
foreign operations. Westwind does not have any financial assets
classified as available for sale or any self-sustaining foreign
operations. As such, there are no items to be reported as Annual
Comprehensive Income.
78
In addition to the foregoing, other sections recently issued and
not yet adopted are described below:
Capital
Disclosures
The CICA issued a new accounting standard, Section 1535,
Capital Disclosures
, which requires the disclosure of
both qualitative and quantitative information that enables users
of financial statements to evaluate the entitys
objectives, policies and processes for managing capital. This
new standard will be effective for Westwind beginning
January 1, 2008.
Financial
Instruments
The CICA issued two new accounting standards, Section 3862,
Financial Instruments Disclosure
and
Section 3863,
Financial Instruments
Presentation
, which apply to interim and annual financial
statements relating to fiscal years beginning on or after
October 1, 2007. This new standard will be effective for
Westwind beginning January 1, 2008.
Off-Balance
Sheet Arrangements
Forward foreign exchange contracts are entered into primarily to
manage foreign exchange risk on pending securities settlements
in currencies other than the Canadian dollar. Forward foreign
exchange contracts are entered into primarily to manage foreign
exchange risk on pending securities settlements in currencies
other than the Canadian dollar. These derivatives have a nominal
fair value due to their short term to maturity, which is
typically three business days. At December 31, 2006, there
was outstanding one forward foreign exchange contract to sell
Australian $9.9 million and to buy $9.0 million
Canadian dollars on January 5, 2007. No other derivatives
entered into by Westwind were outstanding at June 30, 2007,
December 31, 2006 and 2005.
Quantitative
and Qualitative Disclosures About Market Risk
Westwinds principal business activities engender various
types of risks, including market, credit, foreign exchange and
commodity price risks. Westwind is also exposed to other risks
in the conduct of its business such as the effects of inflation.
Exposure to these risks could be material to the consolidated
financial statements of Westwind. Set forth below is a
discussion of some of these risks together with quantitative
information regarding the aggregate amount and value of
financial instruments that were held that remain outstanding, in
each case, as of December 31, 2006 and 2005. Due to the
nature of the business of Westwind, in particular the brokerage
business, the amount or value of financial instruments that are
held will fluctuate on a daily and
intra-day
basis and the
year-end
values and amounts presented below are not necessarily
indicative of the exposures to market risk and other risks that
may be experienced at various times throughout any given year.
Market
Risk
Market risk represents the risk of loss that may result from the
change in value of a financial instrument due to fluctuations in
its market price. Market risk may be heightened during times of
significant fluctuations in market activity or market prices, as
well as in times when market participants refrain from
transacting in typical quantities
and/or
at
typical bid-offer spreads. Westwinds exposure to market
risk is directly related to its role as a financial intermediary
in customer trading and to its investment and financing
activities. These activities include committing from time to
time to purchase large blocks of stock from publicly-traded
issuers or their significant shareholders. Westwind trades in
equity securities as an active participant in the listed equity
markets in Canada, the U.S. and United Kingdom and
typically maintains securities in inventory to facilitate
trading activities and customer order flow.
79
The following tables categorize fair value of market risk
sensitive financial instruments of Westwind by type of security
as of June 30, 2007 and December 31, 2006 and 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Equity securities long
|
|
$
|
14,263,943
|
|
|
$
|
8,520,037
|
|
|
$
|
967,251
|
|
Broker warrants
|
|
|
3,487,000
|
|
|
|
3,368,000
|
|
|
|
1,200,000
|
|
Underwriting commitment
|
|
|
10,875,000
|
|
|
|
10,160,550
|
|
|
|
8,550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,625,943
|
|
|
$
|
22,048,587
|
|
|
$
|
10,717,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities short
|
|
$
|
2,515,500
|
|
|
$
|
256,480
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westwind attempts to manage market risk through monitoring of
the companys trading associated with its brokerage
activities. In particular, Westwinds management monitors
transactions having a specific risk profile as well as overall
securities positions to help manage the companys overall
market risk. In reviewing these transactions and trading
positions, management and dedicated risk-management personnel
review and consider overall and sector-specific market
conditions. Westwinds accounting staff also monitors
trading positions and transactions to ensure that transactions
and positions are appropriately reflected on the companys
financial statements as well as the market risk reports that are
delivered to management.
Credit
Risk
Credit risk arises from potential non-performance by
counterparties, customers or equity security issuers. Westwind
places and executes customer orders. The orders are then settled
by an unrelated clearing organization that maintains custody of
customers securities and provides financing to customers.
The majority of Westwinds transactions are conducted
through its clearing organization. The clearing organization
also serves as the primary source of Westwinds short-term
financing (consisting of securities long/securities sold, not
yet purchased), which is collateralized by cash and securities
owned by Westwind and held on deposit by the clearing
organization. At June 30, 2007, December 31, 2006 and
2005, Westwind had on deposit, for this purpose with its
clearing organization, $3.9 million, $2.3 million and
$0.8 million, respectively. The securities owned by
Westwind may be pledged by the clearing broker in the course of
its clearing activities. At any time, amounts receivable from
the clearing organization represents amounts receivable in
connection with the trading of facilitation and proprietary
positions and the commissions earned from customer securities
transactions. As of June 30, 2007, December 31, 2006
and 2005, Westwind had cash on deposit with the clearing broker
of $350,000. Although the clearing organization represents
Westwinds primary source of credit risk, Westwind is
exposed to credit risk from other brokers, dealers and other
financial institutions with which it transacts business.
Westwind also has entered into indemnification agreements with
its clearing organization that expose Westwind to off-balance
sheet credit risk associated with its customers. Under these
agreements, Westwind may be required to purchase or sell
financial instruments at prevailing market prices in the event a
Westwind customer fails to settle a trade on its original terms
or in the event cash and securities in customer accounts are not
sufficient to fully cover customer obligations. If this were to
occur, Westwind would be obligated to settle the particular
transaction at prevailing (and potentially unfavorable) market
prices. Westwind attempts to mitigate this risk through its
customer selection process and through customer account
agreements whereby customers agree to comply with margin
requirements imposed by governmental and self-regulatory
organization regulations and clearing organization policies.
Commodity
Price Risk
As described above, Westwind provides financial services that
include investment banking to companies in the sectors of mining
and energy with over 77.8% of Westwinds investment banking
revenue derived from those sectors in 2006. A significant
decline in the price of metals, minerals, oil and natural gas in
the commodities market may adversely affect Westwinds
ability to successfully complete investment banking transactions
in those sectors or reduce the size of those transactions, and
accordingly the fees that Westwind generates from those
transactions.
80
Foreign
Currency Risk
Foreign exchange rate risk arises from the possibility that
changes in foreign exchange rates will affect the value of
assets and liabilities. When Westwind buys or sells a security
denominated in a currency other than Canadian dollars or buy or
sells where the agency commission paid is in a currency other
than Canadian dollars, exposure exists from a net open currency
position. Until the position is covered by selling or buying the
equivalent amount of the same currency, Westwind is exposed to
the risk that the exchange rate may move against it. Westwind
attempts to hedge some of the risk arising from foreign exchange
activities primarily through the use of forward contracts.
Forward foreign exchange contracts are entered into primarily to
manage foreign exchange risk on pending securities settlements
in currencies other than the Canadian dollar. These derivatives
have a nominal fair value due to their short term to maturity,
which is typically three business days.
Effect
of Inflation
Westwinds assets are primarily recorded at their current
market value and, to a large extent, are liquid in nature. The
rate of inflation affects Westwinds expenses, such as
employee compensation, office leasing costs, information
technology and communications charges which may not be readily
recoverable in the price of services offered by Westwind. In
addition, to the extent that inflation causes interest rates to
rise and has other adverse effects on the securities markets and
on the value of securities held in inventory, it may adversely
affect Westwinds financial position and results of
operations.
81
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of November 6, 2007
(unless otherwise indicated) certain information regarding the
beneficial ownership of Thomas Weisel Partners common stock. In
accordance with the rules of the SEC, beneficial
ownership includes voting or investment power with respect
to securities. Unless otherwise indicated, the address for each
person listed below is:
c/o Thomas
Weisel Partners Group, Inc., One Montgomery Street,
San Francisco, California 94104. To our knowledge, except
as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all
shares of common stock beneficially owned by them.
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|
|
|
|
|
|
|
|
|
|
Shares of Common Stock
|
|
|
|
Beneficially Owned(a)
|
|
Name of Beneficial Owner
|
|
Number
|
|
|
Percent
|
|
|
Directors and Named Executive Officers:
|
|
|
|
|
|
|
|
|
Thomas W. Weisel(b)
|
|
|
2,406,563
|
|
|
|
9.4
|
%
|
David A. Baylor(c)
|
|
|
192,276
|
|
|
|
|
*
|
William L. McLeod(d)
|
|
|
144,966
|
|
|
|
|
*
|
Paul C. Slivon(e)
|
|
|
433,200
|
|
|
|
1.7
|
%
|
Anthony V. Stais(f)
|
|
|
207,094
|
|
|
|
|
*
|
Matthew R. Barger(g)
|
|
|
31,641
|
|
|
|
|
*
|
Michael W. Brown(h)
|
|
|
13,410
|
|
|
|
|
*
|
B. Kipling Hagopian(i)
|
|
|
26,682
|
|
|
|
|
*
|
Timothy A. Koogle(j)
|
|
|
16,268
|
|
|
|
|
*
|
Michael G. McCaffery(k)
|
|
|
20,178
|
|
|
|
|
*
|
All Directors and Executive Officers as a Group
(13 persons)(l)
|
|
|
3,618,325
|
|
|
|
14.1
|
%
|
Significant Stockholders:
|
|
|
|
|
|
|
|
|
Nomura America Investment, Inc.(m)
|
|
|
1,332,640
|
|
|
|
5.1
|
%
|
|
|
|
*
|
|
Less than 1% of the outstanding shares of common stock.
|
|
(a)
|
|
For purposes of this table, beneficial ownership is
determined in accordance with
Rule 13d-3
under the Securities Exchange Act of 1934, as amended, pursuant
to which a person or group of persons is deemed to have
beneficial ownership of any shares of Thomas Weisel
Partners common stock that such person has the right to acquire
within 60 days of the date of determination.
|
|
|
|
In light of the nature of fully vested Restricted Stock Units
(RSUs) and fully vested options to acquire common
stock (Options), we have also included in this table
shares of common stock underlying fully vested but undelivered
RSUs and fully vested but unexercised Options. For purposes of
computing the percentage of outstanding shares of common stock
held by each person or group of persons named above, any shares
which such person or groups of persons has the right to acquire
within 60 days (as well as the shares of common stock
underlying fully vested but undelivered RSUs and fully vested
but unexercised Options) are deemed to be outstanding but are
not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
|
|
|
|
The shares of common stock underlying fully vested but not yet
delivered RSUs included in the table are as follows:
Mr. Hagopian 3,538, Mr. Koogle
3,538, Mr. McCaffery 3,538 and all
Directors and Executive Officers as a group 20,613.
|
|
|
|
The shares of common stock underlying fully vested but
unexercised Options included in the table are as follows:
Mr. Barger 11,641, Mr. Brown
11,641, Mr. Hagopian 12,730,
Mr. Koogle 12,730,
Mr. McCaffery 16,640 and all Directors and
Executive Officers as a group 65,382.
|
|
|
|
Each of the executive officers listed above or included in all
Directors and Executive Officers as a Group, other than Stephen
J. Buell and Mark P. Fisher, has entered into a pledge agreement
with us that will secure the liquidated damages provisions in
the partners equity agreement each of them entered into
with us at the time of
|
82
|
|
|
|
|
our initial public offering by a pledge of 50% of the shares of
our common stock owned by him (including through indirect
ownership and ownership through affiliated entities) at the time
of the completion of our initial public offering on
February 7, 2006. In addition, each of these executives has
agreed not to pledge shares of our common stock owned by them to
any party other than us (commonly referred to as a
negative pledge).
|
|
(b)
|
|
Mr. Weisels beneficial ownership includes
(i) 1,551,633 shares of common stock owned by him
directly (a portion of which are pledged to Thomas Weisel
Partners Group, Inc. as security for certain obligations to
Thomas Weisel Partners Group, Inc.),
(ii) 765,816 shares of common stock owned by Ross
Investments Inc., an entity wholly owned by him (a portion of
which are pledged to Thomas Weisel Partners Group, Inc. as
security for certain obligations to Thomas Weisel Partners
Group, Inc.) and (iii) 89,114 shares of common stock
as to which he disclaims beneficial ownership and which are
owned by his wife, as trustee for immediate family members of
Mr. Weisel. Adult children of Mr. Weisel own
422,515 shares, which shares are not reflected in the table
and as to which he disclaims beneficial ownership.
Mr. Weisel also holds 51,870 unvested RSUs, ownership of
which is not reflected in the table.
|
|
(c)
|
|
A portion of the shares of common stock held by Mr. Baylor
are pledged to Thomas Weisel Partners Group, Inc. as security
for certain obligations to Thomas Weisel Partners Group, Inc.
Mr. Baylor also holds 31,122 unvested RSUs, ownership of
which is not reflected in the table.
|
|
(d)
|
|
A portion of the shares of common stock held by Mr. McLeod
are pledged to Thomas Weisel Partners Group, Inc. as security
for certain obligations to Thomas Weisel Partners Group, Inc.
Mr. McLeod also holds 22,304 unvested RSUs, ownership of
which is not reflected in the table.
|
|
(e)
|
|
A portion of the shares of common stock held by Mr. Slivon
are pledged to Thomas Weisel Partners Group, Inc. as security
for certain obligations to Thomas Weisel Partners Group, Inc.
Mr. Slivon also holds 31,122 unvested RSUs, ownership of
which is not reflected in the table.
|
|
(f)
|
|
A portion of the shares of common stock held by Mr. Stais
are pledged to Thomas Weisel Partners Group, Inc. as security
for certain obligations to Thomas Weisel Partners Group, Inc.
Mr. Stais also holds 31,122 unvested RSUs, ownership of
which is not reflected in the table.
|
|
(g)
|
|
Mr. Bargers beneficial ownership includes 11,641
fully vested but unexercised Options.
|
|
(h)
|
|
Mr. Browns beneficial ownership includes 11,641 fully
vested but unexercised Options. Mr. Brown also holds 3,538
unvested RSUs, ownership of which is not reflected in the table.
|
|
(i)
|
|
Mr. Hagopians beneficial ownership includes
(i) 3,538 shares of common stock underlying fully
vested but not yet delivered RSUs, (ii) 12,730 fully vested
but unexercised Options and (iii) 10,414 shares of
common stock held by he and his wife as trustees of The Hagopian
Family Trust. Mr. Hagopian also holds 7,076 unvested RSUs
and 6,103 unvested Options, ownership of which is not reflected
in the table.
|
|
(j)
|
|
Mr. Koogles beneficial ownership includes
(i) 3,538 shares of common stock underlying fully
vested but not yet delivered RSUs and (ii) 12,730 fully
vested but unexercised Options. Mr. Koogle also holds 7,076
unvested RSUs and 6,103 unvested Options, ownership of which is
not reflected in the table.
|
|
(k)
|
|
Mr. McCafferys beneficial ownership includes
(i) 3,538 shares of common stock underlying fully
vested but not yet delivered RSUs and (ii) 16,640 fully
vested but unexercised Options. Mr. McCaffery also holds
7,076 unvested RSUs and 7,628 unvested Options, ownership of
which is not reflected in the table.
|
|
(l)
|
|
In the aggregate, Directors and Executive Officers as a group
also hold 300,074 unvested RSUs and 19,834 unvested Options,
ownership of which is not reflected in the table.
|
|
|
|
(m)
|
|
Includes up to 486,486 shares of common stock that may be
acquired by Nomura America Investment, Inc. pursuant to the
warrant issued to it in connection with our reorganization from
a limited liability company to a corporation, which became
exercisable immediately following the completion of our initial
public offering in February 2006. The address of Nomura America
Investment, Inc. is 2 World Financial Center, Building B, New
York, New York 10281. Information as to the beneficial ownership
by Nomura America Investment, Inc. is based on our stock
register as of November 6, 2007 and does not reflect
purchases or sales of publicly traded shares of our common stock
by Nomura America Investment, Inc.
|
83
Householding
of Special Meeting Materials
The SEC has adopted rules that permit companies and
intermediaries (such as banks and brokers) to satisfy the
delivery requirements for proxy statements with respect to two
or more stockholders sharing the same address by delivering a
single proxy statement addressed to those stockholders. This
practice, known as householding, is designed to
reduce the volume of duplicate information and reduce printing
and postage costs. If you and others who share your mailing
address own Thomas Weisel Partners common stock in street name,
meaning through bank or brokerage accounts, you may have
received a notice that your household will receive only one
proxy statement from each company whose stock is held in such
accounts. Unless you responded that you did not want to
participate in householding, you were deemed to have consented
to it and a single copy of our proxy statement has been sent to
your address.
We will promptly deliver separate copies of this proxy statement
at the request of any stockholder who is in a household that
participates in the householding of our proxy materials. You may
send your request by mail to our General Counsels office
at Thomas Weisel Partners Group, Inc., One Montgomery Street,
San Francisco, CA 94104 or by telephone at
(415) 364-2500.
Shareholder
Proposals for 2008 Annual Meeting of Shareholders
Shareholders who, in accordance with the SECs
Rule 14a-8,
wish to present proposals for inclusion in the proxy materials
to be distributed by us in connection with our 2008 Annual
Meeting of Shareholders must submit their proposals to our
Secretary on or before December 20, 2007. As the rules of
the SEC make clear, simply submitting a proposal does not
guarantee its inclusion.
In accordance with Section 1.11(b) of our By-Laws, for a
matter not included in our proxy materials to be properly
brought before the 2008 Annual Meeting of Shareholders, a
shareholders notice of the matter the shareholder wishes
to present must be delivered to our Secretary &
General Counsel at One Montgomery Street, 37th Floor,
San Francisco, California 94104 as follows:
(i) If the 2008 Annual Meeting is scheduled to take place
within 30 days before or after the first anniversary date
of the 2007 Annual Meeting, such notice shall be delivered not
less than 90 days nor more than 120 days prior to the
first anniversary date of the 2007 Annual Meeting;
(ii) If, and only if, the 2008 Annual Meeting is not
scheduled to take place within 30 days before or after the
first anniversary date of the 2007 Annual Meeting, such notice
shall be delivered before the close of business on the later of
(a) the date ninety days prior to the date of the 2008
Annual Meeting or (b) the tenth day following the date on
which the date for the 2008 Annual Meeting is first publicly
announced or disclosed.
Assuming that the 2008 Annual Meeting occurs within 30 days
before or after the first anniversary date of the 2007 Annual
Meeting, any such notice given by or on behalf of a shareholder
pursuant to these provisions of our By-Laws (and not pursuant to
SECs
Rule 14a-8)
must be received no earlier than January 24, 2008 and no
later than February 23, 2008.
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
document we file at the SECs public reference room located
at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our SEC
filings are also available to the public at the SECs
website at
http://www.sec.gov.
You also may obtain free copies of the documents we file with
the SEC by going to our website at www.tweisel.com. Our website
address is provided as an inactive textual reference only. The
information provided on our website is not part of this proxy
statement, and therefore is not incorporated by reference.
The SEC allows us to incorporate by reference into this proxy
statement documents that we file with the SEC. This means that
we can disclose important information to you by referring you to
those documents.
84
The information filed by us and incorporated by reference is
considered to be a part of this proxy statement, and later
information that we file with the SEC will update and supersede
that information. Statements contained in this proxy statement,
or in any document incorporated by reference, regarding the
contents of any contract or other document are not necessarily
complete and each such statement is qualified in its entirety by
reference to such contract or other document filed as an exhibit
with the SEC. We incorporate by reference into this proxy
statement the following documents filed with the SEC:
|
|
|
|
|
Our Annual Report on
Form 10-K
for 2006;
|
|
|
|
Our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007;
|
|
|
|
Our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2007;
|
|
|
|
|
|
Our Current Report on
Form 8-K
filed on February 6, 2007;
|
|
|
|
|
|
Our Current Report on
Form 8-K
filed on February 14, 2007 (other than the information
furnished under Item 2.02 and Exhibit 99.1 thereto);
|
|
|
|
|
|
Our Current Report on
Form 8-K
filed on February 26, 2007 (other than the information
furnished under Item 7.01 thereto);
|
|
|
|
|
|
Our Current Report on
Form 8-K
filed on May 7, 2007 (other than the information furnished
under Item 7.01 thereto);
|
|
|
|
Our Current Report on
Form 8-K
filed on May 15, 2007 (other than the information furnished
in Exhibit 99.1 thereto);
|
|
|
|
Our Current Report on
Form 8-K
filed on July 31, 2007 (other than the information
furnished under Item 2.02 and Exhibit 99.1 thereto);
|
|
|
|
Our Current Report on
Form 8-K
filed on October 1, 2007 (other than the information
furnished under Item 7.01 thereto); and
|
any other document we file with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, after the date of this proxy
statement but prior to the date on which the special meeting is
held.
Any person, including any beneficial owner, to whom this proxy
statement is delivered may request copies of proxy statements or
other information concerning us, without charge, by written or
telephonic request directed to our Shareholder Services
Department at
(415) 364-2500
or by mail to Thomas Weisel Partners Group, Inc., One Montgomery
Street, San Francisco, CA 94104, Attention: General
Counsel. We will provide, without charge, to each person to whom
a proxy statement is delivered, upon written or oral request of
such person and by first class mail or other equally prompt
means, within one business day of receipt of such request, a
copy of any and all of the information that has been
incorporated by reference in this proxy statement (not including
exhibits to the information that is incorporated by reference
unless such exhibits are specifically incorporated by reference
into the information that this proxy statement incorporates).
85
Annex
A
ARRANGEMENT
AGREEMENT
dated as of September 30, 2007
by and among
THOMAS WEISEL PARTNERS GROUP, INC.,
TWP ACQUISITION COMPANY (CANADA), INC.,
WESTWIND CAPITAL CORPORATION,
and
LIONEL CONACHER, as SHAREHOLDERS REPRESENTATIVE
A-1
|
|
|
|
|
|
|
ARTICLE I
|
|
DEFINITIONS
|
|
|
A-5
|
|
1.1
|
|
Specific Definitions
|
|
|
A-5
|
|
1.2
|
|
Other Terms
|
|
|
A-5
|
|
|
|
|
|
|
|
|
ARTICLE II
|
|
THE TRANSACTIONS
|
|
|
A-6
|
|
2.1
|
|
The Arrangement
|
|
|
A-6
|
|
2.2
|
|
Implementation Steps by the Company
|
|
|
A-6
|
|
2.3
|
|
Implementation Steps by the Parent and Canadian Sub
|
|
|
A-6
|
|
2.4
|
|
Interim Order
|
|
|
A-7
|
|
2.5
|
|
Articles of Arrangement, Closing Date and Closing
|
|
|
A-8
|
|
2.6
|
|
Securities and Corporate Compliance
|
|
|
A-8
|
|
|
|
|
|
|
|
|
ARTICLE III
|
|
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
|
|
A-9
|
|
3.1
|
|
Organization, Good Standing and Qualification
|
|
|
A-9
|
|
3.2
|
|
Capital Structure
|
|
|
A-9
|
|
3.3
|
|
Corporate Authority; Approval and Fairness
|
|
|
A-10
|
|
3.4
|
|
Governmental Filings; No Violations; Certain Contracts, Etc
|
|
|
A-10
|
|
3.5
|
|
Financial Statements; Certain Debt; Books and Records
|
|
|
A-11
|
|
3.6
|
|
Undisclosed Liabilities, Etc
|
|
|
A-11
|
|
3.7
|
|
Absence of Certain Changes
|
|
|
A-11
|
|
3.8
|
|
Taxes
|
|
|
A-12
|
|
3.9
|
|
Permits; Registrations
|
|
|
A-13
|
|
3.10
|
|
Compliance with Laws
|
|
|
A-13
|
|
3.11
|
|
Real Property
|
|
|
A-13
|
|
3.12
|
|
Intellectual Property
|
|
|
A-13
|
|
3.13
|
|
Contracts
|
|
|
A-14
|
|
3.14
|
|
Litigation
|
|
|
A-14
|
|
3.15
|
|
Employee Benefit Plans
|
|
|
A-14
|
|
3.16
|
|
Labor and Employment Matters
|
|
|
A-15
|
|
3.17
|
|
Environmental Matters
|
|
|
A-15
|
|
3.18
|
|
Insurance
|
|
|
A-16
|
|
3.19
|
|
Certain Payments
|
|
|
A-16
|
|
3.20
|
|
Related Party Transactions
|
|
|
A-16
|
|
3.21
|
|
Brokers and Finders
|
|
|
A-16
|
|
3.22
|
|
Disclaimer
|
|
|
A-16
|
|
|
|
|
|
|
|
|
ARTICLE IV
|
|
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND CANADIAN SUB
|
|
|
A-16
|
|
4.1
|
|
Organization, Good Standing and Qualification
|
|
|
A-16
|
|
4.2
|
|
Corporate Authority
|
|
|
A-17
|
|
4.3
|
|
Capitalization
|
|
|
A-17
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|
4.4
|
|
Capital Structure of Canadian Sub
|
|
|
A-17
|
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4.5
|
|
Governmental Filings; No Violations; Certain Contracts, Etc
|
|
|
A-17
|
|
4.6
|
|
Parent Reports; Financial Statements
|
|
|
A-18
|
|
4.7
|
|
Financial Ability
|
|
|
A-19
|
|
4.8
|
|
Litigation
|
|
|
A-19
|
|
A-2
|
|
|
|
|
|
|
ARTICLE V
|
|
COVENANTS OF THE COMPANY
|
|
|
A-19
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5.1
|
|
Interim Operations
|
|
|
A-19
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5.2
|
|
Acquisition Proposals
|
|
|
A-21
|
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5.3
|
|
Access and Reports
|
|
|
A-22
|
|
|
|
|
|
|
|
|
ARTICLE VI
|
|
OTHER COVENANTS
|
|
|
A-22
|
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6.1
|
|
Filings; Other Actions; Notification
|
|
|
A-22
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6.2
|
|
Publicity
|
|
|
A-23
|
|
6.3
|
|
Social and Employee-Related Plans
|
|
|
A-23
|
|
6.4
|
|
Parent Arrangement Shares for Exchange
|
|
|
A-23
|
|
6.5
|
|
Proxy Statement Filing, etc
|
|
|
A-23
|
|
6.6
|
|
Parent Meeting
|
|
|
A-23
|
|
6.7
|
|
Further Assurances
|
|
|
A-23
|
|
6.8
|
|
Expenses
|
|
|
A-24
|
|
6.9
|
|
Additional Covenants of Parent and Canadian Sub
|
|
|
A-24
|
|
6.10
|
|
Cooperation
|
|
|
A-25
|
|
6.11
|
|
Update to Shareholder List
|
|
|
A-25
|
|
6.12
|
|
Tax Election
|
|
|
A-25
|
|
6.13
|
|
Equity and Pledge Agreements
|
|
|
A-26
|
|
|
|
|
|
|
|
|
ARTICLE VII
|
|
CONDITIONS TO CLOSING
|
|
|
A-26
|
|
7.1
|
|
Conditions to Each Partys Obligation to Effect the
Arrangement
|
|
|
A-26
|
|
7.2
|
|
Conditions to Obligations of Parent and Canadian Sub
|
|
|
A-27
|
|
7.3
|
|
Conditions to Obligation of the Company
|
|
|
A-28
|
|
|
|
|
|
|
|
|
ARTICLE VIII
|
|
TERMINATION
|
|
|
A-28
|
|
8.1
|
|
Termination by Mutual Consent
|
|
|
A-28
|
|
8.2
|
|
Termination by Either the Parent or the Company
|
|
|
A-29
|
|
8.3
|
|
Termination by the Company
|
|
|
A-29
|
|
8.4
|
|
Termination by the Parent
|
|
|
A-29
|
|
8.5
|
|
Effect of Termination and Abandonment
|
|
|
A-29
|
|
|
|
|
|
|
|
|
ARTICLE IX
|
|
INDEMNIFICATION; SHAREHOLDERS REPRESENTATIVE
|
|
|
A-29
|
|
9.1
|
|
Survival
|
|
|
A-29
|
|
9.2
|
|
Indemnification by the Shareholders
|
|
|
A-30
|
|
9.3
|
|
Indemnification by the Parent
|
|
|
A-30
|
|
9.4
|
|
Monetary Limits on Indemnification
|
|
|
A-31
|
|
9.5
|
|
Exclusivity
|
|
|
A-32
|
|
9.6
|
|
Procedure Related to Direct Claim
|
|
|
A-32
|
|
9.7
|
|
Procedures Related to Third Party Claim
|
|
|
A-33
|
|
9.8
|
|
Insurance; Tax Benefits
|
|
|
A-33
|
|
9.9
|
|
Shareholders Representative
|
|
|
A-34
|
|
9.10
|
|
Adjustment to Arrangement Consideration
|
|
|
A-35
|
|
|
|
|
|
|
|
|
ARTICLE X
|
|
RESERVED
|
|
|
A-35
|
|
A-3
|
|
|
|
|
|
|
ARTICLE XI
|
|
MISCELLANEOUS
|
|
|
A-35
|
|
11.1
|
|
Notices
|
|
|
A-35
|
|
11.2
|
|
Amendments and Waivers
|
|
|
A-36
|
|
11.3
|
|
Successors and Assigns
|
|
|
A-36
|
|
11.4
|
|
Governing Law
|
|
|
A-36
|
|
11.5
|
|
Consent to Jurisdiction
|
|
|
A-36
|
|
11.6
|
|
Counterparts
|
|
|
A-36
|
|
11.7
|
|
No Third Party Beneficiaries
|
|
|
A-36
|
|
11.8
|
|
Entire Agreement
|
|
|
A-36
|
|
11.9
|
|
Captions
|
|
|
A-36
|
|
11.10
|
|
Severability
|
|
|
A-37
|
|
11.11
|
|
Construction
|
|
|
A-37
|
|
11.12
|
|
Interpretation
|
|
|
A-37
|
|
11.13
|
|
Time of Essence
|
|
|
A-37
|
|
11.14
|
|
Expenses
|
|
|
A-37
|
|
|
|
|
|
|
|
SCHEDULE I-A
|
|
|
Shareholders Party to Voting Agreement
|
|
SCHEDULE I-B
|
|
|
Parent Stockholders Party to Voting Commitments
|
|
SCHEDULE II
|
|
|
Required Company Information
|
|
EXHIBIT A
|
|
|
Defined Terms
|
|
EXHIBIT B
|
|
|
Plan of Arrangement
|
|
EXHIBIT C
|
|
|
Social and Employee-Related Plans
|
|
EXHIBIT D
|
|
|
Arrangement Resolution
|
|
EXHIBIT E-1
|
|
|
Form of Legal Opinion(s) of Company Counsel
|
|
EXHIBIT E-2
|
|
|
Form of Legal Opinion of Sullivan & Cromwell LLP
|
|
EXHIBIT E-3
|
|
|
Form of Legal Opinion(s) of Stikeman Elliott LLP and Additional
Parent Canadian Counsel
|
|
EXHIBIT F
|
|
|
Form of Company Voting Agreement
|
|
EXHIBIT G
|
|
|
Form of Voting Commitment
|
|
EXHIBIT H
|
|
|
Form of Equity Agreement
|
|
EXHIBIT I
|
|
|
Form of Pledge Agreement
|
|
EXHIBIT J
|
|
|
Form of Certificate of Designations
|
|
EXHIBIT K
|
|
|
Form of Voting and Exchange Trust Agreement
|
|
EXHIBIT L
|
|
|
Form of Exchangeable Share Support Agreement
|
Company Disclosure Letter
|
A-4
ARRANGEMENT
AGREEMENT
THIS ARRANGEMENT AGREEMENT (this
Agreement
),
dated as of September 30, 2007, by and among Thomas Weisel
Partners Group, Inc., a Delaware corporation (the
Parent
), TWP Acquisition Company (Canada),
Inc., a corporation organized under the Ontario Business
Corporations Act and a wholly-owned subsidiary of the Parent
(the
Canadian Sub
), Westwind Capital
Corporation, a corporation organized under the Ontario Business
Corporations Act (the
Company
), and Lionel
Conacher, as Shareholders Representative.
