SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement
under Section 14(d)(4) of the Securities Exchange Act of 1934
World Energy Solutions, Inc.
(Name of Subject Company)
World Energy Solutions, Inc.
(Name of Person(s) Filing Statement)
Common Stock,
par value $0.0001 per share
(Title of Class of Securities)
98145W208
(CUSIP Number
of Class of Securities)
Philip V. Adams
President
World Energy
Solutions, Inc.
100 Front Street
Worcester, Massachusetts 01608
Telephone: (508) 459-8100
(Name, Address, and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
With Copies to:
Michael A. Refolo
Andrew Croxford
Mirick,
OConnell, DeMallie & Lougee, LLP
100 Front Street
Worcester, Massachusetts 01608-1477
Telephone: (508) 929-1622
¨ |
Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
TABLE OF CONTENTS
Item 1. |
Subject Company Information |
Name and Address.
The name of the subject company is World Energy Solutions, Inc., a Delaware corporation (WES or the Company). The address and telephone
number of the Companys principal executive office is 100 Front Street, Worcester, Massachusetts 01608 and (508) 459-8100.
Securities.
This Solicitation/Recommendation on Schedule 14D-9 (together with the exhibits and annexes attached hereto, as it may be amended or supplemented, this
Schedule 14D-9) relates to the Companys common stock, par value $0.0001 per share (the Common Stock). As of November 3, 2014, there were 12,713,158 shares of Common Stock issued and outstanding, which includes
251,750 shares of unvested restricted stock.
Item 2. |
Identity and Background of Filing Person |
(a) Name and Address.
The name, business address and business telephone number of the Company, which is both the person filing this Schedule 14D-9 and the subject company, are set
forth above under the heading, Name and Address in Item 1, which information is incorporated by reference herein. The Companys website address is www.worldenergy.com. The information on the Companys website should not be
considered a part of this Schedule 14D-9.
(b) Tender Offer and Merger.
This Schedule 14D-9 relates to the tender offer by Wolf Merger Sub Corporation, a Delaware corporation (Merger Sub) and a wholly-owned subsidiary
of EnerNOC, Inc., a Delaware corporation (EnerNOC and, together with Merger Sub, the Offerors), to purchase all outstanding shares of Common Stock (collectively, the Shares) at a price of $5.50 per Share, net to
the seller in cash (less any required withholding taxes and without interest) (the Offer Price), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 19, 2014 (as amended or supplemented
from time to time, the Offer to Purchase), and in the related Letter of Transmittal (as amended or supplemented from time to time, the Letter of Transmittal and, which together with the Offer to Purchase, constitute the
Offer), which are annexed to and filed with the Offerors Tender Offer Statement on Schedule TO (together with the exhibits thereto, as it may be amended or supplemented, the Schedule TO), filed by the Offerors with the
U.S. Securities and Exchange Commission (the SEC) on November 19, 2014. The Offer to Purchase and Letter of Transmittal are being mailed with this Schedule 14D-9 and are filed as Exhibits (a)(1) and (a)(2), respectively, hereto and
are incorporated herein by reference.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of November 4, 2014, by and
among EnerNOC, Merger Sub and the Company (as amended from time to time, the Merger Agreement). The Merger Agreement sets forth the terms and conditions of the Offer and provides that, among other things, as soon as practicable following
the consummation of the Offer and, subject to the satisfaction or waiver of certain customary conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the Merger) in accordance with the General
Corporation Law of the State of Delaware, as amended (the DGCL). Following the consummation of the Merger, the Company will continue as the surviving corporation (the Surviving Corporation) and as a wholly owned subsidiary of
EnerNOC.
The Merger will be governed by Section 251(h) of the DGCL, which provides that following consummation of a successful tender offer for a
public corporation, and subject to certain statutory provisions, if the acquirer holds at least the amount of shares of each class of stock of the acquired corporation that would otherwise be required to
approve a merger for the acquired corporation, and the other stockholders receive the same consideration for their stock in the merger as was payable in the tender offer, the acquirer can effect
a merger without the action of the other stockholders of the acquired corporation. Accordingly, if the Offer is consummated, the Merger Agreement contemplates that the parties will effect the closing of the Merger without a vote of the stockholders
of the Company in accordance with Section 251(h) of the DGCL and, concurrently with the closing of the Merger, the Company and EnerNOC will cause a certificate of merger (the Certificate of Merger) to be filed with the Secretary of
State of the State of Delaware under the DGCL. The Merger will be effective at the time of such filing or such later time as specified in the Certificate of Merger and agreed to by the Company and EnerNOC in writing (the Effective Time).
Pursuant to the Merger Agreement, at the Effective Time any remaining Shares not validly tendered pursuant to the Offer (other than any (i) Shares
owned by EnerNOC, Merger Sub or any other affiliate of EnerNOC that is directly or indirectly wholly owned by the ultimate parent of EnerNOC, (ii) Shares owned by the Company or any direct or indirect wholly-owned subsidiary of the Company and
(iii) Shares held by the Companys stockholders who properly demand and perfect dissenters rights in accordance with Section 262 of the DGCL and who, as of the Effective Time of the Merger, have not effectively withdrawn or lost
such dissenters rights) will be cancelled and extinguished and converted automatically into the right to receive cash in an amount equal to the Offer Price. In addition, holders of vested stock options with an exercise price equal to or less
than the Offer Price shall receive the Offer Price less the per Share exercise price for each Share underlying such options. All other holders of options shall receive an option to purchase shares of EnerNOCs common stock based on an equity
award exchange ratio set forth in the Merger Agreement.
The Merger Agreement also provides that, at the Effective Time, and in accordance with the terms
of each warrant to purchase shares of the Companys Common Stock that is issued and outstanding immediately prior to the Effective Time, the Surviving Corporation shall pay the holder of each such warrant, as promptly as reasonably practicable
after the Effective Time, an amount in cash, without interest, equal to the product of (i) the aggregate number of shares of Common Stock subject to such warrant, multiplied by (ii) the excess, if any, of the Merger Consideration (as
defined in the Offer to Purchase) over the per share exercise price under such warrant. In the event that the per share exercise price under a warrant is equal to or greater than the Merger Consideration, such warrant shall be cancelled as of the
Effective Time without payment therefor and shall have no further force or effect.
Pursuant to the Merger Agreement, with respect to each award of
restricted stock under the Companys stock plans (each a Restricted Stock Award and collectively, the Restricted Stock Awards), at the Effective Time, each Restricted Stock Award outstanding immediately prior to the Effective
Time (whether vested or unvested), will be cancelled and converted into the right to receive, as soon as reasonably practicable after the Effective Time, a cash payment per Share equal to the Offer Price less any applicable tax withholding. With
respect to any unvested Restricted Stock Awards, the cash payment per Share equal to the Offer Price less any applicable tax withholding and without interest, shall remain subject to the same repurchase option, risk of forfeiture, vesting schedule
and other conditions as were set forth in the applicable restricted stock purchase agreement or other contract and shall be payable at the time such Restricted Stock Award would have vested or when the applicable conditions would have terminated, as
applicable, provided that the holder of the unvested Restricted Stock Award continues to be employed or in service with EnerNOC or its affiliates through the applicable vesting date or termination of condition.
EnerNOC and the Company have made customary representations, warranties and covenants in the Merger Agreement, including covenants (i) to promptly make
all filings required by the Securities Exchange Act of 1934, as amended (the Exchange Act), and other applicable laws with respect to the Offer and the Merger; and (ii) to use their commercially reasonable efforts to take all
appropriate action to consummate and effectuate the Offer, the Merger and the other transactions contemplated by the Merger Agreement. Additionally, prior to consummation of the Merger, the Company has agreed to conduct its business in all material
respects in the ordinary and usual course and to comply with certain other operating covenants through the consummation of the Merger.
2
During the period beginning on the date of the Merger Agreement and continuing until 11:59 p.m., Boston,
Massachusetts time, on December 29, 2014 (the Go-Shop Period), the Company has the right to directly or indirectly initiate, solicit or encourage any Takeover Proposals (as defined in the Merger Agreement) and waive standstill
provisions to enable Takeover Proposals to acquire the entire Company to be submitted to the Company. At the end of the Go-Shop Period, the Company must cease any existing solicitation, encouragement, discussion or negotiation with any third parties
but may continue to receive proposals and engage in discussions and activities with third parties that the Companys Board of Directors (the Board) believes in good faith is, or could reasonably be expected to result in, a Superior
Proposal (as defined in the Merger Agreement).
The Merger Agreement contains certain termination rights for the Company and EnerNOC. Upon termination of
the Merger Agreement circumstances by EnerNOC upon a breach by the Company or other reasons of termination by EnerNOC specified in the Merger Agreement, the Company will be required to pay EnerNOC a termination fee of $2,398,821. Notwithstanding the
foregoing, the termination fee will be $1,028,066 if the Merger Agreement is terminated by the Company in order to enter into a Superior Proposal, provided that such termination occurs during the Go-Shop Period or thereafter with respect to a
Superior Proposal from certain excluded parties. The Merger Agreement also provides that EnerNOC will be required to pay the Company a reverse termination fee of $3,598,232 under certain circumstances specified in the Merger Agreement. The
termination fee payable by the Company is the sole and exclusive remedy except in limited circumstances in the event of fraud or willful breach or in the event of a breach of the go-shop provisions.
Merger Sub commenced (within the meaning of Rule 14d-2 promulgated under the Exchange Act), the Offer on November 19, 2014. Subject to the terms and
conditions of the Merger Agreement and the Offer, which allow for limited extensions, the Offer will expire at 11:59 p.m., Boston Massachusetts time, on January 2, 2015.
The foregoing summary of the Offer is qualified in its entirety by the more detailed description and explanation contained in the Offer to Purchase and the
Letter of Transmittal, copies of which have been filed as Exhibits (a)(1) and (a)(2), respectively, hereto and are incorporated herein by reference. The Merger Agreement is summarized in Section 13The Transaction DocumentsThe
Merger Agreement of the Offer to Purchase. The summary of the Merger Agreement set forth in the Offer to Purchase and any summary provisions of the Merger Agreement set forth herein do not purport to be complete and each is qualified in its
entirety by reference to the Merger Agreement, a copy of which is filed as Exhibit (d)(1) to this Schedule 14D-9 (by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K filed with the SEC on November 5, 2014) and is
incorporated herein by reference.
As set forth in the Offer to Purchase, the principal executive offices of EnerNOC and Merger Sub are located at One
Marina Park Drive, Suite 400, Boston, Massachusetts 02210.
The information relating to the Offer, including the Schedule TO, this Schedule 14D-9 and
related documents can be obtained without charge from the SECs website at www.sec.gov.
Item 3. |
Past Contacts, Transactions, Negotiations and Agreements |
Except as set forth in this Schedule 14D-9, as
of the date of this Schedule 14D-9, to the knowledge of the Company, there are no material agreements, arrangements or understandings nor any actual or potential conflicts of interest between the Company or its affiliates, on the one hand, and
(i) its executive officers, directors or affiliates or (ii) EnerNOC, Merger Sub or their respective officers, directors or affiliates, on the other hand.
Arrangements with EnerNOC and Merger Sub.
Ownership
of Shares
According to the Offer to Purchase, as of November 19, 2014, neither EnerNOC nor Merger Sub nor any of their affiliates own any Shares.
3
Interest in the Offer and the Merger
The interest of EnerNOC and its affiliates in respect of the Offer and the Merger are different from the interests of the Companys stockholders because
EnerNOC has an interest in acquiring Shares at the lowest possible price, whereas the Companys stockholders have an interest in selling their Shares for the highest possible price. Certain of the Companys executive officers and directors
may have financial interests and inducements related to the transactions contemplated by the Merger Agreement, including the Offer and the Merger, that are different from, or in addition to, the interests of holders of Shares generally. The special
committee of independent directors established by the Board (the Special Committee) and the Board were aware of these potentially differing interests and inducements and considered them, among other matters, in evaluating and negotiating
the Merger Agreement and in reaching the decision to approve the Merger Agreement and the transactions contemplated thereby, as more fully discussed below in Item 4The Solicitation or Recommendation.
In addition, while the stockholders of the Company will cease to have any interest in the Company after they sell their Shares in the Offer or after their
Shares are converted in the Merger, EnerNOC will benefit from any future increases in the value of the Company and bear the risks of any future decreases in the value of the Company.
Merger Agreement
The summary of the Merger Agreement
contained in Section 13The Transaction DocumentsThe Merger Agreement of the Offer to Purchase and the description of the conditions of the Offer contained in Section 15Conditions to the Offer of
the Offer to Purchase are incorporated herein by reference. Such summary and description do not purport to be complete and are qualified in their entirety by reference to the Merger Agreement.
The Merger Agreement incorporated by reference in this Schedule 14D-9 is intended to provide holders of Shares with information regarding the terms of the
Merger Agreement and is not intended to update, modify or supplement any factual disclosures about the Offerors or the Company or any of their respective affiliates. The representations, warranties and covenants contained in the Merger Agreement
were made only as of specified dates for the purposes of such agreement, were solely for the benefit of the parties to such agreement and may be subject to qualifications and limitations agreed upon by such parties. In particular, in reviewing the
representations, warranties and covenants contained in the Merger Agreement and discussed in the foregoing description, it is important to bear in mind that such representations, warranties and covenants were negotiated with the principal purposes
of allocating risk between the parties, rather than establishing matters as facts, and establishing the circumstances in which a party to the Merger Agreement may have the right not to consummate the Offer or the Merger if the representations and
warranties of the other party prove to be untrue due to a change in circumstance or otherwise. Such representations, warranties and covenants may also be subject to a contractual standard of materiality that is different from what may be viewed as
material by holders of Shares or from the standard of materiality generally applicable to reports or documents filed with the SEC, and in some cases were qualified by disclosures set forth in a disclosure letter that was provided by the Company to
the other parties but is not publicly filed as part of the Merger Agreement. Stockholders are not third-party beneficiaries under the Merger Agreement. Accordingly, stockholders should not rely on such representations, warranties and covenants as
characterizations of the actual state of facts or circumstances described therein. Information concerning the subject matter of such representations, warranties and covenants, which do not purport to be accurate as of the date of this Schedule
14D-9, may have changed since the date of the Merger Agreement, which subsequent developments or new information may or may not be fully reflected in the parties public disclosures.
Non-Disclosure Agreement
The Company and EnerNOC entered
into a Non-Disclosure Agreement, effective as of April 15, 2014, as amended by amendments dated June 11, 2014, August 20, 2014, October 3, 2014, October 15, 2014 and October 31, 2014 (collectively, the
Non-Disclosure Agreement). Pursuant to the Non-Disclosure Agreement,
4
subject to certain exceptions, the Company and EnerNOC agreed to keep confidential all trade secrets or confidential or proprietary information. Under the Non-Disclosure Agreement, proprietary
information includes any notes, analyses, compilations, studies, interpretations, memoranda or other documents which contain, reflect or are based upon any proprietary information.
The Company and EnerNOC also agreed for a period of two (2) years after the date of the Non-Disclosure Agreement not to solicit or attempt to solicit any
employee, consultant or independent contractor of the other to become an employee, consultant or independent contractor, subject to certain exceptions related to general solicitations and hiring previously terminated employees.
The foregoing summary description of the Non-Disclosure Agreement does not purport to be complete and is qualified in its entirety by reference to the
Non-Disclosure Agreement, a copy of which is filed as Exhibit (d)(2)(i) hereto and is incorporated by reference herein.
Tender and Support
Agreements
On November 4, 2014, each of the Companys directors and executive officers (each a Signatory and, collectively, the
Signatories) entered into a Tender and Support Agreement with the Offerors (each, a Tender and Support Agreement and collectively, the Tender and Support Agreements), pursuant to which the Signatories agreed,
among other things, to tender all of their Shares in the Offer on the terms and subject to the conditions set forth in the Tender and Support Agreements. The Signatories hold, beneficially or of record, approximately 515,414 outstanding Shares in
the aggregate (which for purposes of this subsection excludes any Shares issuable upon exercise of stock options), which represents approximately 4.14% of the Shares issued and outstanding. The Signatories entered into the Tender and Support
Agreements solely in their capacities as stockholders of the Company and the Company is not a party to the Tender and Support Agreements.
The foregoing
summary description of the Tender and Support Agreements does not purport to be complete and is qualified in its entirety by reference to the Form of Tender and Support Agreement, a copy of which is filed as Exhibit (d)(3) hereto and is incorporated
herein by reference.
Arrangements with Executive Officers, Directors and Affiliates of the Company.
In considering the recommendation of the Board set forth below in Item 4The Solicitation or Recommendation, the Companys stockholders
should be aware that the Companys executive officers and directors have agreements or arrangements that may provide them with interests in the Offer and the Merger that may differ from, or are in addition to, those of the Companys
stockholders generally. These interests may present such executive officers and directors with certain conflicts of interest. The Special Committee and the Board were aware of these potential conflicts and considered them, among other matters, in
reaching the decision to approve the Merger Agreement and the transactions contemplated thereby.
Consideration Payable for Shares Tendered Pursuant to
the Offer
If each of the Companys executive officers and directors (and persons and entities affiliated with them) were to tender any Shares
each owns for purchase pursuant to the Offer, each would receive the same cash consideration on the same terms and conditions as the Companys other tendering stockholders. As of November 4, 2014, the Companys directors and executive
officers (and persons and entities affiliated with them) owned, in the aggregate, 515,414 Shares (which for purposes of this subsection excludes any Shares issuable upon exercise of stock options). If the Companys directors and executive
officers (and persons and entities affiliated with them) were to tender all of their current Shares for purchase pursuant to the Offer and those Shares were accepted for payment and paid for by the Offerors, the directors and executive officers (and
persons and entities affiliated with them) would receive an aggregate of approximately $2.8 million in cash, subject to any withholding required by applicable tax laws. For a description of the treatment of stock options held by the directors and
executive
5
officers of the Company, see below under the heading Effect of the Offer and the Merger on Stock Options. For a description of the treatment of restricted stock held by the directors
and executive officers of the Company, see below under the heading Effect of the Offer and the Merger on Restricted Stock Awards.
The
following table sets forth, as of November 4, 2014, the cash consideration that each executive officer and non-employee director would be entitled to receive in respect of his or her outstanding Shares if such individual were to tender all of
his or her outstanding Shares pursuant to the Offer and those Shares were accepted for purchase and purchased by the Offerors.
|
|
|
|
|
|
|
|
|
Name |
|
Number of Shares |
|
|
Consideration Payable in Respect of Shares ($) |
|
Philip V. Adams |
|
|
218,000 |
|
|
|
1,199,000 |
|
Martha Danly |
|
|
|
|
|
|
|
|
James F. Parslow |
|
|
38,438 |
|
|
|
211,409 |
|
Edward Libbey |
|
|
192,973 |
(1) |
|
|
1,061,352 |
|
Thad Wolfe |
|
|
34,614 |
|
|
|
190,377 |
|
Ralph Sheridan |
|
|
16,149 |
(2) |
|
|
88,820 |
|
Peter Londa |
|
|
7,032 |
|
|
|
38,676 |
|
Sean Sweeney |
|
|
6,149 |
|
|
|
33,820 |
|
John Fox |
|
|
2,059 |
|
|
|
11,325 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
515,414 |
|
|
|
2,834,779 |
|
(1) |
Includes 66,300 shares owned by Edward Libbeys wife. |
(2) |
Includes 10,000 shares owned directly by Ralph Sheridan with the remaining 6,149 being held by Value |
Management, LLC of which Ralph Sheridan is a 100% owner.
Effect of the Offer and the Merger on Stock Options
The
Merger Agreement provides that, with respect to each stock option to acquire Shares issued under the Companys stock plans (each, an Option and collectively, the Options), at the Effective Time, each Option that is
outstanding and vested immediately prior to the Effective Time, if the per Share exercise price for the Option is equal to or less than the Offer Price, will be cancelled immediately prior to the Effective Time and converted into the right to
receive, as soon as reasonably practicable after the Effective Time, a cash payment equal to the product of (x) the total number of Shares subject to such Option and (y) the amount, if any, by which $5.50 exceeds the exercise price per
Share underlying such Option, less any applicable tax withholding.
Pursuant to the Merger Agreement, at the Effective Time, each Company Option that is
outstanding and unvested as of immediately prior to the Effective Time, and Options in which the exercise price per Share is greater than $5.50, will be assumed by EnerNOC, and automatically converted at the Effective Time into options to purchase
shares of common stock of EnerNOC, based on an equity award exchange ratio. The equity award exchange ratio will be calculated by dividing the Offer Price by the volume weighted average trading price of one share of EnerNOC common stock
as reported on NASDAQ during the 20-day period ending on the second to last NASDAQ trading date immediately before the Effective Time.
6
The following table sets forth information regarding the stock options held by the Companys directors and
executive officers as of November 4, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Number of Shares Underlying Option |
|
|
Exercise Price/ Share ($) |
|
|
Payment Upon Option Cancellation ($) |
|
Philip V. Adams |
|
|
50,000 |
|
|
$ |
3.17 |
|
|
|
116,500 |
|
Martha Danly |
|
|
37,500 |
(1) |
|
$ |
3.81 |
|
|
|
63,375 |
|
James F. Parslow |
|
|
1,250 |
|
|
$ |
3.17 |
|
|
|
2,913 |
|
|
|
|
6,000 |
(2) |
|
$ |
3.81 |
|
|
|
10,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
94,750 |
|
|
|
|
|
|
|
192,928 |
|
(1) |
Excludes 37,500 shares that were unvested as of November 4, 2014. |
(2) |
Excludes 6,000 shares that were unvested as of November 4, 2014. |
Effect of the Offer and the Merger on
Restricted Stock Awards
The Merger Agreement provides that, with respect to each Restricted Stock Award, at the Effective Time, each Restricted Stock
Award outstanding immediately prior to the Effective Time (whether vested or unvested), will be cancelled and converted into the right to receive, as soon as reasonably practicable after the Effective Time, a cash payment per Share equal to the
Offer Price less any applicable tax withholding. With respect to any unvested Restricted Stock Awards, the cash payment per Share equal to the Offer Price less any applicable tax withholding and without interest, shall remain subject to the same
repurchase option, risk of forfeiture, vesting schedule and other conditions as were set forth in the applicable restricted stock purchase agreement or other contract and shall be payable at the time such Restricted Stock Award would have vested or
when the applicable conditions would have terminated, as applicable, provided that the holder of the unvested Restricted Stock Award continues to be employed or in service with EnerNOC or its affiliates through the applicable vesting date or
termination of condition.
