PREM14A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Under § 240.14a-12

INSEEGO CORP.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

N/A

  (2)  

Aggregate number of securities to which transaction applies:

 

N/A

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

N/A

  (4)  

Proposed maximum aggregate value of transaction:

 

$50,000,000

  (5)  

Total fee paid:

 

$5,795

  Fee paid previously with preliminary materials.
 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

  (1)  

Amount previously paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

9645 Scranton Road, Suite 205

San Diego, California 92121

[●], 2016

Dear Stockholder:

You are cordially invited to attend a special meeting of the stockholders of Inseego Corp. (“Inseego”) to be held on [●], 2017 at 10:00 a.m., local time, at the offices of Paul Hastings LLP located at 4747 Executive Drive, San Diego, California 92121.

On September 21, 2016, Inseego entered into a stock purchase agreement with Novatel Wireless, Inc. (“NWI”), T.C.L. Industries Holdings (H.K.) Limited (“Purchaser Parent”) and Jade Ocean Global Limited (“Purchaser,” and together with Purchaser Parent, “Purchasers”), pursuant to which Purchaser will acquire all of the issued and outstanding shares of common stock of NWI from Inseego for $50.0 million in cash (the “Sale”). Inseego owns all of the outstanding shares of common stock of NWI as a result of an internal reorganization that was effected in order to facilitate the Sale, as more fully described in the enclosed proxy statement.

The Sale of all of the outstanding shares of common stock of NWI may constitute the sale of substantially all of Inseego’s property and assets under Delaware law and we are therefore seeking the approval of the Sale by Inseego’s stockholders. The board of directors of each of Inseego, NWI and the Purchasers has approved the stock purchase agreement and the transactions contemplated thereby.

We are soliciting proxies for use at the special meeting of Inseego’s stockholders to consider and vote upon proposals to (i) adopt the stock purchase agreement, (ii) approve an amendment to the amended and restated certificate of incorporation of NWI to remove certain provisions that require Inseego’s stockholders to approve certain corporate actions of NWI, (iii) approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to certain of Inseego’s named executive officers in connection with the Sale, including the agreements and understandings pursuant to which such compensation may be paid or become payable, and (iv) adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposal to adopt the stock purchase agreement. Our board of directors unanimously recommends that you vote “FOR” each of the foregoing proposals.

Your vote is very important. The adoption of the stock purchase agreement and the approval of the amendment to NWI’s amended and restated certificate of incorporation each require the affirmative vote of the holders of a majority of Inseego common stock outstanding and entitled to vote on the matter. The approval, on a non-binding, advisory basis, of the compensation that may be paid or become payable to certain of Inseego’s named executive officers in connection with the Sale, including the agreements and understandings pursuant to which such compensation may be paid or become payable, and the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes in favor of the proposal to adopt the stock purchase agreement, each require approval by the affirmative vote of the holders of a majority of Inseego common stock present in person or by proxy and entitled to vote on the matter at the special meeting. Whether or not you plan to attend the Inseego special meeting, please vote your shares through the Internet, by telephone or by signing and returning the enclosed proxy card as soon as possible to make sure that your shares of Inseego common stock are represented at the special meeting.

The accompanying proxy statement provides you with detailed information about the proposed Sale, the special meeting and the other business to be considered by Inseego’s stockholders. We encourage you to read the entire proxy statement and the stock purchase agreement carefully. A copy of the stock purchase agreement is attached as Annex A to the accompanying proxy statement. You may also obtain more information about Inseego from documents we have filed with the U.S. Securities and Exchange Commission.

On behalf of your board of directors, we thank you for your continued support.

 

Very truly yours,
Sue Swenson
Chief Executive Officer

This proxy statement is dated [●], 2016 and is first being mailed to stockholders on or about [●], 2016.


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LOGO

9645 Scranton Road, Suite 205

San Diego, California 92121

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD [], 2017

 

 

A special meeting of the stockholders of Inseego Corp. (“Inseego”) will be held on [●], 2017 at 10:00 a.m. local time at the offices of Paul Hastings LLP located at 4747 Executive Drive, San Diego, California 92121, for the following purposes:

 

  1.

To approve the adoption of the stock purchase agreement, dated as of September 21, 2016, by and among Inseego, Novatel Wireless, Inc. (“NWI”), T.C.L. Industries Holdings (H.K.) Limited, and Jade Ocean Global Limited (the “Purchaser”), which provides for the sale by Inseego of all of the issued and outstanding shares of the common stock of NWI to Purchaser for $50.0 million in cash (the “Sale”);

 

  2.

To approve an amendment to the NWI amended and restated certificate of incorporation to remove certain provisions that require Inseego stockholders to approve certain corporate actions of NWI;

 

  3.

To approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to certain of Inseego’s named executive officers in connection with the transactions contemplated by the stock purchase agreement, including the agreements and understandings pursuant to which such compensation may be paid or become payable; and

 

  4.

To approve an adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposal to adopt the stock purchase agreement.

The board of directors of Inseego has unanimously determined that the stock purchase agreement and the transactions contemplated thereby, including the Sale, are advisable, fair to and in the best interests of Inseego and its stockholders, has authorized, adopted, and approved the stock purchase agreement and the transactions contemplated thereby, including the Sale, and unanimously recommends that you vote “FOR” the adoption of the stock purchase agreement, “FOR” an amendment to NWI’s amended and restated certificate of incorporation, “FOR” the approval, on a non-binding, advisory basis, of the compensation that may be paid or become payable to certain of Inseego’s named executive officers in connection with the Sale, including the agreements and understandings pursuant to which such compensation may be paid or become payable, and “FOR” an adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposal to adopt the stock purchase agreement.

Only holders of record of shares of Inseego common stock at the close of business on November 28, 2016 are entitled to notice of, and to vote at, the special meeting and any postponements or adjournments thereof. At the close of business on the record date, Inseego had [●] shares of common stock outstanding and entitled to vote. Everyone attending the special meeting will be required to present valid picture identification, such as a driver’s license or passport, as more fully described elsewhere in this proxy statement.

Your vote is very important. The Sale may constitute the sale of substantially all of the property and assets of Inseego under Section 271 of the Delaware General Corporation Law and we are therefore seeking the approval of the Sale by Inseego’s stockholders. Proposal Nos. 1 and 2 each require approval by the affirmative vote of the holders of a majority of Inseego common stock outstanding and entitled to vote on the matter. Proposal Nos. 3 and 4 each require approval by the affirmative vote of the holders of a majority of Inseego common stock present in person or by proxy and entitled to vote on the matter at the special meeting.


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All Inseego stockholders are cordially invited to attend the special meeting in person. However, even if you plan to attend the special meeting in person, we request that you complete, date, sign and return the enclosed proxy card in the postage-paid envelope or vote your shares by telephone or through the Internet as instructed in these materials as promptly as possible prior to the special meeting to ensure that your shares of Inseego common stock will be represented at the special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, all of your shares will be voted “FOR” Proposal Nos. 1, 2, 3 and 4. If you fail to return your proxy card as instructed on the enclosed proxy card or fail to submit your proxy by telephone or through the Internet and do not vote in person at the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as an “AGAINST” vote with respect to Proposal Nos. 1 and 2, but will have no effect with respect to Proposal Nos. 3 and 4. If you do attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

This proxy statement provides you with detailed information about the Sale, the proposed amendment to the NWI amended and restated certificate of incorporation and the other business to be considered by you at the special meeting. We encourage you to read the entire document carefully.

 

By Order of the Board of Directors,
Lance Bridges
Senior Vice President, General Counsel & Secretary

[●], 2016

IMPORTANT: If you hold shares of Inseego common stock through an account with a broker, dealer, bank or other nominee please follow the instructions you receive from them to vote your shares.


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TABLE OF CONTENTS

 

     Page  

SUMMARY TERM SHEET

     1   

General Description of the Sale

     1   

The Reorganization

     1   

Parties to the Sale

     2   

Reasons for the Sale

     2   

Use of Proceeds and Activities of Inseego Following the Sale

     2   

Recommendation of the Public Company Board

     3   

Opinion of NWI’s Financial Advisor

     3   

Conditions to the Completion of the Sale

     4   

Government Approvals

     4   

No Solicitation

     4   

Termination of the Purchase Agreement

     4   

Termination Fees

     5   

Indemnification by Inseego

     5   

Material U.S. Federal Income Tax Consequences

     5   

No Dissenters’ Rights

     5   

Risk Factors

     6   

The Special Meeting

     6   

QUESTIONS AND ANSWERS ABOUT THE SALE AND SPECIAL MEETING

     7   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     13   

RISK FACTORS

     14   

PROPOSAL NO. 1: THE SALE PROPOSAL

     18   

General Description of the Sale

     18   

Parties to the Sale

     18   

Background of the Sale

     19   

Recommendation of the Public Company Board and its Reasons for the Sale

     27   

Activities of Inseego Following the Sale

     29   

Certain Financial Projections

     30   

Opinion of NWI’s Financial Advisor

     32   

Material U.S. Federal Income Tax Consequences of the Sale

     38   

Accounting Treatment of the Sale

     38   

Government Approvals

     38   

No Dissenters’ Rights

     39   

Employee Matters

     39   

Treatment of MiFi Business Employee Options and Restricted Stock Units

     39   

Interests of Certain Persons in the Sale

     39   

The Reorganization

     41   

The Purchase Agreement

     45   

Escrow Agreement

     58   


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     Page  

IP Cross License Agreement

     58   

Transition Services Agreement

     58   

Required Vote; Recommendation of the Inseego Board

     58   

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     59   

UNAUDITED CONDENSED FINANCIAL STATEMENTS OF THE MIFI BUSINESS

     66   

PROPOSAL NO. 2: THE NWI CHARTER AMENDMENT PROPOSAL

     80   

Overview

     80   

Reasons for the Amendment

     80   

Impact on Rights of Inseego Stockholders

     80   

Required Vote; Recommendation of the Inseego Board

     81   

PROPOSAL NO. 3: THE SALE-RELATED COMPENSATION PROPOSAL

     82   

Required Vote; Recommendation of the Inseego Board

     82   

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

     83   

Directors and Named Executive Officers

     83   

Five Percent Holders

     84   

STOCKHOLDER PROPOSALS FOR THE 2017 ANNUAL MEETING OF STOCKHOLDERS

     85   

DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS

     85   

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     85   

MISCELLANEOUS AND OTHER MATTERS

     86   

 


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SUMMARY TERM SHEET

This summary highlights selected information from this proxy statement. It may not contain all of the information that is important to you with respect to the Sale (as defined below) or any other matter described in this proxy statement. We urge you to carefully read this proxy statement, as well as the documents attached to, referred to or incorporated by reference into this proxy statement, to fully understand the Sale Proposal (as defined below). In particular, you should read the Purchase Agreement (as defined below), which is described elsewhere in this proxy statement and is attached hereto as Annex A. For a list of documents incorporated by reference into this proxy statement, see the section entitled Where You Can Find Additional Information beginning on page 85.

General Description of the Sale

On September 21, 2016, Inseego Corp. (formerly named Vanilla Technologies, Inc., and referred to herein as “Inseego”) entered into a stock purchase agreement (the “Purchase Agreement”) with Novatel Wireless, Inc. (“NWI”), T.C.L. Industries Holdings (H.K.) Limited (“Purchaser Parent”) and Jade Ocean Global Limited (“Purchaser,” and together with Purchaser Parent, “Purchasers”), pursuant to which Purchaser will acquire all of the issued and outstanding shares of common stock of NWI (“NWI Shares”) from Inseego for $50.0 million in cash (the “Sale”), subject to potential adjustment, including based on NWI’s working capital and outstanding indebtedness as of the closing of the Sale. Currently, NWI Shares are solely owned by Inseego as a result of an internal reorganization that was effected in order to facilitate the Sale (the “Reorganization”), as more fully described below. Immediately following the completion of the Sale, Purchaser will own all of the NWI Shares and NWI will be a wholly owned subsidiary of Purchaser.

Following the completion of the Sale, Inseego will continue to own certain assets and liabilities (including equity interests in the Retained Subsidiaries, as defined below) used in the Retained Business (as defined below). Inseego will maintain the same corporate functions, the same board of directors and a majority of the same senior executives as it had prior to the completion of the Sale. For additional information, see the sections entitled “Proposal No. 1: The Sale Proposal—The Purchase Agreement” beginning on page 45 and “—The Reorganization” beginning on page 41.

The Reorganization

As previously announced, on November 8, 2016, in order to facilitate the proposed Sale and as required by the Purchase Agreement, Inseego, NWI and their affiliates completed the Reorganization. The purpose and effect of the Reorganization was to separate NWI’s assets and liabilities associated with NWI’s mobile broadband business, which includes its MiFi branded hotspots and USB modem product lines (the “MiFi Business”), from the assets and liabilities associated with its Ctrack branded fleet and vehicle telematics solutions, stolen vehicle recovery, telemetry and connectivity solutions businesses (the “Retained Business”).

In connection with the Reorganization, (i) NWI contributed the Retained Business, which includes its equity interests in certain subsidiaries, including DigiCore Holdings Limited (“DigiCore” or “Ctrack”) and R.E.R. Enterprises, Inc. (“RER”) and its wholly owned subsidiary, Feeney Wireless, LLC, (“FW”), Novatel Wireless Solutions, Inc. and each of their direct and indirect subsidiaries (collectively, the “Retained Subsidiaries”), to Inseego; and (ii) Vanilla Merger Sub, Inc., a newly formed Delaware corporation and direct, wholly owned subsidiary of Inseego and indirect, wholly owned subsidiary of NWI formed solely for the purpose of effecting the Reorganization, merged with and into NWI, with NWI surviving as a direct, wholly owned subsidiary of Inseego (the “Merger”). The Reorganization was deemed to be finalized upon completion of the Merger on November 8, 2016. For additional information, including a detailed description of each step of the Reorganization, see the section entitled “Proposal No. 1: The Sale Proposal—The Reorganization” beginning on page 41.

In connection with the completion of the Merger, each share of NWI common stock was automatically converted into an equivalent corresponding share of Inseego common stock, having the same rights and limitations as the corresponding share of NWI common stock that was converted. Accordingly, all holders of NWI common stock immediately prior to the completion of the Merger automatically became stockholders of Inseego. Any shares of NWI common stock that you hold now represent, on a 1-for-1 basis, shares of Inseego common stock. Like the shares of NWI common stock outstanding prior to the Merger, shares of Inseego common stock trade on The NASDAQ Global Select Market; however, the trading symbol for Inseego common stock is “INSG.”

 

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We use the term “Public Company” throughout this proxy statement. It is important to understand that, as used in this proxy statement, such references to the “Public Company” shall mean “NWI” at all times prior to the completion of the Reorganization, and “Inseego” at all times after the completion of the Reorganization. Similarly, references in this proxy statement to the “Public Company Board” shall mean the board of directors of NWI at all times prior to the Reorganization (the “NWI Board”), and shall mean the board of directors of Inseego at all times after the Reorganization (the “Inseego Board”).

Parties to the Sale

Inseego Corp.

Inseego is a leading provider of solutions for the Internet of Things (“IoT”), including software-as-a-service (“SaaS”) solutions for the telematics and telemetry markets. Inseego’s broad range of products principally include, through its Retained Subsidiaries, product offerings for fleet and vehicle telematics, stolen vehicle recovery, user-based insurance, integrated asset management, machine-to-machine (“M2M”) communications devices, applications software and SaaS services. Inseego’s product offerings also include M2M and telematics hardware devices. Through its wholly owned subsidiary, NWI, Inseego offers intelligent mobile hotspots and USB modems.

Inseego is a Delaware corporation that was formed in 2016. As a result of the Reorganization, Inseego became the sole stockholder, and successor registrant to, NWI, a Delaware corporation formed in 1996. For additional information about the Reorganization, see the section entitled “Proposal No. 1: The Sale Proposal—The Reorganization” beginning on page 41. Inseego’s principal offices are located at 9645 Scranton Road, Suite 205, San Diego, CA 92121, and its telephone number is (858) 812-3400. Inseego’s website address is www.inseego.com. Inseego’s common stock is listed on The NASDAQ Global Select Market under the trading symbol “INSG.” Additional information regarding Inseego is included in documents incorporated by reference into this proxy statement. For additional information, see the section entitled “Where You Can Find Additional Information” beginning on page 85.

T.C.L. Industries Holdings (H.K.) Limited and Jade Ocean Global Limited

T.C.L. Industries Holdings (H.K.) Limited is a limited liability company formed under the laws of Hong Kong and Jade Ocean Global Limited is a company formed under the laws of the British Virgin Islands. Purchasers are members of TCL Corporation, a company listed on the Shenzhen Stock Exchange. TCL Corporation’s business lines include, among other things, designing, manufacturing and marketing a portfolio of smart products, and providing internet application services globally. TCL Corporation’s products are currently sold in over 160 countries throughout North America, Latin America, Europe, the Middle East, Africa and Asia Pacific, and the group currently employs approximately 82,000 people worldwide.

Reasons for the Sale

The Public Company Board considered a number of factors before deciding to enter into the Purchase Agreement, including, among other things, the price to be paid by Purchaser for the NWI Shares, the strategic and financial benefits to Inseego that are expected to result from the Sale, the scope of the sale process with respect to the MiFi Business that led to entering into the Purchase Agreement, the future business prospects of the MiFi Business and the Retained Business and the terms and conditions of the Purchase Agreement. For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—Recommendation of the Public Company Board and its Reasons for the Sale” beginning on page  27.

Use of Proceeds and Activities of Inseego Following the Sale

The proceeds from the Sale will be received by Inseego, not Inseego stockholders. Inseego will use a portion of the proceeds to pay for transaction costs associated with the Reorganization and the Sale and for general working capital purposes. The remaining proceeds from the Sale may be used, at the discretion of the Public Company Board (subject, as the case may be, to restrictions imposed by Inseego’s senior secured revolving credit facility with Wells Fargo Bank, NA, the Indenture, dated June 10, 2015, governing the 5.50% convertible senior notes due 2020 (the “Notes”) (and the instrument governing any securities for which the Notes may be exchanged) and the Purchase Agreement), in connection with unspecified acquisitions of other complementary businesses, to invest in the Retained Business, to repay indebtedness or a combination thereof.

 

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Following the Sale, Inseego will continue to be a public company operating under the name Inseego Corp., and immediately after the consummation of the Sale all of Inseego’s revenues will be generated by the Retained Business. For additional information, see the sections entitled “Proposal No. 1: The Sale Proposal—Activities of Inseego Following the Sale” beginning on page 29, “Unaudited Pro Forma Condensed Consolidated Financial Statements” beginning on page 59 and “Unaudited Condensed Financial Statements of the MiFi Business” beginning on page 66.

Recommendation of the Public Company Board

The Public Company Board has unanimously determined that the Purchase Agreement and the transactions contemplated thereby, including the Sale, are advisable, fair to and in the best interests of Inseego and its stockholders, has authorized, adopted, and approved the Purchase Agreement and the transactions contemplated thereby, including the Sale, and unanimously recommends that you vote:

 

   

FOR” the proposal to adopt the Purchase Agreement (the “Sale Proposal”);

 

   

FOR” the proposal to amend the NWI amended and restated certificate of incorporation (the “NWI Charter Amendment Proposal”);

 

   

FOR” the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to certain of Inseego’s named executive officers in connection with the Sale, including the agreements and understandings pursuant to which such compensation may be paid or become payable (the “Sale-Related Compensation Proposal”); and

 

   

FOR” an adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the Sale Proposal (the “Adjournment Proposal”).

The Sale Proposal, the NWI Charter Amendment Proposal, the Sale-Related Compensation Proposal and the Adjournment Proposal are collectively referred to herein as the “Proposals.”

For a discussion of factors that the Inseego Board considered in deciding to recommend the approval of the Sale Proposal, see the section entitled “Proposal No. 1: The Sale Proposal—Recommendation of the Public Company Board and its Reasons for the Sale” beginning on page 27.

Opinion of NWI’s Financial Advisor

On September 19, 2016, Houlihan Lokey Capital, Inc. (“Houlihan Lokey”) rendered to the NWI Board an oral opinion (confirmed by delivery of Houlihan Lokey’s written opinion, dated September 19, 2016, to the NWI Board) as to the fairness, from a financial point of view and as of such date, to Inseego of the $50.0 million aggregate cash consideration to be received in the Sale by Inseego pursuant to the Purchase Agreement, which opinion was based on and subject to the various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Houlihan Lokey in connection with the preparation of its opinion. For purposes of Houlihan Lokey’s analyses and opinion, the term “NWI Board” refers to the board of directors of NWI prior to the Reorganization.

Houlihan Lokey’s opinion was directed to the NWI Board (in its capacity as such), addressed the fairness, from a financial point of view and as of September 19, 2016, to Inseego of the $50.0 million aggregate cash consideration to be received in the Sale by Inseego pursuant to the Purchase Agreement and did not address any other aspect or implication of the Sale or related transactions or any other agreement, arrangement or understanding. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this proxy statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. Neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, a recommendation to the NWI Board, any security holder or any other person as to how to act or vote with respect to any matter relating to the Sale, any related transactions or otherwise.

 

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Conditions to the Completion of the Sale

We expect to complete the Sale as soon as possible following the approval of the Sale Proposal at the special meeting. The parties’ obligations to effect the Sale are subject to the satisfaction or, to the extent permitted, waiver of various conditions, including, among others, the following:

 

   

the approval by Inseego’s stockholders of the Sale Proposal (the “Required Stockholder Vote”);

 

   

no governmental order being in effect which makes the Sale illegal or otherwise restrains or prohibits the Sale;

 

   

obtaining the approval of the Committee on Foreign Investment in the United States (“CFIUS”);

 

   

NWI no longer being a borrower under the Notes; and

 

   

the accuracy of the representations and warranties of each of the parties in the Purchase Agreement.

For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—The Purchase Agreement—Conditions to the Completion of the Sale” beginning on page 56.

Government Approvals

Under the Exon-Florio Amendment to the Defense Production Act of 1950, 50 U.S.C app. § 2170, as amended (“Exon-Florio”), the President of the United States of America is authorized to prohibit or suspend acquisitions, mergers or takeovers by foreign persons of a U.S. business if the President determines, after investigation, that the exercise of control by a foreign person over an acquired U.S. business has the potential to impair the national security of the U.S. Pursuant to Exon-Florio, CFIUS has been delegated the President’s authority to review on national security grounds any transaction whereby a foreign party acquires control of a U.S. business. CFIUS can initiate a review of a transaction on its own or in response to an initial submission by the parties to a transaction of a joint voluntary notice (“JVN”) prior to closing of a transaction.

Inseego and Purchasers submitted a JVN to CFIUS, which was accepted for review as of November 22, 2016, and agreed to supply additional information and documents as required in connection with the CFIUS review process. For additional information, see “Proposal No. 1: The Sale Proposal—Government Approvals” beginning on page 38.

No Solicitation

In the Purchase Agreement, Inseego and NWI have agreed, subject to certain exceptions, that prior to the completion of the Sale, they will not, and will not authorize or permit their respective representatives to, among other things, directly or indirectly:

 

   

solicit, initiate or knowingly encourage or facilitate an alternative acquisition proposal with respect to the MiFi Business;

 

   

participate in discussions or negotiations with third parties regarding an alternative acquisition proposal with respect to the MiFi Business; or

 

   

furnish any non-public information regarding the MiFi Business to any third party in connection with or in response to an alternative acquisition proposal.

The restrictions set forth above do not, however, prohibit the Public Company from furnishing information regarding Inseego and NWI to, or participating in discussions with, a person making an unsolicited written acquisition proposal if: (i) the Public Company Board determines in good faith that such acquisition proposal constitutes or would reasonably be expected to result in a superior proposal; (ii) the Public Company Board determines in good faith that failure to take such action would be inconsistent with its fiduciary duties; and (iii) Inseego and NWI enter into a confidentiality agreement with such person with terms comparable to the terms of the confidentiality agreement between NWI and Purchaser.

Termination of the Purchase Agreement

Generally, the Purchase Agreement may be terminated prior to closing of the Sale:

 

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by the mutual written consent of Inseego and Purchasers;

 

   

by Purchasers or Inseego, if:

 

   

the closing of the Sale does not occur by April 21, 2017;

 

   

a U.S. government agency blocks the Sale or the Sale otherwise becomes illegal;

 

   

the Inseego stockholder meeting is held and Inseego stockholders fail to approve the Sale Proposal; or

 

   

there is an incurable breach of the other party’s representations and warranties or covenants that would prevent the closing condition related to such other party’s representations and warranties or covenants from being satisfied prior to April 21, 2017;

 

   

by Purchasers, if, prior to Inseego obtaining the Required Stockholder Vote, (i) the Inseego Board changes its recommendation with respect to the Sale Proposal and the NWI Charter Amendment Proposal; (ii) Inseego fails to include its recommendation with respect to such proposals in this proxy statement; (iii) the Public Company Board adopts, approves, endorses or recommends any alternative acquisition proposal; (iv) the Inseego Board fails to reaffirm its recommendation with respect to the Sale Proposal and the NWI Charter Amendment Proposal within 10 business days after the date any alternative acquisition proposal is first publicly disclosed; (v) the NWI Board changes its recommendation with respect to the Sale Proposal and the NWI Charter Amendment Proposal or approves or recommends any alternative acquisition proposal; or (vi) Inseego or NWI materially breach their respective no-solicitation obligations; or

 

   

by Inseego, if the Public Company Board determines to enter into a definitive agreement with respect to a superior proposal.

For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—The Purchase Agreement—Termination of the Purchase Agreement” beginning on page  57.

Termination Fees

The Purchase Agreement provides that Inseego will be required to pay Purchasers, and Purchasers will be required to pay Inseego, in each case in the event the Purchase Agreement is terminated under specified circumstances, a termination fee of $4.0 million. Purchaser has placed $4.0 million in escrow as security for its obligation to pay such termination fee to Inseego. For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—The Purchase Agreement—Termination Fees” beginning on page 57.

Indemnification by Inseego

From and after the closing of the Sale, subject to the terms and conditions of the Purchase Agreement, Inseego is obligated to indemnify Purchasers, their affiliates and their respective representatives against any losses which may be incurred or suffered by any of them as a result of: (i) any inaccuracy in or breach of any of the representations or warranties of Inseego contained in the Purchase Agreement; (ii) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Inseego pursuant to the Purchase Agreement; and (iii) any and all Retained Liabilities (as defined below). For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—The Purchase Agreement—Indemnification by Inseego” beginning on page 46.

Material U.S. Federal Income Tax Consequences

The proposed Sale is entirely a corporate action undertaken by Inseego. Inseego’s U.S. stockholders will not realize any gain or loss for U.S. federal income tax purposes as a result of the Sale. For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—Material U.S. Federal Income Tax Consequences of the Sale” beginning on page 38.

No Dissenters’ Rights

Under the Delaware General Corporation Law (the “DGCL”), dissenters’ rights are not available to any stockholders in connection with the Sale, regardless of whether such stockholders vote for or against the approval of the Sale Proposal, because the Sale does not constitute a merger or consolidation.