RECITALS
WHEREAS, the board of directors of the Company (the
Company Board
) (i) deems it in the best
interests of the Company and its Shareholders for the Company to
effect the transactions provided for herein, including the
Arrangement pursuant to which Canadian Sub will acquire all of
the outstanding Company Common Shares and Company Class A
Common Shares in exchange for aggregate consideration comprised
of the Cash Payment and Consideration Shares (together, the
Arrangement Consideration
) pursuant to the
Plan of Arrangement described herein, and (ii) has resolved
to recommend that the Shareholders approve the Arrangement
Resolution.
WHEREAS, the board of directors of the Parent (i) deems it
advisable and in the best interests of Parent and its
stockholders to effect, and to cause Canadian Sub to effect, the
transactions provided for herein, and (ii) has resolved to
recommend that the stockholders of the Parent vote in favor of
the issuance of the Parent Arrangement Shares.
WHEREAS, as a condition and inducement to the Parent and
Canadian Sub entering into this Agreement and incurring the
obligations set forth herein, concurrently with the execution
and delivery of this Agreement, the Parent and Canadian Sub are
entering into the Voting Agreement with the Shareholders listed
on
Schedule I-A
hereto pursuant to which, among other things, such Shareholders
holding Company Common Shares and Company Class A Common
Shares constituting the Requisite Company Vote, have agreed,
subject to and in accordance with the terms thereof, to vote all
Company Common Shares and Company Class A Common Shares
owned by such Shareholders in favor of the approval of the
Arrangement Resolution.
WHEREAS, as a condition and inducement to the Parent and
Canadian Sub entering into this Agreement and incurring the
obligations set forth herein, concurrently with the execution
and delivery of this Agreement, the Shareholders listed on
Schedule I-A
are entering into the Equity Agreement and the Pledge Agreements
with the Parent.
WHEREAS, as a condition and inducement to the Company entering
into this Agreement and performing the obligations set forth
herein, prior to or concurrently with the execution and delivery
of this Agreement, each of the Parent stockholders identified in
Schedule I-B
has entered into a voting commitment (the
Voting
Commitment
) in the form attached hereto as
Exhibit G.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1
Specific
Definitions
.
For purposes of this Agreement,
the terms defined in
Exhibit A
have the meanings
specified or referred to therein.
1.2
Other Terms
.
Other terms
defined elsewhere in the text of this Agreement shall, unless
otherwise indicated, have the meaning indicated throughout this
Agreement.
A-5
ARTICLE II
THE TRANSACTIONS
2.1
The Arrangement
.
The
Arrangement shall become effective on the Closing Date and the
steps to be carried out pursuant to the Arrangement shall become
effective on the Closing in the order set out in the Plan of
Arrangement in substantially the form set forth in
Exhibit B
to this Agreement.
2.2
Implementation Steps by the
Company
.
The Company shall:
(a) subject to the terms of this Agreement, as soon as
reasonably practicable, apply in a manner (including as to form,
content and procedure) reasonably acceptable to the Parent under
Section 182 of the OBCA for the Interim Order and
thereafter use its reasonable best efforts to obtain the Interim
Order as promptly as practicable;
(b) use its reasonable best efforts to convene and hold the
Company Meeting, in accordance with the Interim Order, as
promptly as practicable for the purpose of considering the
Arrangement Resolution, and to distribute a written summary of
this Agreement prepared by the Company in form and substance
reasonably satisfactory to the Parent for consideration by the
Shareholders in connection therewith;
(c) except as required to convene a quorum or otherwise as
permitted under this Agreement, not adjourn (except as required
by Law), postpone or cancel (or propose or permit the
adjournment, postponement or cancellation of) the Company
Meeting without the Parents consent (not to be
unreasonably withheld or delayed);
(d) through the Company Board, recommend that Shareholders
approve the Arrangement Resolution and use commercially
reasonable efforts to solicit approval of the Arrangement
Resolution from Shareholders representing the Requisite Company
Vote;
(e) provide notice to the Parent of the Company Meeting and
allow Representatives of the Parent to attend the Company
Meeting;
(f) provide notice of the application for the Interim Order
and Final Order to the Director;
(g) subject to obtaining the approvals as required by the
Interim Order, as promptly as practicable after the Company
Meeting, apply in a manner (including as to form, content and
procedure) reasonably acceptable to the Parent, to the Court
under Section 182 of the OBCA for the Final Order and
thereafter use its reasonable best efforts to obtain the Final
Order;
(h) subject to obtaining the Final Order and the
satisfaction or waiver of the conditions to Closing set forth in
Article VII
hereto, on the date contemplated in
Section 2.5(b)
or as soon thereafter as reasonably
practicable, send to the Director for endorsement and filing by
the Director, the Articles of Arrangement and such other
documents as may be required in connection therewith under the
OBCA to give effect to the Arrangement; and
(i) without limiting the foregoing, (i) provide the
Parent with all drafts, copies of the final versions of and a
reasonable opportunity to review and comment on all
applications, filings, motions and other documents prepared by
or on behalf of the Company in connection with the approval of
the Arrangement by the Court and the approval of the Arrangement
Resolution by the Shareholders, (ii) consider in a
reasonable manner all of the comments on, or proposed changes
to, such documents received from, or on behalf of, the Parent,
and (iii) make such changes to such documents as are
reasonably acceptable to the Company.
2.3
Implementation Steps by the Parent and
Canadian Sub
.
The Parent and Canadian Sub
shall:
(a) subject to the terms of this Agreement, as soon as
reasonably practicable following receipt of the Required Company
Information, prepare and file with the SEC the Proxy Statement
pursuant to
Section 6.5
;
(b) subject to the terms of this Agreement, as soon as
reasonably practicable following the filing and mailing of the
Proxy Statement, convene and hold the Parent Meeting for the
purpose of considering and approving the issuance of the Parent
Arrangement Shares pursuant to this Agreement and the Plan of
Arrangement, and advise the Company from time to time as the
Company reasonably requests as to the aggregate tally of the
proxies received by the Parent in respect of the Parent Meeting;
A-6
(c) except as required to convene a quorum or otherwise as
permitted under this Agreement, not adjourn (except as required
by Law), postpone or cancel (or propose or permit the
adjournment, postponement or cancellation of) the Parent Meeting
without the Companys consent (not to be unreasonably
withheld);
(d) through the board of directors of the Parent, recommend
that the stockholders of Parent vote in favor of the issuance of
the Parent Arrangement Shares;
(e) the Parent shall amend the articles of Canadian Sub to
create the Exchangeable Shares prior to the Effective Time in a
manner consistent with the Canadian Sub share provisions in
substantially the form attached as
Annex A
to the
Plan of Arrangement;
(f) subject to obtaining the Final Order and the
satisfaction or waiver of the other conditions herein contained
in favor of each party, on the Closing Date, the Parent shall:
(1) file the Certificate of Designations, substantially in
the form set forth in
Exhibit J
hereto, with the
Secretary of State of the State of Delaware;
(2) execute and deliver and cause CallRightCo and Canadian
Sub to execute and deliver, the Exchangeable Share Support
Agreement and the Voting and Exchange
Trust Agreement; and
(3) create (including if necessary by amending the
Parents certificate of incorporation) and issue to the
Trustee the Voting Share;
(g) include disclosure in the Proxy Statement to be
delivered to Parents stockholders in connection with the
Parent Meeting, describing that certain stockholders (being the
stockholders listed on
Schedule I-B
),
including all members of the Parents Executive Committee,
have entered into the Voting Commitment;
(h) prepare and file with all applicable securities
commissions or similar securities regulatory authorities of
Canada in consultation with the Company all necessary
applications to seek exemptions from the prospectus,
registration and other requirements of the applicable securities
Laws of all relevant provinces in Canada, for the issuance and
resale of Parent Common Stock (including Parent Common Stock
issued upon the exchange of Exchangeable Shares) and
Exchangeable Shares by the Shareholders on or after the Closing
Date, without qualification with or approval of or the filing of
any document, including any prospectus or similar document, or
the taking of any proceeding with, or the obtaining of any
further order, ruling or consent from, any Governmental Entity
or pursuant to the fulfillment of any other legal requirement in
any such jurisdiction (other than with respect to such first
resale, any restrictions on transfer by reason of a holder being
a control person of the Parent or Canadian Sub for
purposes of Canadian securities Laws);
(i) carry out the terms of the Interim Order, as promptly
as practicable and as required under the terms thereof to be
carried out by the Parent or Canadian Sub;
(j) authorize and reserve for issuance shares of Parent
Common Stock and Exchangeable Shares to be issued in the
Arrangement and a sufficient number of shares of Parent Common
Stock so that the retraction and exchange rights attached to the
Exchangeable Shares may be honored;
(k) take all such steps and do all such acts and things,
including without limitation, making or causing to be made the
Cash Payment and issuing Exchangeable Shares and Parent Common
Stock, as are specified in the Plan of Arrangement and the Final
Order to be taken or done by the Parent or Canadian Sub; and
(l) without limiting the foregoing, (i) provide the
Company with all drafts, copies of the final versions of and a
reasonable opportunity to review and comment on all
applications, filings, motions and other documents prepared by
or on behalf of the Parent in connection with the Parent Meeting
and the Proxy Statement, (ii) consider in good faith all of
the comments on, or proposed changes to, such documents received
from, or on behalf of, the Company, and (iii) make such
changes to such documents as are reasonably acceptable to the
Parent.
2.4
Interim Order
.
The
application referred to in
Section 2.2(a)
shall
request that the Interim Order provide:
(a) for each class of Persons to whom notice is to be
provided in respect of the Arrangement and the Company Meeting
and for the manner in which such notice is to be provided;
A-7
(b) that, subject to the approval of the Court, the
requisite approval for the Arrangement Resolution shall be not
less than 67% of the votes cast on the Arrangement Resolution by
the Shareholders present in person or by proxy at the Company
Meeting, voting together as a single class, each Company Common
Share entitling the holder thereof to one vote on the
Arrangement Resolution and each Company Class A Common
Share entitling the holder thereof to ten votes on the
Arrangement Resolution (the
Requisite Company
Vote
);
(c) that, in all other respects, the terms, restrictions
and conditions of the Organizational Documents of the Company
each as in effect as of the date of this Agreement, including
quorum requirements and all other matters, shall apply in
respect of the Company Meeting;
(d) for the notice requirements with respect to the
application to the Court for the Final Order;
(e) that following Closing, the Shareholders shall be bound
by, and through the Shareholders Representative entitled
to exercise the rights and remedies in respect of, the
representations, warranties and covenants in this Agreement, and
under and to the extent provided in the indemnification
provisions set forth in
Article IX
of this
Agreement; and
(f) confirmation that dissent rights shall not be
applicable to the Arrangement because of Section 6.6(a) of
the unanimous shareholders agreement dated June 10,
2004 in respect of the Company, as amended pursuant to an
amendment dated May 30, 2005 (the
Shareholders Agreement
) and that such
agreement and all rights and obligations thereunder shall
terminate at the Closing.
2.5
Articles of Arrangement, Closing Date and
Closing
.
(a) The Articles of Arrangement shall implement the Plan of
Arrangement, and shall, with such other matters as are necessary
to effect the Arrangement, and all subject to the provisions of
the Plan of Arrangement, provide as follows:
(1) the authorized share capital of Canadian Sub shall be
increased or modified by the creation of an unlimited number of
Exchangeable Shares having the rights, privileges, restrictions
and conditions described in the Plan of Arrangement;
(2) each Shareholder shall be entitled to receive the
consideration set out in the Plan of Arrangement for each
Company Share held by it, on the terms and subject to the
limitations and conditions set out in the Plan of
Arrangement; and
(3) Canadian Sub shall become the holder of all of the
issued and outstanding Company Shares on the Closing Date.
(b) On the second Business Day after the satisfaction or
waiver (subject to applicable Laws) of the last condition to be
satisfied or waived (the
Closing Date
)
(excluding conditions that, by their terms, cannot be satisfied
until the Closing Date, but subject to the satisfaction or,
where permitted, waiver of those conditions as of the Closing
Date) set forth in
Article VII
, unless another time
or date is agreed to in writing by the Parent and the Company,
each acting reasonably, the Articles of Arrangement (in form and
substance reasonably satisfactory to the Parent) shall be filed
by the Company with the Director. From and after the Closing,
the Plan of Arrangement will have all of the effects provided by
applicable Laws, including the OBCA. The closing of the
Transactions (the
Closing
) will take place at
the offices of Sullivan & Cromwell LLP located at 125
Broad Street, New York, NY 10004, on the Closing Date, or at
such other location as may be agreed upon by the Parent and the
Company.
2.6
Securities and Corporate Compliance
.
(a) Each of the Parent and Canadian Sub, on the one hand,
and the Company, on the other hand, shall furnish to the other
all such information concerning it, its respective Affiliates
and its respective shareholders as may be reasonably required to
effect the actions described in
Section 2.2
,
Section 2.3
,
Section 2.5
and this
Section 2.6
, and each covenants and represents to
the other, as to itself and its Subsidiaries, that no
information furnished by it or its Subsidiaries that is included
or incorporated by reference in (i) the Proxy Statement,
(ii) the applications for the Interim Order and the Final
Order or (iii) the other documents distributed to the
Shareholders in connection with the Company Meeting will, at the
date of mailing or filing thereof and, in respect of the Proxy
Statement, at the time of the Parent Meeting, contain any untrue
statement of a material fact or omit to state a material fact
required to be
A-8
stated in any such document or necessary in order to make any
information so furnished for use in any such document not
misleading in the light of the circumstances in which it is
furnished or to be used.
(b) Each of the Parent and Canadian Sub, on the one hand,
and the Company, on the other hand, shall promptly notify the
other if at any time before the Closing it becomes aware that
any application for an order described in
Section 2.2
,
Section 2.3
,
Section 2.5
and this
Section 2.6
does
not conform to the requirements of
Section 2.6(a)
,
or otherwise requires an amendment or supplement to such
application. In any such event, the Parent, Canadian Sub and the
Company shall cooperate in the preparation of a supplement or
amendment to such document, as required and as the case may be,
and, if required by applicable Law or the Court, shall cause the
same to be distributed to the Shareholders and filed with the
relevant securities regulatory authorities of the other
provinces and territories of Canada.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or subsections
of the disclosure letter delivered to the Parent by the Company
concurrently with the entering into of this Agreement (the
Company Disclosure Letter
) or to the extent
that the qualifying nature of such disclosure with respect to
such section or subsection is reasonably apparent from the
disclosure in any other section or subsection of the Company
Disclosure Letter, the Company hereby represents and warrants to
the Parent and Canadian Sub that:
3.1
Organization, Good Standing and
Qualification
.
Each of the Company and its
Subsidiaries is a legal entity duly organized, validly existing
and in good standing under the Laws (as defined in
Section 3.10
) of its respective jurisdiction of
organization and has all requisite corporate power and authority
to own, lease and operate its properties and assets and to carry
on its business as presently conducted and is qualified to do
business and is in good standing in each jurisdiction where the
ownership, leasing or operation of its assets or properties or
conduct of its business requires such qualification, except
where the failure to be so qualified or in good standing would
not be expected to have a Company Material Adverse Effect. The
Company has made available to the Parent complete and correct
copies of the Organizational Documents of the Company and each
of its Subsidiaries, each as amended as of the date of this
Agreement.
3.2
Capital Structure
.
(a) The authorized share capital of the Company consists of
(i) an unlimited number of common shares of which
9,825,678 shares are outstanding as of the date hereof (the
Company Common Shares
), (ii) 750,000
Class A Common Shares of which 750,000 shares are
outstanding as of the date hereof (the
Company
Class A Common Shares
), (iii) an unlimited
number of Class A Preference Shares, none of which are
outstanding as of the date hereof and (iv) an unlimited
number of Class B Preference Shares, none of which are
outstanding as of the date hereof (collectively, the
Company Shares
). All of the Company Shares
have been duly authorized and are validly issued, fully paid and
nonassessable. The Company has no shares reserved for issuance.
The Company is not a reporting issuer (as such term is defined
under the Securities Act (Ontario)) and there is no published
market for the Company Shares.
(b) The Company has, concurrently with the execution and
delivery of this Agreement, delivered to the Parent a true and
complete list (the
Shareholder List
) of the
Shareholders on the date hereof, showing with respect to each
such Shareholder (i) the number of Company Common Shares
and Company Class A Common Shares owned beneficially and of
record by such Shareholder, (ii) the number and class of
any restricted shares held by such Shareholder that remain
subject to repurchase, redemption or call or a vesting period
following the Closing and a description of such repurchase,
redemption or call rights or vesting period, and (iii) an
estimate of the portion of the Arrangement Consideration to
which such Shareholder would be entitled in connection with the
Arrangement based on information reasonably available to the
Company and the agreed assumptions and allocations set forth in
such schedule. No shareholder or former shareholder of the
Company or any other Person is or could be entitled to
additional payments under the Shareholders Agreement in
connection with the Transactions, including pursuant to
Sections 3.9(d) and 6.6(b) thereof, other than, in the case
of Shareholders, their portion of the Arrangement Consideration
hereunder.
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(c) Each outstanding share of each of the Companys
Subsidiaries has been duly authorized and validly issued and is
fully paid and nonassessable and owned by the Company directly
or indirectly, free and clear of any lien, charge, pledge,
security interest, claim or other encumbrance (a
Lien
). There are no preemptive or other
outstanding options, warrants, agreements, commitments or rights
of any kind that obligate the Company or any of its Subsidiaries
to issue or sell any shares of Capital Stock of the Company or
any of its Subsidiaries or any securities or obligations
convertible or exchangeable into or exercisable for, or giving
any Person a right to subscribe for or acquire, any securities
of the Company or any of its Subsidiaries, and no securities or
obligations evidencing such rights are authorized, issued or
outstanding. The Company does not have outstanding any bonds,
debentures, notes or other obligations granting the holders
thereof the right to vote (upon a conversion or otherwise) with
the Shareholders on any matter.
(d) Section 3.2(d) of the Company Disclosure Letter
sets forth (x) each of the Companys Subsidiaries and
the ownership interest of the Company in each such Subsidiary,
as well as the ownership interest of any other Person in each
such Subsidiary and (y) the Capital Stock or other direct
or indirect ownership interest beneficially owned by the Company
or any of its Subsidiaries in any other Person, except for
broker warrants and trading positions maintained by the Company
and its Subsidiaries in the ordinary course of business. The
Company does not own, directly or indirectly, any voting
interest in any other Person. For the purpose of this
Section 3.2(d)
, beneficially owned means
the power, directly or indirectly, of a Person to direct the
vote or disposition of shares of Capital Stock.
3.3
Corporate Authority; Approval and
Fairness
.
(a) The Company has all
requisite corporate power and authority and has taken all
corporate action necessary in order to execute, deliver and
perform its obligations under this Agreement and the Plan of
Arrangement and to consummate the Arrangement, subject only to
the approval of the Arrangement by the Court and the adoption of
the Arrangement Resolution. This Agreement has been duly
executed and delivered by the Company and constitutes a valid
and binding agreement of the Company enforceable against the
Company in accordance with its terms.
(b) The Company Board has (A) determined that the
Arrangement is fair to, and in the best interests of, the
Company and its Shareholders, approved this Agreement and the
Arrangement and the other transactions contemplated hereby, and
resolved to recommend that the Shareholders approve the
Arrangement Resolution (the
Company
Recommendation
) and (B) directed that the
Arrangement Resolution be submitted to the Shareholders for
their approval.
3.4
Governmental Filings; No Violations;
Certain Contracts, Etc
.
(a) Other than
the filings, notices, approvals, orders, consents,
registrations, permits and authorizations (A) pursuant to
Section 2.2
, (B) required by the Financial
Industry Regulatory Authority, (C) required by the
Investment Dealers Association of Canada, (D) required by
the Financial Services Authority, and (E) set out in
Section 3.4(a) of the Company Disclosure Letter
(collectively, the
Company Approvals
), no
notices, reports or other filings are required to be made by the
Company with, nor are any approvals, orders, consents,
registrations, permits or authorizations required to be obtained
by the Company from, any U.S., Canadian, U.K., or other
governmental, regulatory or Self Regulatory Organization,
agency, commission or body or any court or other legislative,
executive or judicial governmental entity (each, a
Governmental Entity
), in connection with the
execution, delivery and performance of this Agreement by the
Company and the consummation of the Arrangement and the other
transactions contemplated hereby by the Company.
(b) The execution, delivery and performance of this
Agreement by the Company do not, and the consummation of the
Arrangement and the other transactions contemplated hereby will
not, constitute or result in (A) a breach or violation of
the Organizational Documents of the Company or any of its
Subsidiaries, (B) with or without notice, lapse of time or
both, a breach or violation of, a termination (or right of
termination) or default under, the creation or acceleration of
any obligations under or the creation of a Lien on any of the
assets of the Company or any of its Subsidiaries pursuant to any
agreement, lease, license, contract, note, mortgage or indenture
(each, a
Contract
) binding upon the Company
or any of its Subsidiaries or, assuming (solely with respect to
performance of this Agreement and consummation of the
Arrangement and the other transactions contemplated hereby)
compliance with the matters referred to in
Section 3.4(a)
, under any requirement of Law
applicable to the Company or any of its Subsidiaries or
(C) any change in the rights or obligations of any party
under any Contract
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binding upon the Company or any of its Subsidiaries, except, in
the case of clause (B) or (C) above, for any such
breach, violation, termination, default, creation, acceleration
or change that would not, individually or in the aggregate, have
a Company Material Adverse Effect. Section 3.4(b) of the
Company Disclosure Letter sets forth a correct and complete list
of Material Contracts pursuant to which consents or waivers are
required prior to consummation of the transactions contemplated
by this Agreement.
3.5
Financial Statements; Certain Debt; Books
and Records
.
(a) True and complete copies of the Companys audited
consolidated balance sheet as of December 31, 2006 (the
Audit Date
) and December 31, 2005,
together with related audited consolidated statements of income
and cash flows for the fiscal years ended December 31,
2006, December 31, 2005 and December 31, 2004, are
included in Section 3.5(a)(i) of the Company Disclosure
Letter (the
Annual Financial Statements
).
True and complete copies of the Companys unaudited
consolidated balance sheet as of June 30, 2007 and 2006,
together with related consolidated unaudited statements of
income for the six months period then ended, are included in
Section 3.5(a)(ii) of the Company Disclosure Letter (the
Interim Financial Statements
, and together
with the Annual Financial Statements, the
Financial
Statements
). The Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved and fairly present the
consolidated financial condition and results of operations of
the Company and its Subsidiaries as of the respective dates
thereof and for the respective periods indicated (subject, in
the case of the Interim Financial Statements, to absence of
notes and normal year-end recurring audit adjustments that will
not be material in amount or effect). Neither the Company nor
any of its Subsidiaries is a party to or otherwise involved in
any off-balance sheet arrangements.
(b) The books and records of the Company and each of its
Subsidiaries are complete and correct in all material respects
and maintained in all material respects in accordance with sound
business practices and with the applicable rules of any
Governmental Entity. At the Closing, all material books and
records of the Company and its Subsidiaries will be in the
possession or control of the Company or will be made available
or delivered to the Parent at or promptly following the Closing.
(c) The Company and its Subsidiaries maintain books,
records and accounts that, in all material respects, accurately
and fairly reflect the transactions and dispositions of the
Companys and its Subsidiaries assets. The Company
and its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with
managements general or specific authorization;
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP;
(iii) access to assets is permitted only in accordance with
managements general or specific authorization; and
(iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate
action is taken with respect to any material differences.
3.6
Undisclosed Liabilities,
Etc
.
(a) Section 3.6 of the Company
Disclosure Letter sets forth all of the outstanding Indebtedness
of the Company and its Subsidiaries as of the date hereof.
(b) The Company and its Subsidiaries do not have any
liabilities or obligations of any nature (whether known,
unknown, absolute, accrued, contingent or otherwise, whether
direct or indirect, or as guarantor or otherwise with respect to
any liability or obligation of any other Person and whether due
or to become due), except (i) as and to the extent
reflected in the Financial Statements, (ii) for liabilities
and obligations incurred in the ordinary course of business
under the Contracts and not required under GAAP to be reflected
in the Financial Statements or (iii) incurred since
June 30, 2007 in the ordinary course of business.
3.7
Absence of Certain
Changes
.
From the Audit Date to the date
hereof, the Company and its Subsidiaries have conducted their
business only in the ordinary course of their business
consistent with past practices and there has not been any
Company Material Adverse Effect. In particular, from the Audit
Date to the date hereof, except as otherwise permitted by this
Agreement there has not been:
(a) any merger or consolidation with any other Person or
winding-up,
dissolution or liquidation of the Company or any of its
Subsidiaries;
A-11
(b) any acquisition of assets in excess of $250,000 on an
individual basis or $500,000 in the aggregate (including the
acquisition of shares of capital stock of a Person) outside the
ordinary course of business by the Company or its Subsidiaries
from any other Person;
(c) any incurrence of indebtedness by the Company or its
Subsidiaries for borrowed money or any guarantee of any such
indebtedness of any other Person or any issuance or sale of any
debt securities or warrants or other rights to acquire any debt
securities, other than indebtedness for borrowed money incurred
in the ordinary course of business by the Company and its
Subsidiaries consistent with past practices;
(d) transfer, sale, lease or other disposition of any of
the Companys or its Subsidiaries assets or
businesses, other than in the ordinary course of business;
(e) issuance, sale, transfer or other disposition or
encumbrance by the Company or its Subsidiaries of the
Companys or its Subsidiaries Equity Securities;
(f) any reclassification, split, combination, subdivision,
redemption, purchase or other acquisition by the Company or its
Subsidiaries of any of the Companys or its
Subsidiaries Equity Securities;
(g) any termination or departure of any managing
director-level employee of the Company or any of its
Subsidiaries;
(h) any exercise of Broker Warrants by the Company or its
Subsidiaries other than in the ordinary course of business;
(i) any transaction of the type described in
Section 3.20(b)
;
(j) any material damage, destruction or other casualty loss
with respect to any material asset or property owned, leased or
otherwise used by the Company or any of its Subsidiaries,
whether or not covered by insurance;
(k) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
Capital Stock of the Company or any of its Subsidiaries (except
for dividends or other distributions by any direct or indirect
wholly-owned Subsidiary to the Company or to any wholly-owned
Subsidiary of the Company);
(l) any material change in any method of accounting or
accounting practices by the Company or any of its Subsidiaries;
(m) any change in the methodology used for determining
compensation or severance that results in an increase in the
compensation or severance payable or to become payable to its
officers or employees (except for increases in compensation to
employees in the ordinary course of business and consistent with
past practice) or any establishment, adoption, entry into or
amendment of any employee benefit plan, policy or arrangement
for the benefit of any director, officer or employee, except to
the extent required by applicable Laws;
(n) any amendment or change to the Organizational Documents;
(o) any material Tax election, any material change in
method of Tax accounting, any change in respect of a material
Tax election previously made by the Company or any of its
Subsidiaries or any settlement of a material Tax claim with any
Governmental Entity; or
(p) any agreement or undertaking by the Company or any of
its Subsidiaries to do any of the foregoing.
3.8
Taxes
.
The Company and
each of its Subsidiaries (i) have duly and timely prepared
in good faith and filed all Tax Returns required to be filed by
any of them and all such filed Tax Returns are complete and
accurate in all material respects, (ii) have paid all Taxes
that were required to be paid by them and withheld all Taxes
that the Company or any of its Subsidiaries were obligated to
withhold from amounts owing to any employee, creditor or third
party, other than Taxes that are immaterial in amount or that
are being contested in good faith (and for which adequate
reserves have been established), (iii) have made adequate
reserves for all material Taxes that are not yet due and
payable, and (iv) have not waived any statute of
limitations with respect to Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency. As of the
date of this Agreement, there are not pending or, to the
A-12
Knowledge of the Company, threatened any material audits,
examinations, investigations or other proceedings in respect of
Taxes or Tax matters relating to the Company or any of its
Subsidiaries. There are not, to the Knowledge of the Company,
any unresolved questions or claims concerning the Companys
or any of its Subsidiaries Tax liability that would, if
resolved against the Company or any such Subsidiary, have a
Company Material Adverse Effect. The Company has made available
to the Parent true and correct copies of all Tax Returns filed
by the Company and its Subsidiaries since December 31,
2003. Neither the Company nor any of its Subsidiaries has any
material liability with respect to income, franchise or similar
Taxes that accrued on or before December 31, 2003 in excess
of the amounts accrued with respect thereto that are reflected
in the Financial Statements.