The following table sets forth information regarding the unvested Restricted Awards held by the Companys directors and
executive officers as of November 4, 2014:
|
|
|
|
|
|
|
|
|
Name |
|
Number of Restricted Stock Awards |
|
|
Payment Upon Cancellation ($) |
|
Philip V. Adams |
|
|
75,000 |
(1) |
|
|
412,500 |
|
James F. Parslow |
|
|
40,000 |
(2) |
|
|
220,000 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
115,000 |
|
|
|
632,500 |
|
(1) |
Includes 50,000 shares that vest on June 6, 2016 and 25,000 shares that vest on February 7, 2017. |
(2) |
All shares vest on September 20, 2016. |
Section 16 Matters
Pursuant to the Merger Agreement, the Company has agreed to take all steps as may be required to cause to be exempt under Rule 16b-3 under the Exchange Act any
dispositions of Shares pursuant to the Offer and the Merger that are treated as dispositions under Rule 16b-3 by each director or officer of the Company who is subject to the reporting requirements of Section 16(a) of the Exchange Act with
respect to the Company.
Employment Agreements Following the Merger
As of the date of this Schedule 14D-9, the Offerors have informed the Company that no members of the Companys current management has entered into any
agreement, arrangement or understanding with EnerNOC, Merger Sub or their affiliates regarding employment with the Surviving Corporation. However, EnerNOC may in
7
the future enter into employment or consultancy, compensation, retention, severance or other employee or consultant benefit arrangements with the Companys executive officers and other key
Company employees. The Offerors may also choose not to enter into employment or consultancy, compensation, retention, severance or other employee or consultant benefit arrangements with the Companys executive officers and other key Company
employees.
Philip Adams Employment Agreement
Effective February 7, 2013, the Company and Mr. Adams entered into an employment agreement (the Employment Agreement) to reflect his new
role and responsibilities as the Companys Chief Executive Officer. Under the Employment Agreement, Mr. Adams is paid a base salary of $25,000 per month, and is eligible for a bonus based on criteria to be determined by the Board (see
Bonus Arrangements for Executive Officers below).
See Item 8Golden Parachute Payments below for additional information regarding
severance disclosure.
Bonus Arrangements for Executive Officers
Under the revised Companys bonus compensation plan, the Companys annual cash incentive bonus for executive officers is intended to compensate for
performance related to the Companys operational and financial goals. No executive bonus may be awarded unless the Company has achieved net income at fiscal year-end. The net income shall be split, with 50% retained by the Company, and 50%
forming the bonus pool up to an aggregate total executive bonus pool cap of $340,000 and any additional net income shall be retained by the Company. Further, any amount in the bonus pool that is not awarded shall be retained by the Company.
The bonuses will be awarded based on the following business performance criteria and percentages, as set forth below: (1) net income; (2) new
bookings and renewals achievement; and (3) year-end cash balance. The Chief Executive Officer and Chief Operating Officer will receive 50% of their bonus upon achievement of the net income target, 25% upon the new bookings target, and 25% upon
the renewals achievement target. The Chief Financial Officer will receive 50% of his bonus upon achievement of the net income target, 12.5% upon the new bookings target, 12.5% upon the renewals achievement, and 25% upon achievement of the year-end
cash balance target, including collections against accounts receivable.
On November 1, 2014, the Special Committee resolved (i) that for the
purposes of calculating payments under the Companys bonus/commission structure (including the bonus compensation plan for executive officers) for the year ending December 31, 2014, the Companys year-end financial results will be
calculated excluding all transaction related expenses incurred in connection with the Merger; and (ii) an employee being terminated will not impact an employees right to receive his or her bonus, unless the employee voluntarily resigns or
is terminated for cause prior to the payment date.
Director and Officer Indemnification and Insurance
Section 102(b)(7) of the DGCL allows a corporation to eliminate the personal liability of directors of a corporation to the corporation or its
stockholders for monetary damages for a breach of fiduciary duty as a director, except where such liability arises from a breach of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, the payment of a dividend or a stock redemption or repurchase in violation of the DGCL, or any transaction from which the director derived an improper personal benefit. Included in the Companys certificate of incorporation,
as amended to date (the Charter) is a provision to limit or eliminate the personal liability of its directors to the fullest extent permitted under the DGCL, as it now exists or may in the future be amended. The Company has also entered
into indemnification agreements with each of its executive officers and directors providing for a contractual right to indemnification to the fullest extent permitted by law, and includes, in certain circumstances, the right to advancement of
expenses.
8
Section 145 of the DGCL (Section 145) provides that, subject to certain limitations, a
corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against amounts paid and expenses incurred in connection with
an action or proceeding to which he is or is threatened to be made a party by reason of such position, if such person shall have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the
corporation, and, in any criminal proceeding, if such person had no reasonable cause to believe his or her conduct was unlawful. The Company has included in its Charter provisions that require the Company to provide indemnification to its current
and former directors and officers and other persons serving at the request of the corporation as an officer, director, partner, employee or trustee of another corporation, partnership, joint venture, trust or other enterprise (each an
Indemnitee) to the fullest extent permitted under the DGCL. In addition, Section 145 also provides that expenses, including attorneys fees, incurred by an officer or director of the corporation in defending an action, suit or
proceeding may be paid by the corporation in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount so advanced if it is ultimately determined
that the person is not entitled to be indemnified by the corporation as authorized by Section 145, and further provides that such expenses incurred by former directors and officers or other employees and agents of the corporation (or persons
serving at the request of the corporation in related capacities) may be paid upon such terms and conditions as the corporation deems appropriate. The Charter provides that the Company shall advance expenses to Indemnitees incurred in connection with
any such proceeding; provided that such advancements will be made only upon an undertaking to repay if indemnification is ultimately not permitted.
In
addition, the Company also maintains insurance on behalf of its directors and officers insuring them against liability asserted against them in their capacities as directors or officers or arising out of such status.
The Merger Agreement provides that all existing rights to indemnification, advancement of expenses and exculpation that any person who is or has been at any
prior time or who becomes prior to the consummation of the Merger an officer or director of the Company or its subsidiaries (an Indemnified Party) is entitled to and that are contained in the organizational documents of the Company or
any of its subsidiaries as in effect as of November 4, 2014, will survive the Merger and will be assumed by the Surviving Corporation.
Pursuant to
the Merger Agreement, for six years after the Effective Time, to the fullest extent permitted under applicable law, EnerNOC and the Surviving Corporation have agreed to indemnify, defend and hold harmless each Indemnified Party with respect to all
actions or omissions by each Indemnified Party in its capacity as such occurring at or prior to the Effective Time, and to reimburse each Indemnified Party for any legal or other expenses reasonably incurred in connection with investigating or
defending any losses, claims, damages, liabilities, fees, expenses, judgments and fines as such expenses are incurred, subject to the Surviving Corporations receipt of an undertaking by such Indemnified Party to repay such legal and other fees
and expenses paid in advance if it is ultimately determined in a final and non-appealable judgment of a court of competent jurisdiction that such Indemnified Party is not entitled to be indemnified under applicable law; provided, however, that the
Surviving Corporation will not be liable for any settlement effected without the Surviving Corporations prior written consent (which consent will not be unreasonably withheld, conditioned or delayed). In addition, the Surviving Corporation has
agreed to, and EnerNOC has agreed to cause the Surviving Corporation to, (i) maintain in effect for a period of six years after the Effective Time, if available, the current policies of directors and officers liability insurance
maintained by the Company immediately prior to the Effective Time (provided that the Surviving Corporation may substitute therefor policies, of at least the same coverage and amounts and containing terms and conditions that are not less advantageous
to the directors and officers of the Company when compared to the insurance maintained by the Company as of the date of the Merger Agreement), or (ii) obtain as of the Effective Time tail insurance policies with a claims period of
six years from the Effective Time with at least the same coverage and amounts and containing terms and conditions that are not less advantageous to the directors and officers of the Company, in each case with respect to claims arising out of or
relating to events which occurred before or at the Effective Time (including in connection with the transactions contemplated by the Merger Agreement); provided, however, that in no event will the Surviving
9
Corporation be required to expend, for any such annual policy in excess of $300,000 annually (the Maximum Premium). If such insurance coverage cannot be obtained at an annual premium
equal to or less than the Maximum Premium, the Surviving Corporation has agreed to obtain, and EnerNOC has agreed to cause the Surviving Corporation to obtain, that amount of directors and officers insurance (or tail
coverage) obtainable for an annual premium equal to the Maximum Premium.
Item 4. |
The Solicitation or Recommendation |
Recommendation of the Special Committee and the Companys
Board of Directors.
For the reasons described in more detail below, after careful consideration, the Special Committee on November 1, 2014,
unanimously (a) determined, subject to the receipt of the Fairness Opinion, that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable to, and in the best interests of, the holders of
Common Stock; (b) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and the other transaction documents; (c) recommended, subject to the terms of the Merger
Agreement, that the holders of Common Stock accept the Offer at the Offer Price; and (d) adopted certain other resolutions necessary and appropriate to effect such transaction.
In addition and for the reasons described in more detail below, after careful consideration, the Board, on November 3, 2014, unanimously
(a) determined and declared that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are fair to, and in the best interests of the Company and its stockholders; (b) approved and declared
advisable the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, on the terms and subject to the conditions set forth in the Merger Agreement (such approval having been made in accordance with the DGCL);
(c) elected that the Merger Agreement and the transactions contemplated thereby be expressly governed by Section 251(h) of the DGCL; (d) approved the Merger Agreement, the Offer, the Merger and the Tender and Support Agreement
(although the Company is not a party to the Tender and Support Agreement) for purposes of and in accordance with Section 203 of the DGCL; (e) recommended that the Companys stockholders accept the Offer and tender their Shares
pursuant to the Offer; and (f) adopted certain other resolutions necessary and appropriate to effect such transactions.
The Board, based on the
Special Committees recommendation and for the other reasons described in more detail below, hereby unanimously recommends that the Companys stockholders accept the Offer and tender their Shares pursuant to the Offer.
In reaching the conclusions and in making the recommendation described above, the Board consulted with the Companys management, as well as the
Companys financial and legal advisors, and took into account a number of reasons, described under Background to the Offer; Reasons for the Recommendation of the Board below.
Background of the Offer; Reasons for the Recommendation of the Board
The parties first engaged in discussions regarding the possible acquisition of the Company by EnerNOC in early 2010 and, on March 1, 2010, entered into a
mutual non-disclosure agreement. Shortly thereafter, the Company provided minimal confidential information to support a possible offer from EnerNOC.
On
March 5, 2010, EnerNOC provided an indication of interest and preliminary term sheet to purchase the Company for $3.75$4.00 per Share in shares of EnerNOCs common stock, based on the immediately preceding 30-day average closing
price of such Shares. EnerNOCs shares of common stock sold in the range of $25.93 to $37.00 during the first quarter of 2010. After review of such indication of interest by the Board at a meeting in March 2010, the Board determined that the
offered price was insufficient for a sale given the Companys prospects. On March 23, 2010, Timothy Healy, EnerNOCs Chief Executive Officer, emailed the
10
Companys key management to further express interest. However, after failing to reach agreement on valuation, on March 26, 2010, EnerNOC formally withdrew its proposal. Thereafter,
there were few communications and occasional attempts to do business together by the companies through 2013.
On November 21, 2013, Philip V. Adams,
the Companys Chief Executive Officer, met with Mr. Healy for the purpose of getting reacquainted and to discuss the possibility of a strategic combination of the two companies. Mr. Adams and Mr. Healy exchanged emails in
November and December of 2013 to schedule a follow up meeting but were unsuccessful in arranging a date.
On January 10, 2014, Ardsley Advisory
Partners and its affiliates (Ardsley) filed a Schedule 13D with the SEC, together with a letter to Dr. Edward Libbey, then Chairman of the Board, relaying Ardsleys recommendation that the Company focus on the energy
procurement business, primarily for large enterprises, and cease making investments in the energy efficiency business.
On February 6, 2014, the
Company engaged Canaccord Genuity, Inc. (Canaccord) to provide financial advisory services related to a review of the Companys strategic alternatives, including an analysis and evaluation of the Companys business, operations,
financial condition and prospects. Under the terms of that engagement, Canaccord would also assist the Companys management in the development of a mergers and acquisitions strategy and an evaluation of the Companys financing needs and
available financing alternatives. On February 20, 2014, the Company issued a press release that included an announcement that the Company had retained Canaccord to assist in its review of the Companys strategic alternatives.
On March 10, 2014, Mr. Healy emailed Mr. Adams to propose the possibility of the two companies entering into acquisition discussions, subject
to obtaining the Companys advance commitment that EnerNOC and the Company would be headed in the same direction. The following day, after consulting with Dr. Libbey, Mr. Adams replied to Mr. Healy and stated that he
had been instructed to have further discussions. Mr. Healy requested an opportunity to present his thoughts regarding a potential combination to the Board.
On March 18, 2014, Mr. Adams communicated the Boards desire to have Mr. Healy make a presentation to the Board at its next regularly
scheduled meeting to be held on March 25, 2014. Mr. Adams and Mr. Healy had several telephone calls prior to the Board meeting to coordinate the presentation.
On March 25, 2014, the Board held a meeting with representatives of Canaccord and Mirick, OConnell, DeMallie & Lougee LLP, the
Companys outside general counsel (Mirick OConnell) in attendance. At the meeting, Canaccord reported on the Companys position in the market as well as the valuation and merger and acquisition environment for similar
businesses and Mirick OConnell discussed the Boards fiduciary duties with respect to any transaction proposal. Following that discussion, Mr. Healy and Neil Moses, Chief Financial Officer of EnerNOC, joined the meeting to present an
overview of the business of EnerNOC and the perceived general synergies if the two companies were combined. Mr. Healy noted that he was not prepared at that time to suggest a purchase price but suggested that the transaction consideration would
likely be all cash. He advised the Board that EnerNOC would not participate in a broader auction process if the Company made a determination to conduct such a process although it would agree to provisions for a post-signing go-shop and he noted
EnerNOCs willingness to move forward only under an exclusivity agreement. Mr. Healy further suggested that the parties have a more in depth conversation, together with agreement as to a due diligence process. After Mr. Healy and
Mr. Moses exited the meeting, the Board discussed the concept of combining with EnerNOC and determined to compare its own outlook without a combination, the possibility of other acquirers, and the possibility of combining with EnerNOC. The
Board discussed with Canaccord EnerNOCs transaction history and the potential loss of EnerNOC as a suitor if the Company were to initiate a broad sale process. The Board determined to continue discussions with EnerNOC and to allow it access to
certain confidential information subject to execution of an appropriate non-disclosure agreement. The Board suggested a further review of internal strategies and asked Canaccord to create a list of potential buyers and strategic partners to assist
the Board with its analysis.
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On April 1, 2014, Mr. Healy followed up with Mr. Adams to express his continued interest in the
Company as a result of the March 25 meeting.
On April 4 and April 6, 2014, Mr. Adams met with members of EnerNOCs management
team to discuss business process and technology issues. On or about the same date, Canaccord was contacted by the investment banking firm, Pacific Crest, who informed Canaccord that they had been retained by EnerNOC as its financial advisor for a
potential transaction. Subsequently Canaccord and Pacific Crest engaged in multiple interactions as the companies explored a transaction.
On
April 15, 2014, the Company and EnerNOC executed the Non-Disclosure Agreement.
On April 16, 2014, members of EnerNOCs and the
Companys senior teams met at the offices of Canaccord to provide a software demonstration.
On April 24, 2014, the Board held a telephonic
meeting and briefly discussed its communications with Canaccord regarding EnerNOC as a potential acquirer of the Company, as well as other possible purchasers.
On May 5, 2014, EnerNOC delivered a letter setting forth a non-binding indication of interest (the LOI) to Mr. Adams, together with a
proposed exclusivity and standstill agreement. The LOI provided for an aggregate purchase price of $68.5 million to $71.1 million, which, based on EnerNOCs assumption of the Companys fully diluted Share count using the treasury
stock-method of approximately 12.5 million Shares, represented a purchase price of $5.50 to $5.70 per Share, a premium of 31% to 36% above the $4.20 closing price of the Shares on May 2, 2014. The LOI contemplated a go-shop
process whereby the Company would have the opportunity after an agreement is signed to seek a Superior Proposal. The proposed form of exclusivity and standstill agreement provided for an exclusivity and standstill period through July 2, 2014
and an exception to the standstill provision that would permit EnerNOC to purchase Shares from stockholders of the Company. The proposed agreement also contained a provision requiring the Company to publicly disclose eventually all of the material
non-public information disclosed to EnerNOC. After consultation with Mirick OConnell, the Board determined that the draft agreement was not acceptable and instructed counsel to negotiate an amendment to the Non-Disclosure Agreement to address
exclusivity and standstill provisions, which negotiations continued through June 11, 2014.
On May 12, 2014, the Board held a telephonic meeting
with representatives of Canaccord and Mirick OConnell in attendance. After Mirick OConnell discussed the Boards fiduciary duties with respect to any offer, the representatives of Canaccord discussed the LOI. The LOI provided for a
price range of $5.50 to $5.70 per Share, or a 31% or 36% premium over the $4.20 market price at that time. The Board discussed with Canaccord comparisons with similarly sized acquisitions, the advantages and disadvantages to remaining independent,
the Companys revenue trends and projections and prospects for growth, the risks of selling the Company and the proposed go-shop process described in the LOI. The Board determined to continue its discussions at a meeting later in
the week.
On May 15, 2014, the Board held a telephonic meeting with representatives of Mirick OConnell and Canaccord again in attendance. The
Board discussed three possible alternatives to responding to EnerNOCs LOI in order to obtain the highest price. After discussing the merits of a go-shop process subject to a termination fee, the Board agreed to negotiate the
proposed offer price further, but without mandating a best and final offer and agreed that a longer and more robust standstill provision than that presented by EnerNOC in the LOI would need to be negotiated and agreed upon before additional
confidential information could be shared with EnerNOC. The Board instructed Canaccord and Mirick OConnell to pursue this course of action with the appropriate representatives of EnerNOC. The Board also discussed an informal inquiry received by
Canaccord from a potential financial acquirer; however, there was no further action by the party making the inquiry.
On May 23, 2014, the Strategic
Alternatives Committee of the Board (the SAC), which was formed as a requirement under the Companys March 2014 settlement agreement with Ardsley Partners and was at the time
12
comprised of Peter Londa, Ralph Sheridan and Dr. Libbey, held a telephonic meeting with Mirick OConnell in attendance to review the status of the standstill negotiations with EnerNOC.
In light of the perceived delays in reaching an agreement on the standstill provision, the SAC suggested that Mr. Adams reach out to EnerNOC to discuss the status of the conversations. The SAC agreed that a data room should be created to
expedite the due diligence review process, assuming agreement on the standstill provision could be reached. That day, the Company established an electronic data room for the delivery of due diligence materials to EnerNOC and its advisors should
discussions proceed. At this meeting, the SAC also discussed a working strategic plan related to the Company, with a proposal to outline the Companys vision, goals, market size and position, sales initiative and new products, among other
topics.
On June 5, 2014, the SAC held a telephonic meeting to discuss further the status of the proposed standstill provision. At that meeting, and
again on July 17, 2014, the SAC also discussed further the proposed strategic plan for the Company.
On June 6, 2014, Mr. Adams, and
representatives of Mirick OConnell, Canaccord and Cooley LLP, EnerNOCs outside counsel (Cooley), discussed the issues related to the proposed standstill provisions.
On June 11, 2014, the Company and EnerNOC amended the Non-Disclosure Agreement to provide for exclusivity through June 27, 2014 and a standstill
provision through March 11, 2015, the latter subject to earlier termination generally in the event that the Company entered into an acquisition or similar agreement with another purchaser.
On June 19, 2014, the Board held a telephonic meeting, also attended by a representative of Mirick OConnell. At that meeting Mr. Adams
discussed the current status of discussions with EnerNOC. That day a meeting was held at EnerNOC with representatives of the Company, EnerNOC, Canaccord and Pacific Crest to discuss customer-related issues.
On June 20, 2014, a financial due diligence call was held among representatives of EnerNOC, Canaccord, Pacific Crest and James Parslow, the
Companys Chief Financial Officer.
On June 23, 2014, following the regular Board meeting, the Board discussed a recent transaction in the
marketplace (Ecova) and Mr. Adams discussed his communications with representatives of Canaccord with respect to the ongoing process with EnerNOC.
On June 26, 2014, a meeting was held at EnerNOCs offices, which included representatives of EnerNOC, Company management, Canaccord and Pacific
Crest for the purpose of demonstrating the Companys technology and discussing the Companys view of potential synergies of a transaction.
On
June 30, 2014, Mr. Healy placed a telephone call to Mr. Adams to verbally present an offer of $5.50 per Share, following which EnerNOC delivered a revised LOI (the Revised LOI) to the Company reflecting such price. The
aggregate purchase price of approximately $69.3 million for an estimated 12.6 million Shares represented a premium of approximately 37% above the $4.01 closing price of the Shares on June 30, 2014.
On July 8, 2014, the Board held a telephonic meeting with representatives of Mirick OConnell and Canaccord in attendance to discuss the Revised
LOI. Canaccord reviewed the terms of the offer and provided various metrics and valuation methodologies to compare the Companys current enterprise value against the implied enterprise value reflected by the Revised LOI. The Board discussed
various options, including continuing to negotiate with EnerNOC on an exclusive basis, entering into a broad sale process or remaining independent. Canaccord addressed other potential bidders and described the go-shop process, as well as
the effect of a termination fee. The Board proposed allowing further discussion with EnerNOC to obtain a better understanding on whether the purchase price could be improved while, at the same time, allowing the Companys management to complete
its work on a revised operating plan to create a more definitive comparison. To that end, the Board determined to
13
create the Special Committee for the purpose of developing a strategy to respond the Revised LOI and appointed Messrs. Londa and Sheridan, together with John Fox to such committee.
On July 10, 2014, the SAC met with Mr. Adams and representatives of Mirick OConnell and Canaccord to discuss business forecasts, a Company
strategic plan, and how Canaccord should respond to Pacific Crest with respect to the Revised LOI in order to determine whether the purchase price from EnerNOC could be improved. That day, in accordance with the negotiating strategy discussed during
the meeting with the SAC, Canaccord communicated to Pacific Crest that the Company did not accept EnerNOCs offer contained in the Revised LOI and would instead continue an internal strategic review.
On July 28, 2014, Mr. Healy emailed Mr. Londa and asked to speak with him by telephone. During this call, Mr. Healy conveyed his views
regarding EnerNOCs offer. He also noted EnerNOCs desire to engage Canaccord to participate in its contemplated financing.