 

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Risk Factors

The Sale, including the possibility that the Sale may not be completed, involves a number of risks to Inseego and its stockholders, including the following:

 

   

the announcement and pendency of the Sale, whether or not completed, may adversely affect the MiFi Business or the Retained Business;

 

   

if we fail to complete the Sale, the MiFi Business and/or the Retained Business may be adversely affected;

 

   

we may be unable to complete the Sale if we are unable to effect an exchange, conversion or similar transaction in respect of the Notes in a timely manner;

 

   

following the closing of the Sale, we will be subject to three-year non-competition and non-solicitation covenants, which may limit our ability to operate our business in certain respects or sell the Retained Business to certain third parties; and

 

   

Inseego may become obligated to incur certain defense costs in connection with certain intellectual property-related litigation matters, and may become obligated to indemnify Purchasers for certain other losses relating to the MiFi Business.

For additional information regarding the risk factors related to the Sale and the operation of the Retained Business by Inseego following the closing of the Sale, see the section entitled “Risk Factors” beginning on page 14.

The Special Meeting

Time, Date and Place. The special meeting will be held on [●], 2017 at 10:00 a.m. local time at the offices of Paul Hastings LLP located at 4747 Executive Drive, San Diego, California 92121.

Matters to be Considered at the Special Meeting. At the special meeting, holders of Inseego common stock as of the record date will consider and vote upon:

 

   

the Sale Proposal;

 

   

the NWI Charter Amendment Proposal;

 

   

the Sale-Related Compensation Proposal; and

 

   

the Adjournment Proposal.

Record Date. Holders of Inseego common stock as of the close of business on November 28, 2016, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting and any postponements or adjournments of the special meeting.

Required Vote. The adoption of the Sale Proposal and the approval of the NWI Charter Amendment Proposal each require the affirmative vote of the holders of a majority of Inseego common stock outstanding and entitled to vote on the matter at the special meeting. The approval of the Sale-Related Compensation Proposal and the Adjournment Proposal each require the affirmative vote of the holders of a majority of Inseego common stock present in person or by proxy and entitled to vote on the matter at the special meeting.

 

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QUESTIONS AND ANSWERS ABOUT THE SALE AND SPECIAL MEETING

The following are some questions that you, as a stockholder of Inseego, may have regarding the Sale and the special meeting, together with brief answers to those questions. Inseego urges you to read carefully the remainder of this proxy statement, including the annexes and other documents referred to or incorporated by reference in this proxy statement, because the information in this section may not provide all of the information that might be important to you with respect to the Sale and the special meeting.

 

Q.

What is the Sale?

 

A.

Inseego entered into the Purchase Agreement with NWI and Purchasers, pursuant to which Purchaser will acquire NWI’s MiFi Business by acquiring all of the NWI Shares from Inseego, which Inseego owns as a result of the Reorganization, for $50.0 million in cash to be paid to Inseego upon the closing of the Sale, subject to potential adjustment, including based on NWI’s working capital and outstanding indebtedness as of the closing of the Sale. A complete copy of the Purchase Agreement is attached to this proxy statement as Annex A.

 

Q.

Why is Inseego proposing to effect the Sale?

 

A.

In the course of reaching its decision to approve the Sale, the Public Company Board considered the historical financial performance and prospects of the MiFi Business, as operated by Inseego, and the prospects for the Retained Business. In particular, the Public Company Board took into account the value that Inseego reasonably believes it can provide to its stockholders by using the proceeds of the Sale to invest in the long-term strategic plan of the Retained Business. For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—Recommendation of the Public Company Board and its Reasons for the Sale” beginning on page 27.

 

Q.

Why am I receiving these materials?

 

A.

The Sale may constitute the sale of substantially all of Inseego’s property and assets under Section 271 of the DGCL and we are therefore seeking the approval of Inseego’s stockholders. Inseego is sending these materials to you to help you decide how to vote your shares of Inseego common stock with respect to the proposed Sale and the other matters to be considered at the special meeting. This proxy statement contains important information about the Sale, the special meeting and the other proposals, and you should read it carefully.

 

Q.

How would the proceeds from the Sale be used?

 

A.

The proceeds from the Sale will be received by Inseego, not Inseego stockholders. Inseego will use a portion of the proceeds to pay for transaction costs associated with the Reorganization and the Sale and for general working capital purposes. The remaining proceeds from the Sale may be used, at the discretion of the Public Company’s Board (subject, as the case may be, to restrictions imposed by Inseego’s senior secured revolving credit facility with Wells Fargo Bank, NA, the indenture governing the Notes (and the instrument governing any securities for which the Notes may be exchanged) and the Purchase Agreement), in connection with unspecified acquisitions of other complementary businesses, to invest in the Retained Business, to repay indebtedness or a combination thereof.

 

Q.

How will Inseego stockholders be affected by the Sale and how will the Sale affect Inseego’s Retained Business?

 

A.

The Sale will have no effect on the number of shares or the attributes of shares of Inseego common stock held by Inseego’s stockholders. However, Inseego’s business will undergo significant changes in connection with the Sale. Inseego’s business operations will transition from designing, manufacturing and selling mobile broadband hardware products, with approximately 80% of revenues tied to one customer, to a predominantly SaaS, services and solutions business, with thousands of customers generating recurring revenue.

 

Q.

Are there any risks associated with the Sale?

 

A.

Yes. You should carefully review the section entitled “Risk Factors” beginning on page 14, which presents risks and uncertainties related to the Sale, the MiFi Business and the operations of the

 

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Retained Business by Inseego following the completion of the Sale or in the event the Purchase Agreement is terminated prior to completion of the Sale.

 

Q. What stockholder approval is required to complete the Sale?

 

A.

As a condition to the completion of the Sale, Inseego’s stockholders must approve the Sale Proposal, which requires the affirmative vote of the holders of a majority of Inseego common stock outstanding and entitled to vote on the matter at the special meeting. The Sale is not contingent upon approval of the other Proposals by Inseego’s stockholders.

In addition to the approval of the Sale Proposal by the Inseego stockholders, each of the other conditions to the completion of the Sale contained in the Purchase Agreement must be satisfied or waived. For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—The Purchase Agreement—Conditions to the Completion of the Sale” beginning on page 56.

 

Q.

Are there any other proposals to be considered and approved at the special meeting?

 

A.

Yes. In addition to the Sale Proposal, Inseego is also asking its stockholders to approve the NWI Charter Amendment Proposal, which requires the affirmative vote of the holders of a majority of Inseego common stock outstanding and entitled to vote on the matter at the special meeting, and the Sale-Related Compensation Proposal and the Adjournment Proposal, each of which requires the affirmative vote of the holders of a majority of Inseego common stock present in person or by proxy and entitled to vote on the matter at the special meeting.

 

Q:

Why is Inseego seeking to have its stockholders approve the amendment to NWI’s amended and restated certificate of incorporation?

 

A.

In connection with the Reorganization, as discussed in detail in “Proposal No. 1: The Sale Proposal—The Reorganization” beginning on page 41, the NWI certificate of incorporation was amended and restated, as required under the DGCL, to include a provision requiring Inseego stockholders to approve certain corporate actions of NWI (the “Restrictive Voting Provision”). Following the closing of the Sale, Purchaser will own all of the outstanding equity interests of NWI. Because the Restrictive Voting Provision would limit Purchasers’ and NWI’s ability to own and operate NWI going forward, approval of the NWI Charter Amendment Proposal is necessary to facilitate the Sale.

It is important to understand that approval of the NWI Charter Amendment Proposal would have no effect on the right of Inseego stockholders to vote on matters relating to Inseego, such as a merger or consolidation of Inseego, a sale of all or substantially all of Inseego’s assets, amendments to Inseego’s certificate of incorporation, or any other acts or transactions requiring the approval of Inseego’s stockholders under applicable law. For additional information, see the section entitled “Proposal No. 2: The NWI Charter Amendment Proposal” beginning on page 80.

 

Q.

Why am I being asked to cast a non-binding, advisory vote to approve the Sale-Related Compensation Proposal and what will happen if such proposal is not approved at the special meeting?

 

A.

In accordance with the rules promulgated under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Inseego is providing its stockholders with the opportunity to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to certain of Inseego’s named executive officers in connection with the Sale, including the agreements and understandings pursuant to which such compensation may be paid or become payable.

Approval of the Sale-Related Compensation Proposal is not a condition to the completion of the Sale. This non-binding proposal is merely an advisory vote and will not be binding on Inseego, the Inseego Board or Purchasers. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the Sale is completed, certain of our named executive officers may become eligible to receive certain payments, under certain circumstances. For additional information, see the sections entitled “Proposal No. 1: The Sale Proposal—Interests of Certain Persons in the Sale” beginning on page 39 and “Proposal No. 3: The Sale-Related Compensation Proposal” beginning on page 82.

 

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Q. When is the closing of the Sale expected to occur?

 

A.

If the Sale Proposal is approved by Inseego stockholders and all other conditions to the completion of the Sale are satisfied or waived on a timely basis, the closing of the Sale is expected to occur in the first quarter of 2017.

 

Q:

How does the Inseego Board recommend that Inseego stockholders vote with respect to each of the proposals?

 

A:

The Inseego Board recommends that the Inseego stockholders vote “FOR” the Sale Proposal, “FOR” the NWI Charter Amendment Proposal, “FOR” the Sale-Related Compensation Proposal and “FOR” the Adjournment Proposal.

 

Q.

What are the U.S. federal income tax consequences of the Sale to U.S. stockholders?

 

A.

The proposed Sale is entirely a corporate action undertaken by Inseego. Inseego’s U.S. stockholders will not realize any gain or loss for U.S. federal income tax purposes as a result of the Sale. For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—Material U.S. Federal Income Tax Consequences of the Sale” beginning on page 38.

 

Q.

Do I have dissenters’ rights in connection with the Sale?

 

A.

No. Under the DGCL, dissenters’ rights are not available to any stockholders in connection with the Sale, regardless of whether such stockholders vote for or against the approval of the Sale Proposal, because the Sale does not constitute a merger or consolidation.

 

Q.

When and where will the special meeting take place?

 

A.

The special meeting will be held on [●], 2017 at 10:00 a.m. local time at the offices of Paul Hastings LLP located at 4747 Executive Drive, San Diego, California 92121.

 

Q.

Who can attend and vote at the special meeting?

 

A.

Holders of Inseego common stock as of the close of business on November 28, 2016, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting. Each share of Inseego common stock is entitled to one vote on all matters that come before the meeting. At the close of business on the record date, there were [●] shares of Inseego common stock issued and outstanding.

 

Q:

What do I need to do now and how do I vote?

 

A:

Inseego urges you to read this proxy statement carefully, including its annexes, and to consider how the Sale and the actions contemplated by each of the Proposals may affect you.

If your shares of Inseego common stock are registered directly in your name with Inseego’s transfer agent, you are considered, with respect to those shares, to be the “stockholder of record,” and the proxy materials and proxy card are being sent directly to you by Inseego. There are four methods by which you may vote your shares at the special meeting:

 

   

In Person. You may vote your shares in person at the special meeting (if you satisfy the admission requirements, as described below). Even if you plan to attend the special meeting in person, we encourage you to vote in advance by telephone, through the Internet or by mail so that your vote will be counted in the event you later decide not to attend the special meeting.

 

   

By Telephone. You may vote your shares 24 hours a day by calling the telephone number listed on the proxy card and following the instructions provided by the recorded message any time up until 1:00 a.m., Pacific Time, on [●], 2017.

 

   

By Internet. You may vote your shares 24 hours a day by logging onto the secure website included on the proxy card and following the instructions provided any time up until 1:00 a.m., Pacific Time, on [●], 2017.

 

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By Mail. You may vote by completing, signing, dating and promptly returning the proxy card in the postage-paid return envelope provided with the proxy materials for receipt prior to the special meeting.

Everyone attending the special meeting will be required to present valid picture identification, such as a driver’s license or passport. If your shares are held through an account with a broker, dealer, bank or other nominee, you will need a recent brokerage account statement or letter from your broker, dealer, bank or other nominee reflecting stock ownership as of the record date. If you do not have valid picture identification and, if applicable, a recent brokerage account statement or letter from your broker, dealer, bank or other nominee reflecting stock ownership as of the record date, you may not be admitted to the special meeting.

 

Q.

What happens if I do not sign and return my proxy card or vote by telephone, through the Internet or in person at the special meeting or I do not otherwise provide proxy instructions?

 

A.

If you are a stockholder of record of Inseego common stock and you do not sign and return your proxy card or vote by telephone, through the Internet or in person, your shares will not be voted at the special meeting and will not be counted as present for the purpose of determining the presence of a quorum, which is required to transact business at the special meeting. Assuming the presence of a quorum, the failure to return your proxy card or otherwise vote your shares at the special meeting will have the same effect as voting “AGAINST” the Sale Proposal and the NWI Charter Amendment Proposal and your failure to take action will have no effect on the outcome of the Sale-Related Compensation Proposal or the Adjournment Proposal.

If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as present for the purpose of determining the presence of a quorum for the special meeting and all of your shares will be voted “FOR” each Proposal.

 

Q.

What if I abstain from voting?

 

A.

If you attend the special meeting or submit a proxy card, but affirmatively elect to abstain from voting, your proxy will be counted as present for the purpose of determining the presence of a quorum for the special meeting, but will not be voted at the special meeting. As a result, your abstention will have the same effect as voting “AGAINST” each Proposal.

 

Q.

What is a broker non-vote?

 

A.

Broker non-votes are shares held in “street name” by brokers, dealers, banks and other nominees that are present or represented by proxy at the special meeting, but with respect to which the broker, dealer, bank or other nominee is not instructed by the beneficial owner of such shares how to vote on a particular proposal and such broker, dealer, bank or nominee does not have discretionary voting power on such proposal. Because brokers, dealers, banks and other nominees holding shares in “street name” do not have discretionary voting authority with respect to the Sale Proposal, the NWI Charter Amendment Proposal or the Sale-Related Compensation Proposal described in this proxy statement, if a beneficial owner of shares of Inseego common stock held in “street name” does not give voting instructions to the broker, dealer, bank or other nominee, then those shares will not be counted as present in person or by proxy at the special meeting. If you fail to issue voting instructions to your broker, dealer, bank or other nominee, it will have the same effect as a vote “AGAINST” the Sale Proposal and the NWI Charter Amendment Proposal. The failure to issue voting instructions to your broker, dealer, bank or other nominee will have no effect on the outcome of the Sale-Related Compensation Proposal or the Adjournment Proposal.

 

Q:

If my shares of Inseego common stock are held in “street name” by my broker, dealer, bank or other nominee, will my broker, dealer, bank or nominee vote my shares for me and may I vote in person?

 

A:

If your shares of Inseego common stock are held through an account with a broker, dealer, bank or nominee, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you together with a voting instruction card. You must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting

 

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instructions provided by your broker, dealer, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Inseego.

As the beneficial owner, you are also invited to attend the special meeting in person. However, since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the special meeting unless you obtain a “legal proxy” from the broker, dealer, bank or other nominee that holds your shares giving you the right to vote the shares in person at the special meeting.

 

Q:

May I revoke or change my vote after I have provided proxy instructions?

 

A:

Yes. You may revoke or change your vote at any time before your proxy is voted at the special meeting. You can do this in one of three ways: (i) delivering written notice to Inseego’s Corporate Secretary at Inseego’s principal executive office, (ii) executing and delivering a proxy bearing a later date to Inseego’s Corporate Secretary at Inseego’s principal executive office, or (iii) voting in person at the special meeting. Your attendance at the special meeting without further action on your part will not automatically revoke your proxy. If you have instructed your broker, dealer, bank or other nominee to vote your shares, you must follow directions received from your broker, dealer, bank or other nominee in order to change those instructions.

 

Q.

What constitutes a quorum for the special meeting?

 

A.

Holders of a majority of shares of Inseego common stock entitled to vote at the special meeting must be present at the special meeting, in person or by proxy, to constitute a quorum, which is necessary to conduct the special meeting. Your shares will be counted toward the quorum if you submit a properly executed proxy or vote at the special meeting. In addition, abstentions and broker non-votes will be treated as present for the purpose of determining the presence of a quorum for the transaction of business at the special meeting. If there is no quorum, then either the chairman of the meeting or the holders of a majority in voting power of the shares of common stock that are entitled to vote at the meeting, present in person or by proxy, may adjourn the meeting until a quorum is present or represented.

 

Q:

Who is paying for this proxy solicitation?

 

A:

Inseego will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. Inseego will bear any fees paid to the SEC. Inseego may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners for their reasonable expenses in forwarding solicitation material to such beneficial owners. Inseego’s directors, officers and employees may also solicit proxies in person or by other means of communication. Such directors, officers and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation.

 

Q.

What does it mean if I received more than one proxy card?

 

A.

If you received more than one proxy card, your shares are likely registered in more than one name or are held in more than one account. These should each be voted and/or returned separately in order to ensure that all of your shares of Inseego common stock are voted.

 

Q.

Will I receive any payment for my shares of Inseego common stock in connection with the Sale?

 

A.

No. The proceeds from the Sale will be paid directly to Inseego, not Inseego stockholders.

 

Q.

Do I need to send in my old Novatel Wireless, Inc. stock certificates as a result of the Reorganization?

 

A.

No. As more fully described in the section entitled “Proposal No. 1: The Sale Proposal—The Reorganization,” beginning on page 41, in connection with the Reorganization, your shares of NWI common stock were automatically converted into equivalent corresponding shares of Inseego common stock without an exchange of stock certificates and represent your ownership interest in Inseego and therefore, you do not need to send in your old stock certificates for Novatel Wireless, Inc. as a result of the Reorganization.

 

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Q. Whom should I contact if I have any questions about the Sale or the special meeting?

 

A.

If you have any questions about the Sale or the special meeting, or if you need assistance in submitting your proxy or voting your shares or need additional copies of this proxy statement or the enclosed proxy card, you should contact Inseego at the address and telephone number listed below:

Inseego Corp.

9645 Scranton Road, Suite 205

San Diego, California 92121

Attn: Secretary

(858) 812-3400

If your shares are held through an account with a broker, dealer, bank or other nominee, you should call your broker, dealer, bank or other nominee for additional information.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement and the other documents referred to or incorporated by reference into this proxy statement contain or may contain “forward-looking statements” of Inseego within the meaning of Section 21E of the Exchange Act. For this purpose, any statements contained herein, other than statements of historical fact, may be forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. Statements that include words such as “may”, “will”, “project”, “might”, “expect”, “believe”, “anticipate”, “intend”, “could”, “would”, “estimate”, “continue” or “pursue” or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement and the other documents referred to or incorporated by reference herein and relate to a variety of matters, including but not limited to, (i) the timing and anticipated completion of the proposed Sale; (ii) the benefits expected to result from the proposed Sale; (iii) the tax consequences of the Sale; (iv) the prospects for the Retained Business; (v) the projections of future financial performance of the MiFi Business; and (vi) other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of Inseego’s management, are not guarantees of performance and are subject to significant risks and uncertainty. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in this proxy statement and those that are referred to or incorporated by reference into this proxy statement. Additional factors that could cause actual results to differ materially from those described in forward-looking statements contained herein include, but are not limited to:

 

   

potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Sale;

 

   

unexpected costs, charges or expenses relating to or resulting from the Sale;

 

   

litigation or adverse judgments relating to the Sale;

 

   

risks relating to the completion of the proposed Sale, including the risk that the Required Stockholder Vote might not be obtained in a timely manner or at all; Inseego not being able to effect an exchange, conversion or similar transaction with respect to the Notes in a timely manner or at all; or other conditions to the completion of the Sale not being satisfied;

 

   

any difficulties associated with requests or directions from governmental authorities resulting from their reviews of the Sale, including the approval of CFIUS; and

 

   

any changes in general economic and/or industry-specific conditions.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement or, in the case of documents referred to in this proxy statement, as of the date of those documents. Inseego disclaims any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this proxy statement or to reflect the occurrence of unanticipated events, except as required by law.

 

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RISK FACTORS

In addition to the other information included and referred to in this proxy statement, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 13, you should carefully consider the following risk factors before deciding how to vote your shares of Inseego common stock at the special meeting. These factors should be considered in conjunction with the other information included by Inseego in this proxy statement and the risk factors described in Inseego’s other filings with the SEC, including all filings incorporated herein by reference. If any of the risks described below, incorporated by reference or otherwise referred to in this proxy statement actually materialize, the business, financial condition, results of operations, or prospects of Inseego, or the stock price of Inseego, could be materially and adversely affected.

Risks Related to the Sale

The announcement and pendency of the Sale may adversely affect the MiFi Business and/or the Retained Business.

The announcement and pendency of the Sale may adversely affect the trading price of our common stock, our business or our relationships with clients, customers, suppliers and employees. Third parties may be unwilling to enter into material agreements with respect to the MiFi Business or the Retained Business. New or existing customers, suppliers and business partners may prefer to enter into agreements with our competitors who have not expressed an intention to sell their business because customers, suppliers and business partners may perceive that such new relationships are likely to be more stable. Additionally, employees working in the MiFi Business or the Retained Business may become concerned about the future of the MiFi Business or the Retained Business, as applicable, and lose focus or seek other employment. In addition, while the completion of the Sale is pending we may be unable to attract and retain key personnel and our management’s focus and attention and employee resources may be diverted from operational matters.

If we fail to complete the Sale, our business and financial performance may be adversely affected.

The completion of the Sale is subject to the satisfaction or waiver of various conditions, including the approval of the Sale by our stockholders and approval of CFIUS, which may not be satisfied in a timely manner or at all.

If the Sale is not completed, we may have difficulty recouping the costs incurred in connection with negotiating the Sale. Our directors, executive officers and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the Sale, and we will have incurred significant third party transaction costs, in each case, without any commensurate benefit, which may have a material and adverse effect on our stock price and results of operations.

In addition, if the Sale is not completed, the Inseego Board, in discharging its fiduciary obligations to our stockholders, may evaluate other strategic alternatives including, but not limited to, continuing to operate the MiFi Business for the foreseeable future or an alternative sale transaction relating to the MiFi Business. An alternative sale transaction, if available, may yield lower consideration than the proposed Sale, be on less favorable terms and conditions than those contained in the Purchase Agreement and involve significant delay. Any future sale of substantially all of the assets of Inseego or other transactions may be subject to further stockholder approval.

Finally, if the Sale is not completed, the announcement of the termination of the Purchase Agreement may adversely affect our relationships with customers, suppliers and employees, which could have a material adverse impact on our ability to effectively operate the Retained Business or the MiFi Business, and we may be required to pay a termination fee of $4.0 million under certain circumstances, each of which could have further adverse effects on our business, results of operations and the trading price of our common stock.

The failure to effectively utilize the proceeds from the Sale may adversely affect the Retained Business.

As previously discussed in this proxy statement, the proceeds from the Sale will be received by Inseego, not Inseego’s stockholders. Inseego will use a portion of the proceeds to pay for transaction costs associated with the Reorganization and the Sale and for general working capital purposes. The remaining proceeds from the Sale may be used, at the discretion of the Public Company Board (subject, as the case may be, to restrictions contained in certain debt documents and the Purchase Agreement), in connection with unspecified acquisitions

 

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of other complementary businesses, to invest in the Retained Business, repay indebtedness or a combination thereof. The failure to utilize such proceeds effectively could affect our ability to continue to develop and sell our products and grow the Retained Business, which could adversely affect the Retained Business and cause the value of your investment to decline.

Our executive officers may have interests in the Sale other than, or in addition to, the interests of our stockholders generally.

Our executive officers may have interests in the Sale that are different from, or are in addition to, the interests of our stockholders generally. The Public Company Board was aware of these interests and considered them, among other matters, in approving the Purchase Agreement.

In certain circumstances, our executive officers may receive cash payments and vesting of certain equity awards in connection with the Sale. For additional information, see the section entitled “Proposal No. 1: The Sale Proposal—Interests of Certain Persons in the Sale” beginning on page 39.

We may be unable to complete the Sale if we are unable to effect an exchange, conversion or similar transaction in respect of the Notes in a timely manner and we may be unable to effect such a transaction on favorable terms.

The Purchase Agreement contains a closing condition that, prior to completing the Sale, NWI will no longer be a borrower under the indenture governing the Notes. The Notes mature in 2020 and we do not currently have the right to repurchase or redeem the Notes under the terms of the indenture governing the Notes, nor do we have sufficient funds or availability under our revolving credit facility to redeem the Notes in full. In addition, the agreement governing our revolving credit facility would also prohibit us from repurchasing or redeeming the Notes in full. Without the consent of 100% of the affected holders of the Notes we are not permitted to take certain actions including, without limitation, any amendment of the indenture governing the Notes that may impair the right of any holder of the Notes to institute suit for payment on any Note, including with respect to any consideration due upon conversion of a Note. This means that we are not permitted to remove NWI as the issuer of the Notes by amending the indenture governing the Notes without the consent of the holders of 100% of the outstanding principal amount of the Notes.

Because we are not able to repurchase or redeem the Notes and it would be extremely difficult to amend the Notes and the indenture governing the Notes to remove NWI as the issuer thereunder, we expect to conduct an exchange offer to give existing holders of the Notes an opportunity to obtain notes issued by Inseego, the publicly traded parent company of NWI. The Purchase Agreement provides that the purchase price will be reduced by an amount equal to all outstanding indebtedness of NWI as of the closing. Accordingly, we will need a very high percentage of the holders of the outstanding Notes to participate in the proposed exchange offer in order to decrease the outstanding principal amount of outstanding Notes and facilitate the Sale of NWI to the Purchasers on a substantially debt-free basis. Alternatively, we may be required to utilize our cash, borrow funds under our revolving credit facility or make other arrangements, to satisfy any obligations with respect to the Notes that remain outstanding following completion of the exchange offer. This will effectively reduce the proceeds that we expect to receive from the Sale which could have an adverse effect on our business and financial condition.

We will likely incur significant expenses in connection with the proposed exchange offer and, in order to incentivize the holders of the Notes to participate in the proposed exchange offer, we are likely going to be required to offer terms that are less favorable to us than the terms currently governing the Notes, which may have an adverse effect on our results of operations. Any new notes issued in exchange for the Notes as a result of such transaction may impose restrictive covenants on us, our operations and our ability to engage in certain transactions that are in addition to, or more difficult to comply with than, the restrictive covenants contained in the indenture governing the Notes. In addition, any such notes issued in exchange for the Notes may be entitled to a higher interest rate or a lower conversion rate, meaning that if converted, such notes would convert into more shares of Inseego common stock than would the current Notes, thereby potentially causing additional dilution to Inseego’s stockholders.