3.9
Permits; Registrations
.
(a) Section 3.9(a) of the Company Disclosure Letter
sets forth, as of the date hereof, each material registration of
the Company and its Subsidiaries and each employee of any of
them as a broker-dealer, a registered representative or a sales
person (or in a similar capacity) with any Self-Regulatory
Organization or the securities or commodities commission or
other Governmental Entity of any state, province or other
jurisdiction; and no other such registrations are required for
the Company and its Subsidiaries to own and operate their
businesses as presently conducted. Each such registration is in
good standing in all material respects.
(b) The Company and its Subsidiaries have all material
permits, governmental licenses, and similar authority necessary
for the conduct of their businesses as presently conducted.
Neither the Company nor any of its Subsidiaries is in default in
any material respect under any of such franchises, permits,
licenses, or other similar authority.
(c) Neither the Company nor any of its Subsidiaries is
required to be registered under the U.S. Investment Company
Act of 1940, as amended.
3.10
Compliance with
Laws
.
The business of the Company and its
Subsidiaries has been, and is being, conducted in compliance, in
all material respects, with all national, federal, state,
provincial, local or foreign statutes, ordinances, rules or
regulations, in each case having the force of law. Except with
respect to regulatory matters covered by
Section 3.4(a)
, no investigation or review by any
Governmental Entity (including any Self-Regulatory Organization)
with respect to the Company or any of its Subsidiaries is
pending or, to the Knowledge of the Company, threatened. Each of
the Company and its Subsidiaries has obtained and is in
compliance with all permits, licenses, certifications,
approvals, registrations, consents, authorizations, exemptions
and orders issued or granted by a Governmental Entity necessary
to conduct its business as presently conducted, except those the
absence of, or non-compliance with, which would not be expected
to result in a Company Material Adverse Effect.
3.11
Real
Property
.
(a) Neither the Company nor
any of its Subsidiaries owns any real property.
(b) With respect to the real property leased or subleased
to the Company or its Subsidiaries (the
Leased Real
Property
), the lease or sublease for such property is
valid and in good standing in all material respects, and none of
the Company or any of its Subsidiaries is in material breach of
or material default under such lease or sublease, and no event
has occurred which, with notice, lapse of time or both, would
constitute such a breach or default by any of the Company or its
Subsidiaries.
(c) Section 3.11(c) of the Company Disclosure Letter
sets forth all leases and subleases of the Leased Real Property
that require the consent or approval of the landlord in
connection with or upon completion of the Arrangement or the
transactions contemplated by this Agreement.
(d) To the Knowledge of the Company, neither the whole (nor
any material portion) of Leased Real Property has been
condemned, requisitioned, or otherwise taken by any Governmental
Entity. No notice of any such condemnation, requisition, or
taking has been received by the Company or any of its
Subsidiaries. To the Knowledge of the Company, no such
condemnation, requisition, or taking of any of the Leased Real
Property is threatened.
3.12
Intellectual
Property
.
(a) The Company and each of
its Subsidiaries has sufficient rights to use all Intellectual
Property material to their businesses as presently conducted.
Such Intellectual Property owned by the Company and its
Subsidiaries is valid, and is not subject to any outstanding
order, judgment, decree or agreement adversely affecting the
Companys or any of its Subsidiaries use thereof or
their rights thereto in any material
A-13
respect. Neither the Company nor any of its Subsidiaries has
infringed or otherwise violated in any material respect the
Intellectual Property rights of any third party.
(b) The IT Assets of the Company and its Subsidiaries
operate and perform in all material respects as required by the
Company and its Subsidiaries to operate their business as
currently conducted. To the Knowledge of the Company, no person
has gained unauthorized access to the IT Assets. The Company
has, and each of its Subsidiaries have, implemented reasonable
backup and disaster recovery technology related to their
respective IT Assets consistent with industry practices.
3.13
Contracts
.
(a) Other
than as set forth in Section 3.13(a) of the Company
Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party to or bound by:
(1) any lease of real or personal property providing for
annual rentals of $250,000 or more;
(2) any Contract requiring payments to or from the Company
and its Subsidiaries of more than $250,000;
(3) any partnership, joint venture or other similar
agreement or arrangement relating to the formation, creation,
operation, management or control of any partnership or joint
venture;
(4) any Contract that (i) purports to limit the type
of business in which the Company or any of its Subsidiaries may
engage or the geographic locations in which the Company or any
of its Subsidiaries may engage in any business, (ii) could
require the disposition of any material assets or line of
business of the Company or any of its Subsidiaries,
(iii) grants most favored nation status to any
Person, (iv) prohibits or limits the rights of the Company
or any of its Subsidiaries to perform any services or conduct
any business, or (v) purports to prohibit the Company or
any of its Subsidiaries from acquiring the assets or securities
of another Person or any of such Persons Affiliates;
(5) any Contract between the Company or any of its
Subsidiaries and any director or officer of the Company or any
Person beneficially owning five percent or more of the Company
Common Shares or the Company Class A Common Shares;
(6) any Contract providing for indemnification by the
Company or any of its Subsidiaries of any Person, except for any
such Contract that is entered into in the ordinary course of
business;
(7) any Contract that contains a put, call or similar right
pursuant to which the Company or any of its Subsidiaries could
be required to purchase or sell, as applicable, any Capital
Stock of any Person or assets (other than Broker Warrants or
other securities or commodities trading contracts entered into
in the ordinary course of business); and
(8) any other Contract or group of related Contracts that,
if terminated, would be expected to result in a Company Material
Adverse Effect (the Contracts described in clauses
(1) (8), together with all exhibits and schedules to
such Contracts, being the
Material Contracts
).
(b) A copy of each Material Contract has previously been
made available to the Parent and is in full force and effect.
Neither the Company nor any of its Subsidiaries nor, to the
Knowledge of the Company, any other party thereto is in material
default or breach thereof.
3.14
Litigation
.
There are
no material civil, criminal or administrative actions, suits,
claims, hearings, arbitrations, investigations or other
proceedings pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any
other facts or circumstances of which the Company has Knowledge
that could reasonably be expected to result in any material
claims against the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries is a party to or subject
to the provisions of any judgment, order, writ, injunction,
decree or award of any Governmental Entity.
3.15
Employee Benefit
Plans
.
(a) Section 3.15(a) of the
Company Disclosure Letter sets forth a complete list of all
benefit and compensation plans, contracts, policies or
arrangements covering current or former employees of the Company
and its Subsidiaries and current or former directors of the
Company (other than employment contracts in respect of employees
of the Company or its Subsidiaries), and deferred compensation,
severance, stock option, stock purchase, stock appreciation
rights, Company stock based, incentive and bonus plans (the
Company
A-14
Benefit Plans
). True and complete copies of
all Company Benefit Plans listed in Section 3.15(a) of the
Company Disclosure Letter have been made available to Parent.
(b) All contributions required to be made under each
Company Benefit Plan, as of the date of this Agreement, have
been timely made and all obligations in respect of each Company
Benefit Plan have been properly accrued and reflected in
accordance with GAAP in the most recent Interim Financial
Statements.
(c) There has been no amendment to, announcement by the
Company or any of its Subsidiaries relating to, or change in
employee participation or coverage under, any Company Benefit
Plan which would increase materially the expense of maintaining
such plan above the level of the expense incurred therefor for
the most recent fiscal year. Neither the execution and delivery
of this Agreement, shareholder approval of the Arrangement
Resolution nor the consummation of the transactions contemplated
hereby will (w) entitle any employees of the Company or any
of its Subsidiaries to severance pay or any increase in
severance pay upon any termination of employment after the date
of this Agreement, (x) accelerate the time of payment or
vesting or result in any payment or funding (through a grantor
trust or otherwise) of compensation or benefits under, increase
the amount payable or result in the acceleration of any other
material obligation pursuant to, any Company Benefit Plan, or
(y) limit or restrict the right of the Company to merge,
amend or terminate any Company Benefit Plan. None of the
Arrangement, the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement
will require or result in payments or entitlements under any
Company Benefit Plans that would attract any excise Tax or not
be deductible by the Company under applicable tax laws.
(d) All Company Benefit Plans comply in all material
respects with applicable local Law. The Company and its
Subsidiaries have no material unfunded liabilities with respect
to any such Company Benefit Plan. There is no pending or, to the
Knowledge of the Company, threatened material litigation to
which the Company or any of its Subsidiaries is, or would be, a
party relating to the Company Benefit Plans.
3.16
Labor and Employment Matters
.
(a) As of the date hereof, no employee of the Company or
any of its Subsidiaries holding more than 100,000 Company Shares
has given notice terminating employment with the Company or any
of its Subsidiaries, which termination will be effective on or
after the date of this Agreement and, to the Knowledge of the
Company, as of the date hereof, no such employee plans to
terminate his or her employment with the Company or any of its
Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining
agreement or other Contract with a labor union or labor
organization, nor is the Company or any of its Subsidiaries the
subject of any material proceeding in which a Person has
asserted that the Company or any of its Subsidiaries has
committed an unfair labor practice or that seeks to compel the
Company or any of its Subsidiaries to bargain with any labor
union or labor organization nor is there pending or, to the
Knowledge of the Company, threatened, nor has there been any
labor strike, dispute, walk-out, work stoppage, slow-down or
lockout involving the Company or any of its Subsidiaries.
3.17
Environmental
Matters
.
Except for such matters that,
individually or in the aggregate, would not be expected to
result in a Company Material Adverse Effect: (i) the
Company and each of its Subsidiaries have complied at all times
with all applicable Environmental Laws, (ii) no property
currently or formerly owned or operated by the Company or any of
its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) is or has been contaminated by
the Company or its Subsidiaries with any Hazardous Substance,
(iii) neither the Company nor any of its Subsidiaries is
subject to liability for any Hazardous Substance disposal or
contamination on any third party property, (iv) neither the
Company nor any of its Subsidiaries has been associated with any
release of any Hazardous Substance, (v) neither the Company
nor any of its Subsidiaries has received any written
communication (or, to the Knowledge of the Company, any oral
communication) alleging that the Company or any of its
Subsidiaries may be in violation of, or subject to a claim for
liability under, any Environmental Law and (vi) neither the
Company nor any of its Subsidiaries is subject to any order,
decree, injunction or other arrangement with any Governmental
Entity or any indemnity or other agreement with any third party
in respect of liability for claims under any Environmental Law
or with respect to any Hazardous Substances.
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3.18
Insurance
.
The Company
and its Subsidiaries carry property, casualty, general liability
and executive liability insurance policies (
Insurance
Policies
) with reputable insurance carriers, providing
customary coverage for all normal risks incident to the business
of the Company and its Subsidiaries that are substantially
equivalent to those carried by Persons engaged in similar
businesses and subject to the same or similar perils or hazards.
The Company and its Subsidiaries are in good standing under each
Insurance Policy and all premiums due with respect to all
Insurance Policies have been paid.
3.19
Certain Payments
.
No
director, officer, agent, or employee of the Company or any of
its Subsidiaries, either in their capacity as such or otherwise
on behalf of the Company or any of its Subsidiaries, has
directly or indirectly (i) made any illegal contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or
other payment to any Person, private or public, regardless of
form, whether in money, property, or services, or
(ii) established or maintained any fund or asset required
by GAAP or the U.S. Foreign Corrupt Practices Act (assuming
it were applicable to the Company) to be recorded in the books
and records of the Company that has not been so recorded.
3.20
Related Party
Transactions
.
No director or executive
officer of the Company or any of its Subsidiaries or any
immediate family member of any such director or executive
officer: (a) is a party adverse to the Company or any of
its Subsidiaries in any material legal proceeding or has a
material interest adverse to the Company in any such legal
proceeding or (b) has, since the beginning of the
Companys last fiscal year, had a direct or indirect
material interest in a transaction, or will have a direct or
indirect material interest in a currently proposed transaction,
in which the Company or any of its Subsidiaries is a participant
and the amount involved exceeds $120,000 (other than with
respect to the transactions contemplated by this Agreement). For
purposes of this
Section 3.20
, immediate
family member of a director or executive officer means any
child, stepchild, parent, stepparent, spouse, sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law
of such director or executive officer and any person, other than
a tenant or employee, sharing the household of a director or
executive officer and executive officer shall have
the meaning set forth in
Rule 3b-7
under the Exchange Act (
it being understood
that without
limiting the foregoing, those individuals included within the
definition of Knowledge of the Company shall be considered
executive officers).
3.21
Brokers and
Finders
.
Neither the Company nor any of its
Subsidiaries nor any of the Shareholders nor any of the
officers, directors or employees of the Company or any of its
Subsidiaries has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders
fees in connection with the execution and delivery of this
Agreement, the Arrangement or the other transactions
contemplated in this Agreement.
3.22
Disclaimer
.
Neither the
Company, any of its Subsidiaries, nor any of their respective
officers, directors, employees, Shareholders or representatives
has made, and shall not be deemed to have made, to Parent any
representation or warranty other than those expressly made by it
in
Sections 3.1
through
3.22
. In particular,
other than with respect to those representations and warranties
above and in the other Transaction Agreements or the Letter of
Transmittal, none of the Company, its Subsidiaries, nor any of
their respective officers, directors, employees, Shareholders or
representatives has made any other representation or warranty,
express or implied, at law or in equity, with respect to the
Company or its Subsidiaries, the Company Shares or the business
currently, previously or proposed to be conducted by the Company
and its Subsidiaries, or the Parent including as to
(a) merchantability or fitness for any particular use or
purpose, (b) the operation of the business of the Company
and its Subsidiaries by the Parent after the Closing in any
manner or (c) the probable success or profitability of such
business after the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND CANADIAN SUB
The Parent and Canadian Sub hereby represent and warrant,
jointly and severally, to the Company and the Shareholders that:
4.1
Organization, Good Standing and
Qualification
.
Each of the Parent and
Canadian Sub is a legal entity duly organized, validly existing
and in good standing under the Laws of its jurisdiction of
organization and has all requisite corporate power and authority
to own, lease and operate its properties and assets and to carry
on its
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business as presently conducted and is qualified to do business
and is in good standing in each jurisdiction where the
ownership, leasing or operation of its assets or properties or
conduct of its business requires such qualification.
4.2
Corporate Authority
.
(a) Each of the Parent and Canadian Sub has all requisite
corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its
obligations under this Agreement, subject only to the approval
by the holders of a simple majority of shares of Parent Common
Stock voting at a stockholders meeting (the
Parent Meeting
) duly called and held for such
purpose (the
Requisite Parent Vote
)
of
the issuance of the Parent Arrangement Shares contemplated by
this Agreement and the Plan of Arrangement. Each of this
Agreement and the other Transaction Agreements to which the
Parent or Canadian Sub is a party has been duly executed and
delivered by it, is a valid and binding agreement, and is
enforceable against it in accordance with its terms.
(b) The board of directors of the Parent has
(A) approved this Agreement, the Plan of Arrangement and
the other transactions contemplated hereby and resolved to
recommend that the holders of Parent Common Stock vote in favor
of the issuance of the Parent Arrangement Shares contemplated by
this Agreement and the Plan of Arrangement (the
Parent
Recommendation
)
and (B) directed that such
matter be submitted to the holders of Parent Common Stock for
their approval at the Parent Meeting.
(c) The Parent Arrangement Shares, when issued pursuant to
the terms of this Agreement, the Plan of Arrangement and the
Voting and Exchange Trust Agreement will be validly issued,
fully paid and nonassessable, and no stockholder of the Parent
or any other Person will have any preemptive right of
subscription or purchase in respect thereof.
4.3
Capitalization
.
The
authorized capital stock of the Parent consists of
100,000,000 shares of common stock, par value $0.01 per
share, of which 25,547,611 (
Parent Common
Stock
), were outstanding as of the close of business
on September 28, 2007. All of the outstanding shares of
Parent Common Stock have been duly authorized and are validly
issued, fully paid and nonassessable. The Parent has no Parent
Common Stock reserved for issuance and there are no outstanding
options, warrants or other rights that obligate the Parent to
issue or sell any shares of Parent Common Stock, or any
securities or obligations convertible or exchangeable into or
exercisable for, or a right to subscribe for or acquire, any
shares of Parent Common Stock except for Parent Common Stock
issuable upon exercise of stock options or other awards that
have been or may be granted under the Thomas Weisel Partners
Group, Inc. Equity Incentive Plan, under which, as of the close
of business on September 28, 2007, there were
6,089,160 shares of Parent Common Stock issuable in respect
of such stock options and other awards.
4.4
Capital Structure of Canadian
Sub
.
The authorized capital stock of Canadian
Sub consists of an unlimited number of common shares
(
Canadian Sub Common Stock
), of which 100
were outstanding and owned by CallRightCo as of the date hereof.
All of the issued and outstanding shares of Canadian Sub Common
Stock have been duly authorized and are validly issued, fully
paid and nonassessable. The authorized capital stock of
CallRightCo consists of 100,000,000 common shares
(
CallRightCo Common Stock
), of which 100 were
outstanding and owned by the Parent as of the date hereof. All
of the issued and outstanding shares of CallRightCo Common Stock
have been duly authorized and are validly issued, fully paid and
nonassessable. The Canadian Sub Acquisition Shares, when issued
pursuant to the terms of this Agreement and the Plan of
Arrangement, will be validly issued, fully paid and
nonassessable, no shareholder of Canadian Sub will have any
preemptive right of subscription or purchase in respect thereof
and no other shares of any class of capital stock of Canadian
Sub will be outstanding as of the Closing Date except for the
Exchangeable Shares to be issued on Closing.
4.5
Governmental Filings; No Violations;
Certain Contracts, Etc
.
(a) Other than
the filings
and/or
notices (A) pursuant to
Section 2.2
,
(B) under the Investment Canada Act, (C) required by
the Financial Industry Regulatory Authority, (D) required
by the Investment Dealers Association of Canada,
(E) required by the Financial Services Authority,
(F) in connection with the Proxy Statement and
(G) pursuant to state or provincial securities, takeover
and Blue Sky Laws (collectively, the
Parent
Approvals
), no notices, reports or other filings are
required to be made by the Parent or Canadian Sub with, nor are
any consents, registrations, approvals, permits or
authorizations required to be obtained by the Parent or Canadian
Sub from, any Governmental Entity in connection with the
execution, delivery and performance of this Agreement by the
Parent
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and Canadian Sub and the consummation of the Arrangement and the
other transactions contemplated hereby (including, without
limitation, the issuance of the Parent Arrangement Shares and
the Canadian Sub Acquisition Shares), or in connection with the
continuing operation of the business of the Parent and its
Subsidiaries following the Closing, except those that the
failure to make or obtain would not, individually or in the
aggregate, reasonably be expected to prevent, materially delay
or materially impair the consummation of the transactions
contemplated by this Agreement.
(b) Each of the execution, delivery and performance of this
Agreement by the Parent and Canadian Sub does not, and the
consummation of the Arrangement and the other transactions
contemplated hereby will not, constitute or result in (A) a
breach or violation of, or a default under, the Organizational
Documents of the Parent or any of its Subsidiaries,
(B) with or without notice, lapse of time or both, a breach
or violation of, a termination (or right of termination) or
default under, the creation or acceleration of any obligations
under or the creation of a Lien on any of the assets of the
Parent or any of its Subsidiaries pursuant to any Contract
binding upon the Parent or any of its Subsidiaries or, assuming
(solely with respect to performance of this Agreement and
consummation of the Arrangement and the other transactions
contemplated hereby) compliance with the matters referred to in
Section 4.5(a)
, under any Law to which the Parent or
any of its Subsidiaries is subject or (C) any change in the
rights or obligations of any party under any Contract binding
upon the Parent or any of its Subsidiaries, except, in the case
of clause (B) or (C) above, for any such breach,
violation, termination, default, creation, acceleration or
change that would not, individually or in the aggregate,
reasonably be expected to prevent, materially delay or
materially impair the consummation of the transactions
contemplated by this Agreement.
4.6
Parent Reports; Financial
Statements
.
(a) The Parent has filed or
furnished, as applicable, on a timely basis all forms,
statements, reports and documents required to be filed or
furnished by it with the SEC pursuant to the Exchange Act or the
Securities Act and any rules and regulations promulgated
thereunder (the forms, statements, reports and documents filed
or furnished since the Audit Date and those filed or furnished
subsequent to the date of this Agreement including any
amendments thereto, the
Parent Reports
). Each
of the Parent Reports, at the time of its filing or being
furnished complied, or if not yet filed or furnished, will
comply, in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, and any
rules and regulations promulgated thereunder applicable to the
Parent Reports. As of their respective dates (or, if amended
prior to the date of this Agreement, as of the date of such
amendment) the Parent Reports did not, and any Parent Reports
filed with or furnished to the SEC subsequent to the date of
this Agreement will not, contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not
misleading. There is no information of which the Parent or any
of its officers or directors is currently aware which would
require the Parent to file an amendment to the Parent Reports or
a current report with the SEC pursuant to the Exchange Act or
the Securities Act and any rules and regulations promulgated
thereunder other than to announce the transactions contemplated
by this Agreement upon the approval of this Agreement and the
transactions contemplated hereby by the board of directors of
the Parent.
(b) The Parent maintains disclosure controls and procedures
required by
Rule 13a-15
or
15d-15
under the Exchange Act. Such disclosure controls and procedures
are reasonably designed to effectively ensure that information
required to be disclosed by the Parent is recorded and reported
on a timely basis to the individuals responsible for the
preparation of the Parents filings with the SEC and other
public disclosure documents. The Parent maintains internal
control over financial reporting (as defined in
Rule 13a-15
or
15d-15,
as applicable, under the Exchange Act). Such internal control
over financial reporting is effective in providing reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes policies and procedures that (i) pertain to the
maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the asset of
the Parent, (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
Parent are being made only in accordance with authorizations of
management and directors of the Parent, and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
Parents assets that could have a material effect on its
financial statements.
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(c) The financial statements included in the Parent Reports
fairly present the consolidated financial position and results
of operations of the Parent and its consolidated Subsidiaries as
of their respective dates and for the periods set forth therein
(subject, in the case of unaudited statements, to normal
year-end recurring audit adjustments that will not be material
in amount or effect), in each case in accordance with GAAP
consistently applied during the periods involved, except as
noted therein, and to the Knowledge of the Parent there are no
facts or circumstances that would require that such financial
statements be withdrawn, restated or otherwise modified in any
material respect under GAAP. The Parent has not filed any
current report on a confidential basis with the SEC which
remains confidential.
4.7
Financial Ability
.
The
Parent has the financial means to satisfy its obligation to pay
the Cash Payment pursuant to the Plan of Arrangement and this
Agreement, and the performance of such obligation is not subject
to any requirement for the Parent or any of its Affiliates to
obtain any financing, consent or approval or meet any financial
or other test.
4.8
Litigation
.
Other than
as disclosed in the Parent Reports, there are no material civil,
criminal or administrative actions, suits, claims, hearings,
arbitrations, investigations or other proceedings pending or, to
the Knowledge of the Parent, threatened against the Parent or
any of its Subsidiaries or any other facts or circumstances of
which the Parent has Knowledge that could reasonably be expected
to result in any material claims against the Parent or any of
its Subsidiaries. Other than as disclosed in the Parent Reports,
neither the Parent nor any of its Subsidiaries is a party to or
subject to the provisions of any judgment, order, writ,
injunction, decree or award of any Governmental Entity.
ARTICLE V
COVENANTS OF THE COMPANY
5.1
Interim
Operations
.
(a) The Company covenants
and agrees that, after the date hereof and prior to the Closing
(unless the Parent shall otherwise approve in writing, which
determination by the Parent shall not be unreasonably delayed,
or as otherwise provided for by this Agreement) and except as
required by applicable Laws, the business of the Company and
each of its Subsidiaries shall be conducted in the ordinary and
usual course and, to the extent consistent therewith, the
Company shall use commercially reasonable efforts to preserve
the Companys and each of its Subsidiaries respective
business organizations intact and maintain their respective
existing relations and goodwill with Governmental Entities,
clients, customers, suppliers, distributors, creditors, lessors,
employees and business associates and keep available the
services of their respective present employees and agents.
Without limiting the generality of the foregoing and in
furtherance thereof, from the date of this Agreement until the
Closing, except as set out in Section 5.1(a) of the Company
Disclosure Letter or as the Parent may approve in writing (any
determination as to which by the Parent shall not be
unreasonably delayed) or as otherwise provided for by this
Agreement or as expressly required by applicable Laws, neither
the Company nor any of its Subsidiaries will:
(1) adopt or propose any change in its Organizational
Documents;
(2) merge or consolidate with any other Person, or
restructure, reorganize or completely or partially liquidate or
otherwise enter into any agreements or arrangements imposing
material changes or restrictions on its assets, operations or
businesses;
provided
,
however
, that the Company
may amalgamate with 1619372 Ontario Inc., in which case
references to the Company in this Agreement shall
thereafter be references to the corporation resulting from such
amalgamation;
(3) acquire assets outside of the ordinary course of
business from any other Person with a value or purchase price in
the aggregate in excess of $250,000 in any transaction or series
of related transactions, other than acquisitions pursuant to
Contracts in effect as of the date of this Agreement;
(4) issue, sell, transfer, or otherwise dispose of or
encumber (including through any pledge) any Equity Securities of
the Company or any of its Subsidiaries;
(5) create or incur any material Lien on any of its assets,
other than in the ordinary course of the business of the Company
and its Subsidiaries;
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(6) make any loans, advances or capital contributions to or
investments in any Person (other than among the Company and its
Subsidiaries or in the ordinary course of their business);
(7) reclassify, split, combine, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of
its Equity Securities;
(8) incur any indebtedness for borrowed money or guarantee
such indebtedness of another Person, or issue or sell any debt
securities or warrants or other rights to acquire any of its
debt securities other than indebtedness for borrowed money
incurred in the ordinary course of the business of the Company
and its Subsidiaries consistent with past practices (A) not
to exceed $500,000 in the aggregate or (B) guarantees
incurred in compliance with this Section 5.1 by the Company
of indebtedness of its wholly-owned Subsidiaries;
(9) enter into any Contract that would have been a Material
Contract had it been entered into prior to the date of this
Agreement, except for Contracts (including engagement letters)
for the provision of investment banking services in the ordinary
course of the business;
(10) make any changes with respect to accounting policies
or procedures, except as required by changes in GAAP;
(11) amend, modify or terminate any Material Contract, or
cancel, modify or waive any debts or claims or waive any rights
having in each case a value in excess of $250,000;
(12) (A) make, change or rescind any Tax election,
(B) change any annual Tax accounting period, or change any
method of Tax accounting or file for any change in Tax
accounting method, (C) file any Tax Return, except as is
required to be filed by applicable Law, (D) waive or extend
the statute of limitations in respect of material Taxes,
(E) settle any material Tax claim or assessment or
surrender any right to claim a material Tax refund or
(F) settle or finally resolve any Tax contest with respect
to any material amount of Tax;
(13) transfer, sell, lease, or otherwise dispose of any of
its assets, or businesses, except for sales, transfers, leases,
or other dispositions of assets (i) in the ordinary course
of the business of the Company and its Subsidiaries,
(ii) with a fair market value not in excess of $250,000 in
the aggregate, (iii) pursuant to Contracts in effect prior
to the date of this Agreement, or (iv) consisting of the
cash distributions referred to in Section 5.1(a)(14) of the
Company Disclosure Letter;
(14) except as set forth in Section 5.1(a)(14) of the
Company Disclosure Letter, declare, set aside, make or pay any
dividend or other distribution, payable in cash, stock, property
or otherwise, with respect to any of its Capital Stock (except
for dividends paid by any direct or indirect wholly-owned
Subsidiary to the Company or to any other direct or indirect
wholly-owned Subsidiary of the Company) or enter into any
agreement with respect to the voting of its Capital Stock;
(15) except as required pursuant to existing written,
binding agreements in effect as of the date of this Agreement
and set forth in Section 5.1(a)(15) of the Company
Disclosure Letter, or as otherwise required by applicable Law,
(i) grant or provide any severance or termination payments
or benefits to any of its directors, officers or employees other
than pursuant to existing employment agreements in effect as of
the date of this Agreement and made available to the Parent or
entered into following the date of this Agreement in the
ordinary course consistent with the Companys current form
of employment agreement, provided that Parent be consulted prior
to the entry into thereof, (ii) change the methodology for
determining compensation and bonus payments to directors,
officers or employees other than in the ordinary course of
business consistent with past practice, (iii) increase the
pension, welfare, severance or other benefits of, or make any
new equity awards to directors, officers or employees other than
in the ordinary course of business consistent with past
practice, (iv) establish, adopt, amend or terminate any of
its benefit plans or amend the terms of any outstanding equity
awards, (v) take any action to accelerate the vesting or
payment, or fund or in any other way secure the payment, of
compensation or benefits under any of its benefit plans, to the
extent not already provided in any such benefit plans,
(vi) change any actuarial or other material assumptions
used to calculate funding obligations with respect to any
benefit plan or to change the manner in which contributions to
such
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plans are made or the basis on which such contributions are
determined, except as may be required by GAAP or
(vii) forgive any loans to any of its directors, officers
or employees;
(16) exercise any Broker Warrants other than in the
ordinary course of business and following consultation with the
Parent;
provided
,
however
, that with respect to
all Broker Warrants granted by each issuer thereof to the
Company or its Subsidiaries, (i) up to one-third of such
Broker Warrants may be exercised at any time; (ii) up to
one-third of such Broker Warrants may be exercised only after
reasonable consultation with Parent; and (iii) up to
one-third of such Broker Warrants may be exercised only with the
Parents consent;
provided
further
that
(x) the portions of the Broker Warrants subject to
clauses (ii) and (iii) may be freely exercised by the
Company without consultation or the consent of the Parent to the
extent that the Broker Warrant would expire on or before
January 31, 2008 and (y) any portions of a Broker
Warrant that are exercised prior to the date of this Agreement
shall be taken into account when determining whether the
limitation set forth in clause (i) has been met;
(17) settle any litigation or other proceedings before a
Governmental Entity for an amount in excess of $250,000
individually or $500,000 in the aggregate;
(18) take any action that would result in any of the
conditions to the Arrangement set forth in
Article VII
not being satisfied; or
(19) agree or commit to do any of the foregoing.