On July 31,
2014, the Special Committee met with representatives of Mirick OConnell and Canaccord. At that meeting, Canaccord discussed its communications with EnerNOC regarding the status of negotiations. A representative of Canaccord discussed a
communication he received from Mr. Healy regarding the status of discussions and due diligence. He also noted Mr. Healys inquiry as to whether Canaccord could participate in a syndicate of underwriters in a financing EnerNOC was
contemplating. The Canaccord representative stated that Canaccords role would be limited, and that Canaccords role would be handled by another division within Canaccord. The Special Committee was advised that Canaccord would not act as a
book runner or lead manager nor would Canaccord have control over the process. It was noted that Canaccord brought the inquiry to the Boards attention so that the Board could consider whether any actual or perceived conflict of interest would
arise if Canaccord were to participate as an underwriter in such financing.
On August 1, 2014, the Board held a telephonic meeting with a
representative of Mirick OConnell in attendance. At that meeting, Mr. Londa discussed the inquiry by EnerNOC as to Canaccords participation in a proposed syndicate of underwriters in an upcoming financing. Mr. Londa advised
that Mr. Healy had telephoned him to discuss EnerNOCs desire to have Canaccord participate in the financing and to convey his views as to why (i) EnerNOC would be an appropriate purchaser of the Company and (ii) EnerNOCs
proposed pricing should be acceptable. Mr. Londa noted that he did not enter into any substantive negotiations or discussions with Mr. Healy during that call. The Board discussed the current and historical market price of the Shares, the
prospects of broadening the market with new products or services or enhanced features, the expressions by select stockholders to sell the Company, and the potential loss of opportunity if EnerNOC were to seek a different partner to grow its
procurement services division. The Board agreed to continue discussions with EnerNOC, but requested that Canaccord not participate in the EnerNOC financing syndicate given the potential for a perceived conflict of interest if Canaccord were to
render a fairness opinion in connection with a transaction with EnerNOC. The Board at this time discussed the merits of selecting a second advisor for the fairness opinion should negotiations continue and a fairness opinion become necessary.
Canaccord subsequently informed Mr. Healy that it would not participate as an underwriter in the EnerNOC financing.
On August 11, 2014, the
Special Committee held a telephonic meeting with representatives of Canaccord and Mirick OConnell and Mr. Adams in attendance. The Special Committee discussed strategies for advancing the process with EnerNOC while at the same time
ensuring the best possible price. The Special Committee recommended that representatives of Canaccord meet with Pacific Crest to discuss the Companys desire to move forward with EnerNOC, while stressing that the question as to valuation
remained open. The Special Committee noted the need for EnerNOC to complete its diligence on the Company in order to understand likely synergies of a combined entity and provide the Company with a fully informed offer price. The Special Committee
discussed the risks and benefits of providing EnerNOC with more sensitive information prior to agreement on process issues. The Special Committee also discussed strategies for analysis and evaluation of the Companys short term and long term
future value.
14
On August 19, 2014, a meeting was held at the offices of EnerNOC with Mr. Adams, representatives from
Canaccord, EnerNOCs senior managers and Pacific Crest to discuss the merits of a transaction and due diligence process.
On August 20, 2014,
Mr. Adams executed an amendment to the Non-Disclosure Agreement extending the standstill period to June 12, 2015 and the exclusivity period to October 5, 2014.
On August 21, 2014, EnerNOC delivered a further revised LOI (the Further LOI) which provided for a purchase price of $5.50 per Share. While
the per Share price remained the same as in the Revised LOI, in light of clarification regarding Share count, the aggregate purchase price increased to approximately $70 million for approximately 12.74 million Shares, which represented a
premium of approximately 30% above the $4.23 closing price of the Shares on that date.
On August 22, 2014, the Company established a second
electronic data room that included additional due diligence materials.
On August 27, 2014, representatives from the Company, EnerNOC, Canaccord and
Pacific Crest held a call to discuss due diligence matters and an expected timeline for the potential transaction.
On August 28, 2014, the Board
held a telephonic meeting with representatives of Canaccord and Mirick OConnell in attendance. Canaccord reported that EnerNOC would not increase its original bid price of $5.50 per Share and sought assurances that the price would be
acceptable to the Board. The Board discussed the contents of the Further LOI, including the use of a go-shop provision as a market check. Canaccord confirmed that there had been little other activity or third party inquiries regarding the Company
despite the February press release. At this meeting, the Board approved the expansion of the role of the Special Committee to consider and evaluate the proposal from EnerNOC to acquire the Companys outstanding Shares and to consider certain
other strategic alternatives for the Company other than the EnerNOC proposal, including remaining independent. The Board determined that for independence purposes, and given their experience in past mergers and acquisition transactions, Messrs.
Londa and Fox should be the sole members of the Special Committee and also approved a process for developing a charter for the Special Committee. The Board determined to rename the SAC the Strategic Planning Committee in order to more accurately
reflect the respective roles of the two independent committees.
On September 3, 2014, Mr. Adams and other members of the Companys
management team participated in a call with representatives of EnerNOC and Pacific Crest to discuss industry matters.
On September 4, 2014, after a
review of several law firms, the Special Committee engaged Loeb & Loeb LLP (Loeb) as counsel to the Special Committee. A telephonic meeting of the Special Committee was held that day with representatives of Loeb. Loeb began the
meeting by describing the roles and responsibilities of the Special Committee and the fiduciary obligations of the Board as discussions and possible negotiations with EnerNOC proceeded. General process and strategy matters were discussed and Loeb
provided guidance on the parameters within which Mr. Adams was to act as the due diligence process moved forward. Loeb addressed disclosure and corporate governance issues associated with, and its recommendation regarding, the entry into a
letter of intent with EnerNOC and, based on this advice, the Special Committee instructed Loeb to communicate to EnerNOCs counsel that the Company would not enter into such a letter. Later that day, a telephone call was held among
representatives of the Company, Loeb, Canaccord, EnerNOC, Cooley and Pacific Crest to discuss due diligence timing.
On September 5, 2014, Cooley
circulated a draft of the Merger Agreement and the form of Tender and Support Agreement to Loeb.
On September 5, 2014, Loeb and Canaccord held a
telephone call to discuss Canaccords role as the Companys financial advisor and the nature of Canaccords past relationship with EnerNOC for the purpose of helping the Special Committee to evaluate Canaccords ongoing role in
the transaction process.
15
On September 6, 2014, Loeb and Canaccord spoke regarding the draft Merger Agreement review process.
On September 8, 2014, the Special Committee held a telephonic meeting with representatives of Loeb. Loeb began the meeting with a review of its call with
Canaccord and a discussion took place regarding the possible retention by the Committee of a second financial advisor for purposes of rendering a fairness opinion and/or conducting a market check. The Special Committee noted the Boards request
that Canaccord refrain from participation in EnerNOCs proposed August 2014 financing and Canaccords agreement with the Boards request. Loeb agreed to continue its review of the matter with the goal of providing a recommendation to
the Special Committee if the proposed transaction with EnerNOC were to proceed as proposed. Loeb reviewed the transaction structure contemplated by the draft Merger Agreement and if the proposed transaction with EnerNOC should proceed as proposed
the Special Committee and Loeb discussed the need for a robust and meaningful go-shop process as being of paramount importance. Loeb once again reviewed for the Special Committee the relative roles, responsibilities and obligations of the Special
Committee, Loeb, Company management, Mirick OConnell, Canaccord and a potential second financial advisor.
On September 9, 2014, Loeb and
EnerNOCs in-house legal team held a telephone call to discuss process and timing with respect to review and negotiation of the draft Merger Agreement and the due diligence process. That day, members of the Companys management team and
representatives of Canaccord met with representatives of EnerNOC and Pacific Crest to discuss finance and organizational issues.
On September 10,
2014, a telephone call was held with representatives of Loeb and Mirick OConnell and Mr. Adams to review due diligence procedures to date and going forward, including population of the electronic data room.
On September 10 and 11, 2014, Messrs. Moses and Adams exchanged emails regarding the delivery of due diligence information, including a schedule of
deferred revenue and organizational structure, as well as transaction process and timing, and Mr. Adams confirmed that process and timing were being managed by the Special Committee.
On September 10, 2014, Mr. Londa received a telephone call from Mr. Healy during which Mr. Healy and Mr. Londa discussed the status
of the due diligence process, and specifically when the Company would be prepared to provide additional employee and customer information that EnerNOC viewed as important to its due diligence review.
On September 11, 2014, the Special Committee held a telephone call with representatives of Loeb and Canaccord in attendance to review the material
provisions of the draft Merger Agreement and to solicit and receive legal and strategic advice with respect to negotiation of that agreement. The parties discussed the need for an effective post-signing market check in terms of duration and process
and the Special Committee provided instructions to its advisors regarding communications with EnerNOCs legal counsel and financial advisor, including the Special Committees determination that sensitive due diligence materials would not
be provided by the Company until such time, if ever, as the period of the go-shop, the nature and amount of termination fees and certain other material terms of the potential transaction (other than price) were agreed upon. At this
meeting, Mr. Londa relayed the substance of his telephone conversation with Mr. Healy. Later that day, Loeb provided Cooley with a chart summarizing the Special Committees position with respect to certain material provisions of the
Merger Agreement.
On September 12, 2014, Cooley provided EnerNOCs position with respect to the list of topics for negotiation provided by Loeb
on the prior day.
On September 13, 2014, in an email sent by Mr. Moses to Mr. Adams that was forwarded to Mr. Londa, Mr. Moses
discussed the status of negotiations of the Merger Agreement, as well as the overall timetable for completion of due diligence. Mr. Moses noted that until a timetable could be determined, the EnerNOC
16
acquisition team would stop work on its due diligence review. That day, Mr. Healy also reached out by email and telephone to a representative of Canaccord to discuss the current state of
negotiations and how the parties might move forward more expeditiously, following which Canaccord telephoned Mr. Londa to advise him of such communications.
On September 14, 2014, a telephone call was held with Mr. Londa, Mr. Adams and representatives of Loeb and Canaccord during which
Mr. Londa and Canaccord relayed the substance of their respective written and verbal communications with Mr. Healy. Mr. Adams was requested to brief the group regarding the due diligence materials that had been uploaded into the data
room and then left the call, following which Canaccord and Loeb noted their support of Mr. Londas suggestion to reiterate the message to EnerNOC that sensitive Company materials, including employee and customer information, would not be
shared until the previously outlined business issues were resolved.
On September 15, 2014, the Special Committee held a telephonic meeting with
representatives of Loeb to review each of the open business points outlined in the revised chart in preparation for the following days scheduled conference call with EnerNOC and its advisors to negotiate the draft Merger Agreement. Loeb
conveyed the substance of a call earlier in the day with Cooley. At this meeting, the Special Committee determined to retain a second financial advisor to render a fairness opinion with respect to the proposed transaction and discussed the
alternatives available to the Special Committee with respect to the conduct of a go-shop process. The Special Committee reviewed the potential financial advisors that it would approach, depending upon the services they would be asked to perform. The
Special Committee discussed Canaccords qualifications in terms of industry expertise and Company knowledge for leading the go-shop process. The Special Committee determined that if agreement was reached on the open deal terms, the Special
Committee would then determine how best to conduct the go-shop process.
On September 15, 2014, Loeb provided Cooley with the Special
Committees responses to EnerNOCs proposals with respect to each of the open business points on the draft Merger Agreement, and the prior business relationship that EnerNOC had with Canaccord, including the fact that Canaccord had
provided financial services to EnerNOC in the past. On the same day, Mr. Londa provided an update to Mr. Moses and noted a timeline for delivery of additional due diligence materials once the material business issues were resolved.
On September 16, 2014, a conference call was held among representatives of the Special Committee, Loeb, Canaccord, EnerNOC, Pacific Crest and Cooley to
negotiate the material open terms of the draft Merger Agreement. Agreement in principle was reached regarding the tender offer period, the duration of the go-shop and matching rights periods, break-up fee triggers, changes to the
definition of material adverse effect and its related use throughout the agreement, and provisions regarding the payment of liquidated damages for specified breaches of the agreement. On September 19, 2014, Loeb provided Cooley with a revised
draft of the Merger Agreement, reflecting these changes.
On September 17, 2014, Mr. Londa and Mr. Moses held a call to discuss a mutually
acceptable timeline for the proposed transaction.
On September 18, 2014, the Board met with Loeb to discuss the status of current negotiations and
timelines.
On September 19, 2014, Loeb sent a revised draft of the Merger Agreement to Cooley.
On September 23, 2014, the Companys management team met with representatives of EnerNOC at the offices of Pacific Crest for an in-depth discussion
of the Companys technology.
On September 23, 2014, Mr. Moses emailed Mr. Londa to advise him that a revised draft of the Merger
Agreement was being circulated and to request a copy of the Companys customer list. The next day, Cooley provided Loeb with a revised draft of the Merger Agreement.
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On September 24, 2014, Mr. Londa reported to Mr. Moses by email that Sean Leaver, Director of
Corporate Development and Strategy of EnerNOC, had reached out to Mr. Adams to request final diligence materials. Mr. Londa reiterated the Special Committees position that customer contracts would be released after the Special
Committee reviewed the revised draft Merger Agreement to confirm that the Company and EnerNOC were getting closer to a resolution of the open items. The parties exchanged their views with respect to the advisability of holding the EnerNOC meeting
with Company management scheduled for the following day. Mr. Londa suggested that EnerNOC stay on track with scheduled meetings with certain staff members as the requested due diligence items did not seem to be connected to the management
meetings, while Mr. Moses maintained that the customer and channel information was fundamental to a discussion with management regarding revenue contribution and the strength of such relationships.
On September 24, 2014, Mirick OConnell began preparation of the disclosure schedules in coordination with management of the Company, a process
which continued until November 4, 2014. During that period, representatives of Loeb, Company management and Mirick OConnell had several communications regarding the representations and warranties contained in the draft Merger Agreement
and the contents of the related disclosure schedules, and Mr. Adams continued to oversee the due diligence process being conducted by EnerNOC.
On
September 25, 2014, representatives of the Companys management met with representatives of EnerNOCs management to discuss diligence matters.
On September 25, 2014, Canaccord distributed a draft of an executive summary for use as part of the go-shop materials to Mr. Adams for review and
comment. Later that day, the Special Committee held a telephonic meeting with representatives of Loeb to discuss the open legal and business issues arising from the revised draft of the Merger Agreement. The Special Committee inquired as to the
risks and potential liabilities for the Company if a merger agreement was signed but not consummated and Loeb highlighted the relevant provisions related to such issue, in particular those requiring the payment of a termination fee by the parties. A
discussion took place regarding EnerNOCs request for additional due diligence materials, whether any of the materials requested were deemed sensitive, and which materials were to be withheld at this time.
On September 26, 2014, the Special Committee held a telephonic meeting with representatives of Loeb in attendance to review the written and verbal
proposals from three financial advisory firms contacted by or on behalf of the Special Committee for the purpose of providing a fairness opinion and possibly participating in a go-shop process. The Committee cited its preference to retain
Duff & Phelps Corporation (Duff & Phelps) to provide a fairness opinion with respect to the Offer Price based on such firms vast experience with respect to these types of engagements and, following a discussion
with Loeb of the pros and cons of Duff & Phelpss possible participation with Canaccord in the go-shop process, concluded that Canaccords industry expertise, past transaction experience and its depth of knowledge of the
Companys business gained during the last several months, made Canaccord the best choice for conducting a go-shop process on behalf of the Company under guidelines to be established by, and the supervision of, the Special Committee.
On September 29, 2014, the Special Committee executed an engagement letter retaining Duff & Phelps to render a fairness opinion with respect to
the Offer Price.
On September 29 and 30, 2014, Messrs. Londa and Moses exchanged emails regarding the status of merger negotiations and due
diligence deliveries.
On September 30, 2014, representatives of Loeb and Cooley held a telephone call to review open points on the draft
Merger Agreement, the majority of which pertained to the Companys representations and covenants regarding conduct of its business during the period between signing and closing. Later that day, the Special Committee held a telephonic meeting
with representatives of Loeb to discuss the contents, potential impact of, and options to consider to address a letter that had been received from a stockholder the prior day and an anonymous article posted on the Seeking Alpha website
earlier that morning. Loeb briefed the Special Committee
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on its call with Cooley and the Special Committee instructed Loeb to continue negotiations with Cooley regarding the Merger Agreement and, in connection with these negotiations, to maintain
the Special Committees previous positions on certain key terms while agreeing on compromise approaches on items where language could be revised that would continue to provide the necessary protections to the Company. The Special Committee also
instructed Loeb to continue working with Mirick OConnell on modifications to certain representations and warranties contained in the Merger Agreement.
On October 1, 2014, Mr. Londa and Mr. Moses spoke regarding the expiration of the exclusivity period during the upcoming weekend and
possibility of extending the period through October 15, 2014. Mr. Londa instructed Loeb to coordinate documentation of such extension.
Between
October 3, 2014 and October 4, 2014, Cooley and Loeb negotiated an amendment to the Non-Disclosure Agreement to extend the exclusivity period to October 15, 2014 and to add greater protection for the parties with respect to the
non-solicitation of employees in order to enable the Company to share employee-related information with EnerNOC, which amendment was executed and delivered on October 4, 2014.
On October 8, 2014, Duff & Phelps provided the Special Committee with its preliminary financial analysis in connection with the proposed Merger.
On October 9, 2014, Mr. Londa received a call from Mr. Moses during which he was advised that in light of a recent industry development,
the potential impact of which needed to be evaluated, and because diligence has not been completed, it was uncertain whether the EnerNOC board of directors would take action with respect to the tender offer/merger proposal at its scheduled
October 15, 2014 board meeting. Later that day, the Special Committee held a telephonic meeting with representatives of Loeb and Canaccord to relay the substance of that call. Mr. Adams attended this meeting to provide an update on the
status of the due diligence process and disclosure schedule preparation. A discussion ensued regarding process and timing, including the delivery by Duff & Phelps of its fairness opinion and the presentations by Loeb and Canaccord to the
Committee and the Board. Loeb provided guidance with respect to the required meetings, the decision-making process and required lead time. Canaccord reviewed process and timeline for the go-shop process, including delivery of materials, execution of
non-disclosure agreements and bidding procedures.
On October 14, 2014, Cooley circulated a revised draft of the Merger Agreement and a proposed
extension to the exclusivity period set forth in the Non-Disclosure Agreement. The open points identified in the revised draft of the Merger Agreement that required further negotiation and discussion included the definitions of damages,
knowledge and target material adverse effect, the outside date for the Offer, the timing of the payment of a termination fee in the event that the Company pursued a Superior Proposal, the exclusivity of remedies, the
assumption of certain of the Companys employee bonus obligations, certain post-signing covenants and other related items.
On October 15, 2014,
a telephonic Board meeting was held during which the Special Committee updated the other members of the Board on the transaction and expected time line. Representatives of Loeb and Canaccord attended this meeting. At the request of the Special
Committee, Loeb first summarized the process in which the Special Committee had engaged since its formation and then provided an overview of the material terms of the draft Merger Agreement and Offer, including the proposed 45-day go-shop period
that had been negotiated as part of the transaction to allow the Company to seek and accept superior offers. Canaccord then made a presentation regarding the go-shop process, identified the parties it would contact, and reviewed the proposed
contents of the go-shop marketing package. The Special Committee advised the Board that the current exclusivity period expired that day and that an approximately two week extension was warranted in order to allow EnerNOC the time it needed to
complete the due diligence process. The Board then engaged in a discussion of the proposed Offer, the financial and legal advice it had received in connection with that proposal and the various considerations relevant to proceeding with this
transaction. The Board then adjourned the meeting and agreed to schedule another meeting at such time as the Special Committee advised that it was prepared to make its recommendation to the Board with respect to the proposed Offer.
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Later that evening, Mr. Londa received a telephone call from Mr. Moses advising that at a meeting that
day, the EnerNOC board of directors had expressed its support for moving forward with the transaction. During that call, Mr. Londa stated that the Special Committee was willing to extend the exclusivity period through October 31, 2014
under the same terms and conditions as the prior extension.
On the morning of October 16, 2014, the parties executed and delivered an amendment to
the Non-Disclosure Agreement to reflect the agreed upon extension of the exclusivity period. Later that day, the Special Committee held a telephonic meeting with representatives of Loeb to review the most recent draft of the Merger Agreement
received from Cooley. The issues discussed included the definitions of damages, knowledge, target material adverse effect, the required timing of payment of a termination fee in the event the Board elects to
pursue a Superior Proposal, the requirement that EnerNOC assume certain of the Companys employee bonus obligations, language regarding remedies of the parties and certain covenants to be requested of EnerNOC. The Special Committee provided
feedback on each of the points covered along with instructions to Loeb on addressing such items with EnerNOCs counsel, Mirick OConnell and the Companys management. Loeb also reviewed for the Special Committee the mechanics of the
tender offer, the requisite SEC filings by each of the Company and EnerNOC and the process and timing of a meeting of the full Board to consider and take action respect to the transaction and the role of the Special Committee at such meeting.
On October 17, 2014, Mr. Londa received a telephone call from Mr. Moses to discuss EnerNOCs desired timing with respect to signing and
closing of the proposed Merger, in particular that the closing of the transaction occur following calendar year end. That afternoon, the Special Committee held a telephone meeting with Loeb to discuss the impact of the requested timeline, most
notably the benefit of an additional ten or more days to conduct the go-shop process.
Between October 16 and October 31, 2014, the legal and
financial advisors for each party communicated on multiple occasions to negotiate the draft Merger Agreement and related transaction documents, including the disclosure schedules.
On October 23, 2014, the Board held a telephonic meeting and discussed generally the status of negotiations with EnerNOC. The members of the Special
Committee expressed their belief that an agreement could be reached by November 3, 2014, and in anticipation of that possibility, suggested that a meeting be tentatively scheduled for that date. The Board also discussed the effect of the
transaction on management bonuses and on unvested Options and Restricted Stock Awards.
On October 24, 2014, representatives from the Company,
EnerNOC, Loeb, Cooley and Mirick OConnell held a call to discuss internal and external communications relating to the transaction.
On
October 27, 2014, the Special Committee held a telephonic meeting with Loeb to discuss finalization of the transaction documents and related matters. Loeb advised that two of the remaining open points involved the outside date and
the timing of the payment by the Company of a termination fee in the event of a Superior Proposal. The Special Committee discussed the risks associated with providing EnerNOC with the additional approximately six weeks it was requesting in which to
complete the transaction, as well as EnerNOCs request that a termination fee in the prescribed instance be paid prior to the Companys execution of a definitive agreement with respect to a Superior Proposal. The Special Committee
determined that the potential adverse impact on the Companys business of the extended outside date and the potential chilling effect of the termination payment provision on the Companys ability to obtain a Superior Proposal made such
provisions unacceptable from the Companys point of view and it was agreed that Mr. Londa would relay the Special Committees position to Mr. Moses.