Finally, we cannot compel holders of the Notes to participate in the proposed exchange offer and if we are not able to complete the proposed exchange offer, our board of directors, in order to complete the Sale, will need to evaluate other strategic alternatives for eliminating or reducing NWI’s obligations under the Notes such as an alternative exchange, conversion or similar transaction in respect of such Notes. If we are not able to identify an alternative transaction on terms that are acceptable to us we may not be able to complete the Sale in a timely manner, or at all.

 

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The Purchase Agreement limits our ability to pursue alternatives to the Sale.

The Purchase Agreement contains provisions that may make it more difficult for us to sell Inseego or all, or a significant part, of the MiFi Business to any party other than Purchaser. These provisions include the prohibition on our ability to solicit competing proposals and the requirement that we pay Purchaser a termination fee of $4.0 million if we terminate the Purchase Agreement prior to the closing of the Sale as a result of our determining to accept an alternative acquisition proposal that we determine to be a superior proposal. For additional information, see the sections entitled “Proposal No. 1: The Sale Proposal—The Purchase Agreement—No Solicitation” beginning on page 52 and “—Termination Fees” beginning on page 57.

These provisions could make it less advantageous for a third party that might have an interest in acquiring Inseego or all of or a significant part of the MiFi Business to consider or propose an alternative transaction, even if that party were prepared to pay consideration with a higher value than the consideration to be paid by Purchaser.

Risks Related to Inseego and the Retained Business if the Sale is Completed

Because Inseego is expected to have fewer revenues and assets following the sale of the MiFi Business, there is a possibility that such reduced revenues and assets may affect our ability to satisfy the continued listing standards of The NASDAQ Global Select Market, which could result in the delisting of our common stock.

The continued listing standards of The NASDAQ Global Select Market include, among other things, requirements that we maintain certain levels of stockholders’ equity, total assets, total revenue, market capitalization and/or minimum trading price. Even though we currently satisfy these requirements, following the sale of the MiFi Business our business will be smaller, which may cause us to fail to satisfy the continued listing standards of The NASDAQ Global Select Market. In the event that we are unable to satisfy such continued listing standards, our common stock may be delisted from The NASDAQ Global Select Market. Any delisting of our common stock from such market could adversely affect our ability to attract new investors, decrease the liquidity of our outstanding shares of common stock, reduce our flexibility to raise additional capital, reduce the price at which our common stock trades and increase the transaction costs inherent in trading such shares with overall negative effects for our stockholders. In addition, delisting of our common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our common stock, and might deter certain institutions and persons from investing in our securities at all. For these reasons and others, delisting could adversely affect the price of our common stock and our business, financial condition and results of operations.

Following the closing of the Sale, we will be subject to three-year non-competition and non-solicitation covenants under the Purchase Agreement, which may limit our ability to operate our business in certain respects or sell the Retained Business to a third party.

Following the closing of the Sale, we will be subject to three-year non-competition and non-solicitation covenants made in the Purchase Agreement, as more fully described in “Proposal No. 1: The Sale Proposal—The Purchase Agreement—Post-Closing Covenants.” During such three-year period, we will be restricted from designing, developing, manufacturing, marketing or selling, on a standalone basis, products of the MiFi Business as of the closing of the Sale, subject to certain exceptions, and from soliciting for employment persons who were employees of the MiFi Business as of the closing of the Sale.

These limitations may negatively impact the scope and/or volume of our business, which may adversely affect our financial condition and results of operations. In addition, certain third party acquirers of the Retained Business would be subject to these limitations for a limited period of time, which may limit our opportunities with respect to a future sale transaction of the Retained Business during such time that may otherwise be favorable to Inseego’s stockholders.

 

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Inseego may be, or become, obligated to incur certain defense costs in connection with certain intellectual property-related litigation matters, and may become obligated to indemnify Purchasers for certain losses relating to the MiFi Business.

Under the Purchase Agreement, Inseego retains responsibility for the defense costs for pending litigation matters relating to intellectual property used in the MiFi Business, and may be partially responsible for defense costs for certain threatened litigation matters relating to intellectual property used in the MiFi Business, should proceedings be initiated. In addition, Inseego has agreed to indemnify Purchasers for certain types of losses relating to the MiFi Business, subject to the limitations contained in the Purchase Agreement and described in “Proposal No. 1: The Sale Proposal—The Purchase Agreement—Limitations on Indemnity Obligations.” The amounts of these current and potential future liabilities are currently indeterminable, but if they turn out to be significant, they could adversely affect Inseego’s business, financial condition and results of operations.

Following the closing of the Sale, Inseego will only have the right to use certain intellectual property assets necessary to the operation of the Retained Business through a license from Purchasers, and accordingly, will be subject to the decisions of Purchasers with respect to prosecution, maintenance, protection and their use and licensing of such intellectual property assets.

NWI will retain in the Reorganization, and Purchasers will acquire in the Sale, certain intellectual property assets that are necessary for the operation of the Retained Business. Inseego may continue using such assets indefinitely through that certain intellectual property cross license agreement, which is dated as of September 21, 2016 but which shall become effective only upon the closing of the Sale (the “IP Cross License”). However, Inseego will be reliant on Purchasers to prosecute, maintain and protect those intellectual property assets, and if Purchasers fail to do so adequately, our business may be adversely affected. Further, Purchasers will have the right, subject to any applicable covenants in the Purchase Agreement, to use and license such intellectual property assets, and such use and licensing may be competitive with the operations of the Retained Business and may otherwise adversely affect the Retained Business.

If the Sale is completed, our actual results of operations could differ materially from any expectations or guidance provided by us concerning future results.

We currently expect to realize material cost savings and increased gross profit, but also a significant decrease in revenue, as a result of the sale of our MiFi Business. Excluding upfront non-recurring charges and transaction-related expenses, the sale of our MiFi Business is expected to improve some of the key financial metrics associated with our results of operations. However, these expectations are subject to numerous assumptions, including, without limitation, projections of the future revenues and product margins of the Retained Business; projected acquisition and retention of customers of the Retained Business; anticipated personnel and manufacturing cost savings associated with the Sale; and certain accounting adjustments that we expect to record in our financial statements in connection with the sale of the MiFi Business.

We cannot provide any assurances with respect to the accuracy of the assumptions on which our financial expectations or guidance are based. Any failure to realize the financial benefits we currently anticipate from the Sale could have a material adverse impact on our future operating results and financial condition and could materially and adversely affect the trading price or trading volume of our common stock.

 

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PROPOSAL NO. 1: THE SALE PROPOSAL

The discussion of the Sale in this proxy statement is qualified in its entirety by reference to the Purchase Agreement, a copy of which is attached to this proxy statement as Annex A, and hereby incorporated by reference into this proxy statement. We encourage you to read the Purchase Agreement carefully and in its entirety, as it is the legal document that governs the Sale.

General Description of the Sale

Pursuant to the terms of the Purchase Agreement, Purchasers will acquire all of the issued and outstanding shares of NWI common stock for $50.0 million in cash to be paid to Inseego upon the closing of the Sale, subject to potential adjustment, including based on NWI’s working capital and outstanding indebtedness as of the closing of the Sale. Currently, the NWI Shares are solely owned by Inseego as a result of the Reorganization. Immediately following the completion of the Sale, Purchaser will own all of the NWI Shares and NWI will be a wholly owned subsidiary of Purchaser.

The Sale may constitute a sale of substantially all of Inseego’s property and assets under Section 271 of the DGCL, and we are therefore seeking the approval of the Sale by Inseego’s stockholders.

Parties to the Sale

Inseego Corp.

Inseego is a leading provider of solutions for the IoT, including SaaS solutions for the telematics and telemetry markets. Inseego’s broad range of products principally include, through its subsidiaries DigiCore and FW, product offerings for fleet and vehicle telematics, stolen vehicle recovery, user-based insurance, integrated asset-management M2M communications devices, applications software and SaaS services. Inseego’s products currently operate on every major cellular wireless technology platform. Inseego’s M2M products enable devices to communicate with each other and with server or cloud-based application infrastructures. Inseego’s M2M products and solutions include its integrated M2M communications devices and SaaS delivery platforms, including DigiCore’s Ctrack, which provides fleet and vehicle SaaS telematics, and FW’s Crossroads, which provides easy M2M device management and service enablement. Inseego also designs, produces and sells telematics hardware products.

Through its wholly owned subsidiary, NWI, Inseego offers the MiFi Business products, including intelligent mobile hotspots and USB modems, which provide subscribers with secure and convenient high-speed access to corporate, public and personal information through the Internet and enterprise networks. The Sale relates to the sale of NWI and the MiFi Business.

Inseego is a Delaware corporation that was formed in 2016. As a result of the Reorganization, Inseego became the sole stockholder, and successor registrant to, NWI, a Delaware corporation formed in 1996. For additional information about the Reorganization, see the section entitled “Proposal No. 1: The Sale Proposal—The Reorganization” beginning on page 41. Inseego’s principal offices are located at 9645 Scranton Road Suite 205, San Diego, CA 92121, and its telephone number is (858) 812-3400. Inseego’s website address is www.inseego.com. Inseego common stock is listed on The NASDAQ Global Select Market and trades under the trading symbol “INSG.” Additional information regarding Inseego is included in documents incorporated by reference into this proxy statement. See the section entitled “Where You Can Find Additional Information” beginning on page 85.

T.C.L. Industries Holdings (H.K.) Limited and Jade Ocean Global Limited

T.C.L. Industries Holdings (H.K.) Limited is a limited liability company formed under the laws of Hong Kong and Jade Ocean Global Limited is a company formed under the laws of the British Virgin Islands. Purchasers are members of TCL Corporation, a company listed on the Shenzhen Stock Exchange. TCL Corporation’s business lines include, among other things, designing, manufacturing and marketing a portfolio of smart products, and providing internet application services globally. TCL Corporation’s products are currently sold in over 160 countries throughout North America, Latin America, Europe, the Middle East, Africa and Asia Pacific, and the group currently employs approximately 82,000 people worldwide.

 

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Background of the Sale

From time to time, our Board and senior management team, together with outside legal counsel and financial advisors, review and evaluate strategic opportunities and alternatives as part of a long-term strategy to increase stockholder value. Such opportunities and alternatives include remaining as a stand-alone entity, potential acquisitions of companies, businesses or assets that align with our strategic objectives and potential dispositions of one or more of our businesses.

Prior to March 2015, we primarily focused on the development, manufacturing and sale of mobile broadband products, including MiFi-branded hotspots and USB modem devices, and sold telematics hardware and embedded modules for IoT applications. For the years ended December 31, 2014 and 2013, our mobile computing products business accounted for approximately 79% and 89%, respectively, of our overall revenues.

On March 27, 2015, we acquired RER and its principal operating subsidiary, FW. FW is an IoT product, systems integration and services company that specializes in fixed and mobile cellular-based wireless IoT solutions and services. With this acquisition, we began to migrate from a hardware-focused business model to a business model that focused on higher margin SaaS and IoT offerings and positioned us as a complete IoT solutions and services leader.

In accordance with that strategy, on October 5, 2015, we acquired DigiCore, a leading provider of advanced M2M communication and telematics solutions marketed globally under the Ctrack brand, based in South Africa. Ctrack is a global telematics SaaS offering for vehicle tracking and fleet management solutions, stolen vehicle recovery, insurance telematics, and asset tracking and monitoring markets. The DigiCore acquisition positioned us to deliver comprehensive solutions to the high-growth telematics segment of the IoT on a global scale.

On November 5, 2015, we held our third quarter 2015 financial results conference call during which Ms. Swenson discussed our intention to complete our transformation from a MiFi hardware business to an IoT telematics and telemetry business and addressed a participant’s inquiry regarding whether the MiFi Business would potentially be spun-off or sold as part of that transformation. Ms. Swenson noted that while the MiFi Business is a cash flow positive business, its operating results are unpredictable, that the management of NWI believed that, in light of certain market trends, that the MiFi Business would potentially be particularly attractive to large companies in specific verticals, and that the Public Company would be willing to entertain compelling offers for the MiFi Business.

Between December 2015 and January 2016, in anticipation of a potential sale of the MiFi Business, the Public Company’s management prepared, based on information available at that time, certain financial forecasts, referred to in this proxy statement as the Case A Projections, for the sale of NWI’s MiFi products to Verizon Communications, Inc. (“Verizon”) and Bell Canada (“Bell”), as well as to distributors of MiFi products, assuming the MiFi Business was acquired by, and operated as a division of, a larger company that would provide infrastructure, marketing and operational support and back-office services for the MiFi Business after giving effect to related cost savings, which Case A Projections are summarized in the section entitled “Proposal No. 1: The Sale Proposal—Certain Financial Projections—Case A Projections.” We also contacted and interviewed several investment banking firms, including Houlihan Lokey, which subsequently was engaged as our financial advisor, each with specialized knowledge of the wireless communications industry and relationships with potential financial and strategic acquirors.

On January 6, 2016, we received an unsolicited, non-binding indication of interest from Company A, a private company in the wireless communications industry, regarding a potential acquisition of the MiFi Business at a valuation of $30.0 million to $40.0 million, subject to adjustment based on the results of Company A’s due diligence review. The indication of interest also included other terms and conditions, including the required receipt of certain approvals. Our senior management team, in accordance with our directives, instructed Houlihan Lokey to encourage Company A to continue its due diligence review based on publicly available information so that Company A could improve its initial proposal.

On January 12, 2016, we met with Houlihan Lokey at our offices in San Diego regarding the potential sale of the MiFi Business. We instructed Houlihan Lokey, working with our senior management team, to conduct a targeted marketing process for a potential sale of the MiFi Business by first contacting selected strategic parties that had been identified by our senior management team, with input from Houlihan Lokey, as potentially interested acquirors of the MiFi Business.

 

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Between January 12, 2016 and February 2, 2016, marketing materials, including a proposed management presentation, and a list (which was updated during the process) of potential acquirors were prepared. In addition, we began to populate an electronic data room with documents and other materials related to the MiFi Business.

On January 20, 2016, our Board held a telephonic meeting with members of senior management and representatives of Paul Hastings LLP (“Paul Hastings”), outside counsel to the Public Company, to discuss our 2016 operating budget. As part of this discussion, Ms. Swenson reviewed the competitive landscape and risks and opportunities related to continuing the MiFi Business as then-currently conducted or exiting certain lines of business.

Between January 2016 and May 2016, as more fully described below, a total of 56 potential bidders were contacted, 40 of which were strategic companies and 16 of which were private equity or financial buyers. Of the 56 potential bidders contacted, 19 undertook preliminary due diligence pursuant to non-disclosure agreements and 37 indicated that they were not interested in pursuing a transaction involving the MiFi Business. Nine of the parties that entered into non-disclosure agreements attended management presentations. During the course of the sale process, 16 of the 19 parties that had entered into non-disclosure agreements indicated that they would not submit indications of interest in respect of an acquisition of the MiFi Business.

On February 11, 2016, our Board held a meeting with members of senior management and representatives of Paul Hastings and Houlihan Lokey to discuss, among other things, the potential sale of the MiFi Business. As part of the discussion, Houlihan Lokey discussed with our Board preliminary financial information relating to the MiFi Business and certain process and related aspects of a potential transaction. After the discussion, our Board directed Houlihan Lokey to contact 11 potential strategic acquirors, including Purchasers, Company A and two other parties that previously had expressed potential interest in the MiFi Business.

On February 18, 2016, we continued our shift away from hardware development and manufacturing by entering into an agreement to sell our telematics hardware business to Micronet Enertec Technologies, Inc.

Also on February 18, 2016, we held our fourth quarter 2015 and full fiscal year 2015 financial results conference call during which Ms. Swenson addressed a participant’s question regarding a potential sale of the MiFi Business, noting that the Public Company would entertain a compelling offer to acquire the MiFi Business.

On February 19, 2016, our senior management team approved certain due diligence materials to be provided to prospective bidders and authorized Houlihan Lokey to contact 10 additional potential strategic acquirors.

On March 4, 2016, our senior management team met with representatives of Houlihan Lokey to discuss the sale process and parties that had been contacted. Our senior management team authorized Houlihan Lokey to contact 19 additional potential strategic acquirors in order to enhance the competitive tension of the process.

On March 7, 2016, our senior management team authorized Houlihan Lokey to contact one potential financial acquiror that previously had expressed interest in exploring a potential transaction with us.

On March 15, 2016, we received a revised non-binding indication of interest from Company A regarding a potential acquisition of the MiFi Business for $30.0 million on a debt-free, cash-free basis with a normalized level of working capital, subject to adjustment based on the results of Company A’s due diligence review. The purchase price would be payable in cash at closing, subject to reasonable escrow arrangements. Company A indicated that its financing sources for the transaction would be a combination of cash on hand, an equity infusion from a merchant bank and/or an increase in its existing credit facility. The indication of interest also included other terms and conditions, including the required receipt of certain internal and third party approvals.

On March 18, 2016, our senior management team met with representatives of Houlihan Lokey to discuss the sale process, including the revised indication of interest received from Company A and Company A’s due diligence requests. Our senior management team directed Houlihan Lokey to facilitate Company A’s due diligence efforts and encourage Company A to improve its bid.

On March 23, 2016, we received a revised non-binding indication of interest from Company A for the acquisition of the MiFi Business for $35.0 million on a debt-free, cash-free basis with a normalized level of working capital, plus up to an additional $15.0 million of consideration in the form of an earn-out payment

 

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based on the achievement over a period of two years of (i) a specified gross margin level and (ii) certain add-back savings, which terms were subject to adjustment based on the results of Company A’s due diligence review. The $35.0 million base purchase price would be payable in cash at closing, subject to reasonable escrow arrangements. Our senior management team directed Houlihan Lokey to continue to work with Company A in an effort to improve the total guaranteed consideration.

On March 25, 2016, our senior management team met with representatives of Houlihan Lokey to discuss the sale process and the revised non-binding indication of interest received from Company A on March 23, 2016, including the increase in the proposed cash purchase price from $30.0 million to $35.0 million, and also discussed the $15.0 million earn-out in Company’s A revised indication of interest and its most recent due diligence requests.

On March 28, 2016, our Board held a telephonic meeting with members of senior management to discuss, among other things, various strategic transactions that the Public Company was pursuing to divest non-essential assets. As part of this discussion, Ms. Swenson and Michael Sklansky reported on the process, status and outlook regarding the potential sale of the MiFi Business. The meeting was temporarily adjourned and reconvened on March 31, 2016 and, at that time, Ms. Swenson and Mr. Sklansky further updated our Board on the process, status and outlook regarding the potential sale of the MiFi Business.

On April 1, 2016, we received a non-binding indication of interest from Purchasers related to the acquisition of the MiFi Business based on an enterprise value of approximately $50.0 million on a debt-free, cash-free basis. The proposed consideration included $20.0 million payable at closing, $20.0 million payable if the MiFi Business met certain financial performance targets in the year following the closing, and $10.0 million payable upon the satisfaction of certain conditions related to customers and purchase orders in 2018. The indication of interest stated that the sources of financing would include cash on hand, existing credit lines and financial support from a parent entity, if necessary. The indication of interest also included other terms and conditions, including the required receipt of certain internal and third party approvals.

Also on April 1, 2016, our senior management team met with representatives of Houlihan Lokey to discuss the sale process and the indications of interest and due diligence requests received from Purchasers and Company A.

On April 4, 2016, our senior management team authorized Houlihan Lokey to contact one additional potential financial acquiror.

On April 8, 2016, our senior management team met with representatives of Houlihan Lokey to discuss the status of discussions with potential acquirors. Our senior management team instructed Houlihan Lokey to request that Purchasers and Company A improve their bids if they were interested in continuing in the sale process. In accordance with this directive, Houlihan Lokey contacted the Purchasers and Company A. Purchasers verbally indicated a willingness to increase the cash portion of the consideration but requested an in-person management presentation to further understand the MiFi Business.

On April 10, 2016, we terminated the agreement entered into February 18, 2016 governing the potential sale of our telematics hardware business to Micronet Enertec Technologies, Inc. in accordance with our right to terminate such agreement pursuant to the terms and conditions thereof.

On April 11, 2016, we completed the sale of certain of our hardware modules and related assets to Telit Wireless Solutions, Inc. The disposition of these hardware modules and related assets accelerated our transformation from a hardware-centric manufacturer to a true provider of IoT SaaS and solutions.

On April 15, 2016, our senior management team directed Houlihan Lokey to contact 14 additional potential financial acquirors to enhance the competitive nature of the process.

On April 20, 2016, the Public Company hosted management presentations for representatives of Company A. Representatives of Houlihan Lokey also attended these presentations.

On April 25, 2016, the Public Company hosted management presentations for representatives of Purchasers. Representatives of Houlihan Lokey also attended these presentations.

 

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On April 28, 2016, our Board held a meeting with members of senior management and representatives of Paul Hastings to discuss, among other things, the status of discussions related to the potential sale of the MiFi Business. Ms. Swenson reported on the potential acquirors, efforts made to identify other potential bidders and the proposed timeline for a transaction in the event the Public Company received an acceptable proposal. Ms. Swenson then described other potential asset sale transactions that the senior management team was exploring. Michael Newman provided a forecast for the remaining quarters in 2016 under various scenarios, including scenarios in which the Public Company was unable to complete any proposed divestitures of assets on an acceptable timetable.

On May 2, 2016, our senior management team met with representatives of Houlihan Lokey to discuss the sale process, including the potential acquirors that were actively engaged in the process, the identification of certain bidders viewed as unlikely to progress past the indication of interest stage, a proposed sale process timeline, and a list and description of certain parties that had been approached but had elected not to participate in the sale process.

On May 9, 2016, in accordance with our directives, Houlihan Lokey sent each of Company A and Purchasers a final bid instruction letter. The bid instruction letter set forth the procedures by which the bidders were to submit their final proposals for the acquisition of the MiFi Business and instructed the bidders to submit such proposals, along with a full mark-up of the draft purchase agreement, no later than May 25, 2016.

On May 12, 2016, representatives of the Public Company provided to Company A and Purchasers an auction draft of the purchase agreement and a description of the proposed transaction steps necessary to effectuate the proposed transactions, including the Reorganization and the Sale.

Between May 16 and May 19, 2016, Purchasers and their advisors attended a series of due diligence calls, including calls to address the proposed transaction structure, legal due diligence matters, tax matters, information technology, human resources, intellectual property and business and commercial diligence matters.

Between May 16 and June 3, 2016, Company A and its advisors attended a series of due diligence calls, including calls related to financial and accounting matters, human resources, information technology, legal and tax matters and risk management.

On May 19, 2016, in accordance with our directives, Houlihan Lokey discussed with Company B, a private investment company, the opportunity to acquire the MiFi Business.

On May 25, 2016, Company A provided Houlihan Lokey with a status update regarding certain items called for in the bid instruction letter. As part of the update, Company A reiterated its proposed purchase price of $35.0 million in cash at closing and $15.0 million in contingent payments based on the financial performance of the MiFi Business. Company A indicated that its lender expected to complete its due diligence process on or about June 15, 2016. The update included several other proposed terms and conditions, including a high-level summary of certain transition services that Company A anticipated would be required and the desire for a non-compete agreement.

Also on May 25, 2016, we received a non-binding indication of interest from Company B related to the acquisition of the MiFi Business. The indication of interest included certain background information regarding Company B, including its investment capabilities, resources, skills and experience, its ability to purchase the MiFi Business and certain other information. The indication of interest included a proposed purchase price of between $40.0 million to $50.0 million, consisting of (i) $20.0 million to $25.0 million in cash at closing and (ii) earn-out payments of up to $20.0 million to $25.0 million based on the MiFi Business achieving certain financial metrics. Company B indicated that it would finance the transaction using a combination of both equity and debt. At our request, a representative of Houlihan Lokey spoke with a representative of Company B who indicated that Company B was unlikely to increase its bid.

On May 26, 2016, Purchasers submitted a revised bid for the MiFi Business. The bid was not accompanied by a full mark-up of the draft purchase agreement, but did include a separate document proposing certain changes to the purchase agreement. The bid included a proposed purchase price of up to $65.0 million payable in three tranches: (i) $30.0 million in cash at closing, (ii) up to $20.0 million contingent upon achievement of certain target levels of 2017 operating income, and (iii) up to $15.0 million contingent upon achievement of certain target levels of 2017 and 2018 revenue and operating income. The bid included several significant terms and conditions, including a requirement that risks and liabilities would be allocated as if the transaction were an

 

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asset purchase, proposed changes to the indemnification terms and limitations, a requirement to obtain certain significant customer and supplier consents, proposed changes to the no-shop and fiduciary-out provisions, the addition of non-compete and employee non-solicitation provisions, an increase in the amount of the termination fee payable by Inseego in certain circumstances, removal of the reverse termination fee payable by the Purchasers in certain circumstances, the addition of certain clawback rights of up to 90% of the purchase price that would be triggered based on the occurrence of certain events related to significant customer and supplier relationships, and the addition of certain closing conditions.

Later on May 26, 2016, our senior management team discussed with representatives of Paul Hastings and Houlihan Lokey the bids and indications of interests that had been received from Purchasers, Company A and Company B. Representatives of Houlihan Lokey noted that none of the bids or indications of interest included a full mark-up of the draft purchase agreement, but that the bid from Purchasers included a separate document proposing certain changes to the purchase agreement. Representatives of Paul Hastings and Houlihan Lokey summarized the material terms of Purchasers’ bid, including the purchase price and earn-out structure, and also summarized Company A’s and Company B’s respective indications of interest, noting that Company A indicated that it would require financing for a transaction. Houlihan Lokey also provided an update regarding other potential bidders that had not submitted bids or indications of interest. The participants discussed extending the bid deadline to June 10, 2016 and also discussed certain terms of the proposals, including Purchasers’ proposed purchase price and earn-out structure and clawback mechanism. Our senior management team expressed their views that the clawback mechanism proposed by Purchasers was unacceptable. There was also discussion regarding Purchasers’ rejection of the reverse termination fee and related concerns of our senior management team and advisors regarding the fact that Purchasers’ proposed purchasing entity was a non-domestic entity with little to no known assets in the U.S. Our senior management team instructed our advisors to stress to bidders that a reverse termination fee would be required and that it would need to be held in escrow by a bank in the U.S. Our senior management team directed Houlihan Lokey to cease discussions with Company B and focus instead on Company A and Purchasers, with the objective of negotiating an increase in the amount of guaranteed consideration proposed.

On June 10, 2016, Purchasers submitted a revised bid and a mark-up of the draft purchase agreement. The bid included a purchase price of up to $65.0 million payable in three tranches: (i) $35.0 million in cash at closing, (ii) up to $20.0 million contingent upon achievement of certain target levels of 2017 operating income, and (iii) up to $10.0 million contingent upon achievement of certain target levels of 2017 and 2018 revenue and operating income. The bid reiterated that Purchasers would not need to seek external financing for the transaction. Purchasers proposed that the purchasing entity would be T.C.L. Industries Holdings (H.K.) Limited or its wholly owned special purpose vehicle and Purchasers acknowledged in the bid that an affiliate of the purchasing entity with significant assets would be required to be a party to the purchase agreement and other ancillary agreements. The bid included several significant terms and conditions, including a requirement to obtain certain significant customer and supplier consents, a proposed increase in the amount of the termination fee and a removal of the reverse termination fee, the inclusion of certain clawback rights of up to 50% of the purchase price that would be triggered based on the occurrence of certain events related to significant customer and supplier relationships and the addition of a working capital adjustment. The bid stated that the closing of the transaction would be expected to occur in late 2016 or the first quarter of 2017.