(b) Prior to making any written communications to any of
its or any of its Subsidiaries directors, officers or
employees pertaining to compensation or benefit matters that are
affected by the transactions contemplated by this Agreement, the
Company shall provide the Parent in advance with a copy of the
intended communication; the Parent shall have a reasonable
period of time to review and comment on the communication and
the Parent and the Company shall cooperate in providing any such
mutually agreeable communication. The Company shall promptly,
and in any event within two (2) Business Days, notify the
Parent of any employee of the Company or any of its Subsidiaries
having the title of Vice President or above giving notice
terminating employment with the Company or any of its
Subsidiaries or the Company having Knowledge that any such
employee plans to terminate his or her employment with the
Company or any of its Subsidiaries.
5.2
Acquisition Proposals
.
(a)
No Solicitation or
Negotiation
.
The Company agrees that, except
as expressly permitted by this
Section 5.2
, neither
it nor any of its Subsidiaries nor any of their respective
officers and directors shall, and that the Company shall use its
reasonable best efforts to instruct, as soon as reasonably
practicable following the date hereof, and thereafter use its
reasonable best efforts to cause their respective employees,
investment bankers, attorneys, accountants and other advisors or
representatives (collectively,
Representatives
) not to, directly or
indirectly:
(1) initiate, solicit or encourage any inquiries or the
making of any proposal or offer that constitutes, or could
reasonably be expected to lead to, any Acquisition Proposal;
(2) engage in, continue or otherwise participate in any
discussions or negotiations regarding, or provide any non-public
information or data to any Person relating to, any Acquisition
Proposal; or
(3) otherwise facilitate any effort or attempt to make an
Acquisition Proposal.
(b)
No Change in Recommendation or Alternative
Acquisition Agreement
.
The Company Board and
each committee thereof shall not:
(1) withhold, withdraw, qualify or modify (or publicly
propose or resolve to withhold, withdraw, qualify or modify), in
a manner that is reasonably likely to adversely affect the
consummation of the Arrangement on the terms and conditions set
forth in this Agreement, the Company Recommendation; or
(2) except if this Agreement is terminated in compliance
with
Article VIII
of this Agreement, cause or permit
the Company to enter into any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement,
merger agreement or other agreement relating to any Acquisition
Proposal.
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(c)
Existing
Discussions
.
The Company agrees that it will
immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal.
The Company agrees that it will, as soon as reasonably
practicable, take the necessary steps to inform the individuals
or entities referred to in the first sentence hereof of the
obligations undertaken in this
Section 5.2
. The
Company also agrees that it will promptly request each Person
that has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring it or any of its
Subsidiaries to return or destroy all confidential information
heretofore furnished to such Person by or on behalf of it or any
of its Subsidiaries and will diligently exercise all of its
rights in respect thereof.
(d)
Notice
.
The Company
agrees that it will promptly (and, in any event, within
twenty-four (24) hours) notify the Parent if any inquiries,
proposals or offers with respect to an Acquisition Proposal is
received by it indicating, in connection with such notice, the
name of the Person making such inquiry, proposal or offer and
the material terms and conditions thereof (including, if
applicable, copies of any proposed agreements relating thereto)
and thereafter shall keep the Parent informed, on a current
basis, of the status and terms of any such proposals or offers
(including any amendments thereto).
5.3
Access and
Reports
.
Subject to applicable Law, upon
reasonable notice, the Company shall (and shall cause its
Subsidiaries to) afford the Parent and the Parents
Representatives reasonable access, during normal business hours
throughout the period prior to the Closing, to its employees,
properties, books, contracts and records and, during such
period, the Company shall (and shall cause its Subsidiaries to)
furnish promptly to the Parent all information concerning its
business, properties and personnel as may reasonably be
requested,
provided
that no investigation pursuant to
this
Section 5.3
shall affect or be deemed to modify
any representation or warranty made by the Company in this
Agreement. All requests for information made pursuant to this
Section 5.3
shall be directed to the chief executive
officer or other Person designated by the Company.
ARTICLE VI
OTHER
COVENANTS
6.1
Filings; Other Actions;
Notification
.
(a)
Cooperation
.
Subject to
the terms and conditions set forth in this Agreement, the
Company and the Parent shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) their
respective reasonable best efforts to take or cause to be taken
all actions, and do or cause to be done all things, reasonably
necessary, proper or advisable on its part under this Agreement
and applicable Laws to consummate and make effective the
Arrangement and the other transactions contemplated by this
Agreement as soon as practicable, including preparing and filing
as promptly as practicable all documentation to effect all
necessary notices, reports and other filings and to obtain as
promptly as practicable all consents, registrations, approvals,
permits and authorizations necessary or advisable to be obtained
from any third party
and/or
any
Governmental Entity in order to consummate the Arrangement or
any of the other transactions contemplated by this Agreement.
Subject to applicable Laws relating to the exchange of
information, the Parent shall have the right to direct all
matters with any Governmental Entity consistent with its
obligations hereunder;
provided
that the Parent and the
Company shall have the right to review in advance, and to the
extent practicable each will consult with the other on and
consider in good faith the views of the other in connection
with, all of the information relating to the Parent or the
Company, as the case may be, and any of their respective
Subsidiaries, that appears in any filing made with, or written
materials submitted to, any third party
and/or
any
Governmental Entity in connection with the Arrangement and the
other transactions contemplated by this Agreement. Each of the
Company and the Parent shall give prompt notice to the other of
any development or condition that is reasonably expected to
result in a Material Adverse Effect with respect to it or of any
material failure by it to comply with its obligations under this
Agreement or any of the other Transaction Agreements to which it
is a party.
(b)
Information
.
The Company
and the Parent each shall as soon as practicable, upon request
by the other, furnish the other with all information concerning
itself, its Subsidiaries, directors, officers and stockholders
and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement or any other
statement, filing, notice or application made by or on behalf of
the Parent, the Company or any of their respective
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Subsidiaries to any third party
and/or
any
Governmental Entity in connection with the Arrangement and the
transactions contemplated by this Agreement (except for
information which either the Parent, in the first part, or the
Company, in the second part, in each case acting reasonably,
considers highly proprietary, confidential and sensitive, which
information shall be exchanged under mutually agreed procedures
reasonably designed to protect such information). The Company
agrees that it will provide the Required Company Information to
the Parent as promptly as practicable following the date of this
Agreement.
(c)
Status
.
Subject to
applicable Law and as required by any Governmental Entity, the
Company and the Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions
contemplated by this Agreement, including promptly furnishing
the other with copies of notices or other communications
received by the Parent or the Company, as the case may be, or
any of its Subsidiaries, from any third party
and/or
any
Governmental Entity with respect to such transactions. Neither
the Company nor the Parent shall permit any of its officers or
any other representatives or agents to participate in any
material meeting or discussion with any Governmental Entity in
respect of any filings, investigation or other inquiry relating
to the transactions contemplated hereby unless it consults with
the other party in advance and, to the extent permitted by such
Governmental Entity, gives the other party the opportunity to
attend and participate thereat.
6.2
Publicity
.
The initial
press release regarding this Agreement and the Arrangement shall
be a joint press release and thereafter the Company and the
Parent each shall consult with each other prior to issuing any
press releases or otherwise making written public announcements
with respect to the Arrangement and the other transactions
contemplated by this Agreement and prior to making any filings
with any third party
and/or
any
Governmental Entity (including any national securities exchange
or interdealer quotation service) with respect thereto, except
as may be required by Law or by obligations pursuant to any
listing agreement with or rules of any national securities
exchange or interdealer quotation service or by the request of
any Government Entity (a copy of which shall be provided to the
other party).
6.3
Social and Employee-Related
Plans
.
The Parent and the Company agree to
use commercially reasonable efforts to implement the social and
employee-related plans set forth in
Exhibit C
in the
manner contemplated on
Exhibit C.
6.4
Parent Arrangement Shares for
Exchange
.
The Parent shall duly reserve for
issuance the number of Parent Arrangement Shares issuable in
connection with the exchange by Shareholders of Canadian Sub
Acquisition Shares and upon any issuance of such Parent
Arrangement Shares in accordance with the terms and conditions
applicable to such exchange, such Parent Arrangement Shares
shall be duly authorized, validly issued, fully paid and
nonassessable and free and clear of any Liens other than as
contemplated by the Equity Agreement and the Pledge Agreements.
Such Parent Arrangement Shares shall be issued pursuant to an
effective registration statement under the Securities Act and
shall be registered or qualified for sale under such other
securities or blue sky laws of such jurisdictions in
the United States or Canada, in each case as and to the extent
provided in the Equity Agreement, and will be listed on the
principal national securities exchange on which the Parent
Common Stock is then listed or traded.
6.5
Proxy Statement Filing,
etc
.
The Parent shall prepare and file with
the SEC the proxy statement required to be distributed to the
stockholders of the Parent in connection with the Parent Meeting
(the
Proxy Statement
) as promptly as
practicable following receipt of the Required Company
Information and shall use its reasonable efforts to mail the
Proxy Statement to the stockholders of the Parent as promptly as
practicable thereafter.
6.6
Parent Meeting
.
The
Parent will take, in accordance with applicable Law and its
Organizational Documents, all action necessary to convene the
Parent Meeting as promptly as practicable to consider and vote
upon the approval of the issuance of the Parent Arrangement
Shares contemplated by this Agreement and the Plan of
Arrangement and to cause such vote to be taken, and through the
board of directors of the Parent, will recommend that the
stockholders of the Parent vote in favor of the issuance of the
Parent Arrangement Shares.
6.7
Further Assurances
.
Each
party hereto will execute such documents and other instruments
and take such further actions as may reasonably be required or
desirable to carry out the provisions hereof and consummate the
Transactions. Upon the terms and subject to the conditions
hereof, each party hereto will use its respective
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reasonable best efforts (subject, in the case of the Parent and
the Company, to
Section 6.1
) to: (a) take or
cause to be taken all actions, and to do or cause to be done all
other things, necessary, proper or advisable to consummate the
Transactions as promptly as practicable, and (b) obtain in
a timely manner all necessary waivers, consents, and approvals
and to effect all registrations and filings required or
reasonably desirable to carry out the provisions hereof and
consummate the Transactions as promptly as practicable.
6.8
Expenses
.
All costs and
expenses incurred in connection with this Agreement, the
Arrangement and other transactions contemplated by this
Agreement (including, without limitation, the fees and expenses
of financial advisors, accountants and legal counsel)
(i) if incurred by the Parent and Canadian Sub, shall be
paid by the Parent and (ii) if incurred by the Company,
shall be paid by or on behalf of the Company, subject to the
limit contemplated by
Section 9.2(3)
.
6.9
Additional Covenants of Parent and Canadian
Sub
.
(a) Each of the Parent and Canadian Sub agrees that it
shall, and shall cause its Subsidiaries to, except as
contemplated by this Agreement and the Arrangement or as
otherwise approved by the Company (which determination by the
Company shall not be unreasonably delayed), until the Closing or
the day upon which this Agreement is terminated, whichever is
earlier:
(1) not take any action, refrain from taking any action
(subject to its commercially reasonable efforts), or permit any
action to be taken or not taken, inconsistent with this
Agreement or which would reasonably be expected to significantly
impede the consummation of the Arrangement;
(2) refrain from entering into any transaction or making
any other decisions which would be expected to result in a
Parent Material Adverse Effect;
(3) not completely or partially liquidate or wind up;
(4) not reclassify, split, combine, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of
its Equity Securities in a manner that would materially affect
the consideration to be received by Shareholders;
(5) not issue Equity Securities in a transaction where
approval of such issuance by the stockholders of Parent would be
required;
(6) not declare or pay dividends or make other
distributions to its stockholders other than in the ordinary
course consistent with past practice;
(7) not take any action that would result in any of the
conditions to the Arrangement set forth in
Article VII
not being satisfied;
(8) not terminate, amend or waive any provision of any of
the Voting Commitments;
(9) not agree or commit to do any of the foregoing; and
(10) use its reasonable best efforts to satisfy (or cause
the satisfaction of the conditions precedent to its obligations
hereunder to the extent the same is within its control) and to
take, or cause to be taken, all other action and to do, or cause
to be done, all other things necessary, proper or advisable
under all applicable Laws to complete the Arrangement and the
transactions contemplated by this Agreement, and pay all
expenses incidental thereto, including without limitation using
its reasonable best efforts to: (i) obtain all Parent
Approvals and any other waivers, consents and approvals required
to be obtained by it from other parties to loan agreements,
leases and other contracts; (ii) effect all necessary
registrations and filings and submissions of information
requested by Governmental Entities or under provincial or state
securities Law or Blue Sky rules, in each case
required to be effected by it in connection with the Arrangement
and the transactions contemplated by this Agreement and
participate, and appear in any proceedings before Governmental
Entities in respect thereof; and (iii) oppose, lift or
rescind any injunction or restraining order or other order or
action seeking to stop, or otherwise adversely affecting the
ability of the parties to consummate, the Arrangement or the
other transactions contemplated hereby; provided that this
clause (10) shall not obligate the Parent to make
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any sale or disposition or enter into any agreement or
arrangement that would have a Parent Material Adverse
Effect; and
(b) Parent agrees that, until the Closing or the day upon
which this Agreement is terminated, whichever is earlier it
shall consult in good faith with the Company prior to the Parent
or any of its Subsidiaries:
(1) merging or consolidating with any other Person, or
restructuring, reorganizing or otherwise entering into any
agreements or arrangements imposing material changes or
restrictions on its assets, operations or businesses; and
(2) acquiring assets outside of the ordinary course of
business from any other Person with a value or purchase price in
the aggregate in excess of $2 million in any transaction or
series of related transactions.
6.10
Cooperation
.
Until
Closing, the Parent, Canadian Sub and the Company shall use
commercially reasonable efforts and cooperate in good faith with
each other and the Shareholders to effect the Transactions on a
tax-efficient basis for the Parent, Canadian Sub, the Company
and the Shareholders, including without limitation in connection
with the transactions contemplated in Section 6.10 of the
Company Disclosure Schedule, and none of the representations,
warranties or covenants of Parent, Canadian Sub and the Company
shall be deemed breached or violated by such transactions;
provided
,
however
, that the Parent and Canadian
Sub shall not be required to agree to or implement any
amendments, modifications or changes to the extent that, in the
Parents good faith judgment the implementation of such
amendments, modifications or changes would result in any direct
or indirect incremental costs or liability to the Parent or
Canadian Sub other than incidental costs related to the
implementation that are not in the aggregate material to the
Parent.
6.11
Update to Shareholder
List
.
Not less than three (3) Business
Days prior to the Closing Date, the Company shall deliver an
updated Shareholder List to the Parent reflecting (x) any
repurchase of equity from departing employees (other than
employees who have on or prior to the date hereof executed and
delivered to the Parent the Equity Agreement and Pledge
Agreement) and elections made by Shareholders and
(y) separately indicating those Shareholders that will be
receiving their non-cash consideration in the form of Parent
Common Stock and those Shareholders that will be receiving their
non-cash consideration in the form of Exchangeable Shares,
it
being understood
, that (i) Shareholders that are
Non-Residents of Canada will not be entitled to receive
Exchangeable Shares and (ii) each Non-Resident of Canada
must receive at least twenty-five percent (25%) of such
Shareholders portion of the Arrangement Consideration in
the form of cash (with any shares of Parent Common Stock or
Exchangeable Shares being valued at the volume weighted average
of the daily closing prices for a share of Parent Common Stock
on the principal securities exchange on which the Parent Common
Stock is traded for the ten (10) consecutive trading days
ending on the trading day immediately preceding the Closing
Date). Upon the delivery of such updated Shareholder List to the
Parent, such updated schedule shall be deemed to be the
Shareholder List for all purposes of this Agreement and the Plan
of Arrangement.
6.12
Tax Election
.
Canadian
Sub agrees that, at the request of a Shareholder whose Company
Shares are exchanged for cash and one or more Exchangeable
Shares or Exchangeable Shares alone on the disposition by such
Shareholder of Company Shares pursuant to the Arrangement,
Canadian Sub shall elect jointly with such Shareholder pursuant
to subsection 85(1) of the
Income Tax Act
(Canada) (the
ITA
) (and any analogous provisions of
applicable provincial income tax law) (a
Section 85 Election
), in the prescribed
form and within the prescribed time for purposes of the ITA (or
applicable provincial income tax law), and shall therein agree
with respect to the disposition by such Shareholder of Company
Shares that such Shareholders proceeds of disposition and
Canadian Subs cost of acquiring such Company Shares shall
be such amount as shall be determined by the Shareholder in its
sole discretion within the limits prescribed by the ITA (or
applicable provincial income tax law). A Shareholder who elects
to make a Section 85 Election shall provide two signed
copies of the duly completed prescribed election forms to
Canadian Sub, or to a representative appointed by it, within
120 days after the Closing Date. Canadian Sub shall within
30 days after receiving the election forms, and subject to
such election forms complying with the requirements imposed
under the ITA (or applicable provincial income tax law), sign
and return them to the Shareholder for filing with the Canada
Revenue Agency (or the applicable provincial tax authority).
Except for the obligations to sign and return duly completed
election forms which are received within 120 days of the
Closing Date, and to provide any information reasonably
requested by the Shareholder for the election form concerning
Canadian Sub, neither the Company, Canadian Sub, the Parent nor
any successor corporation shall be
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responsible for any taxes, interest or penalties resulting from
the failure of Shareholder to properly complete or file such
election forms in the form and manner and within the time
prescribed by the ITA (or any applicable provincial
legislation). Canadian Sub hereby agrees to sign and return an
election form received by it more than 120 days following
the Closing Date on the same basis provided it is received by
Canadian Sub or its appointed representative within the time for
filing the Section 85 Election prescribed by the ITA (or
applicable provincial income tax law).
6.13
Equity and Pledge
Agreements
.
The Company shall use its
reasonable best efforts to procure that each Shareholder
receiving consideration under the Arrangement who has not, on or
prior to the date of this Agreement, executed and delivered to
Parent the Equity Agreement and a Pledge Agreement execute and
deliver such agreements to the Parent on or prior to the
Closing. The Company shall use its reasonable best efforts to
procure that any Shareholder that is receiving only cash
consideration under the Arrangement shall enter into an
agreement with Parent on or prior to Closing containing
covenants substantially similar to those set forth in
Article III of the Equity Agreement and in a form agreed to
by the Company and Parent, each acting reasonably.
ARTICLE VII
CONDITIONS
TO CLOSING
7.1
Conditions to Each Partys Obligation
to Effect the Arrangement
.
The respective
obligation of each party to effect the Arrangement is subject to
the satisfaction or waiver at or prior to the Closing of each of
the following conditions:
(a)
Shareholder
Approval
.
The Arrangement Resolution shall
have been duly approved by Shareholders constituting the
Requisite Company Vote in accordance with the Interim Order, and
the issuance of the Parent Arrangement Shares contemplated by
this Agreement shall have been duly approved by the holders of
Parent Common Stock constituting the Requisite Parent Vote.
(b)
Interim and Final
Order
.
The Interim Order and the Final Order
shall each have been obtained on terms consistent with this
Agreement and in a form satisfactory to each of the Company and
the Parent, acting reasonably, and shall not have been set aside
or modified in a manner unacceptable to either the Company or
the Parent, acting reasonably, on appeal or otherwise.
(c)
Regulatory
Consents
.
(1) The Parent shall have
received a determination or deemed approval by the Minister of
Industry that the transactions contemplated hereby are of
net benefit to Canada for purposes of the Investment
Canada Act.
(2) Other than the filing of the Plan of Arrangement with
the appropriate Governmental Entity, the Parent Approvals and
the Company Approvals shall have been made or obtained (as the
case may be), without the imposition of any term, condition or
consequence other than those contemplated by this Agreement and
the consummation of the Arrangement, and except where the
failure to make or obtain same would not put the combined
operations of the Parent, the Company and their respective
Subsidiaries at a material competitive disadvantage by
comparison with their competitors in the jurisdictions in which
they have significant operations.
(d)
Litigation
.
No
Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any Law (whether temporary, preliminary or
permanent) that is in effect that, nor shall there have been
instituted or pending any material suit, action or proceeding in
which a Governmental Entity or another Person is seeking an
order that if successful, would restrain, enjoin or otherwise
prohibit consummation of the Arrangement or the other
transactions contemplated by this Agreement or that
substantially deprives a party of the anticipated benefits of
the transactions contemplated by this Agreement and that, in the
case of a suit, action or proceeding brought or initiated by a
Person other than a Governmental Entity, such suit, action or
proceeding is reasonably likely to success on the legal and
factual merits.
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7.2
Conditions to Obligations of Parent and
Canadian Sub
.
The obligations of the Parent
and Canadian Sub to effect the Arrangement are also subject to
the satisfaction or waiver by the Parent at or prior to the
Closing of the following conditions:
(a)
Representations and
Warranties
.
(i) The representations and
warranties of the Company set forth in this Agreement that are
qualified by reference to Company Material Adverse Effect shall
be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of such date and time
(except to the extent that any such representation and warranty
expressly speaks as of the date hereof or an earlier date, in
which case such representation and warranty shall be true and
correct as of such date) and (ii) the representations and
warranties of the Company set forth in this Agreement that are
not qualified by reference to Company Material Adverse Effect
shall be true and correct as of the date of this Agreement and
as of the Closing Date as though made on and as of such date and
time (except to the extent that any such representation and
warranty expressly speaks as of the date hereof or an earlier
date, in which case such representation and warranty shall be
true and correct as of such date), provided however, that
notwithstanding anything herein to the contrary, the condition
set forth in this
Section 7.2(a)(ii)
shall be deemed
to have been satisfied even if any representations and
warranties of the Company (other than
Sections 3.1
,
3.2
and
3.3
of this Agreement, which must be true
and correct in all respects) are not so true and correct as of
the Closing Date unless the failure of such representations and
warranties of the Company to be so true and correct (considered
without regard to any materiality qualifiers therein) would be
expected to have a Company Material Adverse Effect.
(b)
Performance of Obligations of the
Company
.
The Company shall have performed in
all material respects all obligations required to be performed
by it under this Agreement and the Plan of Arrangement at or
prior to the Closing Date.
(c)
No Material Adverse
Effect
.
Since the date of this Agreement,
there shall not have occurred any Company Material Adverse
Effect.
(d)
Consents Under
Agreements
.
The Company shall have obtained
the consent or approval of each Person whose consent or approval
shall be required under (1) the 70 York Street Lease, dated
as of July 4, 2002, between 70 York Street Limited,
Westwind Capital Partners Inc., Lionel F. Conacher and David M.
Beatty and (2) any other Contract to which the Company or
any of its Subsidiaries is a party, except those such other
Contracts for which the failure to obtain such consent or
approval would not be expected to result in a Company Material
Adverse Effect.
(e)
Legal Opinions
.
The
Parent shall have received the written opinion(s) of outside
counsel to the Company as to certain legal matters regarding the
Company, substantially in the form attached as
Exhibit E-1
.
(f)
Closing Certificate of the
Company
.
The Parent shall have received at
the Closing a certificate signed on behalf of the Company by
each of the Chief Executive Officer and Chief Financial Officer
of the Company to the effect that each such Chief Executive
Officer and Chief Financial Officer has read
Sections 7.2(a)
and
(b)
and the conditions
set forth in
Sections 7.2(a)
and
(b)
have
been satisfied in all material respects.
(g)
Ancillary
Agreements
.
(1) Each of the following
agreements executed by the parties thereto and delivered to the
Parent by or on behalf of each such other party thereto on or
prior to the date of this Agreement shall be in full force and
effect as of the Closing Date and no party thereto (other than
the Parent or Canadian Sub) shall have failed to comply with, or
breached (and not cured such breach on or before the Closing
Date) any such agreement:
(i) the Equity Agreement (in respect of these Shareholders
who have executed and delivered such agreement on or before date
hereof);
(ii) the Pledge Agreements (in respect of these
Shareholders who have executed and delivered such agreement on
or before date hereof); and
(iii) the Conacher Employment Agreement.
A-27
(2) Each of the Shareholders receiving non-cash
consideration under the Arrangement who has not, on or prior to
the date of this Agreement, executed and delivered to Parent the
Equity Agreement and the Pledge Agreement shall have executed
and delivered such agreements to the Parent and such agreements
shall remain in full force and effect.
(h)
Acquisition Co Loan
.
The
outstanding loan from the Company to 1619372 Ontario Inc. shall
have been repaid or repurchased, or the Company and 1619372
Ontario Inc. shall have been amalgamated.
7.3
Conditions to Obligation of the
Company
.
The obligation of the Company to
effect the Arrangement is also subject to the satisfaction or
waiver by the Company at or prior to the Closing of the
following conditions:
(a)
Representations and
Warranties
.
The representations and
warranties of the Parent and Canadian Sub set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as
though made on and as of such date and time (except to the
extent that any such representation and warranty expressly
speaks as of the date hereof or an earlier date, in which case
such representation and warranty shall be true and correct as of
such date).
(b)
Performance of Obligations of Parent and
Canadian Sub
.
Each of the Parent and Canadian
Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement
at or prior to the Closing Date.
(c)
No Material Adverse
Effect
.
Since the date of this Agreement,
there shall not have occurred any Parent Material Adverse Effect.
(d)
Legal Opinions
.
The
Company shall have received the written opinion of
Sullivan & Cromwell LLP, counsel to the Parent as to
certain legal matters regarding Parent and the Parent Common
Stock, substantially in the form attached as
Exhibit E-2
,
and the written opinion(s) of Stikeman Elliott LLP and
additional Canadian counsel to the Parent as to certain legal
matters regarding Canadian Sub and the Canadian Sub Acquisition
Shares, substantially in the form attached as
Exhibit E-3
.
(e)
Closing Certificate of the
Parent
.
The Company shall have received at
the Closing a certificate signed on behalf of the Parent by the
Chief Financial Officer of the Parent to the effect that such
Chief Financial Officer has read
Sections 7.3(a)
and
(b)
and the conditions set forth in
Sections 7.3(a)
and
(b)
have been satisfied.
(f)
Company Ancillary
Agreements
.
Each of the following agreements
executed by the parties thereto and delivered to the Company by
or on behalf of each such other party thereto on or prior to the
date of this Agreement shall be in full force and effect as of
the Closing Date and no party thereto (other than the Company)
shall have failed to comply with, or breached (and not cured
such breach on or before the Closing Date) any such agreement:
(1) the Exchangeable Share Support Agreement; and
(2) the Voting and Exchange Trust Agreement.
(g)
Shareholder Ancillary
Agreements
.
Each of the following agreements
executed or to be executed by the Parent and delivered to the
Shareholders party thereto shall have been executed and
delivered by the Parent and the Parent shall have complied with
and shall not have breached (or shall have cured any such breach
on or before the Closing Date) each such agreement:
(1) the Equity Agreement; and
(2) the Pledge Agreements.
ARTICLE VIII
TERMINATION
8.1
Termination by Mutual
Consent
.
This Agreement may be terminated and
the Arrangement may be abandoned at any time prior to the
Closing, whether before or after the approval of the Arrangement
Resolution by
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the Shareholders, by mutual written consent of the Company and
the Parent by action of their respective boards of directors.
8.2
Termination by Either the Parent or the
Company
.
This Agreement may be terminated and
the Arrangement may be abandoned at any time prior to the
Closing by action of the board of directors of the Parent or the
Company Board if (i) the Arrangement shall not have been
consummated by January 31, 2008 (the
Termination
Date
), whether such date is before or after the
approval of the Arrangement Resolution by the Shareholders,
(ii) the approval by the stockholders of the Parent of the
issuance of the Parent Arrangement Shares contemplated by this
Agreement and the Plan of Arrangement shall not have been
obtained at the Parent Meeting or at any adjournment or
postponement of the Parent Meeting taken in accordance with this
Agreement or (iii) any Law permanently restraining,
enjoining or otherwise prohibiting consummation of the
Arrangement shall become final and non-appealable (whether
before or after the approval of the Arrangement Resolution by
the Shareholders);
provided
that the right to terminate
this Agreement pursuant to this
Section 8.2
shall
not be available to any party that is in material breach of its
obligations under this Agreement.
8.3
Termination by the
Company
.
This Agreement may be terminated by
the Company and the Arrangement may be abandoned at any time
prior to Closing if there has been a breach of any
representation, warranty, covenant or agreement made by the
Parent or Canadian Sub in this Agreement, or any such
representation and warranty shall have become untrue in any
respect after the date of this Agreement, such that
Section 7.3(a)
or
Section 7.3(b)
would
not be satisfied and such breach or condition is not curable or,
if curable, is not cured within the earlier of (i) thirty
(30) days after written notice thereof is given by the
Company to the Parent and (ii) the Termination Date.
8.4
Termination by the
Parent
.
This Agreement may be terminated by
the Parent and the Arrangement may be abandoned at any time
prior to the Closing by action of the board of directors of the
Parent if there has been a breach of any representation,
warranty, covenant or agreement made by the Company in this
Agreement, or any such representation and warranty shall have
become untrue in any respect after the date of this Agreement,
such that
Section 7.2(a)
or
Section 7.2(b)
would not be satisfied and such
breach or condition is not curable or, if curable, is not cured
within the earlier of (i) thirty (30) days after
written notice thereof is given by the Parent to the Company and
(ii) the Termination Date.
8.5
Effect of Termination and
Abandonment
.
In the event of termination of
this Agreement and the abandonment of the Arrangement pursuant
to this
Article VIII
, this Agreement shall become
void and of no effect with no liability to any Person on the
part of any party hereto (or of any of its Representatives or
Affiliates);
provided
,
however
, and
notwithstanding anything in the foregoing to the contrary, that
no such termination shall relieve any party hereto of any
liability or damages to the other party hereto resulting from
any willful breach of this Agreement.