On October 28, 2014, representatives from EnerNOC, Cooley and Loeb held a call to discuss certain open negotiation points in the merger agreement,
including, but not limited to, language relating to cumulative remedies, duration of the Go-Shop Period, the outside date, and payment of termination fees.
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On October 31, 2014, Mr. Moses and Mr. Londa corresponded regarding proposed communications
between EnerNOC and the Companys employees following announcement of the transaction. The parties also executed and delivered an amendment to the Non-Disclosure Agreement to extend the exclusivity period to November 3, 2014.
On the morning of November 1, 2014, the Special Committee held a telephonic meeting at which meeting representatives of each of Loeb, Canaccord and
Duff & Phelps were present. Duff & Phelps presented its financial analysis and rendered to the Special Committee its oral opinion, subsequently confirmed in writing, to the effect that, as of November 1, 2014, and subject to
and based on the assumptions, procedures, factors, qualifications and other matters and limitations set forth in its written opinion, and other factors it deemed relevant, the consideration of $5.50 per Share specified in the then current draft
Merger Agreement to be received by stockholders of the Company in the proposed transaction, was fair, from a financial point of view, to such holders without giving effect to the impact of the proposed transaction on any particular stockholder other
than in its capacity as a stockholder). For additional discussion and information on the Duff & Phelps opinion, refer to the information provided below under the caption Opinion of Duff & Phelps. Loeb and Canaccord
advised the Special Committee of updates since the Board meeting on October 15, 2014 and reiterated and reviewed relevant legal and financial matters. The Special Committee then engaged in a discussion of the proposed Offer, the financial and
legal advice it had received in connection with that proposal and the various considerations relevant to proceeding with this transaction. After that discussion, the Special Committee unanimously approved and recommended that the Board, among other
items, approve the then current draft Merger Agreement and the transactions and related matters contemplated thereby.
On the morning of November 3,
2014, the Board held a telephonic meeting at which representatives of Mirick OConnell, Loeb, Duff & Phelps and Canaccord were present. Mr. Londa, on behalf of the Special Committee, advised the Board that it had engaged in
additional discussions with Loeb, Duff & Phelps and Canaccord as to any updates since the Board meeting on October 15, 2014, and considered the EnerNOC proposal, the financial and legal advice it had received in connection with that
proposal and various considerations, including those discussed during the October 15, 2014 Board meeting. Mr. Londa then advised the Board that the Special Committee had unanimously approved the Merger Agreement, the transactions
contemplated thereby and related matters and that it recommended, among other things, that the Board approve the Merger Agreement, the transactions contemplated thereby and related matters. Based on the recommendation of the Special Committee and
the other considerations discussed and considered by the Board, the Board unanimously approved the Merger Agreement, the transactions contemplated thereby and related matters.
On November 3 and 4, 2014, representatives of the Company, EnerNOC and their respective counsel discussed, and the Special Committee met to consider, the
parameters of post-signing communications by the two companies.
On the evening of November 3, 2014, the parties communicated that agreement had been
reached on all of the material open issues in the draft Merger Agreement and disclosure schedules.
On November 4, 2014, EnerNOC, Merger Sub and the
Company entered into the Merger Agreement.
Go-Shop Process; Current Transaction
As permitted by the terms of the Merger Agreement, the Company, with the assistance of the Special Committees legal and financial advisors, commenced a
go-shop solicitation process to seek alternative proposals for the acquisition of all outstanding Shares. The go-shop solicitation process commenced on November 5, 2014 and will continue until 11:59 p.m., Boston, Massachusetts time, on
December 29, 2014, subject to a five-day extension in the event of a pending proposal by a party which has not been withdrawn, terminated or expired.
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Reasons for the Recommendation of the Special Committee and the Board
The Special Committee and the Board considered the following factors, among others, in initially reaching their conclusion to approve the Merger Agreement and
the transactions contemplated thereby. Such factors (all of which they viewed as generally supporting their decisions to approve the transaction and which are not listed in any relative order or importance):
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the current and historical market price of shares of the Companys stock, including the fact that the $5.50 per Share Offer Price represents (i) an approximately 33% premium to the closing price of $4.14 per
Share on November 3, 2014, the last full trading day before the Merger was approved by the Board and publicly announced, (ii) an approximately 35% premium to the closing price of $4.08 per Share based on the 10 day average; (iii) an
approximately 34% premium to the closing price of $4.10 per Share based on the twenty day average; and (iv) an approximately 30% premium to the closing price of $4.22 per Share based on the 30 day average; |
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the fact that the Offer will be paid in cash, providing certainty, near-term value and liquidity to the Companys stockholders; |
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the fact that the Offer is not subject to a financing condition and the creditworthiness of EnerNOC; |
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in the case of the Board, that the process had been actively managed by an independent Special Committee; |
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the belief of the Special Committee that, with the assistance of Canaccord, they had negotiated the highest price per Share that EnerNOC is presently willing to pay for the Company; |
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the belief that the sale of the Company for the stated consideration is a better alternative to remaining a public company and pursuing the Companys strategic business plan, which could be difficult or slow to
execute considering the Companys size in comparison to other competitors in the industry and its limited financial resources and may not achieve superior returns for stockholders; |
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the opinion of Duff & Phelps regarding the fairness of the consideration, from a financial point of view, to be received by the holders of Shares in connection with the Offer and Merger, as more fully described
below under Opinion of Duff & Phelps; |
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the belief that the 55-day Go-Shop Period and the go-shop process are designed to maximize value for the stockholders of the Company by enabling the Company to conduct a robust and thorough market check/sales process to
confirm whether the Offer Price represents the highest price per Share any buyer is presently willing to pay for the Company; |
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the belief that the $2,398,821 termination fee (representing approximately 3.5% of the total fully diluted equity value of the proposed transaction) or the lesser $1,028,066 termination fee (representing approximately
1.5% of the total fully diluted equity value of the proposed transaction) payable by the Company to EnerNOC under the circumstances is reasonable; |
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the availability of statutory dissenters rights to the Companys stockholders who comply with all required procedures of the DGCL, which allow such stockholders to seek appraisal of the fair value of their
Shares; |
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the financial and legal advice they had received; and |
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the belief of the Board that the Offer represents a full and fair value for the Shares, taking into account the familiarity of the Board with the Companys current and historical financial condition, results of
operations, business, competitive position and prospects, as well as the Companys future business plan, the risks related thereto, and potential long-term value. |
The Board and the Special Committee also considered potential risks and other negative factors in proceeding with the transaction with EnerNOC, including the
following:
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the inability of the Companys stockholders to realize the potential long-term value of a successful execution of the Companys current strategy if it ceased to be a publicly-held company; |
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the $2,398,821 termination fee (representing approximately 3.5% of the total fully diluted equity value of the proposed transaction) or the lesser $1,028,066 termination fee (representing approximately 1.5% of the total
fully diluted equity value of the proposed transaction), including the potential of such termination fee to deter other potential acquirers from proposing an alternative transaction that may be more advantageous to the Companys stockholders;
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the fact that receipt of the Offer Price would be taxable to most of the Companys stockholders for U.S. federal income tax purposes; |
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various potential negative impacts to the Companys business, especially if the transaction fails to close, including a diversion of managements attention from other strategic priorities to focus on matters
relevant to the transaction, a negative reaction by customers, suppliers, employees or other constituencies after the announcement of a transaction, and the obligation to generally conduct its business in the ordinary course subject to restrictions
contained in the Merger Agreement; |
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the fact that the Company did not conduct a full market check immediately prior to signing the Merger Agreement as a means of determining whether there were other parties interested in acquiring or entering into another
strategic transaction with the Company; |
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the fact that the Company has provided EnerNOC with confidential information during EnerNOCs review of a potential transaction, and that, if the Offer and the Merger are not completed, the disclosure of such
information could adversely affect the Companys ability to compete with EnerNOC and its affiliates; and |
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the fact that the Companys executive officers and directors have agreements or arrangements that may provide them with interests in the Offer and the Merger, which may differ from, or are in addition to, those of
the Companys stockholders generally, and the risk that these interests may present such executive officers and directors with certain conflicts of interest. |
The foregoing discussion of the Special Committee and the Boards reasons for its recommendation to adopt and approve the Merger Agreement is not meant
to be exhaustive, but addresses the material information and factors considered by them in their consideration of its recommendation. In view of the wide variety of factors considered by the Company in connection with the evaluation of the Merger
and the complexity of these matters, the Special Committee and the Board did not find it practicable to, and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation.
Rather, the Special Committee and the Board made its determinations and recommendations based on the totality of the information presented to it, and the judgments of individual members of the Special Committee and the Board may have been influenced
to a greater or lesser degree by different factors. In arriving at their respective recommendations, the members of the Special Committee and the Board were aware of the interests of executive officers and directors of the Company as described under
Item 3Agreements with the Companys Current Executive Officers and Directors.
Opinion of Duff & Phelps
Duff & Phelps was engaged to serve as an independent financial advisor to the Special Committee (solely in their capacity as members of the Special
Committee and the Board) to provide an opinion as to the fairness, from a financial point of view, to the stockholders of the Company of the consideration to be received in the Offer and the Merger (the Consideration) by such
stockholders pursuant to the Merger Agreement (without giving effect to any impact of the Transaction on any particular stockholder of the Company other than in its capacity as a stockholder). The Offer, the Merger and the other transactions
contemplated by the Merger Agreement are collectively referred to as the Transaction throughout this summary of Duff & Phelps opinion.
Duff & Phelps rendered its oral opinion to the Special Committee on November 1, 2014 (which was confirmed in writing by delivery of
Duff & Phelps written opinion dated November 1, 2014), that, subject to the assumptions, qualifications and limiting conditions set forth therein, as of such date, the Consideration to be received by the
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stockholders of the Company pursuant to the Merger Agreement was fair, from a financial point of view, to such stockholders (without giving effect to any impact of the Transaction on any
particular stockholder of the Company other than in its capacity as a stockholder).
The full text of the written opinion of Duff & Phelps is
attached as Annex I to this Schedule 14D-9 and is incorporated herein by reference. The full text of the written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and
qualifications and limitations of the review undertaken in rendering the opinion.
Duff & Phelps provided its opinion for the information and
assistance of the Special Committee in connection with, and for the purposes of its evaluation of, the Transaction. Duff & Phelps opinion (i) does not address the merits of the underlying business decision to enter into the
Transaction versus any alternative strategy or transaction; (ii) does not address any transaction related to the Transaction; (iii) is not a recommendation as to how the Special Committee, the Board or any stockholder should vote or act
with respect to any matters relating to the Transaction, whether stockholders should tender Shares in connection with the Offer, or whether the Company should proceed with the Transaction or any related transaction, and (iv) does not indicate
that the Consideration received is the best possibly attainable under any circumstances. Instead, Duff & Phelps opinion merely states whether the Consideration to be received by the stockholders of the Company pursuant to the Merger
Agreement is within a range suggested by certain financial analyses. The decision as to whether to proceed with the Transaction or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which
Duff & Phelps opinion is based.
In connection with its opinion, Duff & Phelps made such reviews, analyses and inquiries as it
deemed necessary and appropriate under the circumstances. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation in general,
and with respect to similar transactions in particular. Duff & Phelps procedures, investigations and financial analyses with respect to the preparation of its opinion included, but were not limited to, the items summarized below:
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Reviewed the following documents: |
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The Companys annual reports and audited financial statements on Form 10-K filed with the SEC for the years ended December 31, 2009 through December 31, 2013 and the Companys unaudited interim
financial statements for the six months ended 30, 2014, and the nine months ended September 30, 2013 and the nine months ended September 30, 2012 included in the Companys Form 10-Q filed with the SEC; |
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Unaudited segment and pro forma financial information for the Company for the year ended December 31, 2013 and the nine-month period ended September 30, 2014, which the Companys management identified as
being the most current financial statements available; |
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Other internal documents relating to the history, current operations, and probable future outlook of the Company, including financial projections prepared by management of the Company for both the current energy
management/procurement and energy efficiency businesses of the Company (the Core Business) and the Companys initiative to build a self-service procurement platform for mid-market brokers (the Enhanced Broker Portal
Initiative); |
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A letter dated October 31, 2014 from the Company, which included certain representations from the Companys management as to historical financial statements, financial projections and the underlying
assumptions, and a pro forma schedule of assets and liabilities (including identified contingent liabilities) for the Company on a post-transaction basis; |
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A draft, dated as of October 30, 2014 of the Merger Agreement; and |
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Various documents and presentations related to the Transaction, including a Board Presentation dated September 18, 2014, a
Project WOLF Discussion Materials presentation dated August 27, |
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2014, and the World Energy Solutions (XWES): The Investment Opportunity presentation dated as of August 2014; |
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Discussed the information referred to above and the background and other elements of the Transaction with the management of the Company; |
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Reviewed the historical trading price and trading volume of the Companys common stock and the publicly traded securities of certain other companies that Duff & Phelps deemed relevant, as described in more
detail below; |
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Performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques, including a discounted cash flow analysis, an analysis of selected public companies that Duff &
Phelps deemed relevant, and an analysis of selected transactions that Duff & Phelps deemed relevant, in each case as described in more detail below; and |
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Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate. |
In performing its analyses and rendering its opinion with respect to the Transaction, Duff & Phelps, with the Companys consent:
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Relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including Company
management, and did not independently verify such information; |
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Relied upon the fact that the Special Committee, the Board and the Company were advised by counsel as to all legal matters with respect to the Transaction, including whether all procedures required by law to be taken in
connection with the Transaction were duly, validly and timely taken; |
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Assumed that any estimates, evaluations, forecasts and projections furnished to Duff & Phelps were reasonably prepared and based upon the best currently available information and good faith judgment of the
person furnishing the same, and Duff & Phelps did not verify and expressed no opinion with respect to such projections or the underlying assumptions; |
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Assumed that information supplied and representations made by Company management were substantially accurate regarding the Company and the Transaction; |
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Assumed that the representations and warranties made in the Merger Agreement were substantially accurate; |
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Assumed that the final versions of all documents reviewed by Duff & Phelps in draft form conformed in all material respects to the drafts reviewed; |
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Assumed that there was no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of the Company since the date of the most recent financial statements and other
information made available to Duff & Phelps, and that there was no information or facts that would have made the information reviewed by Duff & Phelps incomplete or misleading; |
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Assumed that all of the conditions required to implement the Transaction would be satisfied and that the Transaction would be completed in accordance with the Merger Agreement without any amendments thereto or any
waivers of any terms or conditions thereof; and |
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Assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction would be obtained without any adverse effect on the Company or the contemplated benefits
expected to be derived in the Transaction. |
To the extent that any of the foregoing assumptions or any facts on which Duff &
Phelps opinion was based prove to be untrue in any material respect, Duff & Phelps opinion cannot and should not be relied upon. Furthermore, in Duff & Phelps analysis and in connection with the preparation of its
opinion, Duff & Phelps
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made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in
the Transaction.
Although developments following the date of Duff & Phelps opinion may affect the opinion, Duff & Phelps assumes
no obligation to update, revise or reaffirm its opinion. Duff & Phelps opinion was necessarily based upon market, economic financial and other conditions as they existed and could be evaluated on the date of the opinion. You should
understand that developments subsequent to November 1, 2014 may affect the conclusion expressed in Duff & Phelps opinion, and that Duff & Phelps disclaims any undertaking or obligation to advise any person of any change
in any fact or matter affecting its opinion which may come or be brought to the attention of Duff & Phelps after the date of the opinion.
Duff & Phelps did not evaluate the Companys solvency or conduct an independent appraisal or physical inspection of any specific assets or
liabilities (contingent or otherwise). Duff & Phelps was not requested to, and did not, (i) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Transaction, the assets,
businesses or operations of the Company, or any alternatives to the Transaction, (ii) negotiate the terms of the Transaction, and therefore, Duff & Phelps assumed that such terms were the most beneficial terms, from the Companys
perspective, that could, under the circumstances, be negotiated among the parties to the Merger Agreement and the Merger, or (iii) advise the Special Committee, the Board or any other party with respect to alternatives to the Transaction.
Duff & Phelps did not express any opinion as to the market price or value of the Shares (or anything else) after the announcement or the consummation
of the Transaction. Duff & Phelps opinion should not be construed as a valuation opinion, credit rating, solvency opinion, an analysis of the Companys credit worthiness, as tax advice, or as accounting advice. Duff &
Phelps did not make, and assumed no responsibility to make, any representation, or render any opinion, as to any legal matter. The issuance of Duff & Phelps opinion was approved by an authorized fairness opinion committee of
Duff & Phelps.
In rendering its opinion, Duff & Phelps did not express any opinion with respect to the amount or nature of any
compensation to any of the Companys officers, directors, or employees, or any class of such persons, relative to the Consideration to be received by the stockholders of the Company pursuant to the Merger Agreement, or with respect to the
fairness of any such compensation.
Summary of Financial Analyses by Duff & Phelps
Set forth below is a summary of the material analyses performed by Duff & Phelps in connection with providing its opinion to the Special Committee.
This summary is qualified in its entirety by reference to the full text of the written opinion, attached hereto as Annex I. While this summary describes the analyses and factors that Duff & Phelps deemed material in its presentation
to the Special Committee, it is not a comprehensive description of all analyses and factors considered by Duff & Phelps. The preparation of a fairness opinion is a complex process that involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances. Therefore, neither the opinion nor Duff & Phelps underlying analysis is readily susceptible to partial
analysis or summary description. In arriving at its opinion, Duff & Phelps did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, Duff & Phelps believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it in rendering its opinion, without considering all
analyses and factors, could create a misleading or incomplete view of the evaluation process underlying its opinion. The conclusion reached by Duff & Phelps was based on all analyses and factors taken as a whole, and also on the application
of Duff & Phelps own experience and judgment.
The financial analyses summarized below include information presented in tabular format. In
order for Duff & Phelps financial analyses to be fully understood, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the
data below without
26
considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of
Duff & Phelps financial analyses.
Discounted Cash Flow Analysis
Duff & Phelps performed a discounted cash flow analysis of the projected unlevered free cash flows of the Company for the fiscal years ending
December 31, 2014 through December 31, 2023. Duff & Phelps defines free cash flow as the cash generated by the Companys Core Business and Enhanced Broker Portal Initiative, respectively, that is available either
to reinvest or to distribute to security holders. The discounted cash flow analysis was used to determine the net present value of projected unlevered free cash flows utilizing an appropriate cost of capital for the discount rate, which reflects the
relative risk associated with these cash flows as well as the rates of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles to the Transaction. The management of the Company provided
Duff & Phelps financial projections for the fiscal years ending December 31, 2014 through December 31, 2020 and December 31, 2014 through December 31, 2018, for the Core Business and Enhanced Broker Portal Initiative,
respectively. In addition, Duff & Phelps extrapolated financial projections through December 31, 2023 for both the Companys Core Business and Enhanced Broker Portal Initiative based on financial projections and guidance provided
by the Company, and other information it deemed appropriate. Non-Recurring charges and certain costs associated with the Company being a publicly listed company were excluded from the financial projections, as Duff & Phelps believes it is
possible that such costs could be eliminated as a result of a sale of the Company, such as the Transaction.
Duff & Phelps used discount rates
ranging from 13.75% to 14.75% for the Companys Core Business, excluding the Enhanced Broker Portal Initiative, reflecting Duff & Phelps estimate of the Companys cost of capital, to discount the projected unlevered free
cash flows and terminal value. Duff & Phelps calculated the Core Businesss projected unlevered free cash flows by taking the Companys tax-affected earnings before interest, taxes and amortization (EBITDA),
subtracting taxes, adding back depreciation and amortization, subtracting capital expenditures, change in working capital and deferred revenue and subtracting taxes on deferred revenue. Duff & Phelps calculated the Core Businesss
terminal value in 2023 using a perpetuity growth formula assuming a 3.0% terminal growth rate and a discount rate, based on weighted average cost of capital of the Company, ranging from 13.75% to 14.75%. Duff & Phelps believes that this
range of discount rates is consistent with the rate of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles to the Transaction.
Based on these assumptions, Duff & Phelps discounted cash flow analysis indicated an estimated enterprise value for the Companys Core
Business, excluding any value associated with the Companys Enhanced Broker Portal Initiative, of $49.6 million to $54.3 million.
Duff &
Phelps used a venture capital derived discount rate of 30.0% for the Companys Enhanced Broker Portal Initiative, reflecting the inherent risk associated with the launch of the Enhanced Broker Portal Initiative self-service procurement
platform, to discount the projected unlevered free cash flows and terminal value. Duff & Phelps calculated the Enhanced Broker Portal Initiatives projected unlevered free cash flows by taking the Companys tax-affected EBITDA,
subtracting taxes, adding back depreciation and amortization, subtracting capital expenditures and adjusting for changes in free cash flows. Duff & Phelps estimated the Enhanced Broker Portal Initiatives terminal value in 2023 using a
perpetuity growth formula assuming a 3.0% terminal growth rate and a discount rate, based on the Companys overall weighted average cost of capital, of 14.25%. Duff & Phelps believes that this discount rate is consistent with the rate
of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles to the Transaction.
Based on
these assumptions, Duff & Phelps discounted cash flow analysis indicated an estimated enterprise value for the Companys Enhanced Broker Portal Initiative of $6.3 million to $15.7 million. Such range was
27
established using both the Enhanced Broker Portal Initiative and an adjusted version of the Enhanced Broker Portal Initiative that incorporates certain adjustments thereto made by management of
the Company.
Selected Public Companies Analysis
Duff & Phelps compared certain financial information of the Company to corresponding data and ratios from publicly traded companies in the energy
management and brokerage industries that Duff & Phelps deemed relevant to its analysis. The six companies included in the selected public company analysis in the energy management industry were:
|
|
|
ESCO Technologies, Inc. |
|
|
|
PowerSecure International, Inc. |
Duff & Phelps also included the following seven companies in the selected public
company analysis in the brokerage industry due to similarities to the Company in terms of business model and role as a market intermediary:
|
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|
Arthur J. Gallagher & Co. |
|
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|
Jardine Lloyd Thompson Group plc |
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Willis Group Holdings Public Limited Company |
Although none of these selected public companies is directly
comparable to the Company, Duff & Phelps selected these companies for its analysis based on their relative similarity, primarily in terms of business model and primary customers, to that of the Company. For purposes of its analysis,
Duff & Phelps used certain publicly available historical financial data and consensus equity analyst estimates for the selected public companies. This analysis produced valuation multiples of selected financial metrics which Duff &
Phelps utilized to estimate the enterprise value of the Companys Core Business, excluding any value associated with the Companys Enhanced Broker Portal Initiative, which was determined separately using a discounted cash flow analysis as
previously discussed.