On June 13, 2016, our senior management team discussed Purchasers’ bid and mark-up of the draft purchase agreement with representatives of Paul Hastings and Houlihan Lokey. Representatives of Paul Hastings and Houlihan Lokey summarized the material terms of Purchasers’ bid, including the proposed purchase price and earn-out structure and the other significant terms and conditions, including the purchase price clawback rights, CFIUS approval, the proposed allocation of assets and liabilities, the proposed requirement to obtain certain significant customer and supplier consents, the removal of the reverse termination fee and the proposed timeline for closing the transaction. A representative of Houlihan Lokey mentioned that Company A had informed Houlihan Lokey that Company A was planning to submit a bid by June 17, 2016.

Later on June 13, 2016, our Board held a telephonic meeting with members of senior management and representatives of Paul Hastings to discuss, among other things, the proposal from Purchasers. Ms. Swenson described the significant terms of Purchasers’ proposal. Several of the directors expressed concern about the proposed clawback rights, the amount of guaranteed consideration and the proposed allocation of risk between the parties. Following discussion, our Board authorized Ms. Swenson to instruct Houlihan Lokey to have further conversations with Purchasers in an effort to increase Purchasers’ proposed purchase price and to address certain other terms contained in Purchasers’ proposal. Our Board also discussed the possibility of

 

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granting exclusivity to Purchasers if they agreed to pay $50.0 million in cash at closing without claw-back or contingent earn-out payments.

On June 16, 2016, Purchasers indicated their willingness to consider a purchase price of $50.0 million in cash at closing without any clawback rights or contingent earn-out payments, subject to certain conditions relating to, among other things, obtaining certain approvals and entering into an exclusivity agreement.

On June 17, 2016, our senior management team discussed with representatives of Paul Hastings and Houlihan Lokey the terms of Purchasers’ latest proposal, including certain open points. A representative of Houlihan Lokey noted that Purchasers had indicated a willingness to close the transaction sooner than previously indicated, although an exact timeline had not been relayed, and that Company A had not responded to Houlihan Lokey’s calls to inquire whether a bid would be forthcoming. There was a discussion regarding the Public Company’s proposal to require Purchasers to place the amount of the reverse termination fee in escrow. Members of our senior management team indicated that they had concerns about the fact that Purchasers’ proposed purchasing entity was a non-domestic entity with little to no known assets in the U.S., and that without an escrow of the reverse termination fee, it could be difficult to enforce the covenants regarding payment of the fee. It was determined that more information was needed regarding Purchasers’ proposed purchasing entity and whether such entity had substantial assets in the U.S. Our senior management team instructed Houlihan Lokey to offer Purchasers an exclusivity period of 30 days to negotiate the purchase agreement and to indicate to Purchasers that there were still several significant open points to be resolved.

On June 21, 2016, our senior management team discussed with representatives of Paul Hastings conversations between Paul Hastings and K&L Gates LLP, Purchasers’ legal counsel (“K&L Gates”). Representatives of Houlihan Lokey also attended this discussion. A representative of Paul Hastings explained that Purchasers expressed concern with the proposed deal structure and the allocation of unknown liabilities and he further explained that Paul Hastings was in the process of scheduling calls related to tax matters and CFIUS approval. A discussion ensued regarding the importance of confirming that the purchasing entity had significant assets in the U.S. and/or convincing Purchasers to agree to a reverse termination fee to be held in escrow.

On June 22, 2016, we entered into an exclusivity agreement with Purchasers pursuant to which we agreed to engage in negotiations with Purchasers on an exclusive basis regarding the sale of the MiFi Business to Purchasers.

On June 27, 2016, our senior management team spoke with representatives of Paul Hastings to discuss, among other things, certain significant open points in the purchase agreement, open diligence requests from Purchasers, the plan and timing for implementing the Reorganization, and the plan for managing certain significant customer and supplier relationships in connection with the potential transaction. A representative of Paul Hastings explained the process of obtaining CFIUS approval, and a discussion ensued regarding which party should bear the risk of a failure to obtain CFIUS approval. There was a discussion regarding the plan for preparing disclosure schedules and related due diligence matters. Later that day, a representative of Paul Hastings sent K&L Gates a revised draft of the purchase agreement.

On June 30, 2016, representatives of Paul Hastings spoke with representatives of K&L Gates to discuss, among other things, certain significant open points in the purchase agreement. The points discussed included but were not limited to, the allocation of ownership of intellectual property and other assets and liabilities, the concept of holding a reverse termination fee in escrow, matters related to CFIUS approval, tax matters, and issues related to the non-compete and employee non-solicitation provisions.

On July 7, 2016, a representative of K&L Gates sent Paul Hastings comments to the draft purchase agreement. The proposed changes included the addition of a closing condition regarding certain customer and supplier relationships, the removal of the reverse termination fee, the addition of certain withholding obligations, and the shifting of certain liabilities related to intellectual property matters to the Public Company.

Later on July 7, 2016, our senior management team discussed with representatives of Paul Hastings the latest comments to the draft purchase agreement from K&L Gates. Representatives of Houlihan Lokey also attended this discussion. A representative of Paul Hastings explained that there were still a significant number of open points in the purchase agreement, but that the remaining open points appeared to be resolvable. A discussion ensued regarding the importance of having a reverse termination fee held in escrow, the extent of the purchasing entity’s assets in the U.S., and the potential need for additional government approvals based on Purchasers’

 

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domicile. The participants further discussed other open points in the purchase agreement and the timing for the Reorganization.

On July 12, 2016, representatives of the Public Company, Paul Hastings and Houlihan Lokey spoke with representatives of Purchasers and K&L Gates to discuss several significant outstanding points in the purchase agreement. The participants also discussed the plan to have in-person negotiations in San Diego the following week.

Between July 13 and July 18, 2016, representatives of Paul Hastings sent K&L Gates a revised draft of the purchase agreement and other ancillary agreements and schedules.

On July 19 and July 20, 2016, we held full-day in-person negotiations with Purchasers at the offices of Paul Hastings in San Diego regarding the draft purchase agreement, disclosure schedules, ancillary agreements and other open items. The parties discussed various matters, including the overlap between the operations of the MiFi Business and the Retained Business, the treatment of stock options and other equity incentive plan awards held by employees of the MiFi Business and the plan for certain facilities used by the MiFi Business. The parties also discussed the reverse termination fee and the circumstances in which it would be payable. Purchasers agreed that a reverse termination fee would be payable in the event that Purchasers refused to close after the satisfaction of all of Purchasers’ closing conditions and in the event that Purchasers failed to obtain a required governmental approval other than CFIUS approval. However, Purchasers opposed our proposal that the reverse termination fee should also be payable if the parties failed to obtain CFIUS approval. As a compromise, the parties agreed that the reverse termination fee would be payable in the event that Purchasers materially breached their covenants regarding CFIUS approval and CFIUS approval was not obtained.

On July 24, 2016, a representative of Paul Hastings sent K&L Gates a revised draft of the purchase agreement and related disclosure schedules.

On July 28, 2016, our Board held a meeting with members of senior management and representatives of Paul Hastings to discuss, among other things, the status of discussions related to the potential sale of the MiFi Business. Mr. Newman reported on the key terms of the proposed transaction. Also discussed were the potential risks and benefits associated with the proposed transaction and the logistics associated with signing and completing such transaction.

Between August 4 and September 8, 2016, representatives of the Public Company and Purchasers continued to negotiate the terms of the purchase agreement and other ancillary documents, including the amount of the reverse termination fee payable by Purchasers and the amount of the termination fee payable by us. After further discussion, the parties agreed that the amount of each such fee would be $4.0 million. The parties negotiated certain other remaining points related to the purchase agreement, including deal protection measures, matters related to fiduciary duties, the division of facilities between the MiFi Business and the Retained Business, the size of the cap on indemnification claims, the scope of the legal opinions requested by Purchasers, the scope of the non-compete provision in the purchase agreement and certain tax and intellectual property matters.

Between September 8 and September 13, 2016, Purchasers conducted and completed customer and vendor due diligence.

On September 12, 2016, a representative of Paul Hastings sent K&L Gates a revised draft of the purchase agreement.

On September 15, 2016, a representative of K&L Gates sent Paul Hastings a draft of the escrow agreement pursuant to which the reverse termination fee payable by Purchasers would be held in escrow.

On September 16, 2016, our Board held a telephonic meeting with members of senior management and representatives of Paul Hastings to discuss, among other things, the status of negotiations with Purchasers and the proposed timeline for concluding negotiations and signing a definitive purchase agreement and certain ancillary agreements. Prior to the meeting, the directors were provided with certain materials, including financial information and materials illustrating the proposed structure steps. Mr. Newman also reviewed the Case A Projections and financial forecasts for the MiFi Business prepared by the Public Company’s management in September 2016, based on information available at that time, assuming the Public Company continued to operate the MiFi Business as part of the Public Company on a standalone basis after giving effect

 

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to associated costs, which are referred to elsewhere in this proxy statement as the Case B Projections and which are summarized in the section entitled “Proposal No. 1: The Sale Proposal—Certain Financial Projections—The Case B Projections” beginning on page 31. A discussion ensued regarding these financial forecasts and the outlook for our remaining businesses assuming the consummation of the sale of the MiFi Business. Mr. Newman then provided details regarding the expected timeline between the signing and closing of the proposed sale. A representative of Paul Hastings explained that the sale of the MiFi Business, as proposed, would require the Public Company to undergo an internal reorganization. The representative of Paul Hastings discussed in detail the steps for the reorganization and sale. Our Board members asked questions about the proposed terms of the transaction, including questions related to tax matters, the timing of the various steps, the treatment of liabilities and whether the Public Company would be selling the Novatel Wireless name. Mr. Newman explained that it was contemplated that the Novatel Wireless and MiFi names would be included in the sale, and that Inseego would continue to operate NWI’s businesses that were not sold. Our Board directed our senior management team and advisors to work to complete the purchase agreement and other documentation related to the proposed transaction.

Also on September 16, 2016, a representative of K&L Gates sent Paul Hastings comments to the draft purchase agreement.

Later on September 16, 2016, representatives of Paul Hastings provided the Inseego Board and the board of directors of Merger Sub (defined below) with a summary of the material terms of the proposed transaction and updated drafts of the transaction documents for the proposed Reorganization and Sale.

Between September 19 and September 21, 2016, Purchasers, the Public Company and their respective advisors met in Hong Kong to negotiate the purchase agreement and other documentation required for the transaction.

On September 19, 2016, our Board held a meeting with members of senior management and representatives of Paul Hastings and Houlihan Lokey to discuss, among other things, the status of negotiations with Purchasers and the proposed terms of the transaction documents for the Reorganization and Sale. Prior to the meeting, the directors were provided with, among other things, a summary of the material terms of the proposed transaction, current drafts of the transaction documents for the proposed Reorganization and Sale, and draft resolutions approving the Reorganization, including the Merger, the Sale and certain related matters. At this meeting, a representative of Paul Hastings described the reasons for and key steps and terms of the proposed Reorganization that would precede the closing of the Sale contemplated by the Purchase Agreement and explained to our Board senior management’s proposal for treatment of unvested stock options and restricted stock units held by employees that remained employed by NWI following the closing of the Sale. A representative of Paul Hastings summarized the material terms of the draft purchase agreement and other agreements related to the Reorganization and Sale. The terms discussed included, but were not limited to, the non-compete covenant contained in the Purchase Agreement, a proposed covenant relating to Inseego’s obligation to assume the defense of certain litigation matters, the no-shop provision and fiduciary out, other items related to the fiduciary duties of our Board, the termination provisions of the Purchase Agreement, including the circumstances under which Inseego would be required to pay a termination fee and the circumstances under which Purchasers would be required to pay a reverse termination fee, matters related to CFIUS approval and related termination provisions and the fact that the reverse termination fee would be held in escrow. At the request of our Board, Houlihan Lokey then reviewed its financial analysis of the $50.0 million aggregate cash consideration and rendered to our Board an oral opinion (confirmed by delivery of Houlihan Lokey’s written opinion, dated September 19, 2016, to our Board) to the effect that, as of such date and based on and subject to various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Houlihan Lokey in connection with the preparation of its opinion, the $50.0 million aggregate cash consideration to be received by Inseego in the Sale pursuant to the Purchase Agreement was fair to Inseego from a financial point of view. Following the discussion, our Board unanimously approved the Purchase Agreement, the Reorganization agreements and all of the other transaction documents and the transactions contemplated thereby, including the Reorganization, the Sale and certain related matters.

On September 20 and September 21, 2016, representatives of Purchasers, the Public Company and their respective legal advisors finalized the Purchase Agreement and other documentation required for the transaction.

On September 21, 2016, the parties executed the Purchase Agreement and certain ancillary agreements in Hong Kong.

 

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On September 22, 2016, after the close of trading of NWI’s common stock on The NASDAQ Global Select Market, NWI issued a press release announcing the transaction.

On November 8, 2016, we consummated the Reorganization and Inseego succeeded to NWI’s public company status and continued to be listed on The NASDAQ Global Select Market under the trading symbol “INSG.” Upon consummation of the Merger, the individuals who were the directors of NWI immediately prior to the Merger became the directors of Inseego.

On November 8, 2016, the Inseego Board, as the board of directors of the successor public company, adopted resolutions ratifying the NWI Board’s approval of the Purchase Agreement and expressly adopting the recommendation to the Inseego stockholders to approve the Purchase Agreement.

Recommendation of the Public Company Board and its Reasons for the Sale

The Public Company Board, with the assistance of the Public Company’s outside legal counsel and financial advisor, evaluated the terms of the Purchase Agreement and the Sale. After careful consideration, the Public Company Board, in meetings held on September 19, 2016 and November 8, 2016, (i) unanimously determined that the transactions contemplated by the Purchase Agreement, including the Sale, are advisable, fair to and in the best interests of Inseego and our stockholders, (ii) unanimously authorized and approved the Purchase Agreement and the Sale, and (iii) unanimously recommends that you vote “FOR” the Sale Proposal.

The Public Company Board considered a number of factors that it believed supported its decision to take the foregoing actions, including, but not limited to, the following:

Prospects for the MiFi Business and the Retained Business. The Public Company Board considered the current and historical financial condition, results of operations, competitive position, business strategy, strategic options and future growth prospects of the MiFi Business as operated by Inseego, including the financial projections (as described elsewhere in this proxy statement), and assessed a range of possible values to our stockholders associated with continuing to operate the MiFi Business. In addition, the Public Company Board considered the prospects for the Retained Business, including its good faith belief that the Retained Business presents better opportunities for customer diversification, higher margins and recurring revenue when compared to the MiFi Business as currently operated by Inseego. Finally, the Public Company Board considered its view that the proceeds from the Sale would provide Inseego with capital to support its strategic plan to focus its resources on continuing to develop the Retained Business.

Sale Consideration. The Public Company Board considered the $50.0 million in cash to be paid to Inseego by Purchasers as consideration for the MiFi Business in relation to (i) the historical earnings and financial performance of the MiFi Business and (ii) the Public Company Board’s estimate of the current and future prospects of the MiFi Business. The Public Company Board further considered the fact that the form of consideration payable to Inseego will be all cash, which will provide us with certainty of value and immediate liquidity. The Public Company Board also considered the fact that the Inseego consolidated group expects to have sufficient tax losses (including net operating loss carry forwards) to offset any gain expected to be realized by the group from the Sale, thereby limiting its federal income tax liability arising from the Sale.

Scope of the Sale Process. The Public Company Board considered the sale process conducted with respect to the MiFi Business, which included (i) contacting 56 potential bidders regarding the potential sale of the MiFi Business, (ii) executing confidentiality agreements with 19 potential bidders that expressed interest in a potential transaction, and (iii) receiving indications of interest from three of the prospective bidders. In addition, the Public Company Board considered its belief that, after extensive negotiations with representatives of Purchasers, Inseego obtained the highest price that Purchasers were willing to pay for the MiFi Business. The Public Company Board also considered the numerous changes favorable to the Public Company in the terms and conditions of the Purchase Agreement from those initially proposed by Purchaser.

Potential Strategic Alternatives. The Public Company Board considered possible alternatives to the sale of the MiFi Business to Purchasers, including other potential acquisitions, partnerships and opportunities for strategic transactions, as well as the possibility of continuing to operate the MiFi Business, the range of potential benefits to our stockholders of these alternatives and the timing and the likelihood, taking into account execution risks, as well as business, competitive, industry and market risks, of such alternatives. In addition, the Public Company Board considered the fact that, while there were discussions and meetings with other potential third party acquirors, each of those potential acquirors, other than Purchasers, ultimately determined not to pursue a

 

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transaction to purchase the MiFi Business. Given the foregoing and the operational and financial risks associated with continuing to operate the MiFi Business, the Public Company Board determined that the Sale was more favorable to our stockholders than any other strategic alternative reasonably available to us with respect to the MiFi Business.

Opinion of NWI’s Financial Advisor. The NWI Board considered the opinion of Houlihan Lokey rendered to the NWI Board on September 19, 2016 as to the fairness, from a financial point of view and as of such date, to Inseego of the $50.0 million aggregate cash consideration to be received in the Sale by Inseego pursuant to the Purchase Agreement, which opinion was based on and subject to the various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Houlihan Lokey in connection with the preparation of its opinion as more fully described in the section below entitled “Opinion of NWI’s Financial Advisor.”

Terms and Conditions of the Purchase Agreement. The Public Company Board considered its view of the following terms and conditions of the Purchase Agreement as favorable to Inseego:

 

   

NWI will retain the liabilities exclusively relating to the MiFi Business (other than pre-closing liabilities and certain litigation-related liabilities);

 

   

the Public Company Board may, at any time prior to obtaining the Required Stockholder Vote, in response to an unsolicited written acquisition proposal that the Public Company Board determines in good faith (after consultation with outside legal counsel and its financial advisor) constitutes or would reasonably be expected to result in a superior proposal, upon a good faith determination by the Public Company Board (after consultation with its outside legal counsel) that failure to take such action would be inconsistent with its fiduciary duties under applicable law, furnish information with respect to Inseego, NWI and their respective subsidiaries to any person making such acquisition proposal and participate in discussions or negotiations with the person making such acquisition proposal;

 

   

the Public Company Board may, any time prior to obtaining the Required Stockholder Vote, effect a Change in the Inseego Board Recommendation (as defined below) or Change in the NWI Board Approval (as defined below), as applicable, if the Public Company Board concludes in good faith, after consultation with outside legal counsel, that the failure to do so would be inconsistent with its fiduciary duties under applicable law, including in the circumstance where: (i) Inseego receives an unsolicited bona fide written acquisition proposal that the Public Company Board determines in good faith, after consultation with outside legal counsel and financial advisors, constitutes a superior proposal, or (ii) in response to an Intervening Event (as defined below);

 

   

the Public Company Board may terminate the Purchase Agreement and enter into a definitive agreement with respect to an alternative acquisition proposal that the Public Company Board concludes in good faith, after consultation with outside legal counsel and Inseego’s financial advisor, constitutes a superior proposal and the Public Company Board concludes in good faith, after consultation with outside legal counsel, that the failure to enter into such definitive agreement would be inconsistent with the Public Company Board’s fiduciary duties;

 

   

the requirement that the Sale be approved by our stockholders;

 

   

Inseego’s right to receive payment of a reverse termination fee of $4.0 million from Purchasers, in addition to other equitable remedies Inseego may be entitled to, in the event the Purchase Agreement is terminated under certain circumstances;

 

   

Inseego’s right to specifically enforce the terms of the Purchase Agreement and to cause Purchasers to complete the Sale and other transactions contemplated thereby on the terms and subject to the conditions and obligations set forth in the Purchase Agreement; and

 

   

the provisions in the Purchase Agreement related to the impact that a material adverse effect with respect to the MiFi Business would have on the obligation of Purchasers to complete the Sale, and particularly that any event, occurrence, fact, condition or change related to the MiFi Business, results of operations, financial condition or assets of the MiFi Business or Inseego’s ability to complete the transactions contemplated by the Purchase Agreement resulting from Inseego’s failure to meet any internal or published projections, forecasts or revenue or earnings predictions, the taking of any action by Inseego that is contemplated or required by the Purchase Agreement, or attributable to the announcement, pendency or completion of the transactions contemplated by the Purchase Agreement are excluded from the determination of whether a material adverse effect with respect to the MiFi Business has occurred that would permit Purchasers to elect not to complete the Sale.

 

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High Likelihood of Completion. The Public Company Board considered its view that the Sale has a high likelihood of being completed in a timely manner in light of (i) the Sale not requiring approval of the stockholders of either Purchaser, (ii) the Purchase Agreement providing for no contingencies relating to Purchasers’ financing of the transaction, (iii) the relative likelihood of obtaining required regulatory approvals, (iv) Purchasers’ representation that they will have sufficient financial resources to pay the purchase price and complete the Sale, and (v) equitable remedies available to us under the Purchase Agreement in the event of various breaches by Purchasers.

The Public Company Board also considered a variety of risks and other potentially negative factors concerning the Purchase Agreement and the transactions contemplated thereby, including, among others, the following:

 

   

the possibility that the Sale may not be completed for reasons that are beyond the control of Inseego and the adverse effects that a failure to complete the Sale could have on Inseego’s business, the market price for Inseego common stock and Inseego’s relationships with customers and employees, including the fact that (i) Inseego’s directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the Sale, (ii) Inseego will have incurred significant transaction costs, (iii) Inseego’s prospects could be adversely affected, or may be perceived by the market as having been adversely affected, and (iv) Inseego’s continuing business relationships may be disrupted;

 

   

the risk that various provisions of the Purchase Agreement, including the requirement that Inseego pay to Purchaser a termination fee of $4.0 million if the Purchase Agreement is terminated in connection with a superior proposal, may discourage other parties potentially interested in an acquisition of the MiFi Business from pursuing that opportunity (see the section below entitled “The Purchase Agreement—Termination of the Purchase Agreement”);

 

   

the restrictions on Inseego’s operation of the MiFi Business between the date of the Purchase Agreement and the completion of the Sale; and

 

   

the other factors described under “Risk Factors” beginning on page 14.

In addition to considering the factors described above, the Public Company Board considered the fact that its executive officers have interests in the Sale that are different from, or in addition to, the interests of Inseego’s stockholders generally, as discussed in the section below entitled “Interests of Certain Persons in the Sale.”

The above discussion of the factors considered by the Public Company Board is not intended to be exhaustive, but does set forth certain material factors considered by the Public Company Board. In view of the wide variety of factors considered in connection with its evaluation of the Sale and the complexity of these matters, the Public Company Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative or specific weight or values to any of these factors, and individual directors may have held varied views of the relative importance of the factors considered. The Public Company Board viewed its position and recommendation as being based on an overall review of the totality of the information available to it.

The Public Company Board recommends that our stockholders vote “FOR” the Sale Proposal.

Activities of Inseego Following the Sale

Among its reasons for approving the Sale, the Public Company Board believes that divesting the MiFi Business creates a path forward on which to operate the Retained Business, including Ctrack’s fleet management and telematics solutions business and FW’s connectivity solutions business. The Public Company Board believes that the Retained Business is a valuable business and being able to narrow Inseego’s focus will help the Retained Business continue to grow. The Public Company Board will continue to review Inseego’s ongoing strategy, business plan and long-term forecasts for the Retained Business, as well as Inseego’s strategic alternatives prior to and following the completion of the Sale. Following the Sale, Inseego will continue to be a public company operating under the name Inseego Corp., and immediately after the completion of the Sale, all of Inseego’s revenues and income will be generated by the Retained Business, aside from the payments related to the Sale.

 

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Certain Financial Projections

Other than guidance that the Public Company historically has made available on a quarterly basis, the Public Company does not, as a matter of course, publicly disclose long-term forecasts or internal projections as to future performance, earnings or other results, given, among other things, the unpredictability of the underlying assumptions and estimates.

However, in connection with the Sale, the Public Company’s senior management, between December 2015 and January 2016, prepared, based on information available at that time, financial projections for the sale of NWI’s MiFi products to Verizon and Bell, as well as to distributors of MiFi products, assuming the MiFi Business was acquired by, and operated as a division of, a larger company that provides infrastructure, marketing and operational support and back-office services for the MiFi Business after giving effect to related cost savings (the “Case A Projections”). The Case A Projections were provided or made available to the Purchasers and other potential acquirors prior to the execution of the Purchase Agreement with the Purchasers, as well as to the Public Company Board and Houlihan Lokey.

In September 2016, the Public Company’s senior management prepared, based on information available at that time, financial projections for the MiFi Business assuming the Public Company continued to operate the MiFi Business as part of the Public Company on a standalone basis after giving effect to associated costs (the “Case B Projections”). As a result, the Case B Projections are materially different from the Case A Projections. The Case B Projections were prepared for use by the Public Company Board in connection with its evaluation of the Sale as compared to retaining the MiFi Business and continuing to operate such business as part of the Public Company on a standalone basis. The Public Company’s senior management also provided the Case B Projections to the Public Company Board and Houlihan Lokey. Based on the assessments of the senior management of the Public Company and the Public Company Board regarding the Case B Projections relative to the Case A Projections, the Public Company Board directed Houlihan Lokey to use and rely on the Case B Projections for purposes of its financial analyses and opinion described in the section below entitled “Opinion of NWI’s Financial Advisor,” as reflective of the best estimates and judgments of the Public Company’s senior management as to the future financial results and condition of the MiFi Business as a continued operation (and with associated costs) of the Public Company on a standalone basis and the other matters covered thereby.

The financial projections were not prepared with a view toward public disclosure, however, Inseego has included below a summary of the financial projections to provide you with access to certain non-public information that was furnished to other parties in connection with the Sale. The financial projections reflect numerous estimates and assumptions made by the Public Company’s senior management team with respect to general business and economic conditions and competitive, regulatory and other future events, as well as, among other things, matters related specifically to the Public Company’s recent operational performance, product gross margins and anticipated development expenses, all of which are difficult to predict and inherently subjective and many of which are beyond the Public Company’s control. Please read the information set forth in the section below entitled “Important Information About the Financial Projections.”

Case A Projections – Divisional Sale Scenario

The Case A Projections assume (i) that the MiFi Business is acquired as a division of a larger company that provides infrastructure, marketing and operational support and back-office services for the MiFi Business (giving effect to related cost savings), (ii) the continuity of NWI’s existing relationships with Verizon and Bell, as well as distributors of MiFi products, (iii) continuity in the MiFi Business workforce, (iv) modest wage increases in line with expected inflation, (v) new product development of next-generation versions of existing products or awarded product slots, (vi) a reduction of the liability related to the defense of intellectual property lawsuits on historical product sales, which would be retained by the seller, and (vii) quarterly capital expenditures in line with historical levels.