ARTICLE IX
INDEMNIFICATION;
SHAREHOLDERS REPRESENTATIVE
9.1
Survival
.
(a) The representations and warranties of the Company in
this Agreement or in any certificate, schedule or any other
instrument delivered by the Company pursuant to this Agreement
or by the Shareholders in the Letters of Transmittal and any
covenants and other agreements and obligations required to be
performed by the Company on or prior to the Closing pursuant to
this Agreement will survive beyond the Closing for a period of
twelve (12) months following the Closing Date (the last day
of such period being the
General Termination
Date
), at which time such representations and
warranties will expire;
provided
,
however
, that,
notwithstanding the foregoing, the representations and
warranties in
Sections
3.1
,
3.2
and
3.3
shall survive indefinitely and the representations
and warranties in
Sections 3.8
,
3.15
, and
3.17
will survive until the expiration of the applicable
statute of limitations (including any extensions thereof);
provided
further
that the representations and
warranties made by the Shareholders in the Letter of Transmittal
will survive indefinitely (such day of expiration, the
Specific Termination Date,
and together with
the General Termination Date, the
Indemnification
Termination Dates
).
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(b) To the extent that they have not been fully performed
at or prior to the Closing Date, the representations and
warranties of the Parent and the Canadian Sub and any covenants,
agreements or other obligations of the Parent or Canadian Sub
required to be performed on or prior to the Closing shall
survive beyond the Closing and continue in full force and effect
until, and including, the General Termination Date.
9.2
Indemnification by the Shareholders
.
Subject to the provisions hereof, the Shareholders will
severally, on a pro rata basis based on the portion of the
Arrangement Consideration received by each of them (each such
Shareholders pro rata share, a
Pro Rata
Share
), (and as to clause (4) below severally),
indemnify the Parent and Canadian Sub and their officers,
directors, employees, agents and affiliates (collectively, the
Parent Indemnified Parties
) and defend and
hold the Parent Indemnified Parties harmless from and against
any loss, liability, damage or expense (
Acquiror
Losses
) (including reasonable legal fees and expenses
and any other reasonable costs or expenses incurred by the
Parent Indemnified Parties whether as a result of being named as
a party in any proceeding or the investigation by the Parent
Indemnified Parties in determining the existence and amount of
any Losses) suffered or incurred by such Parent Indemnified
Parties by reason of or arising out of or resulting from:
(1) any breach of any representation or warranty (without
giving effect to any qualification as to materiality or Company
Material Adverse Effect or similar qualification contained
therein) of the Company or the Shareholders contained in this
Agreement or in any certificate delivered in connection herewith;
(2) any breach, partial or total, of any covenant,
agreement or obligation of the Company contained in this
Agreement to the extent such covenant, agreement or obligation
is required to be performed by the Company on or prior to the
Closing;
(3) the amount (the
Working Capital
Shortfall
), by which any cash dividend after the date
of this Agreement and on or prior to the Closing Date exceeds
the amount of Distributable Capital (determined as provided in
Section 5.1(a)(14) of the Company Disclosure Letter and
assuming for purposes of this clause (3) that current
liabilities includes all Expenses and that current assets does
not include any amount in respect of Broker Warrants; and
(4) any breach by such Shareholder of any representation or
warranty of the Company contained in the Letter of Transmittal
submitted by such Shareholder;
(clauses (1), (2), (3) and (4) above being referred to
herein together as the
Company Breaches
and
clause (4) being separately referred to herein as a
Shareholder Breach
),
provided
that the Shareholders shall not be required to
indemnify or save harmless the Parent from any Company Breaches
unless a Claim Notice in respect thereof shall have been
provided to the Shareholders Representative (and in the
case of a Shareholder Breach, written notice in respect thereof
(a
Shareholder Claim Notice
) shall have been
mailed to the relevant Shareholder at the address provided
therefor in the Letter of Transmittal or such other address of
which the Shareholder has given notice to the Parent in
accordance with
Section 11.1
(or if no such address
is provided, care of the Companys then principal address))
in accordance with this
Article IX
on or prior to
the General Termination Date or, in the case of any claim,
proceeding or other matter based upon a breach of a
representation and warranty, on or prior to the date on which
such representation and warranty terminates pursuant to
Section 9.1
.
9.3
Indemnification by the Parent
.
Subject to the provisions hereof, the Parent will indemnify the
Shareholders (the
Shareholder Indemnified
Parties
) and defend and hold each of them harmless
from and against any loss, liability, damage or expense (the
Shareholders Losses
and, together with the
Acquiror Losses, the
Losses
) (including
reasonable legal fees and expenses and any other reasonable
costs or expenses incurred by the Shareholders whether as a
result of being named as a party in any proceeding or the
investigation by the Shareholders in determining the existence
and
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amount of any Losses) suffered or incurred by the Shareholders
or any of them by reason of or arising out of or resulting from:
(1) any breach by the Parent or Canadian Sub of any
representation or warranty (without giving effect to any
qualification as to materiality or Parent Material Adverse
Effect or similar qualification contained therein) contained in
this Agreement or in any certificate delivered in connection
herewith; and
(2) any breach, partial or total, of any covenant,
agreement or obligation of the Parent or Canadian Sub contained
in this Agreement to the extent such covenant, agreement or
obligation is required to be performed by the Parent or Canadian
Sub on or prior to the Closing;
(clauses (1) and (2) above being referred to herein
together as the
Parent Breaches
),
provided
that the Parent shall not be required to
indemnify or save harmless the Shareholders from any Parent
Breaches unless a Claim Notice in respect thereof shall have
provided been provided to the Parent in accordance with this
Article IX
on or prior to the General Termination
Date.
9.4
Monetary Limits on
Indemnification
.
(a) No claim shall be
made by an Indemnified Party under
Sections 9.2(1)
and
9.2(2)
of this Agreement until the aggregate Losses
in respect of all matters which could be the subject of
indemnification to such Indemnified Party exceeds $1,500,000 in
which case the indemnification liability shall commence from the
first dollar of Losses. The liability of each Shareholder to
indemnify for Losses (including with respect to any Extended
Claims) shall not exceed in aggregate 25% of the Arrangement
Consideration received by such Shareholder (with any shares of
Parent Common Stock or Exchangeable Shares being valued at the
volume weighted average of the daily closing prices for a share
of Parent Common Stock on the principal securities exchange on
which the Parent Common Stock is traded for the ten
(10) consecutive trading days ending on the trading day
immediately preceding the Closing Date). No claim shall be made
by an Indemnified Party under
Sections 9.2(1)
and
9.2(2)
of this Agreement with respect to any matter
unless the aggregate Losses suffered or incurred by the
Indemnified Party with respect to such matter (taken together
with Losses resulting from the same or substantially similar set
of circumstances, acts or occurrences) exceeds $50,000. The
limitations set forth in this Section shall not apply to
indemnification under
Section 9.2(3)
or
Section 9.2(4)
and any Losses (or indemnification
thereof) in respect of the foregoing shall not be taken into
account for purposes of determining whether such limitations
have been met (such Losses,
Excluded Losses
).
(b) All Acquiror Losses for which a Parent Indemnified
Party is entitled to indemnification hereunder (such event being
referred to herein as an
Arrangement Indemnification
Event
), other than Excluded Losses and other than
Acquiror Losses in respect of indemnifiable Claims arising after
the General Termination Date in respect of claims that survive
such date (
Extended Claims
), shall be
satisfied solely through the enforcement by the Parent against
the Pledged Securities of such Shareholder then pledged to the
Parent under the Pledge Agreement following a final decision of
a court of competent jurisdiction or a mutual settlement
agreement entered into between the Parent and the
Shareholders Representative,
it being understood,
however
, that (x) in the event Excluded Losses shall
have been satisfied pursuant to enforcement by the Parent
against the Pledged Securities of a Shareholder under such
Shareholders Pledge Agreement (such Excluded Losses,
Satisfied Excluded Losses
) and an Arrangement
Indemnification Event subsequently occurs, to the extent there
are no longer Pledged Securities under such Pledge Agreement
available to satisfy the applicable Claim, then the Parent
Indemnified Party shall be entitled to enforce its
indemnification rights hereunder directly against the applicable
Shareholder in respect of the Pro Rata Share of such Shareholder
in an amount not to exceed the Satisfied Excluded Losses,
(y) in the event that Parent has enforced its rights under
the Pledge Agreement in respect of any portion of the Pledged
Securities as a result of a claim by Parent against a
Shareholder under the Equity Agreement, the Parent Indemnified
Parties shall thereafter only be entitled to satisfy Acquiror
Losses under this Agreement in respect of the Pledged Securities
then remaining pledged in favor of Parent under the Pledge
Agreement, and, if no Pledged Securities are then pledged to
Parent under the Pledge Agreement, such Shareholders
liability for Acquiror Losses shall terminate, other than with
respect to Excluded Losses and other than in the case of
Extended Claims and (z) in the event a Shareholder does not
enter into a Pledge Agreement, the Parent Indemnified Party
shall be entitled to enforce its indemnification rights
hereunder directly against the applicable Shareholder.
Notwithstanding anything in this Agreement, except with respect
to Excluded Losses, in no event will a Shareholders
obligations to indemnify for Acquiror Losses hereunder
(including with respect to any Extended Claims), taken together
with any Liquidated
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Damages (as defined in the Equity Agreement) paid by such
Shareholder under the Equity Agreement, exceed such
Shareholders Initial Liquidated Damages.
(c) (i) To the extent that there are no more Pledged
Securities of a Shareholder remaining to satisfy a Claim in
respect of Excluded Losses or Extended Losses for which the
Parent Indemnified Parties are entitled to indemnification
against such Shareholder hereunder or (ii) in the case of a
Shareholder that does not execute a Pledge Agreement, the Parent
Indemnified Parties shall be entitled to proceed directly
against such Shareholder with respect to such Claim but shall
not be obligated to do so before satisfying any such Claim as
against any other Shareholder (whether through the Pledged
Securities or directly).
9.5
Exclusivity
.
Except for
claims for specific performance or other injunctive relief from
and after the Closing or in the case of fraud or willful breach,
recourse under this
Article IX
will serve as the
sole and exclusive remedy for breaches of any covenant,
representation, warranty or other provisions in this Agreement.
The parties and the Shareholders will not have any liability
under, or with respect to, this Agreement other than for
indemnification pursuant to this
Article IX
, except
in the case of fraud or willful breach.
9.6
Procedure Related to Direct
Claim
.
(a) If a claim for Losses is to be made by (i) any
Parent Indemnified Parties, or (ii) the Shareholder
Indemnified Parties (each an
Indemnified
Party
), the Indemnified Party agrees to give prompt
written notice (a
Claim Notice
) to the
Shareholders Representative, in the case of a Parent
Indemnified Party or the Parent, in the case of a Shareholder
Indemnified Party (or, in the case of a Shareholder Breach, a
Shareholder Claim Notice to the applicable Shareholder), in each
case on behalf of the parties providing indemnification pursuant
to this
Article IX
(the
Indemnifying
Parties
) of the assertion of any fact, condition,
event, claim, action or proceeding giving rise to such Losses in
respect of which indemnity is sought under this
Article IX
(a
Claim
);
provided
that the failure to give such prompt written
notice shall not affect the rights of the Indemnified Party
except to the extent the Indemnifying Party is actually
prejudiced by such failure. The Claim Notice or Shareholder
Claim Notice, as applicable, shall specify in reasonable detail
(to the extent that the information is available after due
inquiry) the factual basis for the Claim and the amount of the
Claim, if known and shall include a request for indemnification
pursuant to this
Article IX
.
(b) The obligations of an Indemnifying Party to indemnify,
defend and hold harmless an Indemnified Party will terminate on
the General Termination Date or the Specific Termination Date,
as the case may be;
provided
,
however
, that such
obligations to indemnify, defend and hold harmless will not
terminate with respect to any item as to which one or more
Indemnified Parties have, prior to the applicable
Indemnification Termination Date, made a claim by delivering a
Claim Notice or Shareholder Claim Notice, as applicable, in
accordance with this Agreement, and such obligation to
indemnify, defend and hold harmless shall continue until such
time as the claim to which such Claim Notice or Shareholder
Claim Notice, as applicable, relates has been fully quantified
and/or
adjudicated or otherwise resolved.
(c) In the event that an Indemnifying Party objects to any
amount claimed in connection with any Claim specified in any
Claim Notice (or, in the case of a Shareholder Breach, such
Shareholder objects to any amount claimed in connection with any
Claim specified in any Shareholder Claim Notice), the
Indemnifying Party (being the Parent, Shareholders
Representative or the Shareholder, as the case may be) on the
one hand and the Parent on the other hand shall for a period of
not less than sixty (60) days following delivery of the
Claim Notice or Shareholder Claim Notice, as applicable, seek to
resolve the Claim in good faith. In connection therewith, such
Indemnifying Party shall specify in reasonable detail:
(i) any amount set forth in the Claim Notice or the
Shareholder Claim Notice, as the case may be, to which the
Indemnifying Party objects; and (ii) the nature and basis
for such objection.
(d) In the event a Claim Notice or Shareholder Claim Notice
has been delivered by the Parent, then Pledged Securities having
a Fair Market Value equal to the Loss reflected therein, or in
the case of a Third Party Claim, Pledged Securities having a
Fair Market Value equal to the amount of such Third Party Claim,
shall remain subject to the pledge under the Pledge Agreement
and shall not be released from the pledge to either the Parent
or the applicable Shareholder, except in accordance with either
a written settlement agreement between the Parent and the
Shareholders Representative (or, in the case of a Claim
involving a Shareholder Breach, the applicable
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Shareholder) or the final judgment of a court having competent
jurisdiction over such matter, after which time there shall be
deemed to have been a Payment Event under each Pledge Agreement
with respect to Pledged Securities having a Fair Market Value
equal to each such Shareholders Pro Rata Share of the
amount of Losses indemnifiable under this Agreement as set forth
in the written settlement agreement or such judgment, as the
case may be;
provided
,
however
, that in the case
of a Claim relating to a Shareholder Breach, there shall be
deemed to have been a Payment Event under the applicable
Shareholders Pledge Agreement with respect to Pledged
Securities having a Fair Market Value equal to the amount of
Losses indemnifiable under this Agreement as set forth in the
written settlement agreement or such judgment, as the case may
be.
9.7
Procedures Related to Third Party
Claim
.
(a) In the event the Parent or the Shareholders
Representative becomes aware of a third-party claim made by any
Person against an Indemnified Party, which claim the Indemnified
Party believes is reasonably likely to result in an
indemnification claim under this
Article IX
(a
Third Party Claim
), the Indemnified Party
will promptly deliver a Claim Notice with respect to such claim
to the applicable Indemnifying Party, and such Indemnifying
Party will be entitled, at its expense, to undertake control of
the defense thereof by counsel chosen by it that is reasonably
acceptable to the Indemnified Party;
provided
that
(x) if the Third Party Claim seeks an order, injunction or
other equitable remedy, the Indemnifying Party may undertake
control of the defense of such Third Party Claim acting with the
prior written consent of the Indemnified Party, (y) in the
event that the Parent is the Indemnified Party, the Parent shall
have reasonably concluded that there is a reasonable probability
that the Third Party Claim may materially and adversely affect
its business, the Parent may control such defense and
(z) if the Third Party Claim is in respect of Taxes, the
Shareholders Representative pays any amount of Tax
required to be paid in order to dispute such Third Party Claim
in respect of Taxes; and
provided
further
that any
delay on the part of the Indemnified Party to notify the
Indemnifying Party of such Third Party Claim will not relieve
the Indemnifying Party of any liability or obligation hereunder
except to the extent that the Indemnifying Party has actually
been prejudiced as a result of such delay. The Indemnified Party
may participate in (but not control) through its own counsel and
at its expense the defense of a Third Party Claim of which the
Indemnifying Party has undertaken control pursuant to this
Section 9.7(a)
. Notwithstanding the
foregoing and for the avoidance of doubt, the Indemnifying Party
will be liable for the fees and expenses of counsel employed by
the Indemnified Party for any period during which the
Indemnifying Party has not elected to undertake the defense
thereof pursuant to this
Section 9.7(a)
. If the Indemnifying Party
fails or refuses to undertake control of the defense of such
Third Party Claim within thirty (30) days after the Claim
Notice has been delivered to the Indemnifying Party by the
Indemnified Party pursuant to
Section 9.7(a)
, the
Indemnified Party will have the right to undertake the defense
and to compromise and settle such Third Party Claim with counsel
of its own choosing.
(b) If the Indemnifying Party chooses to defend any Third
Party Claim, all the parties hereto will cooperate in the
defense or prosecution of such Third Party Claim,
provided
that, upon the request of the Indemnified Party,
the Indemnifying Party shall enter into a reasonable
confidentiality agreement related to the information to be
provided by the Indemnified Party with respect to such Third
Party Claim.
(c) The Indemnifying Party will not consent to a settlement
of, or the entry of any judgment arising from, any such claim or
legal proceeding, without the prior written consent of the
Indemnified Party (which consent will not be unreasonably
withheld or delayed). The Indemnifying Party shall have no
liability with respect to any settlement or compromise of a
Third Party Claim effected without the prior written consent of
the Indemnifying Party (which consent will not be unreasonably
withheld or delayed).
(d) Each party hereby consents to the non-exclusive
jurisdiction of any court in which a Third Party Claim is
brought for purposes of any claim for indemnification or
reimbursement with respect to such Third Party Claim or the
matters alleged therein, and agrees that process may be served
on such party with respect to any such claim anywhere in the
world.
9.8
Insurance; Tax
Benefits
.
(a) In calculating the amount
of any Loss, there shall be deducted the amount of proceeds
actually received under any indemnification arrangement or any
insurance policy paid to any Indemnified Party, in the case of
any Loss claimed by such Indemnified Party. The reduction
specified in this
Section 9.8
shall not be applied
if to do so would excuse any insurer or indemnitor from any
obligation to cover any Loss.
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(b) The amount of any payment made pursuant to this
Article IX
in respect of an indemnified Loss shall
be reduced to take into account any Tax benefit actually
realized by the Indemnified Party or its Affiliates arising in
connection with the accrual or payment of an indemnified Loss
and shall be increased to take into account any Tax detriment
actually realized by such Indemnified Party or Affiliate arising
in connection with the accrual or receipt of an indemnity
payment. In computing the amount of any Tax benefit, such
Indemnified Party or its Affiliate shall be deemed to recognize
all other items of income, gains, loss, deduction or credit
before recognizing any item arising from the incurrence of
payment of the indemnified Loss. An Indemnified Party or its
Affiliate shall be deemed to have actually realized
a Tax benefit to the extent that, and at such time as, the
amount of Taxes payable by such Indemnified Party or its
Affiliate is increased above or reduced below, as the case may
be, the amount of Taxes such Indemnified Party or its Affiliate
would be required to pay but for the receipt of the indemnity
payment or incurrence or payment of the indemnified Loss.
9.9
Shareholders
Representative
.
(a) Lionel Conacher, or
any successor approved by holders of a majority of the voting
power of the Capital Stock of the Company immediately prior to
the Closing (such Person and any successor or successors being
the
Shareholders Representative
), shall
act as the representative of the Shareholders, and shall be
authorized to act for and on behalf of the Shareholders and to
take any and all actions required or permitted to be taken by
the Shareholders Representative under this Agreement, with
respect to any claims (including the settlement thereof) for
indemnification pursuant to this
Article IX
,
including without limiting the generality of the foregoing, to
(i) give and receive Claim Notices, other notices and
communications, including copies of statement of claims and
other process which may be served in any such action or
proceeding, and the Shareholders hereby direct and authorize the
Shareholders Representative to accept such service on
their behalf, (ii) dispute or resolve any decision from the
Parent in respect of this Agreement or the Transactions,
(iii) institute or defend any and all legal claims, actions
or other proceedings on behalf of the Shareholders in any
relevant jurisdiction in respect of any dispute in respect of
this Agreement or the Transactions, (iv) negotiate, enter
into settlements and compromises of, and comply with orders of
courts with respect to such claims, actions or other proceedings
and (v) to take all actions necessary or desirable in the
judgment of the Shareholders Representative for the
accomplishment of the foregoing.
(b) The Shareholders shall, based on their Pro Rata Share
be responsible for the payment of all fees and expenses incurred
by the Shareholders Representative in performing his or
her duties under this Agreement.
(c) In all matters relating to this
Article IX
,
the Shareholders Representative shall be the only party
entitled to assert the rights of the Shareholders, and the
Shareholders shall be bound by all actions taken by the
Shareholders Representative in his or her capacity as
such. The Parent is authorized to rely conclusively on any such
action of the Shareholders Representative as being the
duly authorized action of the Shareholders and no party shall
have any cause of action against the Parent for any action taken
by the Parent in reliance upon the instructions, decisions or
actions of the Shareholders Representative. The Parent
shall be entitled to rely on all statements, representations,
decisions and actions of the Shareholders Representative
and shall be entitled to provide notice exclusively to the
Shareholders Representative in any circumstance in which
notice is to be provided to the Shareholders or any Shareholder
Indemnified Party or Indemnifying Party .
(d) The Shareholders Representative shall at all
times act in his or her capacity as Shareholders
Representative in a manner that the Shareholders
Representative believes to be in the best interests of the
Shareholders. The Shareholders Representative shall not be
liable, responsible or accountable in damages or otherwise to
any Shareholder or any other Person for any error of judgment,
or any action taken, suffered or omitted to be taken by it in
connection with any claims under this Agreement or in connection
with the Transactions, except in the case of its bad faith,
fraud or willful misconduct. The Shareholders
Representative may consult with legal counsel and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the
advice of such counsel or experts. The Shareholders
Representative shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement.
(e) Each Shareholder shall indemnify and hold harmless the
Shareholders Representative against any loss or damage
suffered by him or her in the discharge of his or her duties
hereunder, except to the extent that such loss or damage shall
have been the result of the bad faith, fraud or willful
misconduct of the Shareholders Representative.
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9.10
Adjustment to Arrangement
Consideration
.
Any payment required under
Article IX
will be treated for income tax purposes
as an adjustment to the Arrangement Consideration.
ARTICLE X
RESERVED
ARTICLE XI
MISCELLANEOUS
11.1
Notices
.
Any notice,
request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder will be
in writing and will be deemed given: (a) on the date
delivered personally to the recipient that is a party hereto,
(b) on the date delivered to the recipient that is a party
hereto by a private courier, (c) on the date sent by
facsimile, with confirmation of transmission, if sent on a
Business Day of the recipient that is a party hereto during
normal business hours of such recipient, if not, then on the
Business Day of such recipient immediately succeeding the date
on which such facsimile was sent, or (d) on the first
Business Day of the recipient that is party hereto after
delivery by or on behalf of the sender to a nationally
recognized overnight courier service if sent using an overnight
delivery service of such courier. Such communications, to be
valid, must be addressed as follows:
If to the Company or the Shareholders Representative, to:
Westwind Capital Corporation
Attn: Lionel Conacher
70 York Street
Toronto, Ontario Canada
Facsimile No.:
(416) 815-1808
With a copy to (which shall not constitute notice):
Davies Ward Phillips & Vineberg LLP
1 First Canadian Place, 44th Floor
Toronto ON Canada M5X 1B1
Attn: William M. Ainley
Facsimile No:
(416) 863-0871
If to the Parent or Canadian Sub, to:
Thomas Weisel Partners Group, Inc.
One Montgomery Street
San Francisco, CA 94104
Attn: Mark P. Fisher
fax:
(415) 364-2694
Facsimile No.:
(415) 364-2695
With a copy to (which shall not constitute notice):
Sullivan & Cromwell LLP
1870 Embarcadero Road
Palo Alto, California 94303
Attn: Scott D. Miller
Facsimile No.:
(650) 461-5700
or to such other address or to the attention of such Person or
Persons as the recipient party has specified by prior written
notice to the sending party (or in the case of counsel, to such
other readily ascertainable business address as
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such counsel may hereafter maintain). If more than one method
for sending notice as set forth above is used, the earliest
notice date established as set forth above will control.
11.2
Amendments and Waivers
.
(a) Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to
this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any
right or privilege hereunder will operate as a waiver thereof,
nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege.
11.3
Successors and
Assigns
.
This Agreement may not be assigned
by any party hereto without the prior written consent of the
other parties. Subject to the foregoing, all of the terms and
provisions of this Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective permitted
successors and assigns.
11.4
Governing Law
.
This
Agreement and the schedules hereto will be governed by and
interpreted and enforced in accordance with the Laws of the
State of New York, without giving effect to any choice of Law or
conflict of Laws rules or provisions (whether of the State of
New York or any other jurisdiction) that would cause the
application of the Laws of any jurisdiction other than the State
of New York, except with respect to any mandatory provisions of
the OBCA governing the Arrangement.
11.5
Consent to
Jurisdiction
.
Except as otherwise provided in
this Agreement, each party hereto irrevocably submits to the
non-exclusive jurisdiction of any state or Federal court located
within The City of New York for the purposes of any suit, action
or other proceeding arising out of this Agreement or any
transaction contemplated hereby, and agrees to commence any such
action, suit or proceeding only in such courts. Each party
further agrees that service of any process, summons, notice or
document by registered mail to such partys respective
address set forth herein shall be effective service of process
for any such action, suit or proceeding. Each party irrevocably
and unconditionally waives any objection to the laying of venue
of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in such courts, and
hereby irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an
inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY
OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
11.6
Counterparts
.
This
Agreement may be executed in counterparts, and any party hereto
may execute any such counterpart, each of which when executed
and delivered will be deemed to be an original and all of which
counterparts taken together will constitute but one and the same
instrument. This Agreement will become effective when each party
hereto will have received a counterpart hereof signed by the
other party hereto. The parties agree that the delivery of this
Agreement and any other agreements and documents at the Closing,
may be effected by means of an exchange of facsimile signatures.
11.7
No Third Party
Beneficiaries.
Other than as expressly
provided in Article IX, no provision of this Agreement is
intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
11.8
Entire Agreement.
This
Agreement, including the Recitals, the exhibits, the schedules
and the other Transaction Agreements and other documents,
instruments and agreements specifically referred to herein or
therein or delivered pursuant hereto or thereto set forth the
entire understanding of the parties hereto with respect to the
Transactions. All of the foregoing are intended to be and hereby
are specifically made a part of this Agreement. Any and all
previous agreements and understandings between or among the
parties regarding the subject matter hereof, whether written or
oral, are superseded by this Agreement, except for the
Confidentiality Agreements which will continue in full force and
effect in accordance with their respective terms.
11.9
Captions.
All captions
contained in this Agreement are for convenience of reference
only, do not form a part of this Agreement, and will not affect
in any way the meaning or interpretation of this Agreement.
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11.10
Severability.
Any
provision of this Agreement which is invalid or unenforceable in
any applicable jurisdiction will be ineffective to the extent of
such invalidity or unenforceability without invalidating or
rendering unenforceable the remaining provisions hereof, and any
such invalidity or unenforceability in any jurisdiction will not
invalidate or render unenforceable such provision in any other
jurisdiction.
11.11
Construction.
For the
purposes of this Agreement, except as otherwise expressly
provided herein or unless the context otherwise requires:
(a) the meaning assigned to each term defined herein will
be equally applicable to both the singular and the plural forms
of such term and vice versa, and words denoting either gender
will include both genders as the context requires,
(b) where a word or phrase is defined herein, each of its
other grammatical forms will have a corresponding meaning,
(c) the terms hereof, herein,
hereunder, hereby and
herewith and words of similar import will, unless
otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement,
(d) when a reference is made in this Agreement to an
Article, Section, paragraph, Exhibit or Schedule, such reference
is to an Article, Section, paragraph, Exhibit or Schedule to
this Agreement unless otherwise specified, (e) the word
include, includes, and
including when used in this Agreement will be deemed
to be followed by the words without limitation,
unless otherwise specified, and (f) a reference to any
party to this Agreement or any other agreement or document will
include such partys predecessors, successors, and
permitted assigns.
11.12
Interpretation.
The
parties hereto have participated jointly in the negotiation and
drafting of this Agreement, and any rule of construction or
interpretation otherwise requiring this Agreement to be
construed or interpreted against any party by virtue of the
authorship of this Agreement will not apply to the construction
and interpretation hereof.
11.13
Time of Essence.
Each
of the parties hereto hereby agrees that, with regard to all
dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.14
Expenses.
Except as
otherwise provided in this Agreement, each party will bear its
own costs and expenses in connection with this Agreement, the
other Transaction Agreements and the Arrangement, and the
transactions contemplated hereby and thereby, including all
legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties, whether or not the
Arrangement or the other Transactions are consummated.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
A-37
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the date first above written.
THOMAS WEISEL PARTNERS GROUP, INC.
Name: Mark Fisher
Title: General Counsel
TWP ACQUISITION COMPANY (CANADA), INC.
Name: Mark Fisher
Title: General Counsel
WESTWIND CAPITAL CORPORATION
Name: Keith Harris
Title: Chief Financial Officer
LIONEL CONACHER,
as Shareholders Representative
A-38
EXHIBIT A
DEFINED
TERMS
$
means United States dollars.
Acquiror Losses
is defined in
Section 9.2.
Acquisition Proposal
means (i) any
proposal or offer with respect to a merger, joint venture,
partnership, consolidation, dissolution, liquidation, tender
offer, recapitalization, reorganization, share exchange,
business combination or similar transaction involving the
Company or any of its Subsidiaries and (ii) any proposal or
offer to acquire in any manner, directly or indirectly, 20% or
more of the total voting power or of any class of Equity
Securities of the Company, or those of any of its Subsidiaries,
or 20% or more of the consolidated total assets (including
Equity Securities of its Subsidiaries) of the Company, in each
case other than the transactions contemplated by this Agreement.
Affiliate
means, with respect to any
specified Person, any other Person directly or indirectly
controlling, controlled by, or under common control with such
specified Person. The term control (including its
correlative meanings, the terms controlled by and
under common control with), as applied to any
Persons, means the possession, directly or indirectly, of the
power to direct (or cause the direction) of the management and
policies of such Person, whether through the ownership of voting
or other securities, by contract, or otherwise.
Agreement
is defined in the Preamble to this
Agreement.