28
The tables below summarize certain observed trading multiples and historical and projected financial performance,
on an aggregate basis, of the selected public companies as of October 31, 2014. The revenue and EBITDA estimates for 2014 and 2015 in the tables below for the selected public companies were derived based on information for the 12-month periods
ending closest to the Companys 2014 and 2015 fiscal years for which information was available.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Growth |
|
|
EBITDA Growth |
|
|
EBITDA Margin |
|
|
|
LTM |
|
|
2014E |
|
|
2015E |
|
|
LTM |
|
|
2014E |
|
|
2015E |
|
|
LTM |
|
|
2014E |
|
|
2015E |
|
Energy Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean |
|
|
20.8 |
% |
|
|
7.7 |
% |
|
|
13.2 |
% |
|
|
-1.4 |
% |
|
|
-15.9 |
% |
|
|
28.6 |
% |
|
|
14.4 |
% |
|
|
15.6 |
% |
|
|
19.2 |
% |
Median |
|
|
20.2 |
% |
|
|
3.9 |
% |
|
|
9.6 |
% |
|
|
-2.8 |
% |
|
|
-0.8 |
% |
|
|
20.8 |
% |
|
|
10.9 |
% |
|
|
10.7 |
% |
|
|
15.2 |
% |
Brokers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean |
|
|
13.7 |
% |
|
|
13.7 |
% |
|
|
8.1 |
% |
|
|
9.3 |
% |
|
|
18.5 |
% |
|
|
12.4 |
% |
|
|
22.8 |
% |
|
|
24.2 |
% |
|
|
24.9 |
% |
Median |
|
|
13.6 |
% |
|
|
12.2 |
% |
|
|
8.3 |
% |
|
|
10.8 |
% |
|
|
15.0 |
% |
|
|
11.8 |
% |
|
|
21.2 |
% |
|
|
21.5 |
% |
|
|
20.8 |
% |
Aggregate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
|
1.3 |
% |
|
|
-9.6 |
% |
|
|
3.5 |
% |
|
|
-47.0 |
% |
|
|
-119.5 |
% |
|
|
3.8 |
% |
|
|
3.1 |
% |
|
|
-1.7 |
% |
|
|
7.0 |
% |
Maximum |
|
|
42.1 |
% |
|
|
30.8 |
% |
|
|
37.4 |
% |
|
|
30.3 |
% |
|
|
42.4 |
% |
|
|
59.3 |
% |
|
|
43.3 |
% |
|
|
49.2 |
% |
|
|
49.7 |
% |
Mean |
|
|
17.0 |
% |
|
|
11.0 |
% |
|
|
10.5 |
% |
|
|
4.9 |
% |
|
|
4.2 |
% |
|
|
18.3 |
% |
|
|
18.9 |
% |
|
|
20.6 |
% |
|
|
22.5 |
% |
Median |
|
|
13.6 |
% |
|
|
7.3 |
% |
|
|
8.3 |
% |
|
|
7.2 |
% |
|
|
13.0 |
% |
|
|
13.4 |
% |
|
|
14.7 |
% |
|
|
16.0 |
% |
|
|
17.4 |
% |
World Energy Solutions, Inc. |
|
|
8.8 |
% |
|
|
15.2 |
% |
|
|
9.8 |
% |
|
|
83.0 |
% |
|
|
97.6 |
% |
|
|
24.6 |
% |
|
|
15.2 |
% |
|
|
15.3 |
% |
|
|
17.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Value as a Multiple of: |
|
|
|
LTM EBITDA |
|
|
2014E EBITDA |
|
|
2015E EBITDA |
|
|
LTM Revenue |
|
|
2014E Revenue |
|
Energy Management: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean |
|
|
15.1x |
|
|
|
10.5x |
|
|
|
8.9x |
|
|
|
1.87x |
|
|
|
1.80x |
|
Median |
|
|
13.1x |
|
|
|
11.1x |
|
|
|
9.7x |
|
|
|
0.91x |
|
|
|
0.95x |
|
Brokers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean |
|
|
11.7x |
|
|
|
10.5x |
|
|
|
9.2x |
|
|
|
2.33x |
|
|
|
2.20x |
|
Median |
|
|
11.4x |
|
|
|
10.8x |
|
|
|
10.3x |
|
|
|
2.30x |
|
|
|
2.07x |
|
Aggregate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
|
4.3x |
|
|
|
3.7x |
|
|
|
3.4x |
|
|
|
0.90x |
|
|
|
0.82x |
|
Maximum |
|
|
29.3x |
|
|
|
13.4x |
|
|
|
11.5x |
|
|
|
5.66x |
|
|
|
5.21x |
|
Mean |
|
|
13.3x |
|
|
|
10.5x |
|
|
|
9.1x |
|
|
|
2.12x |
|
|
|
2.01x |
|
Median |
|
|
12.3x |
|
|
|
10.8x |
|
|
|
10.0x |
|
|
|
1.90x |
|
|
|
1.88x |
|
LTM = Latest twelve months for which financial information was available.
Enterprise Value = (Market Capitalization) + (Debt + Preferred Stock + Non-Controlling Interest) (Cash & Equivalents)
EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization
Source: Bloomberg, Capital IQ, SEC Filings
Duff &
Phelps used the information above, in conjunction with data from its selected M&A transactions analysis described below, to reach the valuation conclusions described below.
None of the selected public companies were identical to the Company. As a result, a complete valuation analysis cannot be limited to a quantitative review of
the selected public companies, but also requires complex considerations and judgments concerning differences in financial and operating characteristics of such companies, as well as other factors that could affect their value relative to that of the
Company.
29
Selected M&A Transactions Analysis
Duff & Phelps compared the Company to the target companies involved in the 23 selected merger and acquisition transactions listed in the below table.
The selection of these transactions was based, among other things, on the target companys industry, the relative size of the transaction compared to the Transaction and the availability of public information related to the selected
transaction. The selected transactions indicated (i) enterprise value to last twelve months EBITDA multiples ranging from 3.8x to 28.6x, with a median of 11.1x and a mean of 12.8x, and (ii) enterprise value to last twelve
months revenue multiples ranging from 0.40x to 5.63x, with a median of 1.82x and a mean of 2.08x.
|
|
|
|
|
Date
Announced |
|
Acquirer Name |
|
Target Name |
5/29/2014 |
|
Cofely USA, Inc. |
|
Ecova, Inc. |
|
|
|
1/15/2014 |
|
Brown & Brown, Inc. |
|
The Wright Insurance Group, LLC |
|
|
|
7/11/2013 |
|
Schneider Electric S.A. (nka Schneider Electric SE) |
|
Invensys plc (nka Invensys Limited) |
|
|
|
10/3/2013 |
|
Accenture plc |
|
Procurian, Inc. |
|
|
|
4/22/2013 |
|
ABB Ltd. |
|
Power-One, Inc. |
|
|
|
4/15/2013 |
|
Madison Dearborn Partners, LLC |
|
National Financial Partners Corp. |
|
|
|
10/4/2012 |
|
World Energy Solutions, Inc. |
|
Northeast Energy Partners, LLC |
|
|
|
10/1/2012 |
|
Utilitywise Plc |
|
Clouds Environmental Consultancy Ltd. |
|
|
|
6/29/2012 |
|
Melrose PLC (nka Melrose Industries plc) |
|
Elster Group SE |
|
|
|
1/30/2012 |
|
Siemens Canada Limited |
|
RuggedCom, Inc. |
|
|
|
1/9/2012 |
|
MITIE Group PLC |
|
Utilyx Limited |
|
|
|
12/12/2011 |
|
ABB Schweiz AG |
|
Newave Energy Holding SA |
|
|
|
11/1/2011 |
|
World Energy Solutions, Inc. |
|
GSE Consulting, LP |
|
|
|
10/17/2011 |
|
World Energy Solutions, Inc. |
|
Northeast Energy Solutions, LLC |
|
|
|
6/1/2011 |
|
Schneider Electric España, S.A. |
|
Telvent Git, S.A. |
|
|
|
5/19/2011 |
|
Toshiba Corporation, Innovation Network Corporation of Japan |
|
Landis+Gyr AG |
|
|
|
3/29/2011 |
|
GE Energy Management |
|
GE Energy Power Conversion France SAS |
|
|
|
3/3/2011 |
|
Johnson Controls, Inc. |
|
EnergyConnect Group, Inc. |
|
|
|
2/11/2011 |
|
Carillion plc |
|
Eaga plc (nka Carillion Energy Services Limited) |
8/12/2009 |
|
MITIE Group PLC |
|
Dalkia Energy and Technical Services and Dalkia Lighting and Electrical Services |
|
|
|
9/17/2007 |
|
EnerNOC, Inc. |
|
MDEnergy, LLC |
|
|
|
5/23/2007 |
|
World Energy Solutions, Inc. |
|
EnergyGateway, LLC |
|
|
|
2/25/2007 |
|
Itron, Inc. |
|
Actaris SAS (nka Itron France SARL) |
30
Summary of Selected Public Companies / M&A Transactions Analyses
In order to estimate a range of enterprise values for the Companys Core Business, excluding any value associated with the Companys Enhanced Broker
Portal Initiative, Duff & Phelps applied valuation multiples to (i) the Companys projected adjusted EBITDA for the fiscal year ending December 31, 2014, of 9.5x to 10.5x; (ii) the Companys projected adjusted
EBITDA for the fiscal year ending December 31, 2015, of 7.0x to 8.0x; and (iii) the Companys last twelve months adjusted total revenue for the period ending September 30, 2014, of 1.45x to 1.55x. In each case, adjusted
EBITDA and adjusted total revenue exclude both non-recurring items as well as several public company costs, as provided by Company management.
Valuation
multiples were selected, in part, by taking into consideration historical and projected financial performance metrics of the Company relative to such metrics of the selected public companies and selected transactions, including, but not limited to,
the Companys smaller size on a revenue and EBITDA basis, lower EBITDA margins than the aggregate median of the selected public companies but higher projected EBITDA growth than the aggregate median of the selected public companies. Based on
these selected valuation multiples, the enterprise value indication for the Companys Core Business, excluding any value associated with the Companys Enhanced Broker Portal Initiative and certain non-cash earnings projected through the
Companys fiscal year ending December 31, 2019, ranged from $51.6 million to $57.5 million.
Premiums Paid Analysis
As a supplemental analysis, Duff & Phelps determined the premiums paid by acquirers over the public market trading prices in merger and acquisition
transactions involving a change of control of the target. The premiums paid analysis is supplementary only, and Duff & Phelps did not explicitly estimate the value of the Company based on this analysis. The transactions analyzed by
Duff & Phelps included transactions announced after October 2011 involving target companies with businesses deemed relevant by Duff & Phelps. The following summarizes the result of these calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median Stock Price Premium (Median) |
|
|
|
Number of Transactions |
|
|
1-Day Prior (%) |
|
|
1-Week Prior (%) |
|
|
1-Month Prior (%) |
|
Energy Equipment and Services |
|
|
16 |
|
|
|
33.7 |
|
|
|
31.7 |
|
|
|
30.2 |
|
Software |
|
|
65 |
|
|
|
31.8 |
|
|
|
37.1 |
|
|
|
39.1 |
|
US Companies with Enterprise Value between $25 and $100 million |
|
|
71 |
|
|
|
45.6 |
|
|
|
42.7 |
|
|
|
43.7 |
|
Total US M&A Activity |
|
|
542 |
|
|
|
28.8 |
|
|
|
30.6 |
|
|
|
32.9 |
|
Duff & Phelps noted that based on the premium paid analysis the Consideration to be received by the stockholders of
the Company pursuant to the Merger Agreement implies a 32.9% premium over the Companys common stock closing price of $4.14 per Share on October 31, 2014.
Summary of Analyses
The range of estimated enterprise
values for the Companys Core Business that Duff & Phelps derived from its discounted cash flow analysis was $49.6 million to $54.3 million, and the range of estimated enterprise values that Duff & Phelps derived from its
selected public companies / M&A transactions analyses was $51.6 million to $57.5 million. Duff & Phelps concluded that the Companys Core Business enterprise value was within a range of $50.6 million to $55.9 million based on the
analyses described above.
Based on its conclusions regarding the enterprise value of the Companys Core Business, Duff & Phelps estimated
the range of aggregate common equity value of the Company to be $59.9 million to $74.9 million by:
|
|
|
Adding cash and equivalents of $2.8 million as of September 30, 2014; |
|
|
|
Adding the present value of the Enhanced Broker Portal Initiative of approximately $6.3 million to $15.7 million; |
31
|
|
|
Adding the estimated value of the Companys net operating loss carryforwards (derived by estimating the present value of projected tax savings from these carryforwards after giving consideration to the limitations
resulting from a change of control transaction such as the Transaction) of approximately $3.1 million; |
|
|
|
Adding the present value of the Companys tax benefits of amortization of approximately $7.6 million to $7.9 million; |
|
|
|
Subtracting the after-tax cost of legal fees associated with litigation and settlements of approximately $0.7 million; and |
|
|
|
Subtracting debt of $9.7 million as of September 30, 2014. |
Based on the foregoing analysis,
Duff & Phelps estimated the value of each Share, on a fully diluted basis, to range from $4.70 to $5.88. Duff & Phelps noted that the Consideration to be received by the stockholders of the Company pursuant to the Merger Agreement
was within the range of the per Share value indicated by its analyses.
Duff & Phelps opinion and financial analyses were only one of the
many factors considered by the Special Committee and the Board in their evaluation of the Transaction and should not be viewed as determinative of the views of the Special Committee or the Board.
Miscellaneous
The Special Committee selected
Duff & Phelps because Duff & Phelps is a leading independent financial advisory firm, offering a broad range of valuation and investment banking services, including fairness and solvency opinions, mergers and acquisitions advisory,
mergers and acquisitions due diligence services, financial reporting and tax valuation, fixed asset and real estate consulting, employee stock ownership plan (ESOP) and Employee Retirement Income Security Act (ERISA) advisory services, legal
business solutions and dispute consulting. Since 2005, Duff & Phelps has rendered over 472 fairness opinions in transactions aggregating over $142 billion and is regularly engaged in the valuation of businesses and securities in the
preparation of fairness opinions in connection with mergers, acquisitions and other strategic transactions.
Fees and Expenses
The aggregate amount of the fees that the Company has agreed to pay Duff & Phelps for its services in connection with the rendering of its opinion to
the Special Committee, are $225,000 due and payable as follows: $112,500 in cash upon execution of the engagement letter for Duff & Phelps to serve as financial advisor to the Special Committee in its review of the Transaction; and the
remaining $112,500 in cash upon notification that the Duff & Phelps opinion was completed and ready for delivery. No portion of Duff & Phelps fee is contingent upon either the conclusion expressed in the opinion or
whether the Transaction is successfully consummated. Furthermore, Duff & Phelps is entitled to be paid additional fees at Duff & Phelps standard hourly rates for any time incurred should Duff & Phelps be called upon
to support its findings subsequent to the delivery of its opinion. The Company has also agreed to reimburse Duff & Phelps for its out-of-pocket expenses and reasonable fees and expenses of counsel, consultants and advisors retained by
Duff & Phelps in connection with the engagement. The Company has also agreed to indemnify Duff & Phelps for certain liabilities arising out of its engagement.
The terms of the fee arrangements with Duff & Phelps, which the Company believes are customary in transactions of this nature, were negotiated at
arms length, and the Special Committee and the Board are aware of these fee arrangements.
Other than this engagement, during the two years
preceding the date of its opinion, Duff & Phelps has not had any material relationship with any party to the Merger Agreement for which compensation has been received or
32
is intended to be received, nor is any such material relationship or related compensation mutually understood to be contemplated.
Intent to Tender.
To the knowledge of the Company, after
making reasonable inquiry, all of the Companys executive officers and directors currently intend to tender or cause to be tendered all Shares held of record or beneficially by such persons for purchase pursuant to the Offer (other than any
Shares held by directors or executive officers that may be transferred prior to the Expiration Date for estate planning or philanthropic purposes). In addition, each of the Companys executive officers and directors has entered into a Tender
and Support Agreement, pursuant to which they have agreed to tender all of their Shares in the Offer. See Item 3 above under the heading Arrangements with EnerNOC and Merger Sub-Tender and Support Agreements.
Item 5. |
Persons/Assets, Retained, Employed, Compensated or Used. |
Except as set forth above, neither the Company
nor any person acting on its behalf has or currently intends to employ, retain or compensate any person to make solicitations or recommendations to the stockholders of the Company on its behalf in connection with the Offer or the Merger.
Duff & Phelps
The Special Committee retained
Duff & Phelps to provide financial advisory services in connection with the Offer and the Merger. Pursuant to the terms of Duff & Phelpss engagement letter with the Company, the Company is obligated to pay Duff &
Phelps a fee of $225,000. The Company also has agreed to reimburse Duff & Phelps for its reasonable out-of-pocket expenses and to indemnify Duff & Phelps and certain related parties against certain liabilities and expenses related
to or arising out of Duff & Phelpss engagement, including liabilities under federal securities laws.
Canaccord
In February 2014, the Company retained Canaccord to provide financial advisory services in connection with a review of the Companys strategic
alternatives, including an analysis and evaluation of the Companys business, operations, financial condition and prospects. Under the terms of that engagement, Canaccord would also assist the Companys management in the development of a
mergers and acquisitions strategy and an evaluation of the Companys financing needs and available financing alternatives. Under the terms of the agreement, the Company paid Canaccord a retainer fee of $100,000. In the event that a transaction
is consummated, the Company shall pay Canaccord a success fee equal to 2% of the aggregate consideration paid in the sale transaction, less 50% of the retainer fee previously paid. For purposes of the agreement,
aggregate consideration includes the total amount of cash consideration and assumed indebtedness.
Item 6. |
Interest in Securities of the Subject Company |
Securities Transactions
No transactions with respect to Shares have been effected by the Company or, to the Companys knowledge after making reasonable inquiry, by any of its
executive officers, directors, affiliates or subsidiaries during the 60 days prior to the date of this Schedule 14D-9, except for the following:
|
|
|
Each of the Companys executive officers and directors entered into a Tender and Support Agreement, dated November 4, 2014, with EnerNOC and Merger Sub, as described under Item 3 above; and
|
33
|
|
|
On September 18, 2014, each of the members of the Board received Shares, at a price per share of $4.25, as compensation for their services in the ordinary course as follows: |
|
|
|
|
|
Name |
|
Number of Shares |
|
John Fox |
|
|
2,059 |
|
Edward Libbey |
|
|
2,648 |
|
Peter Londa |
|
|
2,942 |
|
Thad Wolfe |
|
|
2,353 |
|
Ralph Sheridan |
|
|
2,059 |
|
Sean Sweeney |
|
|
2,059 |
|
Item 7. |
Purposes of the Transaction and Plans or Proposals |
Except as set forth in this Schedule 14D-9,
including with respect to any negotiations that may be ongoing in respect of the activities during the Go-Shop Period the disclosure of which would jeopardize the continuation of the negotiations, no negotiations are being undertaken or are underway
by the Company in response to the Offer which relate to a tender offer or other acquisition of the Companys securities by the Company, any subsidiary of the Company or any other person.
Except as set forth in this Schedule 14D-9, including with respect to any negotiations that may be ongoing in respect of the Go-Shop Period the disclosure of
which would jeopardize the continuation of the negotiations, no negotiations are being undertaken or are underway by the Company in response to the Offer which relate to, or would result in, (i) any extraordinary transaction, such as a merger,
reorganization or liquidation, involving the Company or any subsidiary of the Company, (ii) any purchase, sale or transfer of a material amount of assets of the Company or any subsidiary of the Company, or (iii) any material change in the
present dividend rate or policy, or indebtedness or capitalization of the Company.
Except as set forth in this Schedule 14D-9, there are no transactions,
Special Committee or Board resolutions, agreements in principle or signed contracts entered into in response to the Offer that relate to one or more of the matters referred to in this Item 7.
Item 8. |
Additional Information |
Certain Management Projections
Introduction
On October 9, 2014, the Company
provided financial projections to Duff & Phelps (the Projections) of (i) the operating performance of the Company for fiscal years 2014 through 2020; and (ii) the operating performance of the Enhanced Broker Portal
Initiative for fiscal years 2015 (when revenue is first projected) through 2018 using both a Base Model format and a Base Model plus Overlay format.
With respect to the Projections related to the Enhanced Broker Portal Initiative, the Base Model represents a direct sales approach to recruiting brokers to
the Companys solution, on a broker by broker basis. The Base Model plus Overlay forecasts modeling a situation where suppliers discontinue their brokers and redirect them to the Companys portal to enable the Company to attract multiple
brokers at one time.
Cautionary Notes
While the
Company prepares projections from time to time for internal use, including for budget planning and for making new hire determinations, the Company does not, as a matter of course, publicly disclose long-term projections as to future performance or
earnings due to the significant unpredictability of the underlying assumptions and estimates.
34
The Projections were prepared solely for internal use and were not prepared with a view toward ultimate public
disclosure, nor were they prepared in accordance with US GAAP, IFRS or any other generally accepted accounting principles, or with a view toward compliance with published guidelines of the SEC or the guidelines established by the American
Institute of Certified Public Accountants for preparation and presentation of financial forecasts or projections.
Neither the Companys independent
public accounting firm nor any other independent accountants have compiled, examined or performed any procedures with respect to the Projections, nor have they expressed any opinion or any other form of assurance on such information or its
achievability, and they assume no responsibility for, and disclaim any association with, the Projections.
The Projections related to the Enhanced Broker
Portal Initiative have no historical basis on which to base the Companys assumptions.
While presented with numerical specificity, the Projections
reflect numerous estimates and assumptions made with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to the Companys business,
including the Companys revenues, expectations of backlog and energy prices, and its expectations in growth in revenue, operating results, operating margins, and free cash flow, all of which are difficult to predict and many of which are beyond
the Companys control.
The Projections are subjective in many respects and thus are susceptible to multiple interpretations and periodic revisions
based on actual experience and business developments. As such, the Projections constitute forward-looking statements and are subject to a variety of factors that could cause actual results to differ materially from the results forecasted in the
Projections, including, but not limited to, the factors set forth in the Annual Report on Form 10-K filed with the SEC on March 31, 2014 and the other current and period reports filed by the Company with the SEC, and those set forth in
Forward-Looking Statements below.
There can be no assurance that the financial results set out in the Projections will be realized or that
actual results will not be significantly higher or lower than projected.