 

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     Fiscal Year
(dollars in millions)
 
     2016E     2017E     2018E  

Revenue, Net

   $ 146.2      $ 151.9      $ 156.8   

Non-GAAP Gross Margin(1)(3)

     30.1     29.7     29.2

Adjusted EBITDA(2)(3)

   $ 24.9      $ 27.2      $ 27.8   

 

(1)

Non-GAAP gross margin is a non-GAAP financial measure and excludes restructuring charges, share-based compensation expense and charges related to NWI’s acquisition and divestiture activities, including the amortization of the step-up to fair value of finished goods from acquisitions and other compensation expense related to acquisitions.

(2)

Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, which Inseego calculates as revenue, minus total operating costs and expenses, plus depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure and excludes restructuring charges and share-based compensation expense.

(3)

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Inseego may not be comparable to similarly titled amounts used by other companies.

The Case B Projections – Continuing Operations Scenario

The Case B Projections (i) assume that the Public Company continues to operate the MiFi Business (giving effect to associated costs), (ii) assume the continuity of NWI’s existing relationships with Verizon and Bell, as well as distributors of MiFi products, (iii) reflect uncertainties regarding new product launches, including potential product volumes, selling prices and costs of materials, (iv) assume pro rata allocated infrastructure and public company expenses based on the percentage of revenues that the MiFi Business represents to the total revenues of the Public Company, and (v) reflect the retention of legal expenses related to the defense of intellectual property lawsuits on historical product sales.

 

     Fiscal Year
(dollars in millions)
 
     2016E     2017E     2018E     2019E     2020E  

Revenue, Net

   $ 149.0      $ 142.3      $ 140.4      $ 138.3      $ 136.2   

Non-GAAP Gross Margin(1)(3)

     27.1     21.8     22.5     22.5     22.5

Adjusted EBITDA(2)(3)

   $ 11.2      $ 6.4      $ 6.9      $ 6.0      $ 5.3   

 

(1)

Non-GAAP gross margin is a non-GAAP financial measure and excludes restructuring charges, share-based compensation expense and charges related to NWI’s acquisition and divestiture activities, including the amortization of the step-up to fair value of finished goods from acquisitions and other compensation expense related to the acquisitions.

(2)

Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, which Inseego calculates as revenue, minus total operating costs and expenses, plus depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure and excludes restructuring charges and share-based compensation expense.

(3)

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Inseego may not be comparable to similarly titled amounts used by other companies.

Important Information About the Financial Projections

While the financial projections were prepared in good faith and management believes the assumptions on which the financial projections were based were reasonable for the scenarios considered, no assurance can be made regarding future events. Since the projections cover multiple years, such information by its nature becomes less predictive with each successive year. The estimates and assumptions underlying the financial projections involve judgments with respect to, among other things, future economic, competitive, regulatory, and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive, and regulatory uncertainties and contingencies, including, among others, the risks and uncertainties described under the section entitled “Cautionary Statement Regarding Forward-Looking Statements,” all of which are difficult to predict and many of which are beyond Inseego’s and/or Purchaser’s control and will be beyond their control following the Sale. There can be no assurance that the underlying assumptions or projected results will be realized, and actual results may differ materially from those reflected in the financial projections, whether or not the Sale is completed.

 

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The financial projections summarized in this section were not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial data, published guidelines of the SEC regarding forward-looking statements, or accounting principles generally accepted in the U.S. (“GAAP”). Inseego’s senior management team prepared the financial projections in good faith and on a reasonable basis based on the best information available to Inseego’s senior management team at the time such projections were prepared. The financial projections, however, are not actual results and should not be relied upon as being necessarily indicative of actual future results, and readers of this proxy statement are cautioned not to place undue reliance on the information provided in this “Certain Financial Projections” section of the proxy statement.

All of the financial projections summarized in this section were prepared by, and are the responsibility of, Inseego’s senior management team, as indicated. Neither Mayer Hoffman McCann P.C. (“MHM”), Inseego’s current independent registered public accounting firm, nor Ernst & Young LLP (“E&Y”), Inseego’s previous independent registered public accounting firm, provided any assistance in preparing the financial projections and neither MHM nor E&Y has examined, compiled, or otherwise performed any procedures with respect to the financial projections and, accordingly, neither MHM nor E&Y has expressed any opinion or given any other form of assurance with respect thereto and assumes no responsibility for the prospective financial information. The E&Y reports incorporated by reference into this proxy statement relate solely to the historical financial information of the Public Company. Such reports do not extend to the financial projections and should not be read to do so.

By including in this proxy statement a summary of the financial projections, neither the Public Company nor any of its representatives has made or makes any representation to any person regarding the ultimate performance of the MiFi Business compared to the information contained in the Public Company’s financial projections. Inseego has made no representation to Purchasers, in the Purchase Agreement or otherwise, concerning the financial projections. The financial projections summarized in this section were prepared during the periods described above and have not been updated to reflect any changes since the date of their preparation or any actual results of the MiFi Business. Inseego undertakes no obligation, except as required by law, to update or otherwise revise the financial projections to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are not realized, or to reflect changes in general economic or industry conditions.

The inclusion of the financial projections in this proxy statement should not be regarded as an indication that Inseego, the Public Company Board, Houlihan Lokey or any party that received the financial projections then considered, or now considers, the financial projections to be necessarily predictive of actual future events, and the financial projections should not be relied upon as such. Inseego views the financial projections as non-material because of the inherent risks and uncertainties associated with such long-range financial projections.

The foregoing summary of the financial projections is not included in this proxy statement in order to induce any Inseego stockholder to vote in favor of the Sale Proposal or any other Proposals.

Opinion of NWI’s Financial Advisor

At a meeting of the NWI Board held to evaluate the Sale on September 19, 2016, Houlihan Lokey rendered to the NWI Board an oral opinion (confirmed by delivery of Houlihan Lokey’s written opinion, dated September 19, 2016, to the NWI Board) as to the fairness, from a financial point of view and as of such date, to Inseego of the $50.0 million aggregate cash consideration to be received in the Sale by Inseego pursuant to the Purchase Agreement, which opinion was based on and subject to the various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Houlihan Lokey in connection with the preparation of its opinion. For purposes of Houlihan Lokey’s analyses and opinion, the term “NWI Board” refers to the board of directors of NWI prior to the Reorganization.

Houlihan Lokey’s opinion was directed to the NWI Board (in its capacity as such), addressed the fairness, from a financial point of view and as of September 19, 2016, to Inseego of the $50.0 million aggregate cash consideration to be received in the Sale by Inseego pursuant to the Purchase Agreement and did not address any other aspect or implication of the Sale or related transactions or any other agreement, arrangement or understanding. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this proxy statement and describes the procedures followed, assumptions made, qualifications and

 

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limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. Neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, a recommendation to the NWI Board, any security holder or any other person as to how to act or vote with respect to any matter relating to the Sale, any related transactions or otherwise.

In connection with its opinion, Houlihan Lokey made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Among other things, Houlihan Lokey:

 

   

reviewed a draft, dated September 15, 2016, of the Purchase Agreement;

 

   

reviewed certain publicly available business and financial information relating to the MiFi Business that Houlihan Lokey deemed relevant;

 

   

reviewed certain information relating to the historical, current and future operations, financial condition and prospects of the MiFi Business made available to Houlihan Lokey by NWI, including (i) financial projections and other estimates prepared by or discussed with the management of NWI, which projections and other estimates such management advised Houlihan Lokey reflect the MiFi Business and its prospects as a continued operation (and with associated costs) of NWI on a standalone basis for the fiscal years ending December 31, 2016 through December 31, 2020 (such standalone financial projections and other estimates, the “Standalone Projections”) and (ii) alternative financial projections and other estimates relating to the MiFi Business prepared by or discussed with the management of NWI in connection with NWI’s sale process for the MiFi Business, which projections and other estimates such management advised Houlihan Lokey reflect the MiFi Business and its prospects within the infrastructure (and acquisition-related cost savings) of potential buyers (such alternative financial projections and other estimates, the “Sale Case Projections”);

 

   

spoke with certain members of the management of NWI and certain of its representatives and advisors regarding the businesses, operations, financial condition and prospects of the MiFi Business, the Sale, related transactions and related matters;

 

   

compared the financial and operating performance of the MiFi Business with that of public companies that Houlihan Lokey deemed relevant; and

 

   

conducted such other financial studies, analyses and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate.

Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to Houlihan Lokey, discussed with or reviewed by Houlihan Lokey, or publicly available, and did not assume any responsibility with respect to such data, material and other information. As the NWI Board was aware, based on the assessments of the management of NWI and the NWI Board regarding the Standalone Projections relative to the Sale Case Projections, at the direction of the NWI Board, Houlihan Lokey utilized and relied upon the Standalone Projections for purposes of its analyses and opinion. In addition, management of NWI advised Houlihan Lokey, and Houlihan Lokey assumed, at the direction of the NWI Board, that the Standalone Projections were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of the MiFi Business as a continued operation (and with associated costs) of NWI on a standalone basis and the other matters covered thereby. Houlihan Lokey expressed no opinion with respect to the Standalone Projections or the assumptions on which they were based. Houlihan Lokey relied upon and assumed, without independent verification, that there was no change in the businesses, assets, liabilities, financial condition, results of operations, cash flows or prospects of the MiFi Business since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Houlihan Lokey that would have been material to its analyses or opinion, that the Standalone Projections reflect all of the assets and liabilities to be assumed and sold in the Sale and that there was no information or any facts that would make any of the information reviewed by Houlihan Lokey incomplete or misleading. Houlihan Lokey was advised by NWI that there were no audited financial statements for the MiFi Business and, accordingly, Houlihan Lokey relied upon and assumed, without independent verification, that there would be no information contained in any such financial statements, if available, not otherwise discussed with or reviewed by Houlihan Lokey that would be meaningful in any respect to its analyses or opinion. Houlihan Lokey also relied upon, without independent verification, the assessments of the management of NWI as to, among other things, (i) the related transactions and the assets, liabilities and financial and other terms involved, (ii) the potential impact on the MiFi Business of certain market, competitive and other

 

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trends in and prospects for, and governmental and regulatory matters relating to, the mobile connectivity industry, including customer concentration, (iii) existing and future technology, products, product candidates, services and intellectual property of the MiFi Business and the validity of, and risks associated with, such technology, products, product candidates, services and intellectual property (including, without limitation, the validity and life of patents or other intellectual property, the timing and probability of successful testing, development and commercialization of such products and product candidates and approval thereof by appropriate governmental authorities), (iv) existing and future licenses and other collaboration arrangements of the MiFi Business and (v) existing and future relationships, agreements and arrangements with, and the ability to attract and retain, key wireless telecommunications operators, manufacturers, customers, distributors and other commercial relationships of the MiFi Business. Houlihan Lokey assumed that there would be no developments with respect to any such matters that would have an effect on the MiFi Business, NWI, Inseego, the Sale or related transactions that would be meaningful in any respect to its analyses or opinion.

Houlihan Lokey relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the Purchase Agreement and related agreements were true and correct, (b) each party to the Purchase Agreement and related agreements would fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the Sale and related transactions would be satisfied without waiver thereof, and (d) the Sale and related transactions would be consummated in a timely manner in accordance with the terms described in the Purchase Agreement and related agreements, without any amendments or modifications. Houlihan Lokey also relied upon and assumed, without independent verification, that (i) the Sale and related transactions would be consummated in a manner that complies in all respects with all applicable foreign, federal and state statutes, rules and regulations and other relevant documents and requirements, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the Sale and related transactions would be obtained and that no delay, limitations, restrictions or conditions would be imposed or occur or amendments, modifications or waivers made that would have an effect on the MiFi Business, NWI, Inseego, the Sale or related transactions that would be meaningful in any respect to Houlihan Lokey’s analyses or opinion. Houlihan Lokey further relied upon and assumed, without independent verification, at the direction of NWI, that any adjustments to the Sale consideration and any liabilities retained by Inseego relating to the MiFi Business in connection with the Sale and related transactions would not have an effect on the MiFi Business, NWI, Inseego, the Sale or related transactions that would be meaningful in any respect to Houlihan Lokey’s analyses or opinion. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that the final executed Purchase Agreement would not differ in any respect from the draft of the Purchase Agreement identified above.

Furthermore, in connection with its opinion, Houlihan Lokey was not requested to make, and did not make, any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance sheet or otherwise) of the MiFi Business, NWI, Inseego or any other business or party nor was Houlihan Lokey provided with any such appraisal or evaluation. Houlihan Lokey did not estimate, and expressed no opinion regarding, the liquidation value of the MiFi Business, NWI, Inseego or any other business or entity. Houlihan Lokey did not undertake an independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities to which the MiFi Business, NWI, Inseego or any other business or entity was or may be a party or was or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the MiFi Business, NWI, Inseego or any other business or entity was or may be a party or was or may be subject.

Houlihan Lokey was not requested to, and did not, advise the NWI Board or any other party with respect to alternatives to the Sale or any related transactions. Houlihan Lokey considered the results of the third-party solicitation process conducted by NWI, with Houlihan Lokey’s assistance, with respect to a possible sale of the MiFi Business. Houlihan Lokey’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Houlihan Lokey as of, the date of its opinion. Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to Houlihan Lokey’s attention after the date of its opinion. Houlihan Lokey also did not express any opinion as to the price or range of prices at which shares of NWI’s common stock or securities of Inseego will trade, or any other securities of any of NWI or Inseego may be transferable, at any time.

Houlihan Lokey’s opinion was furnished for the use of the NWI Board (in its capacity as such) in connection with its evaluation of the Sale and may not be used for any other purpose without Houlihan Lokey’s prior written consent. Houlihan Lokey’s opinion is not intended to be, and does not constitute, a recommendation to

 

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the NWI Board, any security holder or any other party as to how to act or vote with respect to any matter relating to the Sale, any related transactions or otherwise.

Houlihan Lokey was not requested to opine as to, and did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the NWI Board, NWI, Inseego, their respective security holders or any other party to proceed with or effect the Sale or related transactions, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect of, the Sale (other than the $50.0 million aggregate cash consideration to the extent expressly specified in Houlihan Lokey’s opinion), related transactions or otherwise, including, without limitation, any terms, aspects or implications of any related agreements or indemnification or other agreements or arrangements to be entered into in connection with or contemplated by the Sale, related transactions or otherwise, (iii) the fairness of any portion or aspect of the Sale or any related transactions to the holders of any class of securities, creditors or other constituencies of NWI or Inseego, or to any other party, (iv) the relative merits of the Sale or related transactions as compared to any alternative business strategies or transactions that might be available for NWI, Inseego or any other party, (v) the fairness of any portion or aspect of the Sale or any related transactions to any one class or group of NWI’s, Inseego’s or any other party’s security holders or other constituents vis-à-vis any other class or group of NWI’s, Inseego’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents), (vi) whether or not NWI, Inseego, their respective security holders or any other party is receiving or paying reasonably equivalent value in the Sale or related transactions, (vii) the solvency, creditworthiness or fair value of NWI, Inseego or any other participant in the Sale or related transactions, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Sale or related transactions, any class of such persons or any other party, relative to the Sale consideration or otherwise. Furthermore, no opinion, counsel or interpretation was intended in matters that required legal, regulatory, accounting, insurance, tax or other similar professional advice. Houlihan Lokey assumed that such opinions, counsel or interpretations had been or would be obtained from appropriate professional sources. Furthermore, Houlihan Lokey relied, with the consent of the NWI Board, on the assessments of the NWI Board, NWI and their respective advisors as to all legal, regulatory, accounting, insurance and tax matters (including, without limitation, any election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the “Code”), or other tax consequences of the Sale or related transactions) with respect to the MiFi Business, NWI, Inseego, the Sale, related transactions or otherwise.

In performing its analyses, Houlihan Lokey considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company or business used in Houlihan Lokey’s analyses or otherwise reviewed for comparative purposes is identical to the MiFi Business and an evaluation of the results of those analyses is not entirely mathematical. As a consequence, mathematical derivations (such as the high, low, mean and median) of financial data are not by themselves meaningful and in selecting the ranges of multiples to be applied were considered in conjunction with experience and the exercise of judgment. The estimates contained in the financial forecasts and the implied reference range values indicated by Houlihan Lokey’s analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of NWI. Much of the information used in, and accordingly the results of, Houlihan Lokey’s analyses are inherently subject to substantial uncertainty.

Houlihan Lokey’s opinion was only one of many factors considered by the NWI Board in evaluating the Sale and related transactions. Neither Houlihan Lokey’s opinion nor its analyses were determinative of the consideration payable in the Sale or of the views of the NWI Board, management or any other party with respect to the Sale, related transactions or the Sale consideration. Houlihan Lokey was not requested to, and it did not, recommend the specific consideration payable in the Sale and related transactions or that any given consideration constituted the only appropriate consideration for the Sale and related transactions. The type and amount of consideration payable in the Sale and related transactions were determined through negotiation between NWI and Purchaser Parent, and the decision for NWI to enter into the Purchase Agreement was solely that of the NWI Board. Except as described in this summary, NWI imposed no other instructions or limitations on the investigations made or procedures followed by Houlihan Lokey in rendering its opinion.

 

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Financial Analyses

In preparing its opinion to the NWI Board, Houlihan Lokey performed certain financial analyses described below. The summary of Houlihan Lokey’s analyses is not a complete description of the analyses underlying Houlihan Lokey’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Houlihan Lokey’s opinion nor its underlying analyses is readily susceptible to summary description. Houlihan Lokey arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor. While the results of each analysis were taken into account in reaching Houlihan Lokey’s overall conclusion with respect to fairness, Houlihan Lokey did not make separate or quantifiable judgments regarding individual analyses. Accordingly, Houlihan Lokey believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors, could create a misleading or incomplete view of the processes underlying Houlihan Lokey’s analyses and opinion.

The following is a summary of the material financial analyses performed by Houlihan Lokey in connection with the preparation of its opinion and reviewed with the NWI Board on September 19, 2016. The order of the analyses does not represent relative importance or weight given to those analyses by Houlihan Lokey. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create a misleading or incomplete view of Houlihan Lokey’s analyses.

Introduction

In evaluating the MiFi Business from a financial perspective, Houlihan Lokey performed certain financial analyses as more fully described below. For purposes of such analyses, Houlihan Lokey reviewed a number of financial and operating metrics, as applicable, including:

 

   

Enterprise value – generally, the value as of a specified date of the relevant company’s equity market value plus minority interests, debt outstanding and preferred stock and less cash and cash equivalents, based on reported fully-diluted shares.

 

   

EBITDA – generally, the amount of the relevant company’s or business’ earnings before interest, taxes, depreciation and amortization.

 

   

Adjusted EBITDA – generally, the relevant company’s EBITDA, adjusted for certain non-recurring items.

 

   

NFY+1 – generally, the relevant company’s fiscal year following such company’s or business’ next fiscal year for which financial information has not been made public.

 

   

NFY+2 – generally, the relevant company’s fiscal year following NFY+1.

Unless the context indicates otherwise, enterprise values and equity values used in the selected companies analysis described below were calculated using closing prices of the common stock of the selected companies listed below on September 16, 2016. Estimates of the future financial and operating performance of the MiFi Business relied upon by Houlihan Lokey for purposes of the financial analyses described below were based on the Standalone Projections. Estimates of the future financial and operating performance of the selected companies listed below were based on publicly available Wall Street research analysts’ estimates, public filings and other publicly available information for those companies.

Selected Companies Analysis. Houlihan Lokey reviewed selected financial and stock market data, as applicable, of the MiFi Business and the following eight selected publicly traded companies with operations in the mobile connectivity industry (the “Selected Companies”):

 

   

ASUSTek Computer Inc.;

 

   

Brocade Communications Systems, Inc.;

 

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    Digi International Inc.;

 

    NETGEAR, Inc.;

 

    Sierra Wireless, Inc.;

 

    Telit Communications PLC;

 

    Ubiquiti Networks, Inc.; and

 

    ZTE Corporation.

The financial and stock market data reviewed, to the extent publicly available, included:

 

    Enterprise value as a multiple of NFY+1 estimated adjusted EBITDA; and

 

    Enterprise value as a multiple of NFY+2 estimated adjusted EBITDA.

The overall low to high NFY+1 estimated adjusted EBITDA and NFY+2 estimated adjusted EBITDA multiples observed for the Selected Companies were 5.9x to 14.5x (with a mean of 8.0x and a median of 7.4x) and 4.7x to 7.7x (with a mean of 6.3x and a median of 6.1x), respectively. Houlihan Lokey then applied a selected range of NFY+1 estimated adjusted EBITDA multiples derived from the Selected Companies of 6.0x to 7.0x to the fiscal year 2017 estimated EBITDA of the MiFi Business and a selected range of NFY+2 estimated adjusted EBITDA multiples derived from the Selected Companies of 5.0x to 6.0x to the fiscal year 2018 estimated EBITDA of the MiFi Business based on the Standalone Projections. This analysis indicated the following approximate implied equity value reference ranges for the MiFi Business, as compared to the Sale consideration:

 

   

Implied Equity Value Reference Ranges Based on:

     

Sale Consideration

   
   

NFY+1

Adjusted EBITDA

     

NFY+2

Adjusted EBITDA

           
  $38.6 million - $45.0 million     $34.7 million - $41.6 million     $50.0 million  

Discounted Cash Flow Analysis. Houlihan Lokey performed a discounted cash flow analysis of the MiFi Business by calculating the estimated present value of the standalone unlevered, after-tax free cash flows that the MiFi Business was forecasted to generate during the balance of the fiscal year ending December 31, 2016 through the full fiscal year ending December 31, 2020 based on the Standalone Projections. For purposes of this analysis, stock-based compensation was treated as a cash expense. Implied terminal values of the MiFi Business were derived by applying to the terminal year unlevered, after-tax free cash flows of the MiFi Business a selected range of perpetuity growth rates of (1.50%) to 1.50%. Present values (as of September 16, 2016) of the cash flows and terminal values were calculated using a selected discount rate range of 11.0% to 14.0%. This analysis indicated the following approximate implied equity value reference range for the MiFi Business, as compared to the Sale consideration:

 

Implied Equity Value Reference Range

  

Sale Consideration

$17.7 million - $25.0 million    $50.0 million

Other Matters

Houlihan Lokey was engaged by NWI to act as its financial advisor in connection with the Sale and provide financial advisory services, including the delivery of an opinion to the NWI Board as to the fairness, from a financial point of view and as of the date of such opinion, to Inseego of the $50.0 million aggregate cash consideration to be received in the Sale by Inseego pursuant to the Purchase Agreement. NWI engaged Houlihan Lokey based on, among other things, Houlihan Lokey’s experience and reputation. Houlihan Lokey is regularly engaged to provide financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings. Pursuant to its engagement by NWI, Houlihan Lokey is entitled to an aggregate fee currently estimated to be approximately $2.1 million for its services, of which a portion was payable upon Houlihan Lokey’s engagement by NWI, a portion was payable upon delivery of Houlihan Lokey’s opinion and approximately $1.7 million is contingent upon consummation of the Sale. NWI also has agreed to reimburse Houlihan Lokey for certain expenses and to indemnify Houlihan Lokey, its affiliates and certain related parties against certain liabilities and expenses, including certain liabilities under the federal securities laws, arising out of or related to Houlihan Lokey’s engagement.

 

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In the ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, NWI, Inseego, Purchaser Parent, Purchaser or any other party that may be involved in the Sale or any related transactions and their respective affiliates or any currency or commodity that may be involved in the Sale or any related transactions.

Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and/or other financial or consulting services to NWI, Inseego, Purchaser Parent, Purchaser, other participants in the Sale or any related transactions or certain of their respective affiliates in the future, for which Houlihan Lokey and its affiliates may receive compensation. Furthermore, in connection with bankruptcies, restructurings, and similar matters, Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity holders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to, NWI, Inseego, Purchaser Parent, Purchaser, other participants in the Sale or certain of their respective affiliates, for which advice and services Houlihan Lokey and such affiliates have received and may receive compensation.

Material U.S. Federal Income Tax Consequences of the Sale

The following is a discussion of the anticipated material U.S. federal income tax consequences of the Sale. This summary is based upon the Code, existing, proposed and temporary U.S. Treasury Regulations promulgated thereunder and administrative and judicial interpretations thereof, in each case as in effect and available on the date hereof. All the foregoing is subject to change, which change could apply retroactively and could affect the tax consequences described below. No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. In addition, this summary does not discuss any non-U.S., alternative minimum tax, state, or local tax considerations.

The parties to the proposed Sale will make an election pursuant to Section 338(h)(10) of the Code. As a result, the Sale will be treated as a taxable sale of NWI’s corporate assets in exchange for cash and the assumption of certain liabilities. NWI generally will recognize gain or loss based on the difference between the consideration received (including the assumption of liabilities) and its adjusted tax bases in the assets deemed sold. NWI expects to have sufficient losses (including net operating loss carry forwards) to offset any gain expected to be realized from this deemed asset sale, limiting any federal income tax liability arising from the Sale solely to potential alternative minimum tax liability, if any. Any tax liability would be reported on Inseego’s consolidated income tax return for the taxable period that includes the Sale. Stockholders of Inseego will not realize any gain or loss for U.S. federal income tax purposes as a result of the Sale.

This summary is not a complete description of all of the tax consequences of the Sale that may be relevant to you. Stockholders should consult their own tax advisers for advice regarding the U.S. federal, state, local and other tax consequences if proceeds from the Sale are distributed or paid to stockholders, such as in a dividend or share repurchase.

Accounting Treatment of the Sale

The Sale will be accounted for as a “sale of a business” by Inseego, as that term is used under GAAP, for accounting and financial reporting purposes.

Government Approvals

Under Exon-Florio, the President of the United States of America is authorized to prohibit or suspend acquisitions, mergers or takeovers by foreign persons of a U.S. business if the President determines, after investigation, that the exercise of control by a foreign person over an acquired U.S. business has the potential to impair the national security of the United States and that other provisions of existing law do not provide adequate authority to address the potential threat.

Pursuant to Exon-Florio, CFIUS has been delegated the President’s authority to review on national security grounds any transaction whereby a foreign party acquires control of a U.S. business. CFIUS can initiate review

 

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of a transaction on its own or in response to receipt of a JVN submitted by the parties to a transaction that potentially implicates Exon-Florio concerns prior to the closing of such transaction.

The parties submitted a JVN to CFIUS on November 4, 2016 and agreed to supply additional information and documents as required in connection with the CFIUS review process. CFIUS accepted the JVN for review as of November 22, 2016 and notified the parties that the final day of its initial 30-day review of the Sale will be December 21, 2016. CFIUS can clear the Sale on or before the end of the initial 30-day period, or notify the parties that the case is being placed into investigation for a period of up to an additional 45 days. Upon completion of the investigation, if CFIUS determines that there are no unresolved national security concerns with respect to the Sale, it can clear the matter at that time. If CFIUS determines that there are unresolved national security concerns, it can submit a report to the President recommending that the Sale be suspended or prohibited. The President would then have 15 days to reach a determination regarding whether to suspend or prohibit the Sale. At any time during this process, the parties might determine to voluntarily withdraw, and possibly refile, the JVN in order to address any concerns raised by CFIUS in the course of a review or investigation.