Annual Financial Statements
is defined in
Section 3.5(a).
Arrangement
means substantially the events or
transactions, taken in the sequence indicated, set forth in
Exhibit B
to this Agreement.
Arrangement Consideration
is defined in the
Recitals to this Agreement.
Arrangement Indemnification Event
is defined
in
Section 9.4(b).
Arrangement Resolution
means the special
resolution approving the Plan of Arrangement to be considered at
the Company Meeting, substantially in the form of
Exhibit D.
Articles of Arrangement
means the articles of
arrangement of the Company in respect of the Arrangement that
are required by the OBCA to be filed with the Director after the
Final Order is made in order for the Arrangement to become
effective.
Audit Date
is defined in
Section 3.5(a).
Authorization
means any authorization,
approval, consent, certificate, license or permit of or from any
Governmental Entity or pursuant to any Law.
Broker Warrants
means broker warrants owned
beneficially by the Company or its Subsidiaries as of the date
hereof or granted to the Company or its Subsidiaries after the
date hereof.
Business Day
means a day other than a
Saturday, Sunday or other day on which banks located in
San Francisco, California or Toronto, Ontario, Canada are
required or permitted by Law to close.
CallRightCo
means TWP Holdings Company
(Canada), ULC, a Nova Scotia unlimited liability company.
CallRightCo Common Stock
is defined in
Section 4.4.
Canadian Sub
is defined in the Preamble to
this Agreement.
Canadian Sub Acquisition Shares
means the
Exchangeable Shares issuable by the Canadian Sub under the Plan
of Arrangement, after giving effect to the application of the
allocation procedures set forth therein.
Canadian Sub Common Stock
is defined in
Section 4.4.
Capital Stock
means: (a) in the case of
a corporation, its shares of capital stock, (b) in the case
of a partnership or limited liability company, its partnership
or membership interests or units (whether general or
A-39
limited), and (c) any other interest that confers on a
Person the right to receive a share of the profits and losses
of, or distribution of assets of, the issuing entity.
Cash Payment
means $45,000,000.
Claim
is defined in
Section 9.6(a).
Claim Notice
is defined in
Section 9.6(a
).
Closing
is defined in
Section 2.5(b).
Closing Date
is defined in
Section 2.5(b).
Company
is defined in the Preamble to this
Agreement.
Company Approvals
is defined in
Section 3.4(a).
Company Benefit Plans
is defined in
Section 3.15(a).
Company Board
is defined in the Recitals to
this Agreement.
Company Breach
is defined in
Section 9.2.
Company Class A Common Shares
is defined
in
Section 3.2(a).
Company Common Shares
is defined in
Section 3.2(a).
Company Debt
means all liabilities of the
Company or any of its Subsidiaries for borrowed money, whether
current or funded, secured or unsecured and all obligations of
the Company or any of its Subsidiaries evidenced by bonds,
debentures, notes or similar instruments.
Company Disclosure Letter
is defined in the
Preamble to
Article III.
Company Material Adverse Effect
means a
Material Adverse Effect with respect to the Company.
Company Meeting
means the special meeting of
Shareholders, including any adjournment or postponement thereof,
to be called and held in accordance with the Interim Order to
consider the Arrangement Resolution.
Company Recommendation
is defined in
Section 3.3(b).
Company Shares
is defined in
Section 3.2(a).
Conacher Employment Agreement
means the
employment agreement of even date herewith and to be effective
as of the Closing by and between the Parent and Lionel Conacher.
Confidentiality Agreements
means the
Confidentiality Agreements, dated as of August 10, 2007 and
September 6, 2007, respectively, between the Parent and the
Company.
Consideration Shares
means the aggregate
Exchangeable Shares and shares of Parent Common Stock to be
delivered by Canadian Sub and Parent hereunder pursuant to the
Plan of Arrangement,
it being understood, however
, that
the aggregate number of Exchangeable Shares and shares of Parent
Common Stock comprising the Consideration Shares shall equal
7,009,112.
Contract
is defined in
Section 3.4(b).
Court
means the Ontario Superior Court of
Justice (Commercial List).
Director
means the Director appointed
pursuant to Section 278 of the OBCA.
Environmental Law
means any national,
federal, provincial, state or local Law relating to:
(A) the protection, investigation or restoration of the
environment, health, safety, or natural resources, (B) the
handling, use, presence, disposal, release or threatened release
of any Hazardous Substance or (C) noise, odor, indoor air,
employee exposure, wetlands, pollution, contamination or any
injury or threat of injury to persons or property relating to
any Hazardous Substance.
A-40
Equity Agreement
means the Equity Agreement,
in the form of
Exhibit H
attached hereto to be
entered into between the Parent and each of the Shareholders,
provided
, that in the case of a Shareholder receiving
only cash under the Arrangement, Equity Agreement
refers to the agreement to be entered into with such Shareholder
contemplated by
Section 6.13.
Equity Securities
means (a) shares of
Capital Stock, and (b) options, warrants, redemption
rights, repurchase rights, securities, calls or other rights
convertible into, or exercisable or exchangeable for, directly
or indirectly, or otherwise entitling any Person to acquire,
directly or indirectly, shares of Capital Stock.
Exchange Act
means the United States
Securities and Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
Exchangeable Shares
means the non-voting
exchangeable shares in the capital stock of Canadian Sub, having
substantially the rights, privileges, restrictions and
conditions set forth in
Annex A
to the Plan of
Arrangement.
Exchangeable Share Support Agreement
means
the support agreement, substantially in the form of
Exhibit L
hereto, entered into by and among the
Parent, CallRightCo and Canadian Sub on or prior to the Closing
Date.
Excluded Losses
is defined in
Section 9.4(a).
Expenses
means (a) all of the costs and
expenses incurred by the Company in connection with this
Agreement, the Arrangement and the other transactions
contemplated by this Agreement (including the fees and expenses
of the Companys outside accounting and legal advisors,
including Davies Ward Phillips & Vineberg LLP), paid
or payable by the Company for services up to and including the
Effective Time; and (b) the aggregate of any amounts which
the Company may as a result of the completion of the
Transactions become obligated to pay to Persons who prior to the
Closing Date have ceased to be Shareholders and have transferred
their Company Shares to the Company pursuant to the
Companys Organizational Documents and the
Shareholders Agreement or to those individuals listed on
Section 3.2(b) of the Company Disclosure Letter, not to
exceed the amount by which the value of the Arrangement
Consideration exceeds the amount originally paid by the Company
to acquire such Persons Company Shares.
Extended Claim
is defined in
Section 9.4(b).
Final Order
means the final order of the
Court approving the Arrangement as such order may be amended by
the Court at any time prior to the Closing or, if appealed,
then, unless such appeal is withdrawn or denied, as affirmed or
as amended on appeal, in each case in the form reasonably
approved by the Parent and the Company.
Financial Statements
is defined in
Section 3.5(a).
GAAP
means (i) with regard to the
Company, Canadian generally accepted accounting principles, and
(ii) with regard to the Parent, United States generally
accepted accounting principles.
General Termination Date
is defined in
Section 9.1(a)
Governmental Entity
is defined in
Section 3.4(a).
Hazardous Substance
means any substance that
is: (A) listed, classified or regulated pursuant to any
Environmental Law, (B) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive material or radon, and
(C) any other substance which may be the subject of
regulatory action by any Governmental Entity in connection with
any Environmental Law.
Indebtedness
means any of the following:
(a) any indebtedness for borrowed money; (b) any
obligations evidenced by bonds, debentures, notes, or other
similar instruments; (c) any obligations to pay the
deferred purchase price of property or services, except trade
accounts payable and other current liabilities arising in the
ordinary course of business; (d) any indebtedness created
or arising under any conditional sale or other title retention
A-41
agreement with respect to acquired property; (e) any
obligations, contingent or otherwise, under acceptance credit,
letters of credit, or similar facilities; and (f) any
guaranty of any of the foregoing.
Indemnification Termination Dates
is defined
in
Section 9.1(a).
Indemnified Party
is defined in
Section 9.6(a).
Indemnifying Party
is defined in
Section 9.6(a).
Initial Liquidated Damages
means, with
respect to a Shareholder, the dollar amount representing the
Initial Liquidated Damages communicated to such Shareholder
pursuant to the Equity Agreement.
Insurance Policies
is defined in
Section 3.18.
Intellectual Property
means all
(i) trademarks, service marks, brand names, certification
marks, collective marks, d/b/as, Internet domain names,
logos, symbols, trade dress, trade names, and other indicia of
origin, all applications and registrations for the foregoing,
and all goodwill associated therewith and symbolized thereby,
including all renewals of same; (ii) inventions and
discoveries, whether patentable or not, and all patents,
registrations, invention disclosures and applications therefor,
including divisions, continuations,
continuations-in-part
and renewal applications, and including renewals, extensions and
reissues; (iii) published and unpublished works of
authorship, whether copyrightable or not (including databases
and other compilations of information), copyrights therein and
thereto, and registrations and applications therefor, and all
renewals, extensions, restorations and reversions thereof; and
(iv) all other intellectual property or proprietary rights.
Interim Financial Statements
is defined in
Section 3.5(a).
Interim Order
means the interim order of the
Court as contemplated by
Section 2.4
, providing for,
among other things, the calling and holding of the Company
Meeting, as the same may be amended by the Court, in each case
in the form reasonably approved by the Parent and the Company.
ITA
is defined in
Section 6.12.
IT Assets
means computers, computer software,
firmware, middleware, servers, workstations, routers, hubs,
switches, data communications lines, and all other information
technology equipment, and all associated documentation.
Investment Canada Act
means the
Investment
Canada Act
, R.S.C. 1985, c.28.
Knowledge of the Company
means the actual
knowledge of Lionel Conacher, Keith Harris, and Julie Eisenstat
after reasonable inquiry or investigation.
Knowledge of the Parent
means the actual
knowledge of Thomas Weisel, David Baylor or Mark Fisher after
reasonable inquiry or investigation.
Law
means any national, federal, state,
provincial, local or foreign statute, ordinance or common law or
any rule, regulation or standard, in each case having the force
of law, of any Governmental Entity.
Leased Real Property
is defined in
Section 3.11(b).
Letter of Transmittal
means the letter of
transmittal forwarded by the Company to Shareholders in
connection with the Arrangement to be completed and signed by
each such Shareholder as a condition to receipt of such
Shareholders portion of the Arrangement Consideration
(determined in accordance with the Plan of Arrangement).
Lien
is defined in
Section 3.2(c).
Losses
is defined in
Section 9.3.
made available
, in respect of any document,
refers to the posting of such document on the electronic data
room maintained on behalf the Company as of, 6:00 p.m.,
San Francisco time, on the date that is two calendar days
prior to the date of this Agreement
, it being understood
,
however, that a complete list of the documents posted on such
electronic data room is set forth on
Annex A
to the
Company Disclosure Letter.
A-42
Material Adverse Effect
means any result,
occurrence, change, event, violation, inaccuracy, circumstance,
fact or effect (each, an
Effect
) that
individually or in the aggregate with any such other Effects
(regardless of whether or not such Effect constitutes a breach
of any representation or warranty in this Agreement), is or
would reasonably be expected to (A) be material and adverse
to the assets, liabilities, financial condition, business or
results of operations of such Person and its subsidiaries, taken
as a whole, or (B) prevent, materially delay or materially
impair the consummation of the transactions contemplated by this
Agreement, except in the case of clause (A) any such Effect
(i) resulting from any change in applicable law,
(ii) resulting from any change in global, national or
regional political conditions or in general economic, business,
regulatory, political or market conditions or in national or
global financial or capital markets, (iii) resulting from
any change affecting generally the investment banking industry
in the United States or Canada, (iv) resulting from any
natural disaster, (v) relating to a change in the market
trading price or trading volume of shares of that person, other
than as a result of a Material Adverse Effect and
(vi) resulting from the public announcement or pendency of
the transactions contemplated by this Agreement; provided that
with respect to clauses (ii), (iii) and (iv), such matter
does not have a materially disproportionate effect on such
Person and its subsidiaries, taken as a whole, relative to other
comparable companies and entities operating in the industries in
which the Person
and/or
its
subsidiaries operate.
Material Contract
is defined in
Section 3.13(a)(8).
Non-Resident of Canada
means (i) a
person (other than a partnership) who is a non-resident of
Canada for the purposes of the ITA or (ii) a partnership
that is not a Canadian partnership for the purposes of the ITA.
OBCA
means the Ontario Business Corporations
Act, as amended from time to time.
Organizational Documents
means, with respect
to any entity, the Certificate of Incorporation, the Articles of
Incorporation, By-laws, Articles of Organization, Certificate of
Limited Partnership, Certificate of Formation, partnership
agreement, limited liability company agreement, formation
agreement, joint venture agreement, or other similar
constitutive documents of such entity (in each case, as amended
through the date of this Agreement).
Parent
is defined in the Preamble to this
Agreement.
Parent Approvals
is defined in
Section 4.5(a).
Parent Arrangement Shares
means the shares of
common stock, par value $0.01 per share, of the Parent to be
delivered by the Canadian Sub or CallRightCo either directly in
exchange for Company Common Shares and Company Class A
Common Shares or in connection with the exchange of Canadian Sub
Acquisition Shares in accordance with the terms and conditions
of such Canadian Sub Acquisition Shares.
Parent Breaches
is defined in
Section 9.3.
Parent Common Stock
is defined in
Section 4.3.
Parent Indemnified Parties
is defined in
Section 9.2.
Parent Material Adverse Effect
means a
Material Adverse Effect with respect to Parent.
Parent Meeting
is defined in
Section 4.2(a).
Parent Recommendation
is defined in
Section 4.2(b).
Parent Reports
is defined in
Section 4.6(a).
Person
means an individual, a corporation, a
partnership, a limited liability company, a trust, an
unincorporated association, a Governmental Entity or any agency,
instrumentality or political subdivision of a Governmental
Entity, or any other entity or body.
Plan of Arrangement
means the plan of
arrangement in substantially the form of
Exhibit B
and any amendments or variations made thereto in accordance with
this Agreement, the Plan of Arrangement or made at the direction
of the Court in the Final Order and consented to by the Parent
and the Company, each acting reasonably.
Pledge Agreements
means the Pledge Agreements
in the form of
Exhibit I
attached hereto, between
the Parent and each of the Shareholders.
A-43
Pledged Securities
in respect of a
Shareholder has the meaning given to such term in the Pledge
Agreement to which such Shareholder is a party.
Pro Rata Share
is defined in
Section 9.2.
Proxy Statement
is defined in
Section 6.5.
Representative
is defined in
Section 5.2(a).
Required Company Information
means that
information concerning the Company set forth on
Schedule II.
Requisite Company Vote
is defined in
Section 2.4(b).
Requisite Parent Vote
is defined in
Section 4.2(a).
Satisfied Excluded Losses
is defined in
Section 9.4(b).
SEC
means the U.S. Securities and
Exchange Commission.
Section 85 Election
is defined in
Section 6.12.
Securities Act
means the United States
Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
Self-Regulatory Organization
means any
commission, board, agency or body in any state, province or
other jurisdiction that is not a governmental entity but is
charged with the supervision or regulation of brokers, dealers,
securities underwriting or trading, stock exchanges, commodities
exchanges, ECNs, insurance companies or agents, investment
companies or investment advisers, including the Investment
Dealers Association of Canada and the Financial Industry
Regulatory Authority.
Shareholder Breach
is defined in
Section 9.2.
Shareholder Claim Notice
is defined in
Section 9.2.
Shareholder Indemnified Parties
is defined in
Section 9.3.
Shareholder List
is defined in
Section 3.2(b).
Shareholders
means holders of the Company
Common Shares and Company Class A Common Shares.
Shareholders Agreement
is defined in
Section 2.4(f).
Shareholders Losses
is defined in
Section 9.3.
Shareholders Representative
is defined
in
Section 9.9(a).
Specific Termination Date
is defined in
Section 9.1(a).
Subsidiary
means, with respect to any Person,
any other Person of which at least a majority of the securities
or ownership interests having by their terms ordinary voting
power to elect a majority of the board of directors or other
persons performing similar functions is directly or indirectly
owned or controlled by such Person or by one or more of its
Subsidiaries.
Tax
or
Taxes
means
(i) any and all taxes, duties, fees, excises, premiums,
assessments, imposts, levies and other charges or assessments of
any kind whatsoever imposed by any Governmental Entity, whether
computed on a separate, consolidated, unitary, combined or other
basis, including those levied on, or measured by, or described
with respect to, income, gross receipts, profits, gains,
windfalls, capital, capital stock, production, recapture,
transfer, land transfer, license, gift, occupation, wealth,
environment, net worth, indebtedness, surplus, sales, goods and
services, harmonized sales, use, value-added, excise, special
assessment, stamp, withholding, business, franchising, real or
personal property, health, employee health, payroll,
workers compensation, employment or unemployment,
severance, social services, social security, education, utility,
surtaxes, customs, import or export, and including all license
and registration fees and all employment insurance, health
insurance and government pension plan premiums or contributions;
(ii) all interest, penalties, fines, additions to tax or
other additional amounts imposed by any Governmental Entity on
or in respect of amounts of the type described in
clause (i) above or this
A-44
clause (ii); (iii) any liability for the payment of any
amounts of the type described in clauses (i) or
(ii) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period; and
(iv) any liability for the payment of any amounts of the
type described in clauses (i) or (ii) as a result of
any express or implied obligation to indemnify any other Person
or as a result of being a transferee or successor in interest to
any party.
Taxing Authority
means any national, federal,
possession, state, county, city, municipal, local, foreign or
other government, or any political subdivision, agency,
department, administration or court of any such government,
which has the authority to impose, levy, assess, or collect
Taxes, to administer Taxes, to examine Tax Returns or to engage
in similar or related activities.
Tax Return
means all returns and reports
(including elections, declarations, disclosures, schedules,
estimates and information returns) relating to Taxes that are
required to be filed with or made available to a Taxing
Authority in any jurisdiction by the Company or any of its
Subsidiaries.
Termination Date
is defined in
Section 8.2.
Third Party Claim
is defined in
Section 9.7(a).
Transaction Agreements
means this Agreement,
the Voting Agreements, the Plan of Arrangement, the Equity
Agreement, the Pledge Agreements, the Letters of Transmittal,
the Voting and Exchange Trust Agreement, the Exchangeable
Share Support Agreement and all other agreements entered into in
connection with the Transactions and all certificates or other
instruments delivered in connection therewith, whether
contemplated hereunder or thereunder.
Transactions
means, collectively, the
transactions contemplated herein and in the Plan of Arrangement.
Trustee
means the trustee acting under the
Voting and Exchange Trust Agreement and any successor
trustee appointed under the Voting and Exchange
Trust Agreement.
Voting Agreement
means the voting agreement
in substantially the form of
Exhibit F
to be entered
into on or prior to the date of this Agreement between the
Parent and certain Shareholders.
Voting and Exchange Trust Agreement
means the voting and exchange trust agreement in substantially
the form of
Exhibit K
attached hereto to be entered
into on the Closing Date among the Parent, Canadian Sub and the
Trustee.
Voting Commitment
is defined in the Recitals
to this Agreement.
Voting Share
means the share of Special
Voting Preferred Stock of the Parent, par value $0.01 per share,
having the rights, privileges and preferences set forth in the
Certificate of Designations, substantially in the form set forth
on
Exhibit J
hereto.
Working Capital Shortfall
is defined in
Section 9.2(3).
A-45
Annex
B
EXHIBIT B
PLAN OF
ARRANGEMENT
UNDER SECTION 182
OF THE ONTARIO BUSINESS CORPORATIONS ACT
ARTICLE I
INTERPRETATION
1.1
Definitions
.
In this
Plan of Arrangement, unless there is something in the subject
matter or context inconsistent therewith, the following terms
shall have the respective meanings set out below and grammatical
variations of such terms shall have corresponding meanings:
(a)
Affiliate
means, with respect to any
specified Person, any other Person directly or indirectly
controlled by, or under common control with such specified
Person. The term control (including its correlative
meanings, the terms controlled by and under
common control with), as applied to any Persons, means the
possession, directly or indirectly, of the power to direct (or
cause the direction) of the management and policies of such
Person, whether through the ownership of voting or other
securities, by contract, or otherwise;
(b)
Applicable Portion
means the pro
rata portion of the Arrangement Consideration payable pursuant
to
Section 2.3(b)
for each Company Share held by a
Shareholder referred to in such Section based on the aggregate
number of Company Shares to be acquired by Canadian Sub pursuant
to such Section;
(c)
Arrangement
means the arrangement
involving the Company, its shareholders, Parent and Canadian Sub
under Section 182 of the OBCA on the terms and subject to
the conditions set out in this Plan of Arrangement, subject to
any amendments or variations thereto made in accordance with
Section 5.1
or made at the direction of the Court in
the Final Order;
(d)
Arrangement Agreement
means the
Arrangement Agreement, dated as of September 30, 2007,
among Parent, Canadian Sub, the Company and the
Shareholders Representative, as the same may be amended,
modified or supplemented from time to time;
(e)
Arrangement Consideration
means the
aggregate consideration payable in connection with the
Arrangement comprised of the Cash Payment and the Consideration
Shares;
(f)
Arrangement Resolution
means the
special resolution approving the Plan of Arrangement to be
considered at the Company Meeting, substantially in the form
attached as Exhibit D to the Arrangement Agreement;
(g)
Articles of Arrangement
means the
articles of arrangement of the Company in respect of the
Arrangement that are required by the OBCA to be sent to the
Director after the Final Order is made in order for the
Arrangement to become effective;
(h)
Business Day
shall have the meaning
set forth in the Arrangement Agreement;
(i)
CallRightCo
means TWP Holdings
Company (Canada), ULC, an unlimited liability company organized
under the laws of the Province of Nova Scotia and a wholly-owned
subsidiary of Parent;
(j)
Canadian Sub
means TWP Acquisition
Company (Canada), Inc., a corporation existing under the OBCA
and a wholly-owned subsidiary of CallRightCo;
(k)
Cash Allocation Percentage
means 30%
in respect of each Shareholder referred to in
Section 2.3(b), provided that the Cash Allocation
Percentage shall be (i) 18% in respect of Company Shares
held directly or indirectly by Lionel Conacher, (ii) 100%
in respect of Company Shares held directly or indirectly by
George Fowlie and (iii) 70% in respect of Company Shares
held directly or indirectly by Thomas Allen, subject to
adjustment prior to Closing pursuant to Section 6.11 of the
Arrangement Agreement;
B-1
(l)
Cash Payment
means $45 million
minus the Excluded Amount;
(m)
Certificate of Arrangement
means the
certificate of arrangement giving effect to the Arrangement to
be issued by the Director pursuant to subsection 183 of the OBCA
after the Articles of Arrangement have been filed;
(n)
Company
means Westwind Capital
Corporation, a corporation existing under the OBCA;
(o)
Company Common Shares
means the
common shares in the capital of the Company;
(p)
Company Meeting
means the special
meeting of the shareholders of the Company to be called and held
for the purpose of considering the Arrangement Resolution and
any adjournments or postponements thereof;
(q)
Company Shares
means Company Common
Shares and Class A Common Shares of the Company;
(r)
Consideration Shares
means an
aggregate number of Exchangeable Shares and shares of Parent
Common Stock equal to 7,009,112;
(s)
Court
means the Ontario Superior
Court of Justice (Commercial List);
(t)
Depositary
means such person as is
appointed by Parent and the Company as the depositary for the
purpose of, among other things, exchanging the certificates
representing Company Shares for Consideration Shares and cash in
connection with the Arrangement;
(u)
Director
means the Director
appointed pursuant to Section 278 of the OBCA;
(v)
Dividend Amount
has the meaning set
forth in the Exchangeable Share Provisions;
(w)
Effective Date
means the date shown
on the Certificate of Arrangement;
(x)
Effective Time
means 12:01 a.m.
(Toronto time) on the Effective Date;
(y)
Encumbrances
means hypothecs,
pledges, liens, charges, security interests, leases, title
retention agreements, mortgages, restrictions, easements,
rights-of-way, title defects, options or adverse claims or
encumbrances of any kind or character whatsoever;
(z)
Equity Agreement
shall have the
meaning set forth in the Arrangement Agreement;
(aa)
Exchangeable Shares
means the
non-voting exchangeable shares in the capital of Canadian Sub
having the rights, privileges, restrictions and conditions set
forth in the Exchangeable Share Provisions;
(bb)
Exchangeable Share Provisions
means
the rights, privileges, restrictions and conditions attaching to
the Exchangeable Shares, which rights, privileges, restrictions
and conditions shall be substantially as set out in
Annex A
hereto;
(cc)
Excluded Amount
shall have the
meaning set forth in
Section 2.3(b)
;
(dd)
Final Order
means the final order
of the Court approving the Arrangement as such order may be
amended by the Court at any time prior to the Effective Time or,
if appealed, then, unless such appeal is withdrawn or denied, as
affirmed or as amended on appeal;
(ee)
Interim Order
means the interim
order of the Court as contemplated by
Section 2.3
of
the Arrangement Agreement, providing for, among other things,
the calling and holding of the Company Meeting, as the same may
be amended by the Court;
(ff)
ITA
means the Income Tax Act
(Canada);
(gg)
Letter of Transmittal
means the
letter of transmittal to be completed and signed by each
Shareholder as a condition to receipt of such Shareholders
portion of the Arrangement Consideration;
(hh)
Liquidation Amount
has the meaning
set forth in the Exchangeable Share Provisions;
(ii)
Liquidation Call Purchase Price
shall have the meaning set forth in
Section 6.1;
B-2
(jj)
Liquidation Call Right
shall have
the meaning set forth in
Section 6.1;
(kk)
Non-Resident of Canada
means
(i) a Person (other than a partnership) who is a a
non-resident of Canada for the purposes of the ITA or
(ii) a partnership that is not a Canadian partnership for
the purposes of the ITA;
(ll)
OBCA
means the Ontario Business
Corporations Act and the regulations thereunder;
(mm)
Parent
means Thomas Weisel Partners
Group, Inc., a corporation existing under the laws of the State
of Delaware;
(nn)
Parent Common Stock
means the
common stock of Parent, par value $0.01 per share;
(oo)
Person
shall have the meaning set
forth in the Arrangement Agreement;
(pp)
Plan of Arrangement
shall have the
meaning set forth in
Section 1.2
;
(qq)
Pledge Agreement
shall have the
meaning set forth in the Arrangement Agreement;
(rr)
Redemption Call Right
shall
have the meaning set forth in
Section 6.2(a)
;
(ss)
Redemption Call Purchase Price
shall have the meaning set forth in
Section 6.2(a)
;
(tt)
Redemption Date
has the
meaning set forth in the Exchangeable Share Provisions;
(uu)
Share Allocation Percentage
means
70% in respect of each Shareholder referred to in
Section 2.3(b)
, provided that the Share Allocation
Percentage shall be (i) 82% in respect of Company Shares
held directly or indirectly by Lionel Conacher, (ii) 0% in
respect of Company Shares held directly or indirectly by George
Fowlie and (iii) 30% in respect of Company Shares held
directly or indirectly by Thomas Allen, subject to adjustment
prior to Closing pursuant to Section 6.11 of the
Arrangement Agreement;
(vv)
Shareholders
means the registered
holders of Company Shares and, where the context so provides,
includes joint holders of such Company Shares;
(ww)
Shareholders Agreement
has the
meaning given to such term in the Arrangement Agreement;
(xx)
Shareholders Representative
means Lionel Conacher or any successor thereto pursuant to the
Arrangement Agreement;
(yy)
Sixth Anniversary
means the sixth
anniversary of the Effective Date;
(zz)
Transfer Agent
has the meaning set
forth in the Exchangeable Share provisions; and
(aaa)
Transfer Value
means an amount per
Company Share determined in accordance with Schedule B of
the Shareholders Agreement based on the Shareholders Equity (as
defined therein) as at the date of the Arrangement Agreement
multiplied by 1.4, which amount is equal to [CDN$4.87]. [Note:
Bracketed amount as at July 31, 2007. Final amount to be
inserted based on financial statements for period ended
September 30, 2007.]
1.2
Interpretation Not Affected by Headings,
Etc
.
The division of this Plan of Arrangement
into articles, sections and other portions and the insertion of
headings are for reference purposes only and shall not affect
the interpretation of this Plan of Arrangement. Unless otherwise
indicated, any reference in this Plan of Arrangement to
Article or section followed by a number
refers to the specified Article or section of this Plan of
Arrangement. The terms this Plan of Arrangement,
hereof, herein, hereunder
and similar expressions refer to this Plan of Arrangement,
including any appendices hereto, and any amendments, variations
or supplements hereto made in accordance with the terms hereof
or the Arrangement Agreement or made at the direction of the
Court in the Final Order and do not refer to any particular
Article, section or other portion of this Plan of Arrangement.
1.3
Rules of
Construction
.
In this Plan of Arrangement,
unless the context otherwise requires, (a) words importing
the singular number include the plural and vice versa,
(b) words importing any gender include all genders, and
(c) include, includes and
including shall be deemed to be followed by the
words without limitation.
B-3
1.4
Date of Any Action
.
In
the event that any date on which any action is required to be
taken hereunder by any of the parties hereto is not a Business
Day, such action shall be required to be taken on the next
succeeding day which is a Business Day.
1.5
Time
.
Time shall be of
the essence in every matter or action contemplated hereunder.
All times expressed herein or in the Letter of Transmittal are
local time (Toronto, Ontario) unless otherwise stipulated herein
or therein.
1.6
Currency
.
Unless
otherwise stated, all references in this Plan of Arrangement to
sums of money and payments to be made hereunder are expressed in
lawful money of the United States of America.
1.7
Statutes
.
Any reference
to a statute includes all rules and regulations made pursuant to
such statute and, unless otherwise specified, the provisions of
any statute or regulation or rule which amends, supplements or
supersedes any such statute, regulation or rule.
ARTICLE II
ARRANGEMENT
2.1
Plan of
Arrangement
.
This Plan of Arrangement
constitutes an arrangement as referred to in Section 182 of
the OBCA and is made pursuant to, and is subject to the
provisions of, the Arrangement Agreement.
2.2
Binding Effect
.