The Projections cover multiple years and such information by its nature becomes
less predictive with each successive year. In addition, the Projections will be affected by the Companys ability to achieve strategic goals, objectives and targets over the applicable periods. The assumptions upon which the Projections were
based necessarily involve judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are
beyond the Companys control.
The Projections also reflect assumptions as to certain business decisions that are subject to change and cannot,
therefore, be considered a guarantee of future operating results.
Moreover, the inclusion of the Projections should not be regarded as an indication that
the Company, EnerNOC, any of their respective advisors or anyone who received this information (or any information relating to the Company or EnerNOC which may have been considered or referred to by the Companys management in preparing such
Projections or evaluating the Offer) then considered, or now considers, the information necessarily predictive of actual future events.
None of the
Company, EnerNOC, their respective advisors or any of their affiliates intends to, and each of them disclaims any obligation to, update or revise the Projections, except to the extent required by applicable law.
Certain of the Projections with respect to the year ended December 31, 2014, presented below were based in part on actual numbers and in part on
estimates, as they were prepared before the end of 2014. Investors are directed to the information regarding the Companys actual financial results contained in subsequent quarterly and annual reports, including the Companys consolidated
financial statements and accompanying notes thereto.
35
The Projections do not take into account any circumstances or events occurring after the date they were prepared
or any circumstances resulting from or otherwise relating to the Offer, including the periodic reports prepared and filed with the SEC after the date in which the Projections were prepared, the announcement that the Company entered into the Merger
Agreement with EnerNOC, or any subsequent integration activities. Any such delay or cancellation of orders could adversely affect the Companys ability to achieve the results reflected in the Projections. Further, the Projections do not take
into account the effect of the public disclosures referred to above followed by any failure of the Offer to be consummated in accordance with the terms of the Merger Agreement, and should not be viewed as accurate or continuing in that context.
The inclusion of the Projections should not be deemed an admission or representation by the Company (or any other person) that the Projections are viewed by
the Company as material information of the Company. To the contrary, the Company views the Projections as non-material because of the inherent risks and uncertainties associated with such long-term forecasts.
The Projections are not being included in this Schedule 14D-9 to influence your decision whether to tender your shares in the Offer, but because they were
made available by the Companys management to (i) EnerNOC, (ii) Duff & Phelps, (iii) the Special Committee, in connection with their financial analyses and their advice to the Board, and (iv) the Board. The
information from the Projections should be evaluated, if at all, in conjunction with, among other things: (i) the other information regarding the Company contained elsewhere in this Schedule 14D-9, (ii) the important information relating
to the Offer set out in the Offer to Purchase and Letter of Transmittal, and (iii) the historical financial statements and other information regarding the Company and its business and results of operations contained in the Companys public
filings with the SEC.
In light of the foregoing factors and the uncertainties inherent in the Projections, shareholders are cautioned not to place undue,
if any, reliance on the Projections.
Projected Financial Information
The Company provided the following internal non-public Projections for fiscal years 2014 through 2020 to Duff & Phelps on October 9, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
Revenue |
|
$ |
40,221,223 |
|
|
$ |
44,041,320 |
|
|
$ |
48,373,723 |
|
|
$ |
51,306,072 |
|
|
$ |
53,977,343 |
|
|
$ |
56,707,139 |
|
|
$ |
59,208,963 |
|
Net Income |
|
$ |
809,022 |
|
|
$ |
2,299,890 |
|
|
$ |
4,657,428 |
|
|
$ |
6,275,326 |
|
|
$ |
7,597,715 |
|
|
$ |
8,688,653 |
|
|
$ |
9,501,148 |
|
EPS |
|
$ |
0.06 |
|
|
$ |
0.18 |
|
|
$ |
0.37 |
|
|
$ |
0.50 |
|
|
$ |
0.61 |
|
|
$ |
0.69 |
|
|
$ |
0.76 |
|
EBITDA |
|
$ |
5,296,925 |
|
|
$ |
6,814,035 |
|
|
$ |
8,709,600 |
|
|
$ |
9,030,026 |
|
|
$ |
9,577,719 |
|
|
$ |
10,402,700 |
|
|
$ |
11,108,401 |
|
EBITDA Margin |
|
|
13 |
% |
|
|
15 |
% |
|
|
18 |
% |
|
|
18 |
% |
|
|
18 |
% |
|
|
18 |
% |
|
|
19 |
% |
Adjusted EBITDA |
|
$ |
5,993,459 |
|
|
$ |
7,503,694 |
|
|
$ |
9,399,260 |
|
|
$ |
9,719,686 |
|
|
$ |
10,267,379 |
|
|
$ |
11,092,359 |
|
|
$ |
11,798,060 |
|
Cash |
|
$ |
4,221,477 |
|
|
$ |
7,997,931 |
|
|
$ |
13,802,496 |
|
|
$ |
20,703,379 |
|
|
$ |
28,575,403 |
|
|
$ |
39,904,777 |
|
|
$ |
52,458,651 |
|
The Company provided the following internal non-public Projections for the Enhanced Broker Portal InitiativeBase Model
for fiscal years 2015 through 2018 to Duff & Phelps dated October 9, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
Revenue |
|
$ |
59,063 |
|
|
$ |
857,813 |
|
|
$ |
2,954,813 |
|
|
$ |
5,535,000 |
|
Gross Profit |
|
($ |
5,937 |
) |
|
$ |
757,063 |
|
|
$ |
2,821,563 |
|
|
$ |
5,366,000 |
|
Net Margin |
|
($ |
538,746 |
) |
|
($ |
242,331 |
) |
|
$ |
1,054,193 |
|
|
$ |
2,776,433 |
|
EBITDA |
|
($ |
474,163 |
) |
|
($ |
69,831 |
) |
|
$ |
1,298,359 |
|
|
$ |
3,019,350 |
|
Capital Expenditures |
|
$ |
440,000 |
|
|
$ |
240,000 |
|
|
$ |
190,000 |
|
|
$ |
190,000 |
|
36
The Company provided the following internal non-public Projections for the Enhanced Broker Portal
InitiativeBase Model plus Overlay for fiscal years 2015 through 2018 to Duff & Phelps dated October 9, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
Revenue |
|
$ |
70,875 |
|
|
$ |
1,063,125 |
|
|
$ |
4,990,275 |
|
|
$ |
12,200,625 |
|
Gross Profit |
|
$ |
70,785 |
|
|
$ |
994,875 |
|
|
$ |
4,587,275 |
|
|
$ |
11,563,625 |
|
Net Margin |
|
($ |
565,979 |
) |
|
($ |
373,924 |
) |
|
$ |
1,699,502 |
|
|
$ |
6,556,668 |
|
EBITDA |
|
($ |
476,396 |
) |
|
($ |
101,424 |
) |
|
$ |
2,043,668 |
|
|
$ |
6,874,585 |
|
Capital Expenditures |
|
$ |
740,000 |
|
|
$ |
240,000 |
|
|
$ |
190,000 |
|
|
$ |
190,000 |
|
Golden Parachute Payments
The following table sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation that is based on or otherwise relates
to the Offer and the Merger and that may be paid or become payable to the Companys named executive officers, which is referred to as the golden parachute compensation. The information set forth in the table below is intended to
comply with Item 402(t) of Regulation S-K, which requires disclosure of information about certain compensation for each of the Companys named executive officers that is based on or otherwise relates to the Merger.
Please note that the amounts indicated below are estimates based on the material assumptions described in the notes to the table below, which may or may not
actually occur. Some of these assumptions are based on information not currently available and, as a result, the actual amounts, if any, that may be paid or become payable to a named executive officer may differ materially from the amounts set forth
below. Furthermore, for purposes of calculating such amounts, the Company has assumed the following:
|
|
|
the price per Share paid by EnerNOC in the Offer is $5.50 per Share; |
|
|
|
the Merger closed on November 5, 2014, the last practicable date prior to the filing of this Schedule 14D-9; and |
|
|
|
the named executive officers were terminated without cause, the Company did not extend their employment term or for Mr. Adams only, Mr. Adams resigned for good reason, in each case, immediately
following the Merger on November 5, 2014, which is the last practicable date prior to the filing of this Schedule 14D-9. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Cash ($) (1), (3) |
|
|
Equity ($) (2), (3) |
|
|
Total |
|
Chief Executive Officer (PEO), Philip Adams |
|
$ |
426,575 |
|
|
$ |
412,500 |
|
|
$ |
839,075 |
|
Chief Operating Officer, Martha Danly |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Chief Financial Officer (PFO), James Parslow |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
(1) |
The amount reported for Mr. Adams consists of (i) one times his annual base salary ($300,000) in effect as of the date of termination under the terms of his employment agreement with the Company dated
February 7, 2013, payable in twelve monthly installments in accordance with the Companys payroll practice then in effect, beginning 45 days after the date of termination if he is either terminated without cause or terminates
his employment for good reason; and (ii) a pro-rated payment of Mr. Adams maximum potential bonus under the Companys 2014 Bonus Compensation Plan for executive officers, based upon the percentage of the fiscal year ending
December 31, 2014 that Mr. Adams would have worked on the above assumptions ($126,575). |
(2) |
The amount reported consists of cash to be received in respect of unvested restricted stock awards that would accelerate if Mr. Adams employment is involuntarily terminated other than for cause at any
time within 6 months of a change of control of the Company. Under the Merger Agreement, each restricted stock award is being converted into a right to receive unvested cash at the Offer Price per share of restricted stock. Upon
acceleration of Mr. Adams unvested awards, his right to receive such cash payment will automatically vest and become payable. |
37
(3) |
See Item 3Arrangements with the Companys Executive Officers, Directors and Affiliates for more information on these arrangements. |
Philip Adams Employment Agreement
Effective
February 7, 2013, the Company and Mr. Adams entered into an employment agreement (the Employment Agreement) to reflect his new role and responsibilities as the Companys Chief Executive Officer. Under the Employment
Agreement, Mr. Adams is paid a base salary of $25,000 per month, and is eligible for a bonus based on criteria to be determined by the Board.
Pursuant to the Employment Agreement, Mr. Adams may be terminated at will or for cause, as defined in the Employment Agreement, or
Mr. Adams may terminate his employment for any reason or for good reason, also as defined in the Employment Agreement. In the event that Mr. Adams is terminated at will or terminates his employment for good reason,
Mr. Adams shall receive a severance equal to 12 months of his base salary and a prorated bonus payment based upon the percentage of the fiscal year worked by Mr. Adams prior to such termination (See Item 3-Bonus Arrangements for
Executive Officers above).
Under the Employment Agreement, cause is defined as (i) willful failure or refusal of Mr. Adams to
perform his duties under the Employment Agreement; (ii) dishonesty, embezzlement, misappropriation of assets or property (tangible or intangible) of the Company; (iii) gross negligence, willful misconduct, material and willful neglect of
duties, theft, fraud, or breach of fiduciary duty to the Company; (iv) violation of federal or state securities laws; (v) the unauthorized disclosure of any trade secret or confidential information of the Company; (vi) the conviction
of a felony, including a plea of guilty or nolo contendere.
Under the Employment Agreement good reason is defined as existing upon
(i) mutual written agreement by Mr. Adams and the Company that good reason exists; (ii) demotion of Mr. Adams from the position of President and Chief Executive Officer of the Company, without his prior written consent;
(iii) reduction in Mr. Adams authority and/or responsibilities as President and Chief Executive Officer of the Company, without his prior written consent; (iv) reassignment of Mr. Adams to a place of business more than 50
miles from the place of business where he currently works for the Company; (v) any material breach by the Company of the Employment Agreement; (vi) a reduction in Mr. Adams salary and the value of his benefits of greater than
10%, unless such reduction is applied equally to all executives of the Company; or (vii) a termination of Mr. Adams employment within twelve (12) months of a change of control (as defined in the Employment Agreement) for any
reason other than cause.
Under the Employment Agreement, a change of control is deemed to have occurred upon (i) the sale or disposition
of all or substantially all of the assets of the Company to another entity; or (ii) the merger or consolidation of the Company with and into another entity under circumstances in which the Company is not the surviving entity; or
(iii) acquisition of a controlling stake in the Company by any third party.
A termination of Mr. Adams employment with the Company other
than for cause within twelve months of a change of control (each as defined in the Employment Agreement), would thus result in a severance payment to Mr. Adams of $300,000.
Philip Adams Restricted Stock Agreements
Pursuant to a
restricted stock agreement dated June 6, 2012 (as amended on September 17, 2012, the 2012 Agreement), Mr. Adams received 50,000 shares of restricted common stock. In addition, pursuant to a restricted stock agreement dated
February 7, 2013 (as amended on March 25, 2014, together with the 2012 Agreement, the Restricted Stock Agreements), Mr. Adams received a 25,000 Restricted Stock Award. Save as set forth below, each Restricted Stock Award
vests on the fourth anniversary of the date of the award, provided that Mr. Adams is still employed with the Company at that time. Each Restricted Stock Award will accelerate and become
38
immediately vested upon Mr. Adams involuntary termination from employment other than for cause, as defined in the Restricted Stock Agreements, at any time within six months of a
change of control, also as defined in the Restricted Stock Agreements.
Under the Restricted Stock Agreements, cause is defined as
Mr. Adams (i) failure to comply with any law or regulation affecting the business of the Company, (ii) commission of an act of fraud upon, or act evidencing dishonesty to, the Company, (iii) misappropriation of any funds,
property or rights of the Company, (iv) willful breach or habitual neglect of his job duties or his failure or refusal to comply with explicit lawful directives of the Company, (v) conviction of a felony or a misdemeanor involving moral
turpitude, (vi) use or possession of illegal drugs at work or his working under the influence of illegal drugs, or (vii) breach of any noncompetition or confidentiality agreements with, or written policies of, the Company to which
Mr. Adams is bound or subject.
Under the Restricted Stock Agreements, change of control is defined as any merger, share exchange,
consolidation, or purchase of shares of the outstanding capital stock of the Company (other than as part of a financing transaction) after which the voting securities of the Company outstanding immediately prior thereto represent, either by
remaining outstanding or by being converted into voting securities of the surviving or acquiring entity, less than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such event.
An involuntary termination of Mr. Adams employment with the Company other than for cause
(as defined in the Restricted Stock Agreements) within six months of a change of control (also as defined in the Restricted Stock Agreements), would thus result in the immediate vesting of the 75,000 shares of restricted stock currently
held by Mr. Adams.
Litigation Related to the Offer and the Merger
On November 6, 2014, Plaintiff George P. Assad, Jr. filed a putative class action lawsuit captioned Assad v. World Energy Solutions, Inc. et al.,
Civil Action No. 3:13-CV-10324, was filed in the Court of Chancery of the State of Delaware (the Complaint) against the Company, the members of the Board, and the Offerors in connection with the proposed Merger. The Complaint
alleges that the members of the Board breached their fiduciary duties to the Companys stockholders in connection with the proposed transaction Merger. Plaintiff alleges that the members of the Board failed to inform themselves sufficiently of
the Companys value, that the Offer Price undervalues the Company, and that the Merger Agreement contains unreasonable deal protection devices that purportedly preclude competing offers. Plaintiffs allege claims against EnerNOC and
Merger Sub for aiding and abetting such alleged breaches of fiduciary duties. The Complaint seeks injunctive relief, including enjoining or rescinding the Merger, damages, and an award of other unspecified attorneys and other fees and costs,
and other relief.
Although the outcome of this matter cannot be predicted with any certainty, the Company believes the Complaint is without merit and
intends to defend vigorously against it.
Appraisal Rights
No appraisal rights are available in connection with the Offer. However, if the Offer is successful and the Merger is consummated, holders of Shares
immediately prior to the Effective Time are entitled to appraisal rights in connection with the Merger under Section 262.
The following
discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this Schedule 14D-9
as Annex II. All references in Section 262 and in this summary to a stockholder are to the record holder of Shares immediately prior to the Effective Time as to which appraisal rights are asserted. A person having a beneficial
interest in Shares held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely
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manner to perfect appraisal rights. Stockholders should carefully review the full text of Section 262 as well as the information discussed below.
Under the DGCL, if the Merger is completed, holders of Shares immediately prior to the Effective Time who (i) did not tender their Shares in the Offer,
(ii) follow the procedures set forth in Section 262 and (iii) do not thereafter withdraw their demand for appraisal of such Shares or otherwise lose their appraisal rights, in each case in accordance with the DGCL, will be entitled to
have their Shares appraised by the Delaware Court of Chancery and to receive payment of the fair value of such Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with
interest, if any, to be paid upon the amount to be determined to be the fair value. The fair value of such shares as determined by the Delaware Court of Chancery could be greater than, less than or the same as the Offer Price or the
consideration payable in the Merger (which is equivalent in amount to the Offer Price).
Under Section 262, where a merger is approved under
Section 251(h), either a constituent corporation before the effective date of the merger, or the surviving corporation within ten days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the merger and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of
Section 262. This Schedule 14D-9 constitutes the formal notice of appraisal rights under Section 262. A copy of Section 262 is attached as Annex II to this Schedule 14D-9. Any holder of Shares who wishes to exercise such
appraisal rights or who wishes to preserve his, her or its right to do so, should review the following discussion and Annex II carefully because failure to timely and properly comply with the procedures specified will result in the loss of appraisal
rights under the DGCL.
Any stockholder wishing to exercise appraisal rights is urged to consult legal counsel before attempting to exercise such
rights.
If a stockholder elects to exercise appraisal rights under Section 262, such stockholder must do all of the following:
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within the later of the consummation of the Offer, which shall occur on the date on which acceptance and payment for the Shares occurs, and 20 days after the date of mailing of this Schedule 14D-9, deliver to the
Company at the address indicated below a written demand for appraisal of Shares held, which demand must reasonably inform the Company of the identity of the stockholder and that the stockholder is demanding appraisal; |
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not tender their Shares in the Offer; and |
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continuously hold of record the Shares from the date on which the written demand for appraisal is made through the Effective Time. |
Written Demand by the Record Holder.
All written demands
for appraisal should be addressed to World Energy Solutions, Inc., 100 Front Street, Worcester, Massachusetts 01608, attention: Chief Executive Officer. The written demand for appraisal must be executed by or for the record holder of Shares, fully
and correctly, as such holders name appears on the certificate(s) for the Shares owned by such holder. If the Shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made
in that capacity, and if the Shares are owned of record by more than one person, such as in a joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including one of two or more joint owners,
may execute the demand for appraisal for a holder of record. However, the agent must identify the record owner(s) and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner(s).
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A beneficial owner of Shares held in street name who wishes to exercise appraisal rights should
consult with their broker, bank or other nominee to determine the appropriate procedures for the broker, bank or other nominee to make a demand for appraisal of those Shares and otherwise take such actions as may be necessary to ensure that a timely
and proper demand for appraisal is made by or on behalf of the record holder of the Shares. If Shares are held through a brokerage firm, bank or other nominee who in turn holds the Shares through a central securities depository nominee, such as
Cede & Co., a demand for appraisal of such Shares must be made by or on behalf of the depository nominee, and must identify the depository nominee as the record holder. Any beneficial owner who wishes to exercise appraisal rights and holds
Shares through a nominee holder is responsible for ensuring that the demand for appraisal is timely made by the record holder. The beneficial holder of the Shares should instruct the nominee holder that the demand for appraisal should be made by the
record holder of the Shares, which may be a central securities depository nominee if the Shares have been so deposited.
A record holder, such as a
broker, bank, fiduciary, depository or other nominee, who holds Shares as a nominee for several beneficial owners may exercise appraisal rights with respect to the Shares held for one or more beneficial owners while not exercising such rights with
respect to the Shares held for other beneficial owners. In such case, the written demand must set forth the number of Shares covered by the demand. Where the number of Shares is not expressly stated, the demand will be presumed to cover all Shares
held in the name of the record owner.
Filing a Petition for Appraisal.
Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation, or any holder of Shares who has complied with Section 262 and is
entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the Shares held by all holders who did not tender in the
Offer and demanded appraisal. If no such petition is filed within that 120-day period, appraisal rights will be lost for all holders of Shares who had previously demanded appraisal of their Shares. The Company is under no obligation to and has no
present intention to file a petition and holders should not assume that the Company will file a petition or that it will initiate any negotiations with respect to the fair value of the Shares. Accordingly, it is the obligation of the holders of
Shares to initiate all necessary action to perfect their appraisal rights in respect of the Shares within the period prescribed in Section 262.
Within 120 days after the Effective Time, any holder of Shares who has complied with the requirements for exercise of appraisal rights will be entitled, upon
written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of Shares not tendered into the Offer and with respect to which demands for appraisal have been received and the aggregate number of holders of
such Shares. Such statement must be mailed within 10 days after a written request therefor has been received by the Surviving Corporation or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later.
Notwithstanding the foregoing requirement that a demand for appraisal must be made by or on behalf of the record owner of the Shares, a person who is the beneficial owner of Shares held either in a voting trust or by a nominee on behalf of such
person, and as to which demand has been properly made and not effectively withdrawn, may, in such persons own name, file a petition for appraisal or request from the Surviving Corporation the statement described in this paragraph.
Upon the filing of such petition by any such holder of Shares, service of a copy thereof must be made upon the Surviving Corporation, which will then be
obligated within 20 days to file with the Delaware Register in Chancery a duly verified list (the Verified List) containing the names and addresses of all stockholders who have demanded payment for their Shares and with whom agreements
as to the value of their Shares has not been reached. The Delaware Register in Chancery, if ordered by the Delaware Court of Chancery, will give notice by registered or certified mail of the time and place fixed for the hearing on the petition to
the Surviving Corporation and all of the stockholders shown on the Verified List at the addresses shown on the Verified List. Such notice will also be published at least one week before the day of the hearing in a newspaper of general
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circulation published in the City of Wilmington, Delaware, or in another publication determined by the Delaware Court of Chancery. The costs of these notices are borne by the Surviving
Corporation.
At the hearing on the petition, the Delaware Court of Chancery will determine those stockholders who have complied with Section 262 and
who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded appraisal for their Shares and who hold stock represented by certificates to submit their stock certificates to the Delaware
Register in Chancery for notation thereon of the pendency of the appraisal proceeding and, if any stockholder fails to comply with the direction, the Court of Chancery may dismiss the proceedings as to that stockholder.
Determination of Fair Value.
After the Delaware Court of
Chancery determines which stockholders are entitled to appraisal, the appraisal proceeding will be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such
proceeding, the Court of Chancery will determine the fair value of the Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to
be the fair value. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the
Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment.