No Dissenters’ Rights

Under the DGCL, dissenters’ rights are not available to any stockholders in connection with the Sale, regardless of whether such stockholders vote for or against the approval of the Sale Proposal, because the Sale does not constitute a merger or consolidation.

Employee Matters

Pursuant to the Purchase Agreement, prior to the closing of the Sale, Purchasers will interview certain NWI employees who primarily perform services for, or with respect to, the MiFi Business and identify which of such employees they would like NWI to retain following the closing of the Sale (the “MiFi Business Employees”). Inseego will terminate or extend offers of employment with Inseego to all employees of NWI other than the MiFi Business Employees. Upon the closing of the Sale, the MiFi Business Employees will continue their employment with NWI.

Treatment of MiFi Business Employee Options and Restricted Stock Units

Stock Options. The Public Company Board has determined, in accordance with the terms of the applicable compensation plans, that upon the closing of the Sale (i) all vested in-the-money stock options held by any MiFi Business Employee will be cancelled and substituted with cash equal to the difference between the exercise price of such stock options and the price of Inseego’s common stock as of the closing date of the Sale, (ii) all unvested, in-the-money stock options held by any MiFi Business Employee, other than Stephen Sek, shall be cancelled and substituted with cash equal to the difference between the exercise price of such holder’s unvested in-the-money stock options that would have vested on or prior to March 31, 2017 and the price of Inseego’s common stock as of the closing date of the Sale and (iii) all vested and unvested stock options held by any MiFi Business Employee that are out-of-the-money will be cancelled without any compensation paid therefore.

Restricted Stock Units. The Public Company Board has determined, in accordance with the terms of the applicable compensation plans, that upon the closing of the Sale, each restricted stock unit outstanding as of the completion of the Sale and held by any MiFi Business Employee, other than Mr. Sek, will be cancelled and substituted with a number of shares of Inseego common stock equal to the number of shares that would have be issued for restricted stock units scheduled to vest on or prior to March 31, 2017.

Interests of Certain Persons in the Sale

In considering the recommendation of the Public Company Board to vote “FOR” the Sale Proposal, you should be aware that the directors and executive officers of Inseego and NWI have interests in the Sale that may be in addition to, or different from, their interests as stockholders. These interests relate to or arise from, among other things:

 

   

cash payments to potentially be received in respect of in-the-money Inseego stock options upon completion of the Sale;

 

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shares to potentially be received in respect of restricted stock units for which the vesting restrictions may lapse upon completion of the Sale; and

 

   

the right to continued indemnification and insurance coverage for our directors and executive officers following the completion of the Sale, pursuant to the terms of the Purchase Agreement.

The Public Company Board was aware of these potential conflicts of interest during its deliberations on the merits of the Sale and when making its decision to approve the Sale, the Purchase Agreement and the transactions contemplated thereby.

Executive Change in Control and Severance Agreements

In the Reorganization, Inseego assumed the change-in-control and severance agreements (each, a “CIC Agreement”) NWI had previously entered into with Sue Swenson, Michael Newman, Lance Bridges and Stephen Sek (each, an “Executive”), which provide for certain payments and benefits to the applicable Executive if his or her employment is terminated by Inseego without cause or if he or she terminates his or her employment for good reason during a change-in-control period, which commences 30 days before and ends 12 months after a change-in-control.

On November 3, 2016, Ms. Swenson and Messrs. Newman and Bridges each entered into an Acknowledgement, Waiver and Consent acknowledging and agreeing that for purposes of their respective CIC Agreements, the Sale will not constitute a “change in control” or “covered termination” thereunder. Accordingly, no compensation of such executive officers is or will be based on, or otherwise related to, the Sale and the interests of such executive officers in the Sale are not materially different than the interests of our stockholders generally.

In addition, on November 3, 2016, Mr. Sek entered into an Acknowledgement, Waiver and Consent (the “Sek Acknowledgement”) with Inseego and NWI acknowledging and agreeing that coincident with the closing of the Sale, he will voluntarily resign from his employment with Inseego and accept employment with NWI, then-owned by the Purchaser, which resignation will not constitute a “covered termination” under, and as defined in, his CIC Agreement. Pursuant to the terms of the Sek Acknowledgement, Inseego has agreed that, effective as of and contingent upon the closing of the Sale, each outstanding and unvested Inseego stock option and restricted stock unit held by Mr. Sek shall immediately become vested and, if applicable, exercisable, and any forfeiture restrictions or rights of repurchase thereon shall immediately lapse with respect to that number of shares of common stock that would have vested had Mr. Sek’s employment with Inseego continued through April 13, 2018.

Sale-Related Compensation for Certain Named Executive Officers

The following table sets forth the information required by Item 402(t) of Regulation S-K regarding the amount of payments and benefits that may be paid or become payable to certain of Inseego’s named executive officers, in connection with the Sale. Such payments and benefits require the approval, on a non-binding, advisory basis, of Inseego’s stockholders, as described under “Proposal No. 3: The Sale-Related Compensation Proposal.” The information set forth in the table below is based on the following assumptions:

 

    the Sale was completed on November 18, 2016; and

 

    Stephen Sek remained an employee of Inseego on such date.

Golden Parachute Compensation

 

Name

   Cash ($)      Equity ($)(1)(2)      Pension
NQDC
     Prerequisites
/ Benefits ($)
     Tax
Reimbursements
     Other      Total ($)  

Stephen Sek

   $ 0       $ 280,318.28       $ 0       $ 0       $ 0       $ 0       $ 280,318.28   

 

(1)

Represents the aggregate dollar value to be received by Mr. Sek with respect to stock options and restricted stock unit awards and includes:

 

   

$280,318.28, on a pre-tax basis, with respect Mr. Sek’s restricted stock unit awards for which vesting will accelerate pursuant to the Sek Acknowledgement, calculated by multiplying (a) $2.42

 

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(i.e., the closing price of NWI common stock on November 18, 2016) by (b) the number of shares of Inseego common stock subject to such restricted stock units; and

 

   

$0, on a pre-tax basis, with respect to Mr. Sek’s vested in-the-money Inseego stock options and unvested in-the-money Inseego stock options for which vesting will accelerate pursuant to the Sek Acknowledgement, calculated by multiplying (a) the excess, if any, of $2.42 (i.e., the closing price of NWI common stock on November 18, 2016) over the respective per share exercise prices of such options by (b) the number of shares of Inseego common stock subject to such options. As of November 18, 2016, none of Mr. Sek’s Inseego stock options (whether vested or unvested and for which vesting will accelerate pursuant to the Sek Acknowledgement) were in-the-money.

 

(2)

The amount listed in this column is payable upon a “single trigger,” meaning it becomes payable upon completion of Sale regardless of whether Mr. Sek’s employment with NWI continues or is terminated.

Arrangements with Purchasers

As of the date of this proxy statement, except as set forth above, none of the executive officers of Inseego or NWI have entered into any agreement, arrangement or understanding with us or our subsidiaries in connection with the Sale or any amendments or modifications to his or her existing employment agreement with Inseego or NWI, as applicable, in connection with the Sale. Pursuant to the Purchase Agreement, all members of the NWI Board will resign upon closing of the Sale.

As of the date of this proxy statement, none of the executive officers of Inseego or NWI has entered into any agreement, arrangement or understanding with Purchasers or their affiliates in connection with the Sale or any amendments or modifications to his or her existing employment agreement with Inseego or NWI, as applicable, in connection with the Sale, including regarding employment with, or the right to participate in the equity of, Purchasers or NWI on a going-forward basis following the completion of the Sale.

Indemnification and Insurance

The Purchase Agreement provides that all rights to indemnification, advancement of expenses and exculpation by NWI now existing in favor of each current or former executive officer or director of NWI as of the closing of the Sale, as provided in the certificate of incorporation or bylaws of NWI, in each case as in effect on the date of the Purchase Agreement, or pursuant to any other agreements in effect on the date of the Purchase Agreement, shall survive the closing and continue in full force and effect in accordance with their respective terms.

The Purchase Agreement also provides that NWI will, and Purchasers will cause NWI to, either maintain in effect for a period of six years after the closing the current policies of directors’ and officers’ liability insurance maintained by NWI immediately prior to the closing or obtain as of the closing a six year “tail” directors’ and officers’ liability insurance policy covering past and present directors and officers of NWI for events occurring prior to the completion of the Sale.

The Reorganization

Overview

On November 8, 2016, in order to facilitate the proposed Sale and as required by the Purchase Agreement, NWI, Inseego and their affiliates completed the Reorganization, the purpose and effect of which was to separate the MiFi Business from the Retained Business. The Reorganization was accomplished in three steps:

 

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Step 1: Formation of Inseego and Merger Subsidiary

 

NWI formed Inseego, a Delaware corporation and wholly owned direct subsidiary of NWI. Inseego then formed Vanilla Merger Sub, Inc., which was a Delaware corporation and direct, wholly owned subsidiary of Inseego (“Merger Sub”). Merger Sub was formed solely for the purpose of effecting the Reorganization.

  

LOGO

 

 

 

Step 2: Contribution of Assets and Liabilities to Inseego

 

NWI contributed to Inseego all of its assets and liabilities relating to the Retained Business in exchange for shares of Inseego, leaving NWI owning all assets and substantially all post-Sale liabilities related to the MiFi Business. In addition, NWI contributed all of the outstanding equity interests in the Retained Subsidiaries (including DigiCore, RER and their respective direct and indirect subsidiaries) that were held by NWI to Inseego. Following the contribution, NWI holds the MiFi Business and Inseego holds the Retained Business (including the Retained Subsidiaries).

   LOGO

 

 

 

Step 3: The Merger

 

Merger Sub merged with and into NWI, with NWI surviving as a direct, wholly owned subsidiary of Inseego.

   LOGO

 

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Post- Reorganization

 

The end result of the Reorganization is that Inseego owns all of the assets and liabilities used exclusively in the Retained Businesses and all outstanding shares of common stock of NWI. NWI, in turn, owns all assets and substantially all post-Sale liabilities related to the MiFi Business. The outstanding NWI Shares were converted into outstanding shares of Inseego common stock as described below.

  

LOGO

The Merger was completed pursuant to Section 251(g) of the DGCL, which provides for the formation of a holding company without a vote of the stockholders of the constituent corporations. Upon completion of the Merger, Inseego adopted an amended and restated certificate of incorporation and amended and restated bylaws that are substantially the same as those of NWI immediately prior to the completion of the Merger.

Conversion of NWI Common Stock

At the effective time of the Merger, each share of NWI common stock issued and outstanding was automatically converted into an equivalent corresponding share of Inseego common stock, having the same designations, rights, powers and preferences and the qualifications, limitations and restrictions as the corresponding share of NWI common stock that was converted. Accordingly, all holders of NWI common stock immediately prior to the completion of the Merger automatically became stockholders of Inseego. The conversion of NWI common stock into Inseego common stock occurred automatically without an exchange of stock certificates. Stock certificates previously representing outstanding shares of NWI common stock as of immediately prior to the effective time of the Merger now represent the same number of outstanding shares of Inseego common stock after the Merger. Following the effective time of the Merger, shares of Inseego common stock trade on The NASDAQ Global Select Market, however the trading symbol for Inseego common stock is “INSG.”

The Merger qualified as a tax-free reorganization pursuant to Section 368(a) of the Code. Accordingly, the former NWI stockholders will not recognize gain or loss for U.S. federal income tax purposes as a result of the conversion of their shares in the Merger.

Board Structure and Executive Officers of Inseego and NWI Following the Reorganization

Upon completion of the Merger, Ms. Swenson, Philip Falcone, Robert Pons, James Ledwith and David Werner, each of whom were directors of NWI immediately prior to the Merger, became the directors of Inseego. From the date of the Reorganization through the closing of the Sale, Ms. Swenson and Messrs. Newman and Bridges will serve as directors of NWI. Concurrent with the closing of the Sale, such directors will resign from the NWI Board.

In addition, upon completion of the Merger, Ms. Swenson became the President and Chief Executive Officer (“CEO”) of Inseego, Mr. Newman became the Executive Vice President and Chief Financial Officer (“CFO”) of Inseego and Mr. Bridges became the Senior Vice President, General Counsel and Secretary of Inseego. Until the closing of the Sale, Ms. Swenson and Messrs. Newman and Bridges will also retain their current roles as the President and CEO, Executive Vice President and CFO and Senior Vice President, General Counsel and Secretary, respectively, of NWI. Mr. Sek continues to serve as Chief Technology Officer of NWI and will continue to serve in such role with NWI following the closing of the Sale.

Transfer of Assets and Liabilities in the Reorganization

The Reorganization involved the transfer of certain assets from NWI and its affiliates to Inseego and the assumption of certain liabilities by Inseego. The following is a summary of the allocation of assets and

 

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liabilities as between NWI and its subsidiaries, on the one hand, and Inseego and its subsidiaries (other than NWI and its subsidiaries), on the other hand.

In the Reorganization, NWI and its subsidiaries retained the following assets (collectively, the “MiFi Business Assets”):

 

   

lease agreements for NWI’s existing headquarters and certain other facilities used in the MiFi Business;

 

   

all tangible personal property that is primarily used by or necessary or essential to conduct the MiFi Business;

 

   

certain contracts that primarily relate to or are necessary or essential to conduct any activities of the Inseego Business (the “MiFi Business Contracts”);

 

   

certain patents and patent applications, certain trademarks and service marks, including any goodwill associated therewith, certain intellectual property licenses and all other intellectual property held by NWI or its affiliates prior to the Reorganization, that (i) are used in or relate to the MiFi Business, and (ii) that relate to any currently planned future activities of the MiFi Business and

 

   

all receivables of the MiFi Business;

 

   

certain legal claims to the extent arising from or related to the MiFi Business or any MiFi Business Asset;

 

   

certain inventory of the MiFi Business; and

 

   

all goodwill of the MiFi Business as a going concern.

In the Reorganization, NWI and its subsidiaries contributed the following assets to Inseego and its subsidiaries (collectively, the “Retained Assets”):

 

   

lease agreements for certain facilities used in the Retained Business;

 

   

all tangible personal property that is not primarily used by or necessary or essential to conduct the MiFi Business;

 

   

all inventory and receivables of the Retained Business;

 

   

certain contracts of the Retained Business (the “Retained Contracts”);

 

   

all intellectual property of Inseego and its subsidiaries other than (i) certain trademarks that are used in or relate to the MiFi Business or future planned activities of the MiFi Business; (ii) certain patents that are used in or relate to the MiFi Business; and (iii) other intellectual property that is primarily related, necessary or essential to the MiFi Business;

 

   

certain legal claims to the extent arising from or related to the Retained Business or any Retained Asset or Retained Liability (as defined below);

 

   

all of the outstanding capital stock and any other equity interests in each of the Retained Subsidiaries; and

 

   

all other assets, rights and properties of every kind and description and wherever located, whether tangible or intangible, real, personal or mixed, not primarily used in, essential to or necessary to the MiFi Business.

The following liabilities were assumed by Inseego and its subsidiaries in the Reorganization (the “Retained Liabilities”):

 

   

all liabilities of NWI and its subsidiaries to the extent arising out of or related to any of (i) the ownership or operation of the MiFi Business, or (ii) the ownership, operation or use of the MiFi Business Assets, in each case, prior to the closing of the Sale;

 

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(i) all liabilities of NWI and its subsidiaries to the extent arising out of or related to (a) the ownership and operation of the Retained Business or (b) the ownership, operation or use of the Retained Assets, and (ii) all liabilities arising from actions brought by any governmental authority or any derivative action by any stockholder of NWI relating to the Reorganization;

 

   

all liabilities (i) of Inseego and its subsidiaries or NWI and its subsidiaries related to the transfer of employees other than the MiFi Business Employees from NWI to Inseego in connection with the Reorganization and (ii) for accrued and unpaid compensation of the MiFi Business Employees for periods prior to the closing of the Sale;

 

   

certain losses arising out of any third party intellectual property infringement action against the MiFi Business related to the MiFi Business products where either (i) the MiFi Business products were sold prior to the closing of the Sale, or (ii) the MiFi Business products were sold after the closing of the Sale and the infringement does not result from (a) compliance with industry standards essential patents, (b) components acquired from outside suppliers and incorporated into the MiFi Business products, or (c) a customer or other user’s combination of the MiFi Business product into its own or a third party’s product or use of the product in a manner other than as intended; and

 

   

all liabilities arising from the Retained Contracts.

In the Reorganization, NWI and its post- Reorganization subsidiaries retained or assumed from the Retained Subsidiaries, as applicable, all liabilities of the MiFi Business other than the Retained Liabilities (the “MiFi Business Liabilities”).

Omitted Assets or Liabilities

Following the closing of the Sale, if the parties identify any MiFi Business Assets or MiFi Business Liabilities that were inadvertently assigned to or assumed by Inseego or any of the Retained Subsidiaries in the Reorganization, or any Retained Assets or Retained Liabilities that were inadvertently retained by NWI or any of its subsidiaries in the Reorganization, Inseego and Purchasers have agreed to, and to cause their respective affiliates to, for no additional consideration, execute and deliver any contracts and perform all other lawful acts reasonably necessary to transfer such assets or liabilities within 10 business days of receiving notice thereof.

The Purchase Agreement

The following discussion sets forth the material terms of the Purchase Agreement and is qualified in its entirety by reference to the complete text of the Purchase Agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference into this proxy statement. This summary may not contain all of the information about the Purchase Agreement that is important to you. You should refer to the full text of the Purchase Agreement for details of the transaction and the terms and conditions of the Purchase Agreement.

Additionally, the representations, warranties and covenants described in this summary and contained in the Purchase Agreement have been made only for the purpose of the Purchase Agreement and, as such, are intended solely for the benefit of Inseego, NWI and Purchasers. In many cases, these representations, warranties and covenants are subject to limitations agreed upon by the parties and are qualified by certain disclosures exchanged by the parties in connection with the execution of the Purchase Agreement. Furthermore, many of the representations and warranties contained in the Purchase Agreement are the result of a negotiated allocation of contractual risk among the parties and, taken in isolation, do not necessarily reflect facts about Inseego, NWI and Purchasers, their respective subsidiaries and affiliates or any other party. Likewise, any references to materiality contained in the representations and warranties may not correspond to concepts of materiality applicable to investors or stockholders. Finally, information concerning the subject matter of the representations and warranties may have changed since the date of the Purchase Agreement or may change in the future, and these changes may not be fully reflected in the public disclosures made by Inseego, NWI and Purchasers. As a result of the foregoing, you are strongly encouraged not to rely on the representations, warranties and covenants contained in the Purchase Agreement, or any descriptions thereof, as accurate characterizations of the state of facts or condition of Inseego, NWI, Purchasers or any other party. You are likewise cautioned that you are not a third-party beneficiary under the Purchase Agreement and do not have any direct rights or remedies pursuant to the Purchase Agreement.

 

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Purchase and Sale of NWI Shares

Subject to the terms and conditions of the Purchase Agreement, Purchaser will purchase all of the issued and outstanding NWI Shares from Inseego, which shares are solely owned by Inseego as a result of the Reorganization.

For a complete description of the Reorganization, see “Proposal No. 1: The Sale Proposal—The Reorganization” beginning on page 41.

Consideration to be Received by Inseego

Upon the closing of the Sale, Purchaser will pay Inseego $50.0 million in cash, subject to potential adjustment, including based on NWI’s working capital and outstanding indebtedness as of the closing date of the Sale.

Indemnification by Purchasers

Purchasers have agreed to indemnify Inseego and its affiliates and their respective representatives against any losses, damages, costs or expenses, including reasonable attorneys’ fees (but excluding consequential, incidental or punitive damages, except in the case of fraud or to the extent actually paid to a third party) (collectively, “Losses”), incurred or suffered by any such person as a result of:

 

   

any inaccuracy in or breach of any of the representations or warranties of Purchasers contained in the Purchase Agreement; and

 

   

any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Purchasers pursuant to the Purchase Agreement.

Indemnification by Inseego

Inseego has agreed to indemnify Purchasers, their affiliates and their respective representatives against any Losses which may be incurred or suffered by any of such person as a result of:

 

   

any inaccuracy in or breach of any of the representations or warranties of Inseego contained in the Purchase Agreement;

 

   

any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Inseego pursuant to the Purchase Agreement; and

 

   

any and all Retained Liabilities.

Limitations on Indemnity Obligations

The maximum aggregate liability of Inseego for indemnity claims shall not exceed 12.5% of the purchase price (the “General Cap”), except that for breaches of tax and certain “fundamental” representations and warranties, Inseego’s maximum aggregate liability shall not exceed 35% of the purchase price (the “Fundamental Representations Cap”). Inseego shall not be liable for Losses for inaccuracies in its representations and warranties until the aggregate amount of all such Losses exceeds $500,000 (the “Basket”), except with respect to breaches of tax and certain fundamental representations and warranties, which will not be subject to the Basket.

The maximum aggregate liability of Purchasers for indemnity claims resulting from inaccuracies in its representations and warranties shall not exceed the General Cap. Purchasers shall not be liable for Losses in connection with inaccuracies in its representations and warranties until the aggregate amount of all indemnity Losses exceeds the Basket, except with respect to breaches of certain fundamental representations and warranties, which will not be subject to the Basket.

The General Cap, Fundamental Representations Cap and Basket do not apply in the case of fraud or willful misconduct, and in the event either Inseego or Purchasers incur Losses in excess of the Basket, the indemnifying party will be liable for all Losses and not just those in excess of the Basket.

Subject to the terms of the Purchase Agreement, including the parties’ respective rights to receive termination fees, indemnification pursuant to the Purchase Agreement is the sole and exclusive remedy of the parties with

 

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respect to any and all claims for monetary damages under the Purchase Agreement, except for Losses based on fraud and willful misconduct, certain tax Losses and injunctive or other equitable relief to prevent or remedy a breach of the Purchase Agreement.

To the extent an indemnity claim relates to an asset or liability having been erroneously assigned to Inseego or erroneously retained by NWI in the Reorganization, the parties are obligated to first seek to correct such erroneous allocation by notifying the other party and giving them the opportunity to execute and deliver any contracts and perform any other lawful acts reasonably necessary to transfer or assign such asset or liability, as described in “Proposal No. 1: The Sale Proposal—The Reorganization—Omitted Assets or Liabilities” beginning on page 45.

Representations and Warranties

The Purchase Agreement contains customary representations and warranties made by Inseego to Purchasers. Specifically, the representations and warranties of Inseego regarding it and its subsidiaries (including NWI) in the Purchase Agreement (many of which are qualified by concepts of knowledge, materiality and/or dollar thresholds and are further modified and limited by confidential disclosure schedules delivered by Inseego to Purchasers, as may or may not be specifically indicated in the text of the Purchase Agreement) relate to the following subject matters, among other things:

 

   

Inseego and NWI’s organization, existence and good standing;

 

   

Inseego and NWI’s corporate power and authority to enter into the Purchase Agreement and perform their obligations thereunder, and the enforceability of the Purchase Agreement;

 

   

the approval of the Purchase Agreement and the transactions contemplated thereby by the Inseego Board and the NWI Board;

 

   

the capitalization of NWI following the Reorganization;

 

   

subsidiaries of NWI following the Reorganization;

 

   

the absence of conflicts with or defaults under NWI’s or Inseego’s organizational documents, applicable law or material contracts of NWI;

 

   

the inapplicability of anti-takeover statutes to the Sale and the Reorganization;

 

   

Inseego’s compliance with its SEC reporting obligations following the Reorganization;

 

   

the post- Reorganization assets, liabilities and employees of NWI and Inseego;

 

   

certain financial information of the MiFi Business;

 

   

the absence of undisclosed liabilities;

 

   

the absence of certain changes or events affecting the MiFi Business since June 30, 2016;

 

   

material contracts;

 

   

title to, or leasehold interest in, and sufficiency of certain assets, including real property;

 

   

environmental matters;

 

   

intellectual property matters;

 

   

insurance;

 

   

legal proceedings and government orders;

 

   

compliance with any applicable laws, absence of regulatory restrictions and validity of required permits;

 

   

employment matters;

 

   

tax matters;

 

   

broker, finder or other fees and expenses;

 

   

vote required to approve the Sale and the NWI Charter Amendment;

 

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matters relating to certain mergers, combinations, acquisitions, dispositions, or liquidations relating to the MiFi Business;

 

   

compliance with Office of Foreign Assets Control of the U.S. Department of the Treasury and other money laundering laws;

 

   

inapplicability of certain regulatory restrictions to the MiFi Business’s operations;

 

   

inventory;

 

   

employee benefits matters;

 

   

maintenance of books and records; and

 

   

the disclaimer of any other representations or warranties, express or implied.

Many of Inseego’s representations and warranties are qualified by materiality or by exceptions related to the absence of a material adverse effect. Under the Purchase Agreement, “material adverse effect” is defined to mean any event, occurrence, fact, condition or change that is materially adverse to:

 

   

the MiFi Business, results of operations, financial condition or assets of the MiFi Business; or

 

   

the ability of Inseego to complete the transactions contemplated by the Purchase Agreement;

provided, however, that material adverse effect shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to:

 

   

general economic or political conditions;

 

   

conditions generally affecting the industries in which the MiFi Business operates;

 

   

any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security (including those of Inseego) or any market index or any change in prevailing interest rates;

 

   

acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof;

 

   

any action required or contemplated by the Purchase Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of Purchasers;

 

   

any changes in applicable laws or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof;

 

   

the announcement, pendency or completion of the transactions contemplated by the Purchase Agreement, including losses or threatened losses of employees, customers, suppliers, distributors or others having relationships with the MiFi Business;

 

   

any natural or man-made disaster or acts of God; or

 

   

any failure by the MiFi Business to meet any internal or published projections, forecasts or revenue or earnings predictions;

provided that the underlying causes of such failures (subject to the other provisions of the definition) shall not be excluded.

The Purchase Agreement contains customary representations and warranties made by each of the Purchasers to Inseego. Specifically, the representations and warranties of the Purchasers in the Purchase Agreement (some of which are qualified by concepts of knowledge and/or materiality) relate to the following subject matters, among other things:

 

   

corporate organization and authority;

 

   

corporate power and authority to enter into the Purchase Agreement and perform their obligations thereunder, and the enforceability of the Purchase Agreement;

 

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the absence of conflicts with their respective organizational documents, other contracts and applicable law;

 

   

Purchaser’s acquisition of the NWI Shares for investment purposes;

 

   

that neither Purchaser owns shares of NWI or is an “interested stockholder” under the DGCL;

 

   

broker, finder or investment banker fees and expenses;

 

   

sufficiency of funds;

 

   

legal proceedings; and

 

   

their independent investigation, review and analysis of the MiFi Business and MiFi Business Assets.