This
Plan of Arrangement, upon the filing of the Articles of
Arrangement and the issuance of the Certificate of Arrangement,
will become effective at, and be binding at and after, the
Effective Time on (i) the Company, (ii) Parent and
Canadian Sub, (iii) the Shareholders and (iv) all
other former and present parties to the Shareholders Agreement.
2.3
Arrangement
.
Commencing
at the Effective Time, the following shall occur and shall be
deemed to occur in the following order without any further act
or formality, in each case, effective at the Effective Time:
(a) the Company shall be deemed to have given a transfer
notice pursuant to Section 3.7 of the Shareholders
Agreement to the holder of each Company Share who has not
executed and delivered the Equity Agreement and a Pledge
Agreement (or, in the case of a Shareholder whose Share
Allocation Percentage is 0%, the Equity Agreement), and each
such Company Share shall be cancelled without any further act or
formality, and in exchange therefor the Shareholder shall be
entitled to receive from Canadian Sub a cash amount equal
to the Transfer Value in respect of such Company Share (the
aggregate amount payable by the Company pursuant to this
Section 2.3(a) being referred to as the
Excluded
Amount
), less any applicable taxes required to be
withheld under applicable law, and the name of such Shareholder
shall be removed from the register of Shareholders of the
Company and neither the Company, the Parent, Canadian Sub,
such Shareholder nor any other Person shall have any further
obligations or rights whatsoever, whether arising prior to, on
or after the Effective Date, in respect of such Company Share
(including for greater certainty under the Shareholders
Agreement and Article IX of the Arrangement Agreement);
(b) each Company Share held by a Shareholder who has
executed and delivered the Equity Agreement and a Pledge
Agreement (or, in the case of a Shareholder whose Share
Allocation Percentage is 0%, the Equity Agreement) shall be
transferred by such Shareholder, without any further act or
formality, and free and clear of all Encumbrances, to Canadian
Sub in exchange for the payment by Canadian Sub to such
Shareholder of the Applicable Portion of the Arrangement
Consideration, allocated between cash and Exchangeable Shares or
shares of Parent Common Stock, based on the Cash Allocation
Percentage and the Share Allocation Percentage, respectively,
less any applicable taxes required to be withheld under
applicable law, and the name of such Shareholder shall be
removed from the register of Shareholders of the Company and
Canadian Sub will recorded as the registered holder of such
Company Share and shall thereafter be deemed to be the legal and
beneficial owner of such Company Share;
(c) Consideration Shares received by a Shareholder pursuant
to
Section 2.3(b)
having a Fair Market Value (as
defined in the Pledge Agreement of such Shareholder) determined
as at the Effective Date equal to
B-4
such Shareholders Initial Liquidated Damages (as defined
in the Equity Agreement), free and clear of all Encumbrances,
shall be pledged to Parent pursuant to and in accordance with
the Pledge Agreement of such Shareholder; and
(d) the Shareholders Agreement shall be terminated and all
rights and obligations of the Company, the Shareholders and any
other former or present parties thereto before or at the
Effective Time shall be forever released, discharged and
terminated.
2.4
Election Procedure
.
(a) Each Shareholder referred to in
Section 2.3(b)
will be entitled to elect in his, her
or its Letter of Transmittal to receive that portion of the
Arrangement Consideration that is not payable in cash in the
form of Exchangeable Shares or shares of Parent Common Stock.
Each such Shareholder in respect of which an effective election
in the Letter of Transmittal has not been made prior to the
Business Day immediately preceding the Effective Date will be
deemed to have made an election to receive the non-cash portion
of the Arrangement Consideration payable to such Shareholder in
Exchangeable Shares.
(b) If requested by a Shareholder who elects or is deemed
to elect to receive a portion of the Arrangement Consideration
in the form of Exchangeable Shares on the disposition by such
holder of Company Shares pursuant to the Arrangement, Canadian
Sub shall elect jointly with any such Shareholder pursuant to
subsection 85(1) of the ITA (and any analogous provisions of
applicable provincial income tax law) (a
Section 85 Election
), in the prescribed
form and within the prescribed time for purposes of the ITA (or
applicable provincial income tax law), and shall therein agree
with respect to the disposition by such Shareholder of Company
Shares that such Shareholders proceeds of disposition and
Canadian Subs cost of acquiring such Company Shares shall
be such amount as shall be determined by the Shareholder within
the limits prescribed by the ITA (or applicable provincial
income tax law). Such Shareholder and Canadian Sub shall file
any such election as required by the ITA and the regulations
thereunder (or applicable provincial income tax law) so that
such election shall have full force and effect for purposes of
the ITA (or applicable provincial income tax law).
(c) The Depositary, in consultation with the Parent and the
Company, shall make all computations to give effect to
Section 2.3
and this
Section 2.4.
ARTICLE III
RIGHTS OF
DISSENT
3.1
Rights of
Dissent
.
Holders of Company Shares shall have
no rights of dissent with respect to Company Shares in
connection with the Arrangement.
ARTICLE IV
CERTIFICATES
AND PAYMENTS
4.1
Exchange of Certificates for Arrangement
Consideration
.
(a) At or before the Effective Time, Canadian Sub shall,
and Parent shall cause Canadian Sub to, deposit the Arrangement
Consideration and Excluded Amount, net of applicable taxes
required by law to be withheld by Canadian Sub, with the
Depositary for the benefit of the Shareholders in connection
with the Arrangement.
(b) Upon transfer and delivery to the Depositary of a
Letter of Transmittal and certificates that, immediately prior
to the Effective Time, represented Company Shares duly endorsed
in blank for transfer or accompanied by duly executed stock
transfer powers by the holder of record, the holder of such
delivered certificates shall be entitled to receive in exchange
therefor, and the Depositary shall deliver to such holder, a
cheque issued by the Depositary representing that amount of
cash, and certificates representing the Exchangeable Shares or
shares of Parent Common Stock, which such holder has the right
to receive pursuant to the Arrangement.
(c) Until surrendered as contemplated by this
Section 4.1
, each certificate which immediately
prior to the Effective Time represented Company Shares shall be
deemed after the Effective Time to represent only the right to
B-5
receive upon such surrender the Applicable Portion in respect of
such Company Shares. Any such certificate formerly representing
Company Shares not duly surrendered on or before the Sixth
Anniversary shall cease to represent a claim by or interest of
any former Shareholder of any kind or nature against or in the
Company, Parent or Canadian Sub.
(d) On the Sixth Anniversary, the portion of the
Arrangement Consideration payable to such former Shareholder in
Exchangeable Shares (or shares of Parent Common Stock issued in
exchange therefor) or shares of Parent Common Stock, as
applicable, to which such former Shareholder was entitled under
the Arrangement shall be deemed to have been surrendered and
forfeited to Parent, for no consideration.
(e) Any cash payment made by way of check (or other form of
immediately available funds) by the Depositary on behalf of
Canadian Sub that has not been deposited or has been returned to
the Depositary or that otherwise remains unclaimed, in each
case, on or before the Sixth Anniversary, and any right or claim
to payment hereunder that remains outstanding on the Sixth
Anniversary shall cease to represent a right or claim of any
kind or nature and the right of the Shareholder to receive such
former holders applicable cash portion of the Arrangement
Consideration pursuant to this Plan of Arrangement shall
terminate and be deemed to be surrendered and forfeited to
Parent, for no consideration.
4.2
Lost Certificates
.
In
the event any certificate which immediately prior to the
Effective Time represented one or more outstanding Company
Shares that were exchanged pursuant to
Section 2.3
shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate
to be lost, stolen or destroyed, the Depositary will issue in
exchange for such lost, stolen or destroyed certificate, the
applicable Arrangement Consideration for each such Company Share
represented by such certificate in accordance with such
holders Letter of Transmittal and this Arrangement. When
authorizing such payment in exchange for any lost, stolen or
destroyed certificate, the Person to whom such payment is to be
made shall as a condition precedent to the delivery of such
payment, give a bond satisfactory to Canadian Sub and the
Depositary in such sum as Canadian Sub may direct, or
otherwise indemnify Canadian Sub in a manner satisfactory to
Canadian Sub, against any claim that may be made against, or any
loss suffered by, Canadian Sub with respect to the certificate
alleged to have been lost, stolen or destroyed.
4.3
Withholding
Rights
.
(a) The Company, Canadian Sub,
Parent and the Depositary shall be entitled to deduct and
withhold from any consideration otherwise payable to any
Shareholder such amounts as the Company, Canadian Sub, Parent or
the Depositary determines, acting reasonably, are required to be
deducted and withheld with respect to such payment under the
ITA, the United States Internal Revenue Code of 1986, or any
applicable provision of federal, provincial, territorial, state,
local or foreign tax law, in each case, as amended. To the
extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the
holder of Company Shares in respect of which such deduction and
withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority, including
any amount that it is entitled to deduct and withhold for
purposes of section 116 of the ITA. Notwithstanding any
other provisions hereof, no remittance shall be made of any
amount that is withheld pursuant to Section 116 of the ITA
from any consideration otherwise payable, at the Effective Time,
to a particular Shareholder before the last Business Day that
precedes the 30th day after the end of the month in which
the Effective Date occurs, provided that such remittance
deadline shall be extended in respect of such Shareholder to
such later time as may be specified in writing by the Canada
Revenue Agency if such written confirmation is provided by the
Shareholder to Parent or the Depositary on or before the last
Business Day that precedes the 30th day after the end of
the month in which the Effective Date occurs.
4.4
Fractional
Shares
.
Notwithstanding any other provision
of this Plan of Arrangement, no fractional Exchangeable Shares
or fractional shares of Parent Common Stock will be issued and
no holder of Company Shares shall be entitled to receive a
fractional Exchangeable Share or a fractional share of Parent
Common Stock. If a fractional Exchangeable Share or fractional
share of Parent Common Stock would be delivered notwithstanding
the provisions of this
Section 4.4
, in lieu of a
fractional share being delivered therefor, such fractional
interest shall automatically be converted into the right to
receive an amount in cash equal to the product of $14.9805
multiplied by such fractional interest. No such holder will be
entitled to dividends, voting rights, or any other rights as a
stockholder of Canadian Sub in respect of any fractional share.
B-6
4.5
Distributions with Respect to Unexchanged
Shares
.
No dividends or other distributions
declared or made by Canadian Sub or Parent, as the case may be,
after the Effective Time with respect to Exchangeable Shares or
shares of Parent Common Stock, as the case may be, comprising
part of the Arrangement Consideration with a record date after
the Effective Time shall be paid to the holder of any
unsurrendered share certificate for Company Shares with respect
to the Exchangeable Shares or shares of Parent Common Stock, as
applicable, represented thereby, until such certificate is
surrendered for exchange in accordance with this
Article IV.
ARTICLE V
AMENDMENTS
5.1
Amendments to Plan of
Arrangement
.
(a) The Company may amend, modify
and/or
supplement this Plan of Arrangement at any time and from time to
time prior to the Effective Time;
provided
that each such
amendment, modification
and/or
supplement must be (i) set out in writing,
(ii) approved by Parent, (iii) filed with the Court
and, if made following the Company Meeting, approved by the
Court, and (iv) communicated to Shareholders if and as
required by the Court.
(b) Any amendment, modification or supplement to this Plan
of Arrangement may be proposed by the Company at any time prior
to the Company Meeting (provided that Parent and Canadian Sub
shall have provided prior written consent thereto) with or
without any other prior notice or communication, and if so
proposed and accepted by the Persons voting at the Company
Meeting (other than as may be required under the Interim Order),
shall become part of this Plan of Arrangement for all purposes.
(c) Any amendment, modification or supplement to this Plan
of Arrangement that is approved or directed by the Court
following the Company Meeting shall be effective only if
(i) it is consented to in writing by each of the Company
and Parent (in each case, acting reasonably) and (ii) if
required by the Court, it is consented to by Shareholders voting
in the manner directed by the Court.
(d) Any amendment, modification or supplement to this Plan
of Arrangement may be made following the Effective Time
unilaterally by Parent, provided that it concerns a matter
which, in the reasonable judgment of Parent, is of an
administrative nature required to implement this Plan of
Arrangement and is not adverse to the economic interest of any
former Shareholder.
(e) This Plan of Arrangement may be withdrawn prior to the
occurrence of any of the events in Section 2.3 in
accordance with the terms of the Arrangement Agreement.
ARTICLE VI
CERTAIN
RIGHTS OF CALLRIGHTCO TO ACQUIRE EXCHANGEABLE SHARES
6.1
Liquidation Call Right
(a) CallRightCo shall have the overriding right (the
Liquidation Call Right
), in the event of and
notwithstanding the proposed liquidation, dissolution or
winding-up
of Canadian Sub pursuant to Article V of the Exchangeable
Share Provisions to purchase from all but not less than all of
the holders of Exchangeable Shares (other than any holder of
Exchangeable Shares which is Parent or an Affiliate of Parent)
on the Liquidation Date all but not less than all of the
Exchangeable Shares held by each such holder on payment by
CallRightCo of an amount per share (the
Liquidation
Call Purchase Price
) equal to the sum of (i) the
Current Market Price of a share of Parent Common Stock on the
last Business Day prior to the Liquidation Date, which shall be
satisfied in full by CallRightCo causing to be delivered for
each such Exchangeable Share to such holder one share of Parent
Common Stock, and (ii) any Dividend Amount. In the event of
the exercise of the Liquidation Call Right by CallRightCo, each
holder shall be obligated to sell all the Exchangeable Shares
held by the holder to CallRightCo on the Liquidation Date on
payment by CallRightCo to the holder of the Liquidation Call
Purchase Price for each such share, and the Corporation shall
have no obligation to pay any Liquidation Amount to the holders
of such shares so purchased by CallRightCo.
B-7
(b) To exercise the Liquidation Call Right, CallRightCo
must notify the Transfer Agent as agent for the holders of
Exchangeable Shares and the Corporation of CallRightCo s
intention to exercise such right at least 45 days before
the Liquidation Date in the case of a voluntary liquidation,
dissolution or
winding-up
of Canadian Sub and at least five Business Days before the
Liquidation Date in the case of an involuntary liquidation,
dissolution or
winding-up
of Canadian Sub. The Transfer Agent will notify the holders of
Exchangeable Shares as to whether or not CallRightCo has
exercised the Liquidation Call Right forthwith after the expiry
of the period during which the same may be exercised by
CallRightCo. If CallRightCo exercises the Liquidation Call
Right, then on the Liquidation Date CallRightCo will purchase
and the holders will sell all of the Exchangeable Shares then
outstanding for a price per share equal to the Liquidation Call
Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Liquidation Call Right,
CallRightCo shall deposit with, or cause to be delivered to, the
Transfer Agent, on or before the Liquidation Date, certificates
representing the aggregate number of shares of Parent Common
Stock deliverable by CallRightCo and a cheque or cheques of
CallRightCo payable at par in U.S. dollars at any branch of
the bankers of CallRightCo representing the aggregate Dividend
Amount, if any, in payment of the total Liquidation Call
Purchase Price for all holders of Exchangeable Shares (other
than Parent and its Affiliates) less any amounts withheld on
account of tax required to be deducted and withheld therefrom by
Canadian Sub. Provided that CallRightCo has complied with the
immediately preceding sentence, on and after the Liquidation
Date, each holder of Exchangeable Shares (other than Parent and
its Affiliates) shall cease to be a holder of Exchangeable
Shares, the rights of each holder of Exchangeable Shares (other
than Parent and its Affiliates) will be limited to receiving,
without interest, such holders proportionate part of the
total Liquidation Call Purchase Price payable by CallRightCo
upon presentation and surrender by the holder of certificates
representing the Exchangeable Shares held by such holder and the
holder shall on and after the Liquidation Date be considered and
deemed for all purposes to be the holder of the shares of Parent
Common Stock to which it is entitled. Upon surrender to the
Transfer Agent of a certificate or certificates representing
Exchangeable Shares, together with such other documents,
instruments and payments (including, without limitation, any
applicable stamp or similar taxes) as may be required to effect
a transfer of Exchangeable Shares under the OBCA and the
Articles and by-laws of Canadian Sub and such additional
documents and instruments as the Transfer Agent may reasonably
require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor,
and the Transfer Agent on behalf of CallRightCo shall deliver or
cause to be delivered to such holder, certificates representing
the shares of Parent Common Stock to which the holder is
entitled and a cheque or cheques of CallRightCo payable at par
at any branch of the bankers of CallRightCo in payment of the
remaining portion, if any, of the total Liquidation Call
Purchase Price, less any amounts withheld on account of tax
required to be deducted and withheld therefrom by Canadian Sub.
For greater certainty, if CallRightCo does not exercise the
Liquidation Call Right in the manner described above, on the
Liquidation Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the Liquidation Amount
otherwise payable by Canadian Sub in connection with the
liquidation, dissolution or
winding-up
of Canadian Sub pursuant to Article V of the Exchangeable
Share Provisions.
6.2
Redemption Call
Right
.
(a) CallRightCo shall have the overriding right (the
Redemption Call Right
), notwithstanding
the proposed redemption of the Exchangeable Shares by Canadian
Sub pursuant to Article VII of the Exchangeable Share
Provisions, to purchase from all but not less than all of the
holders of Exchangeable Shares (other than any holder of
Exchangeable Shares which is Parent or an Affiliate of Parent)
on the Redemption Date all but not less than all of the
Exchangeable Shares held by each such holder on payment by
CallRightCo to each holder of an amount per Exchangeable Share
(the
Redemption Call Purchase Price
)
equal to the sum of (i) the Current Market Price of a share
of Parent Common Stock on the last Business Day prior to the
Redemption Date, which shall be satisfied in full by
CallRightCo causing to be delivered for each such Exchangeable
Share to such holder one share of Parent Common Stock, and
(ii) any Dividend Amount. In the event of the exercise of
the Redemption Call Right by CallRightCo, each holder shall
be obligated to sell all the Exchangeable Shares held by the
holder to CallRightCo on the Redemption Date, on payment by
CallRightCo to the holder of the Redemption Call Purchase
Price for each such share, and the Corporation shall have no
obligation to redeem, or to pay any Dividend Amount in respect
of such shares so purchased by CallRightCo.
B-8
(b) To exercise the Redemption Call Right, CallRightCo
must notify the Transfer Agent and Canadian Sub of
CallRightCos intention to exercise such right at least
60 days before the Redemption Date. The Transfer Agent
will notify the holders of Exchangeable Shares as to whether or
not CallRightCo has exercised the Redemption Call Right
forthwith after the expiry of the period during which the same
may be exercised by CallRightCo. If CallRightCo exercises the
Redemption Call Right, on the Redemption Date
CallRightCo will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share equal
to the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Redemption Call Right,
CallRightCo shall deposit or cause to be deposited with the
Transfer Agent, on or before the Redemption Date,
certificates representing the aggregate number of shares of
Parent Common Stock deliverable by CallRightCo and a cheque or
cheques of CallRightCo payable at par in U.S. dollars at
any branch of the bankers of CallRightCo representing the
aggregate Dividend Amount, if any, in payment of the total
Redemption Call Purchase Price, less any amounts withheld
on account of tax required to be deducted and withheld therefrom
by Canadian Sub. Provided that CallRightCo has complied with the
immediately preceding sentence, on and after the
Redemption Date, each holder of Exchangeable Shares (other
than Parent and its Affiliates) shall cease to be a holder of
Exchangeable Shares, and the rights of each holder of
Exchangeable Shares will be limited to receiving such
holders proportionate part of the total
Redemption Call Purchase Price payable by CallRightCo upon
presentation and surrender by the holder of certificates
representing the Exchangeable Shares held by such holder and the
holder shall on and after the Redemption Date be considered
and deemed for all purposes to be the holder of the shares of
Parent Common Stock to which it is entitled. Upon surrender to
the Transfer Agent of a certificate or certificates representing
Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of
Exchangeable Shares under the OBCA, the Articles and by-laws of
Canadian Sub and such additional documents and instruments as
the Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and the Transfer Agent on behalf
of CallRightCo shall deliver to such holder, certificates
representing the shares of Parent Common Stock to which the
holder is entitled and a cheque or cheques of Parent payable at
par in US dollars at any branch of the bankers of CallRightCo in
payment of the remaining portion, if any, of the total
Redemption Call Purchase Price, less any amounts withheld
on account of tax required to be deducted and withheld therefrom
by Canadian Sub. For greater certainty, if CallRightCo not
exercise the Redemption Call Right in the manner described
above, on the Redemption Date the holders of the
Exchangeable Shares will be entitled to receive in exchange
therefor the Redemption Price otherwise payable by Canadian
Sub pursuant to Article VII of the Exchangeable Share
Provisions.
ARTICLE VII
FURTHER
ASSURANCES
7.1
Further Assurances
.
Each
of the parties to the Arrangement Agreement and other
Transaction Agreements shall make, do and execute, or cause to
be made, done and executed all such further acts, deeds,
agreements, transfers, assurances, instruments or documents as
may reasonably be required by any of them in order further to
document, evidence and consummate any of the transactions or
events set out herein.
B-9
Annex
C
September 30,
2007
Members of the Board of Directors
Thomas Weisel Partners Group, Inc.
One Montgomery Street
San Francisco, CA 94104
Distinguished Members of the Board:
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to Thomas Weisel
Partners Group, Inc. (TWPG or the
Company) of the consideration being offered to
Westwind Capital Corporation (Westwind or the
Target) in the proposed acquisition (the
Acquisition) of Westwind by a newly formed,
wholly-owned subsidiary of TWPG, pursuant to the Arrangement
Agreement dated as of September 30, 2007, by and among
TWPG, Westwind, TWP Acquisition Company (Canada), Inc., a wholly
owned subsidiary of TWPG and Lionel Conacher, as
shareholders representative (the Agreement).
Pursuant to the Agreement and the transactions contemplated
thereby, the shareholders of the Target will in the aggregate
receive (i) $45 million in cash and (ii) an aggregate number of
Exchangeable Shares (as defined in the Agreement) and shares of
TWPG common stock, par value $.01 per share, equal to 7,009,112
(the Acquisition Consideration).
Keefe, Bruyette & Woods, Inc., as part of its
investment banking business, is continually engaged in the
valuation of the securities of financial services companies in
connection with acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities,
private placements and valuations for various other purposes. As
specialists in the securities of financial services companies,
we have experience in, and knowledge of, the valuation of
securities broker-dealers and investment banking companies. In
the ordinary course of our business as a securities
broker-dealer, we may, from time to time purchase securities
from, and sell securities to, the Company, and as a market maker
in securities, we may from time to time have a long or short
position in, and buy or sell, debt or equity securities of the
Company for our own account and for the accounts of our
customers. To the extent we have any such position as of the
date of this opinion it has been disclosed to the Company. We
have acted exclusively for the Board of Directors of the Company
in rendering this fairness opinion and will receive a fee from
the Company for our services.
In connection with this opinion, we have reviewed, analyzed and
relied upon material bearing upon the Acquisition and the
financial and operating condition of the Company and the Target,
including among other things, the following: (i) the
Agreement; (ii) the Annual Reports to Stockholders of TWPG
for the fiscal years ended December 31, 2006 and 2005 and
the audited financial statements of Target for years ended
December 31, 2006 and 2005; (iii) certain interim
management reports of the Company and Target and certain other
communications from the Company and Target to their respective
stockholders; and (iv) other financial information
concerning the businesses and operations of the Company and
Target furnished or made available to us by the Company and the
Target for purposes of our analysis. We have also held
discussions with senior management of the Company and Target
regarding the past and current business operations, regulatory
relations, financial condition and future prospects of the
Company and Target and such other matters as we have deemed
relevant to our inquiry. In addition, we have compared certain
financial information for the Company and the Target with
similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of
certain recent business
Keefe, Bruyette, & Woods 787 Seventh Avenue New York, NY
10019
212 887 7777 Toll Free 800 966 1559
C-1
combinations in the securities brokerage and investment banking
sector of the financial services industry and performed such
other studies and analyses as we considered appropriate.
In conducting our review and arriving at our opinion, we have
relied upon the accuracy and completeness of all of the
financial and other information provided to us or publicly
available and we have not assumed any responsibility for
independently verifying the accuracy or completeness of any such
information. We have relied upon discussions with management of
the Target as to the reasonableness and achievability of the
financial and operating forecast (and the assumptions and bases
therefor) provided to us, and we have assumed that such forecast
reflects the best currently available estimate and judgment of
the Target and that such forecast will be realized in the
amounts and in the time period currently estimated by the
Target. We have relied upon published financial forecasts and
earnings estimates for the Company and we have assumed that such
forecasts and projections reflect the best currently available
estimates for the Company and that such forecasts and
projections will be realized in the amounts and in the time
periods set forth therein. In rendering our opinion, we have not
made or obtained any evaluations or appraisals of the property
of the Company or Target.
We have considered such financial and other factors as we have
deemed appropriate under the circumstances, including, among
others, the following: (i) the historical and current
financial position and results of operations of the Company and
the Target; (ii) the assets and liabilities of the Company
and Target; and (iii) the nature and terms of certain other
merger and acquisition transactions involving securities
brokerage and investment banking companies. We have also taken
into account our assessment of general economic, market and
financial conditions and our experience in other transactions,
as well as our experience in the valuation of securities and
knowledge of the securities brokerage, investment banking and
financial services industry generally. Our opinion is
necessarily based upon conditions as they exist and can be
evaluated on the date hereof and the information made available
to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Acquisition Consideration is fair,
from a financial point of view, to the Company. This opinion is
for the use and benefit of the Board of Directors of the Company
and is rendered to the Board of Directors in connection with its
consideration of the Acquisition. This opinion is not intended
to be and does not constitute a recommendation to any
stockholder of the Company as to how such stockholder should
vote in respect to the Acquisition.
Very truly yours,
/s/ Keefe,
Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc.
C-2
Annex
D
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS OF
WESTWIND CAPITAL CORPORATION
|
|
|
|
|
Report of Independent Auditors
|
|
|
D-2
|
|
Consolidated Financial Statements:
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
D-3
|
|
Consolidated Statements of Income and Retained Earnings
|
|
|
D-4
|
|
Consolidated Statements of Cash Flows
|
|
|
D-5
|
|
Notes to Consolidated Financial Statements
|
|
|
D-6
|
|
D-1
Report of
Independent Auditors
To the Directors of Westwind Capital Corporation
We have audited the consolidated balance sheets of Westwind
Capital Corporation as at December 31, 2006 and 2005 and
the consolidated statements of income and retained earnings and
cash flows for each of the years in the three year period ended
December 31, 2006. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with Canadian generally
accepted auditing standards and the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free
of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of
Westwind Capital Corporation as at December 31, 2006 and
2005 and the results of its operations and its cash flows for
each of the years in the three year period ended
December 31, 2006 in conformity with Canadian generally
accepted accounting principles.