In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of
Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that proof of value by any techniques or methods that are generally considered acceptable in the financial community and
otherwise admissible in court should be considered, and that fair price obviously requires consideration of all relevant factors involving the value of a company. The Delaware Supreme Court stated that, in making this determination
of fair value, the Court of Chancery must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future
prospects of the merged corporation. Section 262 provides that fair value is to be exclusive of any element of value arising from the accomplishment or expectation of the merger[.] In Cede & Co. v. Technicolor, Inc.,
the Delaware Supreme Court stated that such exclusion is a narrow exclusion that does not encompass known elements of value, but which rather applies only to the speculative elements of value arising from such accomplishment or
expectation. In Weinberger, the Supreme Court of Delaware also stated that elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of
speculation, may be considered.
Stockholders considering appraisal should be aware that the fair value of their Shares as so determined could be
more than, the same as or less than the Offer Price or the consideration payable in the Merger (which is equivalent in amount to the Offer Price) and that an investment banking opinion as to the fairness, from a financial point of view, of the
consideration payable in a sale transaction, such as the Offer and the Merger, is not an opinion as to, and does not otherwise address, fair value under Section 262. Although the Company believes that the Offer Price is fair, no
representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the
same as, the Offer Price or the consideration payable in the Merger (which is equivalent in amount to the Offer Price). Neither EnerNOC nor the Company anticipates offering more than an amount equal to the Offer Price to any stockholder exercising
appraisal rights, and reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262, the fair value of a Share is less than the amount of the Offer Price or the consideration payable in the Merger (which is
equivalent in amount to the Offer Price).
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Upon application by the Surviving Corporation or by any holder of Shares entitled to participate in the appraisal
proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of Shares whose name appears on the Verified List and
who has submitted such stockholders certificates of stock to the Delaware Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal
rights under Section 262. The Court of Chancery will direct the payment of the fair value of the Shares, together with interest, if any, by the Surviving Corporation to the stockholders entitled thereto. Payment will be so made to each such
stockholder, in the case of holders of uncertificated stock, forthwith and, in the case of holders of shares represented by certificates, upon the surrender to the Surviving Corporation of such stockholders certificates. The Court of
Chancerys decree may be enforced as other decrees in such Court may be enforced.
If a petition for appraisal is not timely filed, then the right to
an appraisal will cease. The costs of the action (which do not include attorneys fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable.
Upon application of a stockholder, the Court of Chancery may order all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys fees and the fees and
expenses of experts utilized in the appraisal proceeding, to be charged pro rata against the value of all the Shares entitled to appraisal. In the absence of such determination or assessment, each party bears its own expenses.
Any stockholder who has duly demanded and perfected appraisal rights in compliance with Section 262 will not, after the Effective Time, be entitled to
vote his or her Shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to holders of record of Shares as of a date prior to the Effective Time.
If any stockholder who demands appraisal of Shares under Section 262 fails to perfect, successfully withdraws or loses such holders right to
appraisal, such stockholders Shares will be deemed to have been converted at the Effective Time into the right to receive the consideration payable in the Merger. A stockholder will fail to perfect, or effectively lose, the stockholders
right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time. If no petition for appraisal is filed within 120 days after the Effective Time, or if a stockholder who has not commenced an appraisal proceeding or
joined that proceeding as a named party delivers a written withdrawal of the stockholders demand for appraisal and an acceptance of the terms offered in the Merger within 60 days after the Effective Time, then the right of the stockholder to
appraisal will cease. Any attempt to withdraw made more than 60 days after the Effective Time will require our written approval, and no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the
approval of the Delaware Court of Chancery, and may be conditioned on such terms as the Delaware Court of Chancery deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named
party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement within 60 days after the Effective Time. If the stockholder fails to perfect, successfully withdraws or loses the appraisal
right, the stockholders Shares will be converted into the right to receive the consideration payable in the Merger.
If you wish to exercise your
appraisal rights, you must not tender your Shares in the Offer and must strictly comply with the procedures set forth in Section 262. If you fail to take any required step in connection with the exercise of appraisal rights, it will result in
the termination or waiver of your appraisal rights.
The foregoing summary of the rights of the Companys stockholders to seek appraisal
rights under Delaware law does not purport to be a complete statement of the procedures to be followed by the stockholders of the Company desiring to exercise any appraisal rights available thereunder and is qualified in its entirety by reference to
Section 262. The proper exercise of appraisal rights requires strict
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adherence to the applicable provisions of the DGCL. A copy of Section 262 is included as Annex II to this Schedule 14D-9.
Anti-Takeover Statute
The Company is subject to the
provisions of Section 203 of the DGCL, which imposes certain restrictions upon business combinations involving the Company. The following description is not complete and is qualified in its entirety by reference to the provisions of
Section 203 of the DGCL. In general, Section 203 of the DGCL prevents a Delaware corporation such as the Company from engaging in a business combination (which is defined to include a variety of transactions, including mergers
such as the proposed Merger) with an interested stockholder for a period of three years following the time such person became an interested stockholder unless:
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prior to such time the Board of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
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upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the voting stock outstanding those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
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at or subsequent to such time as the business combination is approved by the Company Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. |
For purposes of Section 203 of the DGCL, the
term interested stockholder generally means any person (other than the corporation and any direct or indirect majority-owned subsidiary of the corporation) that (i) is the owner of 15% or more of the outstanding voting stock of the
corporation, or (ii) is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder; and the affiliates and associates of such person.
A Delaware corporation may
elect not to be covered by Section 203 of the DGCL in its original certificate of incorporation or through an amendment to its certificate of incorporation or bylaws approved by its stockholders. An amendment electing not to be governed by
Section 203 of the DGCL is not effective until 12 months after the adoption of such amendment (except in the case of a corporation that both (i) has never had a class of voting stock listed on a national securities exchange or held of
record by more than 2,000 stockholders, and (ii) has not elected in its original certification or any amendment thereto to be governed by Section 203) and does not apply to any business combination between a Delaware corporation and any
person who became an interested stockholder of such corporation on or prior to such adoption. Neither the Companys Certificate of Incorporation nor By-Laws exclude the Company from the coverage of Section 203 of the DGCL.
The restrictions contained in Section 203 of the DGCL applicable to a business combination will not apply to the execution, delivery or performance of
the Merger Agreement and the consummation of the Offer, the Merger and the other transactions contemplated thereby (including the transactions contemplated by each of the Tender and Support Agreements), because the provisions of Section 203 of
the DGCL have been satisfied by the approval of the Offer and the Merger by the Board.
Stockholder Approval Not Required
Because the Merger will be consummated in accordance with Section 251(h) of the DGCL, no stockholder votes or consents will be necessary to effect the
Merger.
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Cautionary Note Regarding Forward-Looking Statements
This document contains forward-looking statements with respect to the Offer and related transactions, including the benefits expected from the transaction and
the expected timing of the completion of the transaction. When used in this document, the words can, will, intends, expects, is expected, similar expressions and any other statements that
are not historical facts are intended to identify those assertions as forward-looking statements. Such statements are based on a number of assumptions that could ultimately prove inaccurate, and are subject to a number of risk factors, including
uncertainties regarding the timing of the closing of the transaction, uncertainties as to the number of stockholders of the Company who may tender their stock in the Offer, the outcome of marketing efforts conducted during the Go-Shop
period, and general economic and business conditions. The Company does not assume any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. Risk factors that could cause actual
results of the Offer to differ materially include the following: failure to satisfy conditions to the transaction, the risk that the Companys businesses will suffer due to uncertainty related to the transaction, the competitive environment in
our industry and competitive responses to the transaction as well as risk factors set forth above. Further information on factors that could affect the Companys financial results is provided in documents filed by the Company with the SEC,
including the Companys recent filings on Form 10-Q and Form 10-K.
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Exhibit Number |
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Description |
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(a)(1) |
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Offer to Purchase, dated November 19, 2014 (incorporated by reference to Exhibit (a)(1)(i) to the Schedule TO of EnerNOC, Inc. and Wolf Merger Sub Corporation, filed with the SEC on November 19, 2014). |
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(a)(2) |
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Form of Letter of Transmittal (including Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9) (incorporated by reference to Exhibit (a)(1)(ii) to the Schedule TO of EnerNOC, Inc. and Wolf Merger Sub
Corporation, filed with the SEC on November 19, 2014). |
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(a)(3) |
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Opinion of Duff & Phelps Corporation, dated November 1, 2014 (included as Annex I to this Schedule 14D-9). |
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(a)(4) |
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Press Release, issued by EnerNOC, Inc. (incorporated by reference to Exhibit 99.1 to EnerNOC, Inc.s Current Report on Form 8-K filed with the SEC on November 4, 2014). |
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(a)(5) |
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Press Release, issued by World Energy Solutions, Inc. (incorporated by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K filed with the SEC on November 5, 2014). |
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(a)(6) |
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Form of Notice of Guaranteed Delivery (incorporated by reference to Exhibit (a)(1)(iii) to the Schedule TO of EnerNOC, Inc. and Wolf Merger Sub Corporation, filed with the SEC on November 19, 2014). |
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(a)(7) |
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Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (incorporated by reference to Exhibit (a)(1)(iv) to the Schedule TO of EnerNOC, Inc. and Wolf Merger Sub Corporation, filed with the SEC on
November 19, 2014). |
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(a)(8) |
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Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (incorporated by reference to Exhibit (a)(1)(v) to the Schedule TO of EnerNOC, Inc. and Wolf Merger Sub Corporation, filed
with the SEC on November 19, 2014). |
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(a)(9) |
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Summary Advertisement as published in The New York Times on November 19, 2014 (incorporated by reference to Exhibit (a)(1)(vi) to the Schedule TO of EnerNOC, Inc. and Wolf Merger Sub Corporation, filed with the SEC on
November 19, 2014). |
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(d)(1) |
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Agreement and Plan of Merger, dated November 4, 2014 by and among World Energy Solutions, Inc., EnerNOC, Inc. and Wolf Merger Sub Corporation (incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form
8-K, filed with the SEC on November 5, 2014). |
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(d)(2) |
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Non-Disclosure Agreement, effective as of April 15, 2014, as amended by amendments dated June 11, 2014, August 20, 2014, October 3, 2014, October 15, 2014 and October 31, 2014 between World Energy Solutions, Inc. and EnerNOC,
Inc. (incorporated by reference to Exhibit (d)(3) to the Schedule TO of EnerNOC, Inc. and Wolf Merger Sub Corporation, filed with the SEC on November 19, 2014). |
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(d)(3) |
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Form of Tender Support Agreement dated November 4, 2014, by and among EnerNOC, Inc., Wolf Merger Sub Corporation and certain stockholders of World Energy Solutions, Inc. (incorporated by reference to the Current Report on Form 8-K,
filed by the Company on November 5, 2014). |
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(e)(1) |
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Form of Director and Officer Indemnification Agreement between World Energy Solutions, Inc. and each of the officers and directors thereof (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
filed with the SEC on November 5, 2014). |
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(e)(2) |
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Employment Agreement, dated February 7, 2013 by and between World Energy Solutions, Inc. and Philip V. Adams (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on February
13, 2013). |
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(e)(3)* |
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Restricted Stock Agreement dated June 6, 2012 (as amended on September 17, 2012), by and between Philip V. Adams and World Energy Solutions, Inc. |
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(e)(4)* |
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Restricted Stock Agreement dated February 7, 2013 (as amended on March 25, 2014), by and between Philip V. Adams and World Energy Solutions, Inc. |
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(e)(5) |
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World Energy Solutions, Inc. 2006 Stock Incentive Plan (as amended as of May 31, 2012) (incorporated by reference to Exhibit 99.1 to the Companys Registration Statement on Form S-8 (File No. 333-181808). |
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
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By: |
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/s/ Philip V. Adams |
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Name: Philip V. Adams |
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Title: President |
Dated: November 19, 2014
ANNEX I
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Confidential |
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November 1, 2014 |
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Special Committee of the Board of Directors of
World Energy Solutions, Inc.
100 Front Street
20th Floor
Worcester, MA 01608 |
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Special Committee:
World Energy
Solutions, Inc. (the Company) has engaged Duff & Phelps, LLC (Duff & Phelps) to serve as an independent financial advisor to a Special Committee (the Special Committee) of
the Board of Directors (the Board of Directors) of the Company (solely in their capacity as members of the Special Committee and the Board of Directors) to provide an opinion (the Opinion) as of the date hereof
as to the fairness, from a financial point of view, to the public stockholders of the Company of the consideration to be received by such holders in the contemplated transaction described below (the Proposed Transaction) (without
giving effect to any impact of the Proposed Transaction on any particular stockholder other than in its capacity as a stockholder).
Description of
the Proposed Transaction
It is Duff & Phelps understanding that pursuant to the Proposed Transaction, among other things, Wolf
Merger Sub Corporation, a Delaware corporation and a wholly-owned subsidiary (Merger Sub) of EnerNOC, Inc. (Parent) will commence a tender offer (the Offer) to purchase all outstanding shares
of common stock, par value $.0001 per share, of the Company (the Target Common Stock) at a purchase price of $5.50 per share in cash (the Offer Price), and, following consummation of the Offer, Merger Sub will merge
with and into the Company and each outstanding share of Target Common Stock not tendered in the Offer will be converted into the right to receive the Offer Price. The terms and conditions of the Proposed Transaction are more fully set forth in
Agreement and Plan of Merger (the Merger Agreement) proposed to be entered into among the Company, Parent and Merger Sub.
Scope
of Analysis
In connection with this Opinion, Duff & Phelps has made such reviews, analyses and inquiries as it has deemed necessary and
appropriate under the circumstances. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation, in general, and with respect to
similar transactions, in particular. Duff & Phelps procedures, investigations, and financial analysis with respect to the preparation of its Opinion included, but were not limited to, the items summarized below:
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Reviewed the following documents: |
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The Companys annual reports and audited financial statements on Form 10-K filed with the Securities and Exchange Commission (SEC) for the years ended December 31, 2009 through December 31,
2013 and the Companys unaudited interim financial statements for the six months ended June 30, 2014 and the nine months ended September 30, 2013 and September 30, 2012 included in the Companys Form 10-Q filed with the SEC;
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Duff & Phelps, LLC |
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T +1 212 871 2000 |
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www.duffandphelps.com |
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55 East 52nd Street |
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Floor 31 |
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New York, NY 10055 |
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Special Committee of the Board of Directors of
World Energy Solutions, Inc.
Page
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of 4
November 1, 2014
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Unaudited segment and pro forma financial information for the Company for the year ended December 31, 2013 and the nine months ended September 30, 2014, which the Companys management identified as being
the most current financial statements available; |
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c. |
Other internal documents relating to the history, current operations, and probable future outlook of the Company, including financial projections, prepared by management of the Company; |
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d. |
A letter dated October [31], 2014 from the Company, which included certain representations from the Companys management as to historical financial statements, financial projections and the underlying assumptions,
and a pro forma schedule of assets and liabilities (including identified contingent liabilities) for the Company on a post-transaction basis; |
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e. |
A draft, dated as of October 30, 2014 of the Merger Agreement; and |
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f. |
Various documents and presentations related to the Proposed Transaction, including a Board Presentation dated September 18, 2014, a Project WOLF Discussion Materials presentation dated
August 27, 2014, and the World Energy Solutions (XWES): The Investment Opportunity presentation dated as of August 2014; |
2. |
Discussed the information referred to above and the background and other elements of the Proposed Transaction with the management of the Company; |
3. |
Reviewed the historical trading price and trading volume of the Target Common Stock and the publicly traded securities of certain other companies that Duff & Phelps deemed relevant; |
4. |
Performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques including a discounted cash flow analysis, an analysis of selected public companies that Duff &
Phelps deemed relevant, and an analysis of selected transactions that Duff & Phelps deemed relevant; and |
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Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate. |
Assumptions, Qualifications and Limiting Conditions
In performing its analyses and rendering this Opinion with respect to the Proposed Transaction, Duff & Phelps, with the Companys consent:
1. |
Relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including Company
management, and did not independently verify such information; |
2. |
Relied upon the fact that the Special Committee, the Board of Directors and the Company have been advised by counsel as to all legal matters with respect to the Proposed Transaction, including whether all procedures
required by law to be taken in connection with the Proposed Transaction have been duly, validly and timely taken; |
3. |
Assumed that any estimates, evaluations, forecasts and projections furnished to Duff & Phelps were reasonably prepared and based upon the best currently available information and good faith judgment of the
person furnishing the same, and Duff & Phelps expresses no opinion with respect to such projections or the underlying assumptions; |
4. |
Assumed that information supplied and representations made by Company management are substantially accurate regarding the Company and the Proposed Transaction; |
I-2
Special Committee of the Board of Directors of
World Energy Solutions, Inc.
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November 1, 2014
5. |
Assumed that the representations and warranties made in the Merger Agreement are substantially accurate; |
6. |
Assumed that the final versions of all documents reviewed by Duff & Phelps in draft form conform in all material respects to the drafts reviewed; |
7. |
Assumed that there has been no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of the Company since the date of the most recent financial statements and
other information made available to Duff & Phelps, and that there is no information or facts that would make the information reviewed by Duff & Phelps incomplete or misleading; |
8. |
Assumed that all of the conditions required to implement the Proposed Transaction will be satisfied and that the Proposed Transaction will be completed in accordance with the Merger Agreement without any amendments
thereto or any waivers of any terms or conditions thereof; and |
9. |
Assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Proposed Transaction will be obtained without any adverse effect on the Company or the contemplated
benefits expected to be derived in the Proposed Transaction. |
To the extent that any of the foregoing assumptions or any of the facts on
which this Opinion is based prove to be untrue in any material respect, this Opinion cannot and should not be relied upon. Furthermore, in Duff & Phelps analysis and in connection with the preparation of this Opinion, Duff &
Phelps has made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Proposed Transaction.
Duff & Phelps has prepared this Opinion effective as of the date hereof. This Opinion is necessarily based upon market, economic, financial and other
conditions as they exist and can be evaluated as of the date hereof, and Duff & Phelps disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting this Opinion which may come or be brought to
the attention of Duff & Phelps after the date hereof.
Duff & Phelps did not evaluate the Companys solvency or conduct an
independent appraisal or physical inspection of any specific assets or liabilities (contingent or otherwise). Duff & Phelps has not been requested to, and did not, (i) initiate any discussions with, or solicit any indications of
interest from, third parties with respect to the Proposed Transaction, the assets, businesses or operations of the Company, or any alternatives to the Proposed Transaction, (ii) negotiate the terms of the Proposed Transaction, and therefore,
Duff & Phelps has assumed that such terms are the most beneficial terms, from the Companys perspective, that could, under the circumstances, be negotiated among the parties to the Merger Agreement and the Proposed Transaction, or
(iii) advise the Special Committee, the Board of Directors or any other party with respect to alternatives to the Proposed Transaction.
Duff & Phelps is not expressing any opinion as to the market price or value of the Target Common Stock (or anything else) after the announcement or
the consummation of the Proposed Transaction. This Opinion should not be construed as a valuation opinion, credit rating, solvency opinion, an analysis of the Companys credit worthiness, as tax advice, or as accounting advice. Duff &
Phelps has not made, and assumes no responsibility to make, any representation, or render any opinion, as to any legal matter.
In rendering this Opinion,
Duff & Phelps is not expressing any opinion with respect to the amount or nature of any compensation to any of the Companys officers, directors, or employees, or any class of such persons, relative to the consideration to be received
by the public shareholders of the Company in the Proposed Transaction, or with respect to the fairness of any such compensation.
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Special Committee of the Board of Directors of
World Energy Solutions, Inc.
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November 1, 2014
This Opinion is furnished solely for the use and benefit of the Special Committee in
connection with its consideration of the Proposed Transaction and is not intended to, and does not, confer any rights or remedies upon any other person, and is not intended to be used, and may not be used, by any other person or for any other
purpose, without Duff & Phelps express consent. This Opinion (i) does not address the merits of the underlying business decision to enter into the Proposed Transaction versus any alternative strategy or transaction;
(ii) does not address any transaction related to the Proposed Transaction; (iii) is not a recommendation as to how the Special Committee, the Board of Directors or any stockholder should vote or act with respect to any matters relating to
the Proposed Transaction, or whether to proceed with the Proposed Transaction or any related transaction, and (iv) does not indicate that the consideration received is the best possibly attainable under any circumstances; instead, it merely
states whether the consideration in the Proposed Transaction is within a range suggested by certain financial analyses. The decision as to whether to proceed with the Proposed Transaction or any related transaction may depend on an assessment of
factors unrelated to the financial analysis on which this Opinion is based. This letter should not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party.
This Opinion is solely that of Duff & Phelps, and Duff & Phelps liability in connection with this letter shall be limited in
accordance with the terms set forth in the engagement letter between Duff & Phelps and the Company dated September 26, 2014 (the Engagement Letter). This letter may not be reproduced, disseminated, quoted from or referred
to, in whole or in part, without Duff & Phelps written consent, except as otherwise contemplated by the terms set forth in the Engagement Letter.
Disclosure of Prior Relationships
Duff &
Phelps has acted as financial advisor to the Special Committee and will receive a fee for its services. No portion of Duff & Phelps fee is contingent upon either the conclusion expressed in this Opinion or whether or not the Proposed
Transaction is successfully consummated. Pursuant to the terms of the Engagement Letter, a portion of Duff & Phelps fee is payable upon Duff & Phelps stating to the Special Committee that it is prepared to deliver its
Opinion. Other than this engagement, during the two years preceding the date of this Opinion, Duff & Phelps has not had any material relationship with any party to the Proposed Transaction for which compensation has been received or is
intended to be received, nor is any such material relationship or related compensation mutually understood to be contemplated.
Conclusion
Based upon and subject to the foregoing, Duff & Phelps is of the opinion that as of the date hereof the consideration to be received by
the public stockholders of the Company in the Proposed Transaction is fair from a financial point of view to such stockholders (without giving effect to any impact of the Proposed Transaction on any particular stockholder other than in its capacity
as a stockholder).
This Opinion has been approved by the Opinion Review Committee of Duff & Phelps.
Respectfully submitted,
/s/ Duff & Phelps, LLC
Duff & Phelps, LLC
I-4
ANNEX II
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAWRIGHTS OF APPRAISAL
Appraisal Rights.
(a) Any stockholder of
a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholders shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word stockholder means a
holder of record of stock in a corporation; the words stock and share mean and include what is ordinarily meant by those words; and the words depository receipt mean a receipt or other instrument issued by a
depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this title and, subject to paragraph (b)(3) of this section, § 251(h) of this title), § 252, § 254, § 255, § 256,
§ 257, § 258, § 263 or § 264 of this title:
(1) Provided, however, that, except as expressly provided in §
363(b) of this title, no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled
to receive notice of the meeting of stockholders to act upon the agreement of merger or consolidation, were either: (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and further provided that
no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in § 251(f) of
this title.