Generally, each party’s representations and warranties in the Purchase Agreement, and the other party’s right to indemnification for a breach or inaccuracy of such representations and warranties, survive for a period of 15 months following the closing of the Sale. Certain of Inseego’s representations and warranties, specifically those relating to Inseego’s SEC reporting and NWI’s undisclosed liabilities, material contracts, title to and sufficiency of assets, real property, intellectual property, compliance with laws and significant transactions, survive for a period of 24 months following the closing of the Sale. Inseego’s tax and environmental representations and warranties survive for a period ending 60 days after the expiration of the applicable statute of limitations. Finally, both parties’ representations and warranties identified as “fundamental,” such as those relating to formation, authorization, conflicts and broker or finders’ fees, survive for five years following the closing of the Sale.

Special Meeting of Inseego Stockholders

Inseego has agreed to take all action necessary to hold a meeting of its stockholders for the purpose of obtaining the Required Stockholder Vote as promptly as practicable, including mailing this proxy statement to its stockholders. Unless the Purchase Agreement is validly terminated, Inseego is required to submit the Purchase Agreement to its stockholders at the special meeting even if the Inseego Board has effected a Change in the Inseego Board Recommendation.

Indemnification and Insurance

The Purchase Agreement provides that all rights to indemnification, advancement of expenses and exculpation by NWI now existing in favor of each current or former officer or director of NWI as of the closing of the Sale, as provided in the certificate of incorporation or bylaws of NWI, in each case as in effect on the date of the Purchase Agreement, or pursuant to any other agreements in effect on the date of the Purchase Agreement, shall survive the closing and continue in full force and effect in accordance with their respective terms.

The Purchase Agreement also provides that NWI will, and Purchasers will cause NWI to either maintain in effect for a period of six years after the closing the current policies of directors’ and officers’ liability insurance maintained by NWI immediately prior to the closing or obtain as of the closing a six year “tail” directors’ and officers’ liability insurance policy covering past and present directors and officers of NWI for events occurring prior to the completion of the Sale.

Covenants Relating to the Conduct of the MiFi Business Prior to Closing

Affirmative Covenants

Inseego has undertaken customary covenants in the Purchase Agreement relating to the conduct of the MiFi Business prior to the completion of the Sale. In general, Inseego has agreed, among other things, to conduct the MiFi Business in the ordinary course of business consistent with past practice and use commercially reasonable efforts to maintain and preserve intact the current organization and business of NWI and to preserve the rights, franchises, goodwill and relationships of the MiFi Business Employees, customers, lenders, suppliers, regulators and others having business relationships with NWI.

Prior to the closing of the Sale, Inseego and NWI shall, subject to certain limitations: (i) give Purchasers and their representatives reasonable access to and the right to inspect all of the properties, assets, premises, books and records, agreements and other documents and data related to the MiFi Business, and (ii) furnish Purchasers

 

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and their representatives with reasonably requested financial, operating and other data and information related to the MiFi Business. The confidentiality agreement between the parties remains in full force and effect and shall apply to all such information shared with either Purchaser.

Negative Covenants

Prior to the completion of the Sale, Inseego has agreed that it will not (and will cause NWI not to) take any of the following actions with respect to the MiFi Business, subject to specified exceptions, without the prior written consent of Purchaser (which consent shall not be unreasonably withheld or delayed):

 

   

amend the certificate of incorporation or any other organizational document of NWI;

 

   

split, combine, reclassify, issue, sell or dispose of any shares of NWI’s capital stock or grant any options, warrants or other rights to purchase or obtain shares of NWI’s capital stock;

 

   

declare or pay any dividends or distributions with respect to NWI’s capital stock or redeem or repurchase of NWI’s capital stock;

 

   

materially change NWI’s accounting methods or practices, except as required by GAAP or applicable law;

 

   

change NWI’s cash management practices and its policies, practices and procedures with respect to collection of accounts receivable, establishment of reserves for uncollectible accounts, accrual of accounts receivable, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits;

 

   

enter into any contract that would be a material contract of the MiFi Business;

 

   

incur, assume or guarantee any indebtedness in an aggregate amount exceeding $3.0 million, except unsecured current obligations and liabilities incurred in the ordinary course of business consistent with past practice;

 

   

transfer, assign, sell or otherwise dispose of any of the MiFi Business Assets, except in the ordinary course of business and except for any assets having an aggregate value of less than $100,000;

 

   

make any capital investment in, or any loan to, any person or entity;

 

   

accelerate, terminate, materially modify or cancel any material contract to which NWI is a party or by which it is bound;

 

   

make any material capital expenditures;

 

   

other than in the ordinary course of business, (i) grant any bonuses or increase in any compensation or benefits in respect of its current or former employees, officers, managers, independent contractors or consultants, other than as provided for in any written agreements or required by applicable law, (ii) change the terms of employment for any employee or terminate any employees for which the aggregate costs and expenses exceed $50,000, (iii) accelerate the vesting or payment of any compensation or benefit for any current or former employee, officer, manager, independent contractor or consultant, or (iv) adopt, modify or terminate any: (a) severance or retention agreement with any MiFi Business Employee, or (b) collective bargaining or other agreement with a union with respect to the MiFi Business Employees;

 

   

make any loan to (or forgive any loan to), or enter into any other transaction with, any of its current or former directors, officers and employees;

 

   

enter into a new line of business or abandon or discontinue existing lines of business;

 

   

acquire by merger or consolidation with, or by purchase of a substantial portion of the assets or stock of, or by any other manner, any business or any company or any division thereof;

 

   

purchase, lease or otherwise acquire the right to own, use or lease any property or assets for an amount in excess of $50,000 in the aggregate, except for purchases of inventory or supplies in the ordinary course of business consistent with past practice;

 

   

adopt any plan of merger, consolidation, reorganization, liquidation or dissolution or file a petition in bankruptcy under any provisions of federal or state bankruptcy law or consent to the filing of any bankruptcy petition against it under any similar law;

 

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allow NWI or any of its post- Reorganization subsidiaries to make, change or rescind any tax election or amend any tax return with respect to the MiFi Business;

 

   

settle any material legal proceeding with respect to the MiFi Business including any waiver, consent or agreement in relation to a certain opposition to NWI’s application to register certain trademarks included in the MiFi Business Assets under the laws of the People’s Republic of China;

 

   

agree to take any of the foregoing actions;

 

   

sell, assign, transfer, grant any security interest in or otherwise encumber or dispose of any intellectual property or intellectual property licenses included in the MiFi Business Assets;

 

   

grant any license or sublicense to any intellectual property included in the MiFi Business Assets, other than pursuant to non-exclusive licenses or sublicenses granted in the ordinary course of business consistent with past practice;

 

   

abandon, allow to lapse, disclaim or dedicate to the public, or fail to make any filing, pay any fee, or take any other action necessary to prosecute and maintain in full force and effect of any patents, trademark registrations, copyright registrations, internet domain name registrations or pending applications for any of the foregoing, in all cases that will be owned by NWI upon completion of the Reorganization and that are material to the MiFi Business; or

 

   

knowingly fail to take or maintain reasonable measures to protect the confidentiality of any material trade secrets or other non-public intellectual property included in the MiFi Business Assets.

The foregoing restrictions apply only to operation of the MiFi Business, and accordingly, Inseego’s operation of the Retained Business is not subject to these restrictions.

Public Announcements

During the pre-closing period, Inseego and Purchasers have agreed not to issue any public release or announcement concerning the Purchase Agreement and the transactions contemplated thereby without the prior written consent of the other parties, other than releases or announcements as may be required by law or as may be reasonably necessary in light of such party’s public company status.

Efforts to Obtain Governmental Approvals and Other Third Party Consents

Each of Inseego, NWI and the Purchasers has agreed to use its reasonable best efforts to obtain, and to cooperate with the other parties to obtain, all consents, authorizations, orders and approvals from all governmental authorities that may be or become necessary for the performance of its obligations pursuant to the Purchase Agreement.

Purchasers and Inseego have also agreed to exercise best efforts to take all actions and to assist and cooperate with the other parties in doing all things necessary, proper or advisable to obtain the approval of CFIUS as soon as practicable. If necessary to obtain the approval of CFIUS, then at the request of Inseego, each Purchaser shall take such actions and agree to such requirements or conditions to mitigate any national security concerns as may be requested or required by CFIUS, including entering into mitigation agreements with a member agency of CFIUS, except that Purchasers will not be required to agree to such requirements or conditions that would, individually or in the aggregate, have one or more of the following effects: (i) the disposition by Purchaser Parent of a material portion of its business, intellectual properties or product lines with an aggregate value in excess of $50.0 million; (ii) a change in the form or nature of the legal or beneficial ownership of Purchaser in NWI that materially prevents Purchaser from (a) asserting its voting rights with respect to the NWI Shares, (b) selling or otherwise disposing of the NWI Shares or (c) receiving dividends or distributions with respect to the NWI Shares; (iii) a change in the scope or nature of the MiFi Business or the MiFi Business Assets that would have a material adverse effect; or (iv) a change in any of the controlling persons of Purchaser Parent.

In addition, each Purchaser has agreed to use its reasonable best efforts and to take any and all steps necessary to avoid or eliminate each and every impediment under any antitrust, competition, trade regulation or other law or governmental order that may be asserted by any governmental authority or any other party so as to enable the parties to close the transactions contemplated by the Purchase Agreement as promptly as possible, including by submitting to consent decrees, hold separate orders, or otherwise, for the sale or other disposition of its assets or businesses (including the MiFi Business) as are required to be divested in order to avoid the entry of, or to effect the dissolution of, any injunction or other order in any proceeding, which would otherwise have the effect of

 

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materially delaying or preventing the Sale, and to defend through litigation on the merits any claim asserted by any party in order to avoid entry of, or to have vacated or terminated, any governmental order that would prevent the consummation of the Sale.

Each party is required to give notice to the other parties with respect to any contact with any governmental authority or the staff or regulators thereof and to disclose any information brought before or otherwise submitted to or filed with such governmental authority or the staff or regulators thereof in connection with the transactions contemplated by the Purchase Agreement in advance of any such submission or filing, it being the intent that the parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such information.

Inseego and Purchasers have further agreed to use commercially reasonable efforts to give all notices to, and obtain all consents from, certain third parties, except that they shall not be obligated to pay any consideration to any third party in respect of any such consent or approval.

No Solicitation

Subject to certain exceptions described below, prior to the completion of the Sale, Inseego and NWI have agreed that they will not, and will not authorize or permit their respective subsidiaries or any of their respective directors, officers, employees, and other agents to, directly or indirectly:

 

   

solicit, initiate or knowingly encourage, knowingly induce or knowingly facilitate or take any other action which would reasonably be expected to lead to, the making, submission or announcement of, any Acquisition Proposal (as defined below);

 

   

enter into, continue or participate in any discussions or any negotiations with any third party regarding any proposal that constitutes, or would reasonably be expected to lead to the making, submission or announcement of, any Acquisition Proposal;

 

   

furnish any non-public information regarding the MiFi Business to any person or entity or afford any person or entity access to the business, property, assets, books or records of Inseego or NWI or any of their respective subsidiaries in connection with or in response to an Acquisition Proposal or an inquiry that would reasonably be expected to lead to the making, submission or announcement of an Acquisition Proposal;

 

   

approve or recommend an Acquisition Proposal or any letter of intent, memorandum of understanding or other contract contemplating an Acquisition Proposal or requiring Inseego or NWI to abandon or terminate their obligations under the Purchase Agreement;

 

   

waive, terminate, modify or release any person (other than Purchasers or their respective affiliates) from any provision of or grant any permission, waiver or request under, or fail to enforce, any “standstill” or similar agreement or obligation;

 

   

approve any transaction under, or any person becoming an “interested stockholder” under, Section 203 of the DGCL; or

 

   

resolve or agree to do any of the foregoing.

In addition Inseego and NWI have agreed to, and will cause their respective subsidiaries and respective directors, officers, employees, and other agents to, cease and terminate all discussions or negotiations with any person previously conducted with respect to any Acquisition Proposal. Inseego and NWI have also agreed to deny access to any data room containing any confidential information previously furnished to any third party relating to the consideration of an Acquisition Proposal by such third party.

Prior to Inseego obtaining the Required Stockholder Vote, the restrictions set forth above do not prohibit the Public Company from furnishing information regarding Inseego and NWI (and their respective subsidiaries) to, or participating in discussions with, a person making an unsolicited written Acquisition Proposal if: (i) the Public Company Board determines in good faith (after consultation with outside legal counsel and the Public Company’s financial advisor) that such Acquisition Proposal constitutes or would reasonably be expected to result in a Superior Proposal (as defined below); (ii) the Public Company Board determines in good faith (after consultation with outside legal counsel) that failure to take such action would be inconsistent with its fiduciary duties under applicable law; and (iii) Inseego and NWI enter into a confidentiality agreement with such person,

 

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which agreement shall contain terms no less favorable to Inseego and NWI in the aggregate than those contained in the confidentiality agreement between NWI and Purchaser Parent.

Under the Purchase Agreement, subject to the exceptions described below, the Inseego Board has agreed to recommend that the Inseego stockholders approve the Sale Proposal and the NWI Charter Amendment Proposal (the “Inseego Board Recommendation”) and the Inseego Board has also agreed that it will not (i) fail to make the Inseego Board Recommendation (including by failing to include such recommendation in this proxy statement); or (ii) withhold, withdraw, amend, qualify or modify, or publicly propose to withhold, withdraw, amend, qualify or modify, in a manner adverse to Purchasers, the Inseego Board Recommendation. In addition, (a) the NWI Board has agreed that it will not withhold, withdraw, amend, qualify or modify, or publicly propose to withhold, withdraw, amend, qualify or modify, in a manner adverse to Purchasers, its recommendation to Inseego, as the sole stockholder of NWI, to approve the NWI Charter Amendment Proposal (the “NWI Board Approval”), and (b) both the Inseego Board and the NWI Board have agreed that they will not (x) adopt, approve or recommend, or otherwise declare advisable, or publicly propose to adopt, approve or recommend, or otherwise declare advisable, the adoption of, any Acquisition Proposal, (y) make any public statement inconsistent with the Inseego Board Recommendation or the NWI Board Approval, as applicable, or (z) resolve to take any of the foregoing actions. Any of the foregoing actions, if taken by the Inseego Board, shall be referred to herein as a “Change in the Inseego Board Recommendation” and, if taken by the NWI Board, shall be referred to herein as a “Change in the NWI Board Approval.

Notwithstanding the restrictions set forth above, at any time prior to Inseego obtaining the Required Stockholder Vote, the Inseego Board or the NWI Board, as applicable, may (i) effect a Change in the Inseego Board Recommendation in response to an unsolicited bona fide written Acquisition Proposal in circumstances not involving a material breach of the Purchase Agreement that is not withdrawn if the Inseego Board concludes in good faith, after consultation with outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties under applicable law, and after consultation with outside legal counsel and financial advisors, that such Acquisition Proposal constitutes a Superior Proposal; (ii) effect a Change in the Inseego Board Recommendation in response to an Intervening Event (as defined below) if the Inseego Board concludes in good faith, after consultation with outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties under applicable law; or (iii) terminate the Purchase Agreement, but only if the Public Company receives an unsolicited, bona fide written Acquisition Proposal in circumstances not involving a material breach of the Purchase Agreement that is not withdrawn that the Public Company Board concludes in good faith, after consultation with outside legal counsel and the Public Company’s financial advisor, constitutes a Superior Proposal and, after consultation with outside legal counsel, that the failure to enter into a definitive agreement with respect to such Acquisition Proposal would be inconsistent with its fiduciary duties under applicable law.

However, prior to effecting a Change in the Inseego Board Recommendation or terminating the Purchase Agreement and entering into an agreement regarding an Acquisition Transaction (as defined below), Inseego and NWI must:

 

   

provide three days’ prior written notice to Purchasers that they are prepared to effect a Change in the Inseego Board Recommendation or terminate the Purchase Agreement, as applicable, which notice shall specify (i) if relating to a Superior Proposal, the material terms and conditions of such Superior Proposal and the identity of the person making such Superior Proposal, including providing a copy of such proposal and any proposed agreements for such proposal (including any financing commitments related thereto), or (ii) if relating to an Intervening Event, the type of Intervening Event and the reasons for the proposed Change in the Inseego Board Recommendation; and

 

   

during such three day period:

 

   

if the notice is in response to a Superior Proposal, (i) negotiate, and cause their respective representatives to negotiate, with Purchasers and their representatives in good faith to determine whether to propose revisions to the terms of the Purchase Agreement such that it would obviate the need for the Inseego Board to effect a Change in the Inseego Board Recommendation, and (ii) the Inseego Board shall have considered in good faith any changes to the Purchase Agreement suggested by Purchasers and shall not have determined (after consultation with its outside legal and financial advisors) that the Acquisition Proposal previously constituting a Superior Proposal no longer constitutes a Superior Proposal if such changes proposed by Purchasers were to be given effect (it being understood that Inseego and NWI (and their respective subsidiaries) shall not take any action with respect to the Superior

 

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Proposal during such three-day period); provided that any material amendment to the financial terms or other material terms of such Superior Proposal occurring prior to Inseego’s effecting a Change in the Inseego Board Recommendation will require a new written notification from Inseego and NWI and an additional three-day period; or

 

   

if the notice is in response to an Intervening Event, if requested by Purchasers, Inseego and NWI (and their respective subsidiaries) shall engage in good faith negotiations with Purchasers to amend the Purchase Agreement in such a manner that obviates the need for a Change in the Inseego Board Recommendation as a result of the Intervening Event.

Inseego and NWI must promptly notify (and in any event within 48 hours) Purchasers in writing of the receipt of any Acquisition Proposal. Such notice shall indicate the name of the person making, and the material terms and conditions of, such Acquisition Proposal, and Inseego and NWI shall keep Purchasers reasonably informed of the status and material terms of any such Acquisition Proposal, including any material amendments or proposed amendments as to price and other material terms thereof.

Nothing set forth in the Purchase Agreement relating to Acquisition Proposals prevents Inseego or NWI from: (i) taking and disclosing to its stockholders a position contemplated by Rule 14d-9, Rule 14e-2(a) or Item 1012(a) of Regulation M-A under the Exchange Act; or (ii) making any disclosure to its stockholders if, in the good faith judgment of the Public Company Board (after consultation with outside legal counsel) failure to so disclose would be inconsistent with its fiduciary duties under applicable law; provided, however, that the foregoing will not affect the obligations of Inseego and the Inseego Board not to make a Change in the Inseego Board Recommendation except in compliance with the terms of the Purchase Agreement (it being understood that any “stop, look and listen” letter or similar communication of the type contemplated by Rule 14d-9(f) under the Exchange Act shall not be deemed to be a Change in the Inseego Board Recommendation).

An “Acquisition Proposal” means any offer, proposal or inquiry (other than an offer, proposal or inquiry by Purchasers) contemplating or otherwise relating to any Acquisition Transaction.

An “Acquisition Transaction” means any transaction or series of related transactions (other than any of the following actions taken in connection with the Reorganization or any other transactions contemplated by the Purchase Agreement) involving:

 

   

any merger, consolidation, share exchange, business combination, issuance of securities, direct or indirect acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction in which: (i) a person or entity, or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of persons or entities, directly or indirectly acquires, or if consummated in accordance with its terms would acquire, beneficial or record ownership or control of securities representing more than 15% of the outstanding shares of any class of voting or equity securities of Inseego or NWI; or (ii) Inseego or NWI issues securities representing more than 15% of the outstanding shares of any class of voting or equity securities of Inseego or NWI;

 

   

any sale, lease, assignment, license, exchange, transfer, acquisition or disposition of any rights or assets that constitute or account for: (i) 15% or more of the consolidated net revenues of NWI and its post- Reorganization subsidiaries, consolidated net income of NWI and its post- Reorganization subsidiaries or consolidated book value of NWI and its post- Reorganization subsidiaries; or (ii) 15% or more of the fair market value of the assets of NWI and its post- Reorganization subsidiaries;

 

   

any liquidation or dissolution of NWI or Inseego; or

 

   

any combination of the foregoing.

An “Intervening Event” means a material event or circumstance (other than an event or circumstance relating to an Acquisition Proposal) that was not known to the Inseego Board on the date of the Purchase Agreement (or if known, the material consequences of which are not known to or reasonably foreseeable by the Inseego Board as of the date of the Purchase Agreement), which event or circumstance, or any material consequences thereof, becomes known to the Inseego Board prior to the time at which Inseego obtains the Required Stockholder Vote.

Superior Proposal” means an unsolicited bona fide written Acquisition Proposal obtained after the date of the Purchase Agreement in circumstances not involving a material breach of the Purchase Agreement by Inseego or NWI for an Acquisition Transaction (provided that for purposes of this definition, each reference in the definition of “Acquisition Transaction” to 15% shall be deemed to be a reference to 50%) which the Public

 

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Company Board determines in good faith (after consultation with its outside counsel and financial advisor) (i) to be reasonably likely to be consummated if accepted on the terms proposed and (ii) to be more favorable to the Public Company and its stockholders from a financial point of view than the transactions contemplated in the Purchase Agreement, in each case, taking into account at the time of determination all relevant circumstances, including the various legal, financial and regulatory aspects of the proposal, all the terms and conditions of such proposal and the Purchase Agreement, any changes to the terms of the Purchase Agreement offered by Purchasers in response to such Acquisition Proposal and the ability of the person or entity making such Acquisition Proposal to consummate the transactions contemplated by such Acquisition Proposal (based upon, among other things, expectation of obtaining required approvals or any necessary financing).

Post-Closing Covenants

Section 338(h)(10) Election. Following the closing of the Sale, Inseego and Purchasers shall jointly make an election under Section 338(h)(10) of the Code to have the transaction treated as a taxable sale of NWI’s corporate assets in exchange for cash and the assumption of certain liabilities and shall cooperate to take all actions necessary and appropriate to effect and preserve such elections.

Non-competition; Non-solicitation. Inseego has agreed that for three years after the closing of the Sale, it will not, subject to certain exceptions set forth in the Purchase Agreement, directly or indirectly, design, develop, manufacture, market or sell:

 

   

any mobile hotspot device, defined as a battery-enabled, portable cellular communications device whose primary function is to create an area of Wi-Fi coverage to serve as a link between nearby Wi-Fi-enabled devices and a cellular data network;

 

   

any USB modem; or

 

   

any device intended primarily for home use providing voice-over-LTE functionality;

provided, however, that the restrictions above shall not apply (i) if such device or modem is either (a) a Telematics Device, (b) a Telemetry Device, or (c) a Tracking Device (each, as defined in the Purchase Agreement); or (ii) to the marketing and sale by Inseego or its affiliates of third-party devices or modems that are bundled with Inseego’s or its affiliates’ hardware, software and/or service. Notwithstanding the foregoing and subject to certain exceptions, such restrictions will not apply to or be binding on acquirers of the Retained Business through an acquisition of securities of Inseego or all or substantially all of the assets of the Retained Business by a third party, or to third party successors of Inseego.

In addition, during such three-year period, Inseego has agreed not to, directly or indirectly, solicit or hire certain employees previously employed by the MiFi Business, even if any such employee is terminated by NWI, and neither Purchasers, NWI nor any of their respective affiliates may directly or indirectly solicit or hire certain employees of the Retained Business, even if any such employee is terminated by Inseego.

Assumption of Defense of Litigation. The Purchase Agreement requires that Inseego maintain or assume the defense of certain litigation matters relating to intellectual property used in the MiFi Business that were pending or threatened on the date of the Purchase Agreement. With respect to such pending actions, Inseego will pay 100% of the upfront fees and costs of such defense, and with respect to certain litigation matters that were threatened as of the date of the Purchase Agreement, should proceedings be initiated, Inseego would pay 66.7% of the upfront fees and costs of such defense, while NWI would pay the remaining 33.3% of such expenses. If upon resolution of any such litigation matter, there are amounts owing to a third party for either remedial payments relating to past intellectual property infringement or as royalty payments for future sales under a settlement, license or similar arrangement, then Inseego would be liable for the portion of such amount as relates to the pre-closing sales of the MiFi Business products and NWI would be liable for the portion of such amount as relates to the post-closing sales of the MiFi Business products.

No Cash Dividends, Share Repurchases and Prepayment of Indebtedness. For a period of 15 months following the closing of the Sale, Inseego is not permitted to (i) declare, set aside or pay to its stockholders any dividend or other cash distribution; (ii) effect any repurchases, redemptions or buybacks of any of its outstanding capital stock; or (iii) make any prepayments in respect of the Notes.

 

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Conditions to the Completion of the Sale

Conditions to Each Party’s Obligation. The obligation of each of Inseego and Purchasers to complete the Sale is subject to satisfaction of the following conditions:

 

   

the Required Stockholder Vote shall have been obtained;

 

   

any waiting period (and extensions thereof) applicable to the completion of the Sale under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall have expired or been terminated;

 

   

no governmental authority will have enacted, issued or entered any governmental order that has the effect of making the Sale illegal, otherwise restraining or prohibiting completion of the Sale or causing any of the transactions under the Purchase Agreement to be rescinded following completion thereof;

 

   

Purchasers’ receipt of all consents, approvals and/or governmental orders of any governmental authority required by or with respect to either Purchaser in connection with the execution and delivery of the Purchase Agreement and the ancillary agreements and the completion of the transactions contemplated thereby; and

 

   

the approval of CFIUS shall have been obtained.

Conditions to Purchasers’ Obligations. The obligation of Purchasers to complete the Sale is subject to the satisfaction of the following conditions:

 

   

the accuracy of the representations and warranties made by Inseego in the Purchase Agreement as of the closing date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure of such representations and warranties to be true and correct would not have a material adverse effect on the MiFi Business or Inseego’s ability to complete the transaction contemplated thereby;

 

   

Inseego’s performance and compliance in all material respects with all agreements, covenants and conditions required by the Purchase Agreement to be performed or complied with by Inseego prior to or on the closing date;

 

   

receipt by Purchasers of a certificate executed by an authorized officer of Inseego confirming the satisfaction of the conditions relating to the representations and warranties of Inseego and the performance of the agreements and covenants of Inseego;

 

   

receipt by Purchasers of a legal opinion of counsel to NWI and Inseego with respect to certain matters of Delaware and California law; and

 

   

receipt by Purchaser of stock certificates evidencing the NWI Shares, free and clear of liens, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank and with all required stock transfer tax stamps affixed.

Conditions to Inseego’s Obligations. The obligation of Inseego to complete the Sale is subject to the following conditions:

 

   

the accuracy of the representations and warranties made by Purchasers in the Purchase Agreement as of the closing date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure of such representations and warranties to be true and correct would not have a material adverse effect on Purchasers’ ability to complete the transactions contemplated thereby;

 

   

each Purchaser’s performance and compliance in all material respects with all agreements, covenants and conditions required by the Purchase Agreement and to be performed or complied with by it prior to or on the closing date;

 

   

receipt by Inseego of a certificate executed by an authorized officer of each Purchaser confirming the satisfaction of the conditions relating to the representations and warranties of Purchasers and the performance of the agreements and covenants of Purchasers;

 

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NWI shall no longer be a borrower under the indenture governing the Notes; and

 

   

Purchasers shall have delivered to Inseego cash in the amount of the purchase price.

Termination of the Purchase Agreement

The Purchase Agreement may be terminated at any time prior to the completion of the Sale:

 

   

by the mutual written consent of Inseego and Purchasers;

 

   

by Purchasers or Inseego if:

 

   

the closing of the Sale does not occur on or before April 21, 2017 (the “Outside Date”), unless the terminating party’s material breach of the Purchase Agreement was a principal cause of the failure of such closing to have occurred;

 

   

a U.S. government agency blocks the Sale or the Sale otherwise becomes illegal; or

 

   

the special meeting has been held and the Required Stockholder Vote has not been obtained.

 

   

by Purchasers upon written notice to Inseego if:

 

   

there is an incurable breach of Inseego’s representations and warranties or covenants that would prevent the related closing condition from being satisfied prior to the Outside Date, except that Purchasers’ right to terminate will not be available if they have materially breached any covenants or agreements contained in the Purchase Agreement; or

 

   

prior to Inseego obtaining the Required Stockholder Vote, (i) the Inseego Board effects a Change in the Inseego Board Recommendation; (ii) Inseego fails to include in this proxy statement the Inseego Board Recommendation; (iii) the Public Company Board adopts, approves, endorses or recommends any competing Acquisition Proposal; (iv) the Inseego Board fails to reaffirm the Inseego Board Recommendation within 10 business days after the date any competing Acquisition Proposal is first publicly disclosed; (v) the NWI Board changes the NWI Board Approval; or (vi) Inseego or NWI materially breach their respective no-shop obligations (each, a “Triggering Event”).

 

   

by Inseego upon written notice to Purchasers if:

 

   

there is an incurable breach of Purchasers’ representations and warranties or covenants that would prevent the related closing condition from being satisfied prior to the Outside Date, except that Inseego’s right to terminate will not be available if Inseego has materially breached any covenants or agreements contained in the Purchase Agreement; or

 

   

the Public Company Board determines to enter into a definitive agreement with respect to a Superior Proposal that includes the MiFi Business and concurrently with such termination, Inseego enters into a definitive acquisition agreement with respect to such proposal and pays the Purchasers a termination fee of $4.0 million.

Termination Fees

Inseego will be required to pay Purchasers a termination fee of $4.0 million if either: (i) Purchasers terminate the Purchase Agreement because a Triggering Event has occurred; or (ii) Inseego terminates the Purchase Agreement because the Public Company Board has determined to enter into a definitive agreement with respect to a Superior Proposal. Such termination fee shall be Purchasers’ sole and exclusive remedy for such termination.

Purchasers will be required to pay Inseego a termination fee of $4.0 million in the event the Purchase Agreement is terminated because the Outside Date has arrived and (i) Purchasers are in breach of their covenants relating to seeking the approval of CFIUS, (ii) any governmental consent, other than the approval of CFIUS, required by or with respect to Purchasers has not been obtained, or (iii) all closing conditions are satisfied or waived, but Purchasers refuse to close. Purchaser has placed $4.0 million in escrow pursuant to the terms of the Escrow Agreement as security for its obligation to pay such termination fee to Inseego. Such termination fee shall be Inseego’s sole and exclusive remedy for such termination.

 

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Amendment and Waiver

The Purchase Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party thereto. No waiver by any party of any of the provisions thereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No party’s waiver or failure to insist upon strict compliance with an obligation, covenant or agreement on one instance shall operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

Specific Performance

The parties agree that if any provision of the Purchase Agreement were not performed in accordance with the terms thereof, irreparable injury would occur for which monetary damages, even if available, would not be an adequate remedy. Accordingly, each party shall be entitled to specific performance of the terms of the Purchase Agreement, in addition to any other remedy to which they are entitled at law or in equity.

Expenses

Except as otherwise expressly provided in the Purchase Agreement, all costs and expenses incurred in connection with the Purchase Agreement and all related documents and transactions shall be borne by the party incurring such costs and expenses.

Governing Law

The Purchase Agreement is governed by and construed in accordance with the internal laws of the State of Delaware without reference to principles of conflicts of laws that would result in the application of the laws of any other jurisdiction.

Escrow Agreement

In connection with the execution of the Purchase Agreement, Purchasers caused to be deposited $4.0 million with SunTrust Bank, as collateral and security for the payment of Purchasers’ termination fee, if and when it becomes due, which amount will be held in escrow pursuant to the terms of the Escrow Agreement.

IP Cross License Agreement

In connection with the signing of the Purchase Agreement, Inseego and NWI entered into the IP Cross License Agreement, pursuant to which (i) Inseego will grant NWI a worldwide, non-exclusive, non-sublicensable (other than as set forth therein), royalty-free, fully paid-up, perpetual (subject to the terms thereof), irrevocable (subject to the terms thereof), right and license to use certain intellectual property to conduct the MiFi Business, and (ii) NWI will grant Inseego a worldwide, non-transferable (other than as set forth therein), non-exclusive, royalty-free, fully paid-up, perpetual (subject to the terms thereof), irrevocable (subject to the terms thereof), right and license to use certain intellectual property to conduct the Retained Business. The licenses may be sublicensed by each party, subject to certain limitations and conditions.

Transition Services Agreement

In connection with the signing of the Purchase Agreement, Inseego and Purchasers entered into the Transition Services Agreement, pursuant to which Inseego will provide, or cause to be provided, certain services to Purchasers on a transitional basis during the periods and at the prices set forth in the schedules to the Transition Services Agreement. Likewise, Purchasers will provide, or cause to be provided, certain services to Inseego on a transitional basis during the periods and at the prices set forth in the schedules to the Transition Services Agreement.

Required Vote; Recommendation of the Inseego Board

Approval of this Sale Proposal requires the affirmative vote of the holders of a majority of Inseego common stock outstanding and entitled to vote on the matter at the special meeting. For purposes of the vote on this Sale Proposal, an abstention, a “broker non-vote,” or a failure to submit a proxy card or vote by telephone, over the Internet or in person at the special meeting will have the same effect as voting “AGAINST” this Sale Proposal.

THE INSEEGO BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE SALE PROPOSAL.

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial statements are intended to show how the Sale might have affected historical financial statements if the Sale had been completed at an earlier time.

The unaudited pro forma condensed consolidated financial statements present the pro forma financial position and results of operations of the businesses of Inseego as if the sale of NWI, and its MiFi Business, had occurred on January 1, 2015.

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2016 eliminates the MiFi Business from Inseego’s historical assets and liabilities and reflects Inseego’s financial position as if the sale of NWI, including the MiFi Business, had occurred on September 30, 2016.

The unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2016 and the year ended December 31, 2015 eliminates the MiFi Business from Inseego’s historical results for each of those periods and represents the results of operations of Inseego’s RER (also known as FW), DigiCore (also known as Ctrack) and Enfora IoT businesses.

In addition, we have provided an unaudited supplemental pro forma condensed consolidated statement of operations for the year ended December 31, 2015 to reflect (i) the elimination of the MiFi Business from Inseego’s historical results for the year ended December 31, 2015, and (ii) the full-year operating results for RER and DigiCore, acquired on March 27, 2015 and October 5, 2015, respectively, as if those acquisitions had occurred on January 1, 2015.

The unaudited pro forma condensed consolidated financial information has been prepared by management in accordance with the regulations of the SEC and is not necessarily indicative of the condensed consolidated financial position or results of operations that would have been realized had the disposition of the MiFi Business occurred as of the dates indicated, nor is it meant to be indicative of any anticipated condensed consolidated financial position or future results of operations that Inseego’s remaining business will experience after the disposition of the MiFi Business. In addition, the accompanying unaudited pro forma condensed consolidated statement of operations does not include any expected cost savings or restructuring actions which may be undertaken or achievable subsequent to the disposition of the MiFi Business or the impact of any non-recurring activity and one-time transaction related costs.

This unaudited pro forma condensed consolidated financial information should be read in conjunction with the accompanying notes and assumptions as well as the following information:

 

   

Unaudited Condensed Consolidated Financial Statements of Inseego, and notes thereto, as of and for the nine months ending September 30, 2016, included in Inseego’s Quarterly Report on Form 10-Q filed with the SEC on November 7, 2016;

 

   

Audited Consolidated Financial Statements of Inseego, and notes thereto, as of and for the year ended December 31, 2015, included in Inseego’s Annual Report on Form 10-K filed with the SEC on March 14, 2016; and

 

   

Audited Group Financial Statements of DigiCore, and notes thereto, as of and for the years ended June 30, 2014 and June 30, 2015, included in Inseego’s Current Report on Form 8-K/A filed with the SEC on December 17, 2015.

 

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INSEEGO CORP. & SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of September 30, 2016

(in thousands)

 

     Historical
Inseego
    Sale of
MiFi
Business (a)
    Pro Forma
Adjustments
    Pro Forma
without MiFi
Business
 
ASSETS         

Current assets:

        

Cash and cash equivalents

   $ 17,165      $ —        $ 48,023 (b)    $ 65,188   

Accounts receivable, net

     27,497        (12,899       14,598   

Inventories

     39,970        (13,727       26,243   

Prepaid expenses and other

     12,390        (10,140       2,250   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     97,022        (36,766     48,023        108,279   

Property, plant and equipment, net

     7,820        (1,513       6,307   

Rental assets, net

     6,582        —            6,582   

Intangible assets, net

     41,007        (109       40,898   

Goodwill

     33,117        —            33,117   

Other assets

     36        (18       18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 185,584      $ (38,406   $ 48,023      $ 195,201   
  

 

 

   

 

 

   

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY         

Current liabilities:

        

Accounts payable

   $ 32,397      $ (21,071     $ 11,326   

Accrued expenses and other current liabilities

     37,091        (10,272       26,819   

DigiCore bank facilities

     2,702        —            2,702   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     72,190        (31,343     —          40,847   

Long-term liabilities:

        

Convertible senior notes, net

     88,796        —            88,796   

Deferred tax liabilities, net

     3,453        —            3,453   

Other long-term liabilities

     13,386        —            13,386   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     177,825        (31,343     —          146,482   
  

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies

        

Stockholders’ equity:

        

Preferred stock

     —          —            —     

Common stock

     54        —            54   

Additional paid-in capital

     506,141        —          73 (c)      506,214   

Accumulated other comprehensive loss

     (1,868     —            (1,868

Accumulated deficit

     (496,623     (7,063     47,950 (b)(c)      (455,736
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity attributable to Inseego

     7,704        (7,063     48,023        48,664   

Noncontrolling interests

     55        —            55   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     7,759        (7,063     48,023        48,719   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 185,584      $ (38,406   $ 48,023      $ 195,201   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements

 

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INSEEGO CORP. & SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Nine Months Ended September 30, 2016

(in thousands, except for per share data)

 

     Historical
Inseego
    Sale of
MiFi
Business (d)
    Pro Forma
Adjustments
    Pro Forma
Without
MiFi Business
 

Net revenues

   $ 190,636      $ (118,378     $ 72,258   

Cost of net revenues

     123,291        (86,299       36,992   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     67,345        (32,079     —          35,266   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Research and development

     24,248        (14,185       10,063   

Sales and marketing

     24,062        (3,885       20,177   

General and administrative

     34,744        (10,466     (2,103 )(e)      22,175   

Amortization of purchased intangible assets

     2,912        —            2,912   

Impairment of purchased intangible assets

     2,594        —            2,594   

Restructuring charges

     1,685        (574       1,111   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     90,245        (29,110     (2,103     59,032   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (22,900     (2,969     2,103        (23,766

Other income (expense):

        

Interest income (expense), net

     (11,712     (7     26 (f)      (11,693

Other income, net

     986        54          1,040   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (33,626     (2,922     2,129        (34,419

Income tax benefit

     478        3          481   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (33,148     (2,919     2,129        (33,938

Less: Net loss attributable to noncontrolling interests

     (24     —            (24
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Inseego Corp.

   $ (33,172   $ (2,919   $ 2,129      $ (33,962
  

 

 

   

 

 

   

 

 

   

 

 

 

Per share data:

        

Net loss per share attributable to common shareholders:

        

Basic and diluted

   $ (0.62       $ (0.63
  

 

 

       

 

 

 

Weighted-average shares used in computation of basic and diluted net loss per share attributable to common shareholders:

        

Basic and diluted

     53,584            53,584   
  

 

 

       

 

 

 

See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements

 

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INSEEGO CORP. & SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2015

(in thousands, except for per share data)

 

     Historical
Inseego
    Sale of
MiFi
Business (d)
    Pro Forma
Adjustments
    Pro Forma
Without
MiFi Business
 

Net revenues

   $ 220,942      $ (152,362       68,580   

Cost of net revenues

     161,989        (113,922       48,067   
  

 

 

   

 

 

     

 

 

 

Gross profit

     58,953        (38,440       20,513   
  

 

 

   

 

 

     

Operating costs and expenses:

        

Research and development

     35,446        (22,095       13,351   

Sales and marketing

     20,899        (6,958       13,941   

General and administrative

     34,452        (12,790       21,662   

Amortization of purchased intangible assets

     2,126        —            2,126   

Restructuring charges

     3,821        (2,442       1,379   
  

 

 

   

 

 

     

 

 

 

Total operating costs and expenses

     96,744        (44,285       52,459   
  

 

 

   

 

 

     

 

 

 

Operating loss

     (37,791     5,845          (31,946

Other income (expense):

        

Non-cash change in acquisition-related escrow

     (8,286     —            (8,286

Interest income (expense), net

     (7,164     (25     108 (f)      (7,081

Other income, net

     1,128        (191       937   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (52,113     5,629        108        (46,376

Income tax provision

     (181     (4       (185
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (52,294     5,625        108        (46,561

Less: Net loss attributable to noncontrolling interests

     8        —            8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Inseego Corp.

   $ (52,286   $ 5,625      $ 108      $ (46,553
  

 

 

   

 

 

   

 

 

   

 

 

 

Per share data:

        

Net loss per share attributable to common shareholders:

        

Basic and diluted

   $ (0.99       $ (0.88
  

 

 

       

 

 

 

Weighted-average shares used in computation of basic and diluted net loss per share attributable to common shareholders:

        

Basic and diluted

     52,767            52,767   
  

 

 

       

 

 

 

See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements

 

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INSEEGO CORP. & SUBSIDIARIES

Unaudited Supplemental Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2015

(in thousands, except for per share data)

 

     Pro Forma
Without
MiFi Business
    RER (1)     DigiCore (2)     Pro Forma
Adjustments
    Pro Forma
Without
Mifi Business
and Full Year
RER and
Digicore
 

Net revenues

   $ 68,580      $ 5,071      $ 50,840      $ (1,168 )(3)    $ 123,323   

Cost of net revenues

     48,067        2,881        17,514        399  (3)(7)      68,861   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     20,513        2,190        33,326        (1,567     54,462   

Operating costs and expenses:

          

Research and development

     13,351        505        3,812        (965 )(4)(8)      16,703   

Sales and marketing

     13,941        731        17,591        10  (4)      32,273   

General and administrative

     21,662        1,529        14,013        (2,419 )(4)(5)(6)      34,785   

Amortization of purchased intangible assets

     2,126        —          —          2,126  (7)      4,252   

Restructuring charges

     1,379        —          —          —          1,379   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     52,459        2,765        35,416        (1,248     89,392   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (31,946     (575     (2,090     (319     (34,930

Other income (expense):

          

Non-cash change in acquisition-related escrow

     (8,286     —          —          8,286  (9)      —     

Interest expense, net

     (7,081     (25     (578     (6,685 )(10)      (14,369

Other income, net

     937        3        6,454        —          7,394   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (46,376     (597     3,786        1,282        (41,905

Income tax benefit (provision)

     (185     —          664        230  (11)      709   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (46,561     (597     4,450        1,512        (41,196

Less: net income (loss) attributable to noncontrolling interests

     8        —          (47     —          (39
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Inseego Corp.

   $ (46,553   $ (597   $ 4,403      $ 1,512      $ (41,235
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per share data:

          

Net loss per share attributable to common shareholders:

          

Basic and diluted

   $ (0.88         $ (0.76
  

 

 

         

 

 

 

Weighted-average shares used in computation of basic and diluted net loss per share attributable to common shareholders:

          

Basic and diluted

     52,767            1,642  (12) (13)      54,409   
  

 

 

       

 

 

   

 

 

 

See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements

 

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INSEEGO, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Planned sale of the MiFi Business

On September 21, 2016, Inseego entered into a stock purchase agreement (the “Purchase Agreement”) with Novatel Wireless, Inc. (“NWI”), T.C.L. Industries Holdings (H.K.) Limited and Jade Ocean Global Limited (the “Purchaser”), which provides for the sale of all of the issued and outstanding shares of common stock of NWI to the Purchaser for $50.0 million in cash, subject to potential adjustment based on NWI’s working capital and outstanding indebtedness as of the closing of the sale (the “Sale”).

As described elsewhere in this proxy statement, on November 8, 2016, in order to facilitate the proposed Sale and as required by the Purchase Agreement, NWI, Inseego and their affiliates completed an internal reorganization (the “Reorganization”). The purpose and effect of the Reorganization was to separate NWI’s assets and liabilities associated with NWI’s mobile broadband business, which includes its MiFi branded hotspots and USB modem product lines (the “MiFi Business”) from the assets and liabilities associated with its ongoing Ctrack, FW and Enfora IoT businesses.

Upon completion of the Sale, Purchaser will acquire all of the issued and outstanding shares of common stock of NWI, which holds the MiFi Business. Certain assets and liabilities of the MiFi Business will not be included with the Sale, including cash balances, deferred tax assets, and restructuring related liabilities. The MiFi Business focuses on the development, manufacturing and sale of cellular modems and hotspot devices with the vast majority of its customers, sales and operations located in the United States.

Under the terms of the Purchase Agreement, the purchase price of $50.0 million will be increased by the amount by which the working capital of the MiFi Business at the closing date exceeds $5.7 million and decreased by the amount by which the working capital of the MiFi Business at the closing date is less than $5.7 million. In addition, the purchase price will be decreased by the amount of any outstanding indebtedness of NWI as of the closing of the Sale.

Following the Sale, Inseego will continue to operate its remaining R.E.R. Enterprises, Inc. (“RER”), DigiCore Holdings Limited (“DigiCore” or “Ctrack”) and Enfora, Inc. (“Enfora”) Internet of Things (“IoT”) businesses with a continued focus on products and services that generate recurring revenues.

Note 2.    Unaudited pro forma adjustments

The following pro forma adjustments are included in the unaudited pro forma condensed consolidated balance sheet and/or the unaudited pro forma condensed consolidated statements of operations.

 

(a)

Elimination of assets and liabilities attributable to the MiFi Business.

 

(b)

Proceeds from the Sale (in thousands):

 

Gross proceeds

   $ 50,000   

Estimated working capital adjustment, net of outstanding indebtedness

     (277
  

 

 

 

Adjusted gross proceeds

     49,723   

Less: transaction fee paid on closing

     (1,700
  

 

 

 

Adjusted net proceeds

   $ 48,023   
  

 

 

 

 

(c)

Reflects the stock-based compensation expense related to the acceleration of unvested options to purchase shares of common stock of Inseego and unvested restricted stock unit awards as a result of the termination of certain employees of the MiFi Business in connection with the Sale.

 

(d)

Reflects the elimination of revenue, cost of revenues, operating expenses and other income (expense) attributable to the MiFi Business.

 

(e)

Elimination of nonrecurring transaction costs incurred during the nine months ended September 30, 2016 that are directly related to the Sale.

 

(f)

Reduction of interest expense on outstanding balances under Inseego’s revolving credit facility for the nine months ended September 30, 2016 and for the year ended December 31, 2015 which would not have been outstanding had the Sale occurred on January 1, 2015.

 

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Note 3. Unaudited supplemental pro forma adjustments

In separate transactions unrelated to the Sale, Inseego acquired RER on March 27, 2015 and DigiCore on October 5, 2015. An unaudited supplemental pro forma condensed consolidated statement of operations has been presented to reflect the full year operations of RER and DigiCore as if those acquisitions had occurred on January 1, 2015.

The following pro forma adjustments are included in the supplemental unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2015:

 

(1)

Results of operations for RER for the pre-acquisition period January 1, 2015 through March 26, 2015 (the “RER Pre-Acquisition Period”).

 

(2)

Results of operations for DigiCore for the pre-acquisition period January 1, 2015 through October 4, 2015 (the “DigiCore Pre-Acquisition Period”).

 

(3)

Elimination of $1.2 million in intercompany sales between DigiCore and Inseego.

 

(4)

Incremental share-based compensation expense related to stock options granted on the acquisition dates to RER and DigiCore employees on their respective acquisition dates amounting to $44,000 and $0.7 million, respectively, for the RER Pre-Acquisition Period and the DigiCore Pre-Acquisition Period.

 

(5)

Amortization of $0.5 million of cash retention bonuses paid or payable to certain DigiCore employees on the acquisition date for the DigCore Pre-Acquisition Period.

 

(6)

Elimination of transaction costs incurred by Inseego and RER of $1.4 million related directly to the acquisition of RER and incurred by Inseego and DigiCore of $2.3 million related directly to the acquisition of DigiCore.

 

(7)

Amortization of acquired intangibles related to the RER Pre-Acquisition Period and the DigiCore Pre-Acquisition Period as follows (in thousands):

 

     RER      DigiCore      Total  

Cost of net revenues:

        

Developed technology

   $ 147       $ 1,420       $ 1,567   

Amortization of acquired intangibles:

        

Customer relationships / trademarks

   $ 311       $ 1,815       $ 2,126   

 

(8)

Elimination of $1.0 million of amortization of historical intangibles of DigiCore during the DigiCore Pre-Acquisition Period.

 

(9)

Elimination of non-cash change in acquisition-related escrow on assumption that the DigiCore transaction occurred on January 1, 2015.

 

(10)

Interest expense on convertible debt related to the financing of the DigiCore acquisition for the period of January 1, 2015 through June 10, 2015, the date the debt was issued.

 

(11)

Income tax benefit related to taxable DigiCore pro forma adjustments.

 

(12)

To reflect the RER Pre-Acquisition Period of the then obligation to issue approximately 3.2 million shares in March 2016 to former RER shareholders which is assumed to be outstanding for the entire year for the purpose of calculating earnings per share for the year ended December 31, 2015.

 

(13)

To reflect the RER Pre-Acquisition Period portion of the approximately 3.8 million shares issued in connection with the exercise of warrants by an Inseego shareholder in March 2015, the proceeds of which were used to partially fund the RER acquisition, which are assumed to be outstanding for the entire year for the purposes of calculating earnings per share for the year ended December 31, 2015.

 

 

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UNAUDITED CONDENSED FINANCIAL STATEMENTS OF THE MIFI BUSINESS

The accompanying unaudited condensed financial statements of Inseego’s MiFi Business include only the assets and liabilities of the MiFi Business which are being acquired and assumed by Purchaser as a result of the Sale and the revenue and expenses which are related to those specific assets and liabilities.

The accompanying unaudited condensed financial statements have been prepared from Inseego’s historical accounting records and do not purport to reflect the revenue and expenses that would have resulted if the MiFi Business had been a separate, standalone business during the periods presented. Although management has estimated allocations of certain corporate administrative and public company costs to the MiFi Business, such allocations are not necessarily indicative of the actual costs that the MiFi Business would have incurred had it been a standalone entity.

As a product line of Inseego, the MiFi Business is dependent upon Inseego for all of its working capital and financing requirements.

The unaudited condensed financial statements of the MiFi Business consist of:

 

   

Unaudited Condensed Balance Sheet of September 30, 2016, December 31, 2015 and 2014;

 

   

Unaudited Condensed Statements of Operations for the nine months ended September 30, 2016 and the years ended December 31, 2015 and 2014;

 

   

Unaudited Condensed Changes in Inseego’s Net Investment for the nine months ended September 30, 2016 and for the years ended December 31, 2015 and 2014; and

 

   

Unaudited Condensed Statements of Cash Flows for the nine months ended September 30, 2016 and the years ended December 31, 2015 and 2014.

The unaudited financial statements of the MiFi Business should be read in conjunction with (i) the Unaudited Condensed Consolidated Financial Statements of Inseego, and the notes thereto, as of and for the nine months ending September 30, 2016, included in Inseego’s Quarterly Report on Form 10-Q filed with the SEC on November 7, 2016 and (ii) the Audited Consolidated Financial Statements of Inseego, and notes thereto, as of and for the years ended December 31, 2015 and 2014, included in Inseego’s Annual Report on Form 10-K filed with the SEC on March 14, 2016, which are incorporated herein by reference.

 

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MiFi BUSINESS

Unaudited Condensed Balance Sheet

(in thousands)

 

     September 30,      December 31,  
     2016      2015      2014  
ASSETS         

Current assets:

        

Cash and cash equivalents

   $ —         $ —         $ —     

Accounts receivable, net

     12,899         8,203         16,648   

Inventories

     13,727         27,445         26,071   

Prepaid expenses and other

     10,140         3,418         5,816   
  

 

 

    

 

 

    

 

 

 

Total current assets

     36,766         39,066         48,535   

Property, plant and equipment, net

     1,513         2,548         4,532   

Intangible assets, net

     109         288         256   

Other assets

     18         180         467   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 38,406       $ 42,082       $ 53,790   
  

 

 

    

 

 

    

 

 

 
LIABILITIES AND INSEEGO’S NET INVESTMENT         

Current liabilities:

        

Accounts payable

     21,071         21,189         27,806   

Accrued expenses and other current liabilities

     10,272         7,576         13,558   
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     31,343         28,765         41,364   

Long-term liabilities:

        

Other long-term liabilities

     —           33         369   
  

 

 

    

 

 

    

 

 

 

Total liabilities

     31,343         28,798         41,733   

Commitments and contingencies

        

Inseego’s net investment

     7,063         13,284         12,057   
  

 

 

    

 

 

    

 

 

 

Total liabilities and Inseego’s net investment

   $ 38,406       $ 42,082       $ 53,790   
  

 

 

    

 

 

    

 

 

 

See notes to these unaudited condensed financial statements

 

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MiFi BUSINESS

Unaudited Condensed Statements of Operations

(in thousands)

 

     Nine Months Ended     Year Ended  
     September 30,     December 31,  
     2016     2015     2014  

Net revenues

   $ 118,378      $ 152,362      $ 148,646   

Cost of net revenues

     86,299        113,922        118,798   
  

 

 

   

 

 

   

 

 

 

Gross profit

     32,079        38,440        29,848   

Operating costs and expenses:

      

Research and development

     14,185        22,095        22,094   

Sales and marketing

     3,885        6,958        6,730   

General and administrative