|
|
|
|
|
/s/ Ernst & Young LLP
|
Toronto, Canada,
|
|
Chartered Accountants
|
October 16, 2007
|
|
Licensed Public Accountants
|
D-2
Westwind
Capital Corporation
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
As at December 31
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Expressed in Canadian dollars
|
|
|
ASSETS
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
38,943,821
|
|
|
|
17,259,968
|
|
|
|
19,330,064
|
|
Trading securities
[note 4]
|
|
|
28,625,943
|
|
|
|
22,048,587
|
|
|
|
10,717,251
|
|
Due from carrying broker
|
|
|
7,183,651
|
|
|
|
6,327,510
|
|
|
|
1,316,008
|
|
Investment banking fees and commissions receivable
|
|
|
3,731,966
|
|
|
|
4,688,630
|
|
|
|
1,997,795
|
|
Income taxes receivable
|
|
|
449,648
|
|
|
|
355,286
|
|
|
|
|
|
Prepaid expenses and deposits
|
|
|
527,920
|
|
|
|
418,800
|
|
|
|
407,813
|
|
Other receivables
|
|
|
24,873
|
|
|
|
486,801
|
|
|
|
1,239,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
79,487,822
|
|
|
|
51,585,582
|
|
|
|
35,008,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit with carrying broker
[note 1]
|
|
|
350,000
|
|
|
|
350,000
|
|
|
|
350,000
|
|
Capital assets, net
[note 5]
|
|
|
1,884,631
|
|
|
|
1,604,342
|
|
|
|
1,409,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,722,453
|
|
|
|
53,539,924
|
|
|
|
36,768,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold short
[note 4]
|
|
|
2,515,500
|
|
|
|
256,480
|
|
|
|
|
|
Due to carrying broker
|
|
|
1,898,813
|
|
|
|
7,853,464
|
|
|
|
410,951
|
|
Accounts payable and accrued liabilities
|
|
|
24,989,583
|
|
|
|
14,767,691
|
|
|
|
14,805,792
|
|
Discretionary bonus payable
|
|
|
12,988,879
|
|
|
|
5,148,419
|
|
|
|
5,481,500
|
|
Preference shares
[note 7]
|
|
|
|
|
|
|
|
|
|
|
324,810
|
|
Current income tax liability
|
|
|
5,244,457
|
|
|
|
1,977,538
|
|
|
|
1,947,445
|
|
Future tax liability
[note 6]
|
|
|
1,133,500
|
|
|
|
1,224,500
|
|
|
|
490,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
48,770,732
|
|
|
|
31,228,092
|
|
|
|
23,460,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
[note 7]
|
|
|
14,385,404
|
|
|
|
10,647,578
|
|
|
|
7,921,605
|
|
Retained earnings
|
|
|
18,566,317
|
|
|
|
11,664,254
|
|
|
|
5,385,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
32,951,721
|
|
|
|
22,311,832
|
|
|
|
13,307,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,722,453
|
|
|
|
53,539,924
|
|
|
|
36,768,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes
D-3
Westwind
Capital Corporation
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED
EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Month Period
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended June 30,
|
|
|
Years Ended December 31
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Expressed in Canadian dollars
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking fees and commissions
|
|
|
33,692,470
|
|
|
|
16,666,225
|
|
|
|
33,548,205
|
|
|
|
30,602,490
|
|
|
|
21,952,501
|
|
Agency commissions
|
|
|
9,284,455
|
|
|
|
7,485,586
|
|
|
|
14,739,469
|
|
|
|
8,473,439
|
|
|
|
7,823,035
|
|
Principal trading gains (losses)
|
|
|
3,986,121
|
|
|
|
4,239,649
|
|
|
|
8,581,167
|
|
|
|
1,605,204
|
|
|
|
(1,347,111
|
)
|
Interest and other income
|
|
|
1,049,759
|
|
|
|
366,747
|
|
|
|
1,113,434
|
|
|
|
121,447
|
|
|
|
320,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,012,805
|
|
|
|
28,758,207
|
|
|
|
57,982,275
|
|
|
|
40,802,580
|
|
|
|
28,748,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees compensation and benefits
|
|
|
7,375,696
|
|
|
|
6,295,343
|
|
|
|
14,312,473
|
|
|
|
10,288,158
|
|
|
|
5,447,218
|
|
Amortization
|
|
|
245,276
|
|
|
|
202,087
|
|
|
|
469,469
|
|
|
|
372,750
|
|
|
|
334,900
|
|
Other operating and administrative
|
|
|
6,155,560
|
|
|
|
5,027,044
|
|
|
|
10,508,671
|
|
|
|
8,187,756
|
|
|
|
6,768,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,776,532
|
|
|
|
11,524,474
|
|
|
|
25,290,613
|
|
|
|
18,848,664
|
|
|
|
12,551,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before the following
|
|
|
34,236,273
|
|
|
|
17,233,733
|
|
|
|
32,691,662
|
|
|
|
21,953,916
|
|
|
|
16,197,786
|
|
Discretionary bonus
|
|
|
23,594,127
|
|
|
|
10,862,452
|
|
|
|
22,248,623
|
|
|
|
16,406,108
|
|
|
|
11,471,622
|
|
Founders compensation issuance of shares under
share purchase option
(note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,140,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
10,642,146
|
|
|
|
6,371,281
|
|
|
|
10,443,039
|
|
|
|
5,547,808
|
|
|
|
3,586,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
[note 6]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
3,759,373
|
|
|
|
2,047,800
|
|
|
|
3,220,423
|
|
|
|
2,017,520
|
|
|
|
1,376,144
|
|
Future
|
|
|
(91,000
|
)
|
|
|
322,000
|
|
|
|
734,220
|
|
|
|
56,280
|
|
|
|
434,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,668,373
|
|
|
|
2,369,800
|
|
|
|
3,954,643
|
|
|
|
2,073,800
|
|
|
|
1,810,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period
|
|
|
6,973,773
|
|
|
|
4,001,481
|
|
|
|
6,488,396
|
|
|
|
3,474,008
|
|
|
|
1,776,020
|
|
Retained earnings, beginning of period
|
|
|
11,664,254
|
|
|
|
5,385,722
|
|
|
|
5,385,722
|
|
|
|
2,039,906
|
|
|
|
372,118
|
|
Dividends declared
[note 7]
|
|
|
|
|
|
|
(10,039
|
)
|
|
|
(10,039
|
)
|
|
|
(69,966
|
)
|
|
|
|
|
Premium on conversion of shares
[note 7]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,226
|
)
|
|
|
(108,232
|
)
|
Premium on retirement of shares
[note 7]
|
|
|
(71,710
|
)
|
|
|
(11,658
|
)
|
|
|
(199,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings, end of period
|
|
|
18,566,317
|
|
|
|
9,365,506
|
|
|
|
11,664,254
|
|
|
|
5,385,722
|
|
|
|
2,039,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes
D-4
Westwind
Capital Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Six Month Period
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Ended June 30,
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Years Ended December 31
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2007
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2006
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2006
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2005
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2004
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(Unaudited)
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Expressed in Canadian dollars
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OPERATING ACTIVITIES
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Net income for the period
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6,973,773
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4,001,481
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6,488,396
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3,474,008
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1,776,020
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Add items not involving cash Amortization
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245,276
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202,087
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469,469
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372,750
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334,900
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Future income taxes
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(91,000
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)
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322,000
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734,220
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56,280
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434,000
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Founders compensation issuance of shares under
share purchase option
(note 8)
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1,140,000
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7,128,049
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4,525,568
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7,692,085
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3,903,038
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3,684,920
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Net change in non-cash working capital balances related to
operations
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11,415,253
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(5,064,517
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)
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(11,270,653
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)
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4,392,866
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268,623
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Cash provided by (used in) operating activities
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18,543,302
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(538,949
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(3,578,568
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8,295,904
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3,953,543
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INVESTING ACTIVITIES
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Purchase of capital assets
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(525,565
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(210,362
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(664,195
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(557,580
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(267,734
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Share purchase loan paid by related party
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(5,585,641
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Share purchase loan repaid by related party
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35,541
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1,387,545
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1,541,592
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Cash provided by (used in) investing activities
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(490,024
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(210,362
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(664,195
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829,965
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(4,311,783
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FINANCING ACTIVITIES
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Proceeds on issuance of common shares
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3,742,702
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2,312,394
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2,829,392
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2,451,207
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368,750
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Proceeds on issuance of Class A common shares
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7,500
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Dividends paid
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(28,671
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(28,671
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(51,334
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Repurchase of common shares
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(112,127
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(28,978
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(308,855
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Redemption of preference shares
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(319,199
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(319,199
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(490,310
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(372,000
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Cash provided by financing activities
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3,630,575
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1,935,546
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2,172,667
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1,909,563
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4,250
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Net increase (decrease) in cash during the period
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21,683,853
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1,186,235
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(2,070,096
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11,035,432
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(353,990
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Cash and cash equivalents, beginning of period
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17,259,968
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19,330,064
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19,330,064
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8,294,632
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8,648,622
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Cash and cash equivalents, end of period
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38,943,821
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20,516,299
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17,259,968
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19,330,064
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8,294,632
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Supplemental cash flow information
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Income taxes paid
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3,974,707
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2,404,787
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3,660,483
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1,462,683
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259,462
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Loans converted to common shares
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212,800
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64,200
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Common shares converted to preference shares
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226,854
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382,075
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See accompanying notes
D-5
Westwind
Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT JUNE 30, 2007 AND WITH RESPECT TO THE
PERIODS ENDED
JUNE 30, 2007 AND JUNE 30, 2006 IS UNAUDITED)
EXPRESSED IN CANADIAN DOLLARS
Westwind Capital Corporation [Westwind ] was
amalagated under the Ontario Business Corporations Act as
Westwind Capital Partners Inc. on January 31, 2002 and
commenced operations on June 1, 2002. In October 2002,
Westwind changed its name to Westwind Capital Corporation.
The primary business of Westwind is the investment in and
management of its 100% owned subsidiaries, Westwind Partners
Inc. [WP Canada], Westwind Partners (USA) Inc.
[WP USA] and Westwind Partners (UK) Limited
[WP UK].
WP Canada is an Investment Dealer registered in the Canadian
provinces of Ontario, Quebec, Alberta, British Columbia,
Saskatchewan, Manitoba and Nova Scotia and is a member of the
Investment Dealers Association of Canada. WP USA is a
U.S. broker-dealer and as of March 19, 2004 was
granted membership in the National Association of Securities
Dealers and is registered with the Securities and Exchange
Commission. WP UK is a U.K. securities firm authorized by the
Financial Services Authority in the United Kingdom.
WP Canada operates as an Introducing Broker and
conducts its operations under an agreement with National Bank
Financial Inc. and NBCN Inc. [together as National
Bank]. National Bank is the Carrying Broker
and performs certain securities trading, clearing activities and
record keeping as the agent for WP Canada for a fee based on the
number of trades executed, settled and cleared. As a result,
National Bank is responsible for WP Canadas client
accounts subject to indemnification by WP Canada for any related
losses. Under the terms of the agreement, WP Canada has lodged a
deposit of $350,000 with National Bank, which has been presented
as deposit with carrying broker on the consolidated balance
sheets.
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2.
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SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
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The consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting
principles. The significant accounting policies are summarized
as follows:
Basis
of consolidation
The consolidated financial statements include the accounts of
Westwind, WP Canada, WP USA and WP UK.
Use of
estimates
The preparation of financial statements in conformity with
Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingencies at the date of the consolidated financial
statements and the reported amounts of revenue and expenses
during the reporting period. Actual results may vary from these
estimates. These estimates are reviewed periodically by
management and, as adjustments become necessary, they are
reported in income in the year in which they become known.
Foreign
currency translation
WP USA and WP UK are considered to be integrated foreign
operations; accordingly, their accounts are translated using the
temporal method. Under this method, monetary assets and
liabilities denominated in foreign currencies are translated at
exchange rates in effect at the consolidated balance sheet
dates. Non-monetary assets and liabilities denominated in
foreign currencies are translated at rates in effect on the
dates the assets were acquired or liabilities were assumed.
Revenue and expenses are translated at rates of exchange
prevailing on the transaction dates. Gains and losses on
translation are reflected in income.
D-6
Westwind
Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Cash
and cash equivalents
Cash and cash equivalents consist of cash on deposit and
short-term interest bearing notes with a term to maturity of
less than three months from the date of purchase.
Accounting
for security transactions
Security transactions and related revenue and expenses are
accounted for on a trade-date basis. Securities owned and
securities sold short are recorded at market value except in
situations where the securities are not publicly traded or where
restrictions on their marketability exist. In these
circumstances, securities are valued at managements
estimate of fair value, which would not exceed quoted market
value. Any unrealized gains and losses are included in principal
trading gains.
Derivative financial instruments are recorded in securities
owned or securities sold short on the consolidated balance
sheets. They are marked-to-market with the resulting realized
and unrealized gain or loss included in principal trading gains.
Revenue
recognition
Investment banking fees are recorded at the time the transaction
is completed and the related income is reasonably determinable.
Agency commissions consist of revenue generated through
traditional commission-based brokerage services, recognized on a
trade date basis.
Principal trading gains consist of income earned in connection
with principal trading operations and are recognized on a trade
date basis.
Interest income consist of amounts earned on balances due from
clients, cash deposited in bank accounts and investments in
money market instruments. Interest earned is recognized on an
accrual basis.
Income
taxes
Income taxes are accounted for using the liability method. Under
this method, future income taxes are recognized for future
income tax consequences attributable to differences between the
consolidated financial statement carrying values and their
respective income tax bases. Future tax assets and liabilities
are measured using substantively enacted tax rates and laws
expected to apply to taxable income in the period in which the
temporary differences are expected to be recovered or settled.
The effect on future tax assets and liabilities of a change in
tax rates is included in income in the period in which the
change occurs. The amount of future tax assets recognized is
limited to the amount that is more likely than not to be
realized.
Capital
assets
Capital assets are recorded at cost less accumulated
amortization. Amortization is provided using the following
annual rates and methods:
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Furniture and fixtures
Computer equipment
Leasehold improvements
Artwork
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20% declining balance
30% declining balance
Straight-line over the term of the lease
Not depreciated
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D-7
Westwind
Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future
accounting changes
Capital
Disclosures
The CICA issued a new accounting standard, Section 1535,
Capital Disclosures
, which requires the disclosure of
both qualitative and quantitative information that enables users
of financial statements to evaluate the entitys
objectives, policies and processes for managing capital. This
new standard will be effective for Westwind effective
January 1, 2008.
Financial
Instruments
The CICA issued two new accounting standards, Section 3862,
Financial Instruments Disclosure
and
Section 3863,
Financial Instruments
Presentation
, which apply to interim and annual financial
statements relating to fiscal years beginning on or after
October 1, 2007. Westwind intends to adopt these new
standards effective January 1, 2008.
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3.
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CHANGES
IN ACCOUNTING POLICIES
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On January 1, 2007, Westwind adopted the provisions of CICA
Handbook Section 3855
Financial
Instruments Recognition and Measurement
,
CICA Handbook Section 3865,
Hedges
and
CICA Handbook Section 1530
Comprehensive
Income
. These standards were adopted prospectively as
required by the transition provisions and accordingly,
comparative amounts for prior periods have not been restated.
Financial
Instruments Recognition and
Measurement
Section 3855 requires all financial assets and liabilities
(including derivatives) be measured at fair value on initial
recognition except for certain related party transactions.
Measurement in subsequent periods depends on the classification
of the instruments. All financial instruments must be classified
as one of the following categories: held for trading, held to
maturity, loans and receivables and available for sale assets.
The financial assets and liabilities categorized by management
as held for trading at inception are measured at fair value with
unrealized gains and losses recognized in net income.
Westwinds financial instruments classified as held for
trading include trading securities owned including broker
warrants and obligations related to securities sold short.
Westwind has historically measured these instruments at fair
value and any unrealized gains and losses have been included in
income. Westwinds accounting treatment of these
instruments remains unchanged as a result of adoption of the new
accounting standards.
Westwind has not historically applied hedge accounting,
therefore the derivative financial instruments are not
designated as effective hedging financial instruments and as
such, are classified as held for trading and measured at fair
value. Westwind enters into forward contracts in order to
economically manage foreign exchange risk on pending security
settlements in foreign currencies. Historically, the forward
contracts have been recorded at their estimated fair value with
realized and unrealized gains and losses recorded in net income
during the period. Westwinds accounting treatment of these
instruments remains unchanged as a result of adoption of the new
accounting standards.
Available for sale financial assets and liabilities are measured
at fair value with unrealized gains and losses recognized in
other comprehensive income until realized. Westwind does not
hold any securities that would be classified as available for
sale.
Financial assets classified as loans and receivables and held to
maturity are measured at amortized cost. Westwind does not hold
any securities that would be classified as loans and receivables
and held to maturity. The assets and liabilities classified as
loans and receivables held to maturity include due to and from
carrying broker, investment banking fees and commissions
receivable and accounts payable.
D-8
Westwind
Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Hedges
This standard sets out the criteria of when hedge accounting is
applied and how it is applied. It provides the option of
designating qualifying transactions as hedges for accounting
purposes. The qualifying hedging relationships include fair
value hedges, cash flow hedges and hedges of foreign currency
exposures of net investments in self-sustaining foreign
operations. The changes in the fair value of the hedging
derivatives will be recognized in net income or other
comprehensive income depending on the nature of the hedging
relationships. Any gains and losses resulting from any
ineffectiveness in hedging relationships are recognized in net
income immediately. Westwind does not currently apply hedge
accounting and as a result Section 3865 does not apply to
Westwind at this time.
Comprehensive
Income
This section establishes standards for the reporting and
disclosure of other comprehensive income (OCI) in a
new category, Accumulated Comprehensive Income, which will be
added to the shareholders equity on the consolidated
balance sheet. Comprehensive income includes all changes in
equity during the period except those resulting from investments
by shareholders and distributions to shareholders. The major
components included in Accumulated Comprehensive Income will be
unrealized gains and losses on financial assets classified as
available for sale and unrealized foreign exchange gains and
losses arising on translation of the financial statements of
self-sustaining foreign operations. Westwind does not currently
hold any financial assets classified as available for sale and
the foreign operations are considered to be integrated foreign
operations. Accordingly, Section 1530 does not apply to
Westwind at this time.
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4.
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TRADING
SECURITIES AND SECURITIES SOLD SHORT
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Securities owned and securities sold short consist of Canadian
equities and warrants quoted in active markets at June 30,
2007 $14,263,943; December 31, 2006
$8,520,037; and December 31, 2005 $967,251,
broker warrants at June 30, 2007 $3,487,000;
December 31, 2006 $3,368,000; and
December 31, 2005 $1,200,000 and underwriting
commitments made by WP Canada at June 30, 2007
$10,875,000; December 31, 2006 $10,160,550; and
December 31, 2005 $8,550,000. The Canadian
equities and warrants are pledged as collateral for amounts
owing to National Bank. Securities sold short consist of
Canadian equities quoted in active markets.
Capital assets consist of the following:
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June 30, 2007
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Net
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Accumulated
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Book
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Cost $
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Amortization $
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Value $
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(Unaudited)
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Furniture and fixtures
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1,265,135
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526,135
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739,000
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Computer equipment
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833,987
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335,378
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498,609
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Leasehold improvements
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1,281,251
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812,082
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469,169
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Artwork
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177,853
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|
|
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177,853
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3,558,226
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1,673,595
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1,884,631
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D-9
Westwind
Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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|
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|
|
December 31, 2006
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Net
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Accumulated
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Book
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Cost $
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Amortization $
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Value $
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Furniture and fixtures
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1,158,906
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|
|
|
454,745
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|
|
|
704,161
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Computer equipment
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|
|
617,204
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|
|
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282,555
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|
|
334,649
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|
Leasehold improvements
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|
|
1,155,422
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|
|
|
691,019
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|
|
|
464,403
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|
Artwork
|
|
|
101,129
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|
|
|
|
|
|
|
101,129
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|
|
|
|
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|
|
|
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|
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|
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3,032,661
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|
|
1,428,319
|
|
|
|
1,604,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
Accumulated
|
|
|
Book
|
|
|
|
Cost $
|
|
|
Amortization $
|
|
|
Value $
|
|
|
Furniture and fixtures
|
|
|
873,852
|
|
|
|
313,069
|
|
|
|
560,783
|
|
Computer equipment
|
|
|
394,488
|
|
|
|
178,893
|
|
|
|
215,595
|
|
Leasehold improvements
|
|
|
1,100,126
|
|
|
|
466,888
|
|
|
|
633,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,368,466
|
|
|
|
958,850
|
|
|
|
1,409,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total income tax provision for the six month period ended
June 30, 2007 was $3,668,373 [June 30,
2006 $2,369,800; December 31, 2006
$3,954,643; December 31, 2005 $2,073,800;
December 31, 2004 $1,810,144], which
represented an effective consolidated group tax rate of 34%
[June 30, 2006 37%; December 31,
2006 38%; December 31, 2005 37%;
December 31, 2004 50%].
The future tax liability as at June 30, 2007 of $1,133,500
[December 31, 2006 $1,224,500;
December 31, 2005 $490,280] represents taxes on
unrealized gains on securities owned. As these gains are
realized, income taxes will become payable.
D-10
Westwind
Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
[a] Share capital consists of the following:
Authorized
Unlimited common shares, 1 vote per share
750,000 Class A common shares, 10 votes
per share convertible at holders option
into
common shares on a share-for-share basis.
The Class A common shares rank equally
with the common shares in all other respects.
Unlimited Class A preference shares, non-voting
Unlimited Class B preference shares, non-voting,
10% cumulative dividend, redeemable at
$10 per share
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
|
|
Shares
|
|
|
|
|
|
|
#
|
|
|
$
|
|
|
|
(Unaudited)
|
|
|
Issued
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
9,811,705
|
|
|
|
16,143,867
|
|
Less related party loan
[note 7(b)]
|
|
|
(1,266,456
|
)
|
|
|
(2,620,963
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
8,545,249
|
|
|
|
13,522,904
|
|
Class A common shares
|
|
|
750,000
|
|
|
|
862,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,385,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
#
|
|
|
$
|
|
|
#
|
|
|
$
|
|
|
Issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
8,882,156
|
|
|
|
12,441,582
|
|
|
|
7,924,892
|
|
|
|
9,715,609
|
|
Less related party loan
[note 7(b)]
|
|
|
(1,283,629
|
)
|
|
|
(2,656,504
|
)
|
|
|
(1,283,629
|
)
|
|
|
(2,656,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,598,527
|
|
|
|
9,785,078
|
|
|
|
6,641,263
|
|
|
|
7,059,105
|
|
Class A common shares
|
|
|
750,000
|
|
|
|
862,500
|
|
|
|
750,000
|
|
|
|
862,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,647,578
|
|
|
|
|
|
|
|
7,921,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the six month period ended June 30, 2007, 958,226
[June 30, 2006 894,821; December 31,
2006 1,052,796; December 31, 2005
1,287,943; December 31, 2004 581,100] common
shares were issued for a cash consideration of $3,742,702
[June 30, 2006 $2,312,394; December 31,
2006 $2,829,392; December 31, 2005
$2,451,207; December 31, 2004 $368,750]. Also
during the period ended June 30, 2007, 28,677
[June 30, 2006 11,232; December 31,
2006 95,532; December 31, 2005 nil,
December 31, 2004 nil] common shares were
purchased for retirement for $112,127 [June 30,
2006 $28,978; December 31, 2006
$308,855; December 31, 2005 $nil,
December 31, 2004 $nil], representing a premium
on retirement of $71,710 [June 30, 2006
$17,269; December 31, 2006 $205,436;
December 31, 2005 $nil, December 31,
2004 $nil].
D-11
Westwind
Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During 2006, Westwind declared dividends on the Class B
preference shares amounting to $10,039 which were paid during
the first six months of that year. During the six months ended
June 30, 2006, Westwind purchased for retirement 32,481
Class B preference shares with a redemption value of
$319,199 representing a discount of $5,611. In 2005,
Class B preference shares were classified as a liability
because under the terms of the shareholders agreement
Westwind was obligated to purchase the Class B preference
shares within 12 months of the date of issue for a
redemption value of $324,810.
In 2005, 190,000 common shares were issued on conversion of
convertible loans with a value of $212,800. Also during the
prior year, 241,552 common shares were converted to 32,481
Class B preference shares with a redemption value of
$324,810, representing a premium on conversion of $58,226.
During 2005, Westwind declared dividends on the Class B
preference shares amounting to $69,966, of which $51,334 was
paid during 2005 and $18,632 was paid in February 2006. Also
during 2005, Westwind purchased for retirement 49,031
Class B preference shares at their stated value of $490,310.
During 2004, 581,180 common shares were issued for cash
consideration of $368,750. Included in this amount were
250,000 shares with a value $287,500 issued under a share
purchase option agreement for $2,500 with the difference between
the value of the shares issued and the amount paid treated as
founders compensation. Also, during 2004, 60,000 common
shares were issued on conversion of convertible loans with a
value of $64,200. Further, during 2004, 363,189 common shares
were converted to 49,031 Class B preference shares with a
redemption value of $490,307, representing a premium on
conversion of $108,232. As required by the Shareholders
Agreement, Westwind repurchased the shares.
During 2004, Class A common shares were created, providing
for 10 votes per shares and ranking equal to the common shares
in all other respects. Under a share purchase option agreement,
750,000 Class A common shares were issued for cash
consideration of $7,500. The value of these shares was $862,500,
with the difference of $855,000 treated as founders
compensation.
[b] Related party loan
In 2004, Westwind lent $5,585,641 to 1619372 Ontario Inc.
[Acquisition Co.], a company owned by four
shareholders of Westwind. The loan was arranged to allow
Acquisition Co. to partially finance the purchase of
3,565,725 shares in Westwind from former shareholders.
Under the terms of the loan agreement, Acquisition Co. is
obligated to pay 100% of the proceeds received on the resale of
these shares to Westwind to reduce the loan.
The related party loan has no fixed repayment term and no
interest obligation. At June 30, 2007 the related party
loan balance is $2,620,963; December 31, 2006
$2,656,504; and December 31, 2005 $2,656,504.
The carrying values of cash and cash equivalents, securities
owned, accounts receivable, due from carrying broker and
accounts payable and accrued liabilities on the consolidated
balance sheets approximate their fair values due to their
short-term nature.
Credit risk on financial instruments is the risk of a financial
loss occurring as a result of the default of a counterparty on
its obligations to Westwind. Credit risk is managed by dealing
with counterparties Westwind believes to be creditworthy and by
regular monitoring of credit exposures and collateral. Westwind
s significant credit concentration is with counterparties
who are acceptable institutions, as defined by regulation.
D-12
Westwind
Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Westwind is committed to future minimum annual lease payments
and estimated annual realty and operating costs on office
premises as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
|
December 31, 2006
|
|
|
2007
|
|
$
|
758,008
|
|
|
$
|
1,246,542
|
|
2008
|
|
|
1,212,514
|
|
|
|
789,154
|
|
2009
|
|
|
534,431
|
|
|
|
158,940
|
|
2010
|
|
|
611,933
|
|
|
|
139,147
|
|
2011 and thereafter
|
|
|
1,824,877
|
|
|
|
139,147
|
|
Shares
of the Bourse de Montreal Inc.
Under the terms of the Share Purchase Agreement under which
Westwind acquired the shares of Westwind Partners Inc. [then
called DLJ Canada Inc.], any gain on sale of the shares and
dividend income, net of tax, of the Bourse de Montreal Inc. is
to be paid to the previous shareholder group. During the six
months ended June 30, 2007, the shares of the Bourse de
Montreal Inc. were sold and the after-tax gain has been paid to
the previous shareholder group.
Forward
Foreign Exchange Contract
At December 31, 2006, there was outstanding one forward
foreign exchange contract to sell Australian $9,911,620 and to
buy Canadian $8,995,786 on January 5, 2007.
|
|
10.
|
RECONCILIATION
TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES
|
Westwind prepares its consolidated financial statements in
accordance with Canadian generally accepted accounting
principles (GAAP), which conform in all material respects with
GAAP in the United States as applied to the consolidated
financial statements of Westwind.
Future
Accounting Changes
Statement
of Financial Accounting Standards No. 157
Fair Value Measurements
(SFAS No. 157).
In September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements which defines fair value, establishes a
framework for measuring fair value in GAAP and expands
disclosures about fair value measurements. The primary focus of
this statement is to increase consistency and comparability in
fair value measurements, as well as provide better information
about the extent to which fair value is used to measure
recognized assets and liabilities, the inputs used to develop
the measurements, and the effect fair value measurements have on
earnings for the period, if any. SFAS No. 157 is
effective for fiscal years beginning after November 15,
2007. The impact, if any, that the adoption of
SFAS No. 157 will have on the consolidated statements
of financial condition, operations and cash flows will need to
be determined.
Statement
of Financial Accounting Standards No. 159
The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS No. 159).
In February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities
which permits entities to choose to measure many financial
instruments and certain other items at fair value that are not
currently required to be measured at fair value and establishes
presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement
attributes for
D-13
Westwind
Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
similar types of assets and liabilities. SFAS No. 159
is effective for fiscal years beginning after November 15,
2007. The impact, if any, that the adoption of
SFAS No. 159 will have on our consolidated statements
of financial condition, operations and cash flows will need to
be determined.
Subsequent to June 30, 2007, Westwind has entered into an
arrangement agreement with Thomas Weisel Partners Group, Inc.
for the sale of all of the outstanding shares of Westwind. As
consideration for the purchase, the shareholders will receive in
the aggregate US$45 million in cash and 7,009,112 Thomas
Weisel Partners Group, Inc.s common shares. In order to
complete the transaction, Westwind will amend its articles to
create a new class of exchangeable shares. Prior to closing, the
related party loan [note 7(b)] will be repaid to Westwind or the
two companies will be amalgamated. The arrangement agreement
provides for a pre-closing cash distribution by Westwind to its
shareholders of excess working capital over
agreed-upon
working capital and regulatory capital amounts, calculated in
accordance with the arrangement agreement. Closing of the
transaction is expected to occur in January 2008 and is subject
to customary closing conditions, including shareholder, court
and regulatory approvals.
D-14
VOTE BY INTERNET www.proxyvote.com Use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time THOMAS
WEISEL PARTNERS GROUP, INC. the day before the cut-off date or meeting date. Have your proxy ONE
MONTGOMERY STREET, 37TH FLOOR card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic SAN FRANCISCO, CA 94104
voting instruction form. ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would
like to reduce the costs incurred by Thomas Weisel Partners Group, Inc. in mailing proxy materials,
you can consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please follow
the instructions above to vote using the Internet and, when prompted, indicate that you agree to
receive or access shareholder communications electronically in future years. i f t VOTE BY PHONE -
1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand
when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card
and return it in the postage-paid envelope we have provided or return it to Thomas Weisel Partners
Group, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS
BELOW IN BLUE OR BLACK INK AS FOLLOWS: TWPGI1 KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY THOMAS
WEISEL PARTNERS GROUP, INC. The Board of Directors unanimously recommends a vote FOR
proposal numbers 1 and 2. Vote On Proposals For Against Abstain 1. Item 1 Approve the
Issuance of Common Stock for Westwind Transaction: To consider and vote on a proposal to approve
the issuance of shares of Thomas Weisel Partners Group, Inc. common stock (and any 0 0 0 shares
issuable in respect of shares of a Canadian subsidiary of Thomas Weisel Partners that are
exchangeable for shares of Thomas Weisel Partners common stock) as contemplated by the arrangement
agreement, dated as of September 30, 2007, by and among Thomas Weisel Partners Group, Inc., TWP
Acquisition Company (Canada), Inc., Westwind Capital Corporation and the Shareholders
Representative named therein, and the plan of arrangement referred to in that agreement. For
Against Abstain 2. Item 2 Approve Adjournment of Meeting, If Necessary, to Conduct Other
Business: To conduct any other business that properly comes before the special meeting and any
adjournment or postponement of the special 0 0 0 meeting, including any proposal to adjourn the
meeting to solicit additional proxies in favor of the proposal referred to in Item 1. IMPORTANT:
Please sign exactly as your name appears hereon and mail it promptly even though you may plan to
attend the meeting. When shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by a duly authorized person. Signature [PLEASE SIGN
WITHIN BOX] Date Signature (Joint Owners) Date
|
PROXY SPECIAL MEETING OF SHAREHOLDERS OF
|
THOMAS WEISEL PARTNERS GROUP, INC.
|
One Montgomery Street San Francisco,
California 94104
|
This Proxy is Solicited on Behalf of the Board of Directors of the Company
|
The undersigned stockholder hereby appoints Thomas W. Weisel, David A. Baylor and Mark P. Fisher,
and each of them individually as proxies for the undersigned, each with full power of substitution
for and in the name of the undersigned, to act for the undersigned and to vote, as designated on
the reverse, all of the shares of common stock of Thomas Weisel Partners Group, Inc. (the
Company), which the undersigned is entitled to vote at the Special Meeting of Shareholders of the
Company, or adjournment or postponement thereof, to be held December 14, 2007, at 8:00 a.m.,
Pacific Time, at One Montgomery Street, 35th Floor, San Francisco, California 94104 to consider and
act upon the matters as designated on the reverse side.
|
Unless otherwise specified in the boxes and space provided, the proxies shall vote for the
proposals listed on the reverse side and shall have discretionary power to vote upon such other
matters as may properly come before the meeting or any adjournment or postponement thereof. The
Board of Directors has established the close of business on November 6, 2007, as the record date
for the determination of the stockholders entitled to notice of and to vote at this Special Meeting
of Shareholders.
|
Please date, sign and mail your proxy card as soon as possible
(continued
and to be signed on the reverse side)
|
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