(2) Notwithstanding paragraph (b)(1) of this section, appraisal rights under this section shall be available for the shares
of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or
depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in respect thereof, which
shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a. and b. of this section;
or
d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing paragraphs (b)(2)a., b. and c. of this section.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 251(h), § 253 or § 267 of this title is not owned by the parent immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware
corporation.
(4) In the event of an amendment to a corporations certificate of incorporation contemplated by § 363(a) of this
title, appraisal rights shall be available as contemplated by § 363(b) of this title, and the procedures of this
section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as practicable, with the word amendment substituted for the words
merger or consolidation, and the word corporation substituted for the words constituent corporation and/or surviving or resulting corporation.
(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares
of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the
corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in accordance with §
255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that appraisal rights are available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand the appraisal of such stockholders shares shall
deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholders shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to § 228, § 251(h), § 253, or § 267 of this title, then either a
constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy
of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice or, in the case of a merger approved pursuant to § 251(h) of this
title, within the later of the consummation of the tender or exchange offer contemplated by § 251(h) of this title and 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal
of such holders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holders shares. If such notice
did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice or, in the case of a merger approved pursuant to § 251(h) of this
title, later than the later of the consummation of the tender or exchange offer contemplated by § 251(h) of this title and 20 days following the sending of the first notice, such second notice need only be sent to
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each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holders shares in accordance with this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting
corporation or any stockholder who has complied with subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder who has not commenced an appraisal
proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholders demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after such stockholders written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later. Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust
or by a nominee on behalf of such person may, in such persons own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting
corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the
stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington,
Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.
(h) After the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the
rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the accomplishment or
expectation of the merger or consolidation, together
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with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. Unless the Court in its
discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including
any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. Upon application by the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholders certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that such stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the
payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated
stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Courts decree may be enforced as other decrees in the Court of Chancery may
be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.
(j) The costs of the
proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection
with the appraisal proceeding, including, without limitation, reasonable attorneys fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholders demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be
dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not affect the right of any stockholder who has not
commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholders demand for appraisal and to accept the terms offered upon the merger or consolidation within 60 days after the effective date of the
merger or consolidation, as set forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
II-4
Exhibit (e) (3)
WORLD ENERGY SOLUTIONS, INC.
Restricted Stock Agreement
|
|
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Name of Recipient: |
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Philip V. Adams |
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Number of shares of restricted common stock awarded: |
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50,000 |
|
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Grant Date: |
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June 6, 2012 |
World Energy Solutions, Inc. (the Company) has selected you to receive the restricted stock award
described above, which is subject to the provisions of the Companys 2006 Stock Incentive Plan (the Plan) and the terms and conditions contained in this Restricted Stock Agreement. Please confirm your acceptance of this restricted
stock award and of the terms and conditions of this Agreement by signing a copy of this Agreement where indicated below.
|
|
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WORLD ENERGY SOLUTIONS, INC. |
|
|
By: |
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/s/ Dr. Edward T. Libbey |
Name: Dr. Edward T. Libbey
Title: Chairman of the Board |
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Accepted and Agreed: |
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/s/ Philip V. Adams |
Philip V. Adams |
WORLD ENERGY SOLUTIONS, INC.
Restricted Stock Agreement
The terms and conditions of the award of shares of restricted common stock of the Company (the Restricted Shares) made to the
Recipient, as set forth on the cover page of this Agreement, are as follows:
1. Issuance of Restricted Shares.
(a) The Restricted Shares are issued to the Recipient, effective as of the Grant Date (as set forth on the cover page of this Agreement), in
consideration of Recipients acceptance of employment with the Company and employment services to be rendered by the Recipient to the Company.
(b) The Restricted Shares will initially be issued by the Company in book entry form only, in the name of the Recipient. Following the vesting
of any Restricted Shares pursuant to Section 2 below, the Company shall, if requested by the Recipient, issue and deliver to the Recipient a certificate representing the vested Restricted Shares. The Recipient agrees that the Restricted Shares
shall be subject to the forfeiture provisions set forth in Section 3 of this Agreement and the restrictions on transfer set forth in Section 4 of this Agreement.
2. Vesting. Unless otherwise provided in this Agreement or the Plan, the Restricted Shares shall vest in accordance with the following
vesting schedule: 100% of the total number of Restricted Shares shall vest on the fourth anniversary of the Grant Date.
3. Forfeiture
of Unvested Restricted Shares Upon Employment Termination. In the event that the Recipient ceases to be employed by the Company for any reason or no reason, with or without cause, all of the Restricted Shares that are unvested as of the time of
such employment termination shall be forfeited immediately and automatically to the Company, without the payment of any consideration to the Recipient, effective as of such termination of employment. The Recipient shall have no further rights with
respect to any Restricted Shares that are so forfeited. If the Recipient is employed by a subsidiary of the Company, any references in this Agreement to employment with the Company shall instead be deemed to refer to employment with such subsidiary.
4. Restrictions on Transfer. The Recipient shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by
operation of law or otherwise (collectively transfer) any Restricted Shares, or any interest therein, until such Restricted Shares have vested, except that the Recipient may transfer such Restricted Shares: (a) to or for the benefit
of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (the Board) of the Company (collectively, Approved Relatives) or to a trust or similar entity
established for the benefit of the Recipient and/or Approved Relatives, provided that such Restricted Shares shall remain subject to this Agreement (including without limitation the forfeiture provisions set forth in Section 3 and the
restrictions on transfer set forth in this Section 4) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the
terms and conditions of this Agreement; or (b) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or
consolidation). The Company shall not be required (i) to transfer on its books any of the Restricted Shares which have been transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Restricted
Shares or to pay dividends to any transferee to whom such Restricted Shares have been transferred in violation of any of the provisions of this Agreement.
5. Restrictive Legends. The book entry account reflecting the issuance of the Restricted Shares in the name of the Recipient shall bear
a legend or other notation with substantially the following terms:
These shares of stock are subject to forfeiture provisions and
restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his or her predecessor in interest), and such Agreement is available for inspection without charge at the
office of the Secretary of the corporation.
6. Rights as a Shareholder. Except as otherwise provided in this Agreement, for
so long as the Recipient is the registered owner of the Restricted Shares, the Recipient shall have all rights as a shareholder with respect to the Restricted Shares, whether vested or unvested, including, without limitation, any rights to receive
dividends and distributions with respect to the Restricted Shares and to vote the Restricted Shares and act in respect of the Restricted Shares at any meeting of shareholders. Unless otherwise provided by the Board, if any dividends or distributions
are paid in shares, or consist of a dividend or distribution to holders of common stock of the Company other than an ordinary cash dividend, the shares, cash or other property will be subject to the same restrictions on transferability and
forfeitability as the Restricted Shares.
7. Provisions of the Plan. This Agreement is subject to the provisions of the Plan, a
copy of which is furnished to the Recipient with this Agreement. As provided in the Plan, upon the occurrence of a Reorganization Event (as defined in the Plan) other than a liquidation or dissolution of the Company, the rights of the Company
hereunder (including the right to receive forfeited Restricted Shares) shall inure to the benefit of the Companys successor and, unless the Board determines otherwise, shall apply to the
cash, securities or other property which the Restricted Shares were converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Restricted Shares under this Agreement.
8. Tax Matters.
(a)
Acknowledgments: Section 83(b) Election. The Recipient acknowledges that he or she is responsible for obtaining the advice of the Recipients own tax advisors with respect to the acquisition of the Restricted Shares and the
Recipient is relying solely on such advisors and not on any statements or representations of the Company or any of its agents with respect to the tax consequences relating to the Restricted Shares. The Recipient understands that the Recipient (and
not the Company) shall be responsible for the Recipients tax liability that may arise in connection with the acquisition, vesting, forfeiture and/or disposition of the Restricted Shares. The Recipient acknowledges that he or she has considered
the availability of making an election under Section 83(b) of the Internal Revenue Code, as amended, with respect to the issuance of the Restricted Shares and that the Recipient has decided not to file a Section 83(b) election.
(b) Withholding. The Recipient acknowledges and agrees that the Company has the right to
deduct from payments of any kind otherwise due to the Recipient any federal, state, local or other taxes of any kind required by law to be withheld with respect to the vesting of the Restricted Shares. On each date on which Restricted Shares vest,
the Company shall deliver written notice to the Recipient of the amount of withholding taxes due with respect to the vesting of the Restricted Shares that vest on such date; provided, however, that the total tax withholding cannot exceed the
Companys minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). The Recipient shall satisfy
such tax withholding obligations by transferring to the Company, on each date on which Restricted Shares vest under this Agreement, such number of Restricted Shares that vest on such date as have a fair market value (calculated using the last
reported sale price of the common stock of the Company on the NASDAQ Capital Market on the trading date immediately prior to such vesting date) (Fair Market Value) equal to the amount of the Companys tax withholding obligation in
connection with the vesting of such Restricted Shares. A whole number of Restricted Shares shall be transferred to the Company to satisfy the Companys tax withholding obligation, provided, however, that to the extent the Fair Market Value of
such transferred Restricted Shares exceeds the Companys tax withholding obligation, the Company shall, promptly following the transfer of such Restricted Shares to the Company, pay to the Recipient an amount, in cash, equal to the amount by
which the Fair Market Value of the Restricted Shares so transferred exceeds such tax withholding obligation. Such delivery of Restricted Shares to the Company shall be deemed to happen automatically, without any action required on the part of the
Recipient, and the Company is hereby authorized to take such actions as are necessary to effect such delivery.
9. Miscellaneous.
(a) No Right to Continued Employment. The Recipient acknowledges and agrees that, notwithstanding the fact that the vesting of the
Restricted Shares is contingent upon his or her continued employment by the Company, this Agreement does not constitute an express or implied promise of continued employment or confer upon the Recipient any rights with respect to continued
employment by the Company.
(b) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the
internal laws of the State of Delaware without regard to any applicable conflicts of laws provisions.
(c) Recipients
Acknowledgments. The Recipient acknowledges that he or she has read this Agreement, has received and read the Plan, and understands the terms and conditions of this Agreement and the Plan.
WORLD ENERGY SOLUTIONS, INC.
Amendment to the Restricted Stock Agreement
This Amendment (the Amendment) to the Restricted Stock Agreement (the Agreement) of June 6, 2012 between Philip V. Adams
(Recipient) and World Energy Solutions, Inc. (the Company) is entered into as of September 17, 2012. Capitalized terms used herein and not otherwise defined herein have the respective meanings ascribed to such terms in
the Agreement.
Whereas, the Company selected the Recipient to receive a restricted stock award for 50,000 shares of restricted common stock;
Whereas, the Company has agreed to provide the Recipient with certain vesting rights in the event of a change of control;
NOW THEREFORE, the Parties hereby agree to modify the Agreement as follows:
1. Add the following to the end of Section 3 of the Agreement:
Notwithstanding the foregoing, unvested Restricted Shares shall be accelerated upon the involuntary termination of Recipients employment with the Company
other than for Cause if such termination occurs at any time within 6 months after a Change of Control. A Change of Control means any merger, share exchange, consolidation, or purchase of shares of the outstanding capital stock of
the Company (other than as part of a financing transaction) after which the voting securities of the Company outstanding immediately prior thereto represent, either by remaining outstanding or by being converted into voting securities of the
surviving or acquiring entity, less than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving or acquiring entity outstanding immediately after such event. Cause as used
herein means (i) the Recipients failure to comply with any law or regulation affecting the business of the Company, (ii) the Recipients commission of an act of fraud upon, or act evidencing dishonesty to, the Company,
(iii) the Recipients misappropriation of any funds, property or rights of the Company, (iv) the Recipients willful breach or habitual neglect of his job duties or his failure or refusal to comply with explicit lawful directives
of the Company, (v) the Recipients conviction of a felony or a misdemeanor involving moral turpitude, (vi) the Recipients use or possession of illegal drugs at work or his working under the influence of illegal drugs, or
(vii) the Recipients breach of any noncompetition or confidentiality agreements with, or written policies of, the Company to which the Employee is bound or subject.
Please confirm your acceptance of the terms and conditions of this Amendment by signing a copy of this Amendment where indicated below.
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WORLD ENERGY SOLUTIONS, INC. |
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By: |
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/s/ Dr. Edward T. Libbey |
Name: Dr. Edward T. Libbey
Title: Chairman of the Board |
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Accepted and Agreed: |
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/s/ Philip V. Adams |
Philip V. Adams |
Exhibit (e) (4)
WORLD ENERGY SOLUTIONS, INC.
Restricted Stock Agreement
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Name of Recipient: |
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Philip V. Adams |
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Number of shares of restricted common stock awarded: |
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25,000 |
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Grant Date: |
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February 7, 2013 |
World Energy Solutions, Inc. (the Company) has selected you to receive the restricted stock award
described above, which is subject to the provisions of the Companys 2006 Stock Incentive Plan (the Plan) and the terms and conditions contained in this Restricted Stock Agreement. Please confirm your acceptance of this restricted
stock award and of the terms and conditions of this Agreement by signing a copy of this Agreement where indicated below.
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WORLD ENERGY SOLUTIONS, INC. |
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By: |
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/s/ Dr. Edward T. Libbey |
Name: Dr. Edward T. Libbey
Title: Chairman of the Board |
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Accepted and Agreed: |
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/s/ Philip V. Adams |
Philip V. Adams |
WORLD ENERGY SOLUTIONS, INC.
Restricted Stock Agreement
The terms and conditions of the award of shares of restricted common stock of the Company (the Restricted Shares) made to the
Recipient, as set forth on the cover page of this Agreement, are as follows:
1. Issuance of Restricted Shares.
(a) The Restricted Shares are issued to the Recipient, effective as of the Grant Date (as set forth on the cover page of this Agreement), in
consideration of Recipients acceptance of employment with the Company and employment services to be rendered by the Recipient to the Company.
(b) The Restricted Shares will initially be issued by the Company in book entry form only, in the name of the Recipient. Following the vesting
of any Restricted Shares pursuant to Section 2 below, the Company shall, if requested by the Recipient, issue and deliver to the Recipient a certificate representing the vested Restricted Shares. The Recipient agrees that the Restricted Shares
shall be subject to the forfeiture provisions set forth in Section 3 of this Agreement and the restrictions on transfer set forth in Section 4 of this Agreement.
2. Vesting. Unless otherwise provided in this Agreement or the Plan, the Restricted Shares shall vest in accordance with the following
vesting schedule: 100% of the total number of Restricted Shares shall vest on the fourth anniversary of the Grant Date.
3. Forfeiture
of Unvested Restricted Shares Upon Employment Termination. In the event that the Recipient ceases to be employed by the Company for any reason or no reason, with or without cause, all of the Restricted Shares that are unvested as of the time of
such employment termination shall be forfeited immediately and automatically to the Company, without the payment of any consideration to the Recipient, effective as of such termination of employment. The Recipient shall have no further rights with
respect to any Restricted Shares that are so forfeited. If the Recipient is employed by a subsidiary of the Company, any references in this Agreement to employment with the Company shall instead be deemed to refer to employment with such subsidiary.
4. Restrictions on Transfer. The Recipient shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by
operation of law or otherwise (collectively transfer) any Restricted Shares, or any interest therein, until such Restricted Shares have vested, except that the Recipient may transfer such Restricted Shares: (a) to or for the benefit
of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (the Board) of the Company (collectively, Approved Relatives) or to a trust or similar entity
established for the benefit of the Recipient and/or Approved Relatives, provided that such Restricted Shares shall remain subject to this Agreement (including without limitation the forfeiture provisions set forth in Section 3 and the
restrictions on transfer set forth in this Section 4) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the
terms and conditions of this Agreement; or (b) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or
consolidation). The Company shall not be required (i) to transfer on its books any of the Restricted Shares which have been transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Restricted
Shares or to pay dividends to any transferee to whom such Restricted Shares have been transferred in violation of any of the provisions of this Agreement.
5. Restrictive Legends. The book entry account reflecting the issuance of the Restricted Shares in the name of the Recipient shall bear
a legend or other notation with substantially the following terms:
These shares of stock are subject to forfeiture provisions and
restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his or her predecessor in interest), and such Agreement is available for inspection without charge at the
office of the Secretary of the corporation.
6. Rights as a Shareholder. Except as otherwise provided in this Agreement, for
so long as the Recipient is the registered owner of the Restricted Shares, the Recipient shall have all rights as a shareholder with respect to the Restricted Shares, whether vested or unvested, including, without limitation, any rights to receive
dividends and distributions with respect to the Restricted Shares and to vote the Restricted Shares and act in respect of the Restricted Shares at any meeting of shareholders. Unless otherwise provided by the Board, if any dividends or distributions
are paid in shares, or consist of a dividend or distribution to holders of common stock of the Company other than an ordinary cash dividend, the shares, cash or other property will be subject to the same restrictions on transferability and
forfeitability as the Restricted Shares.
7. Provisions of the Plan. This Agreement is subject to the provisions of the Plan, a
copy of which is furnished to the Recipient with this Agreement. As provided in the Plan, upon the occurrence of a Reorganization Event (as defined in the Plan) other than a liquidation or dissolution of the Company, the rights of the Company
hereunder (including the right to receive forfeited Restricted Shares) shall inure to the benefit of the Companys successor and, unless the Board determines otherwise, shall apply to the
cash, securities or other property which the Restricted Shares were converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Restricted Shares under this Agreement.
8. Tax Matters.
(a)
Acknowledgments: Section 83(b) Election. The Recipient acknowledges that he or she is responsible for obtaining the advice of the Recipients own tax advisors with respect to the acquisition of the Restricted Shares and the
Recipient is relying solely on such advisors and not on any statements or representations of the Company or any of its agents with respect to the tax consequences relating to the Restricted Shares. The Recipient understands that the Recipient (and
not the Company) shall be responsible for the Recipients tax liability that may arise in connection with the acquisition, vesting, forfeiture and/or disposition of the Restricted Shares. The Recipient acknowledges that he or she has considered
the availability of making an election under Section 83(b) of the Internal Revenue Code, as amended, with respect to the issuance of the Restricted Shares and that the Recipient has decided not to file a Section 83(b) election.
(b) Withholding. The Recipient acknowledges and agrees that the Company has the right to
deduct from payments of any kind otherwise due to the Recipient any federal, state, local or other taxes of any kind required by law to be withheld with respect to the vesting of the Restricted Shares. On each date on which Restricted Shares vest,
the Company shall deliver written notice to the Recipient of the amount of withholding taxes due with respect to the vesting of the Restricted Shares that vest on such date; provided, however, that the total tax withholding cannot exceed the
Companys minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). The Recipient shall satisfy
such tax withholding obligations by transferring to the Company, on each date on which Restricted Shares vest under this Agreement, such number of Restricted Shares that vest on such date as have a fair market value (calculated using the last
reported sale price of the common stock of the Company on the NASDAQ Capital Market on the trading date immediately prior to such vesting date) (Fair Market Value) equal to the amount of the Companys tax withholding obligation in
connection with the vesting of such Restricted Shares. A whole number of Restricted Shares shall be transferred to the Company to satisfy the Companys tax withholding obligation, provided, however, that to the extent the Fair Market Value of
such transferred Restricted Shares exceeds the Companys tax withholding obligation, the Company shall, promptly following the transfer of such Restricted Shares to the Company, pay to the Recipient an amount, in cash, equal to the amount by
which the Fair Market Value of the Restricted Shares so transferred exceeds such tax withholding obligation. Such delivery of Restricted Shares to the Company shall be deemed to happen automatically, without any action required on the part of the
Recipient, and the Company is hereby authorized to take such actions as are necessary to effect such delivery.
9. Miscellaneous.
(a) No Right to Continued Employment. The Recipient acknowledges and agrees that, notwithstanding the fact that the vesting of the
Restricted Shares is contingent upon his or her continued employment by the Company, this Agreement does not constitute an express or implied promise of continued employment or confer upon the Recipient any rights with respect to continued
employment by the Company.
(b) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the
internal laws of the State of Delaware without regard to any applicable conflicts of laws provisions.
(c) Recipients
Acknowledgments. The Recipient acknowledges that he or she has read this Agreement, has received and read the Plan, and understands the terms and conditions of this Agreement and the Plan.
WORLD ENERGY SOLUTIONS, INC.
Amendment to the Restricted Stock Agreement
This Amendment (the Amendment) to the Restricted Stock Agreement (the Agreement) of February 7, 2013 between Philip V. Adams
(Recipient) and World Energy Solutions, Inc. (the Company) is entered into as of March 25, 2014. Capitalized terms used herein and not otherwise defined herein have the respective meanings ascribed to such terms in the
Agreement.
Whereas, the Company selected the Recipient to receive a restricted stock award for 25,000 shares of restricted common stock;
Whereas, the Company has agreed to provide the Recipient with certain vesting rights in the event of a change of control;
NOW THEREFORE, the Parties hereby agree to modify the Agreement as follows:
1. Add the following to the end of Section 3 of the Agreement:
Notwithstanding the foregoing, unvested Restricted Shares shall be accelerated upon the involuntary termination of Recipients employment with the Company
other than for Cause if such termination occurs at any time within 6 months after a Change of Control. A Change of Control means any merger, share exchange, consolidation, or purchase of shares of the outstanding capital stock of
the Company (other than as part of a financing transaction) after which the voting securities of the Company outstanding immediately prior thereto represent, either by remaining outstanding or by being converted into voting securities of the
surviving or acquiring entity, less than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving or acquiring entity outstanding immediately after such event. Cause as used
herein means (i) the Recipients failure to comply with any law or regulation affecting the business of the Company, (ii) the Recipients commission of an act of fraud upon, or act evidencing dishonesty to, the Company,
(iii) the Recipients misappropriation of any funds, property or rights of the Company, (iv) the Recipients willful breach or habitual neglect of his job duties or his failure or refusal to comply with explicit lawful directives
of the Company, (v) the Recipients conviction of a felony or a misdemeanor involving moral turpitude, (vi) the Recipients use or possession of illegal drugs at work or his working under the influence of illegal drugs, or
(vii) the Recipients breach of any noncompetition or confidentiality agreements with, or written policies of, the Company to which the Employee is bound or subject.
Please confirm your acceptance of the terms and conditions of this Amendment by signing a copy of this Amendment where indicated below.
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WORLD ENERGY SOLUTIONS, INC. |
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By: |
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/s/ Dr. Edward T. Libbey |
Name: Dr. Edward T. Libbey
Title: Chairman of the Board |
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Accepted and Agreed: |
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/s/ Philip V. Adams |
Philip V. Adams |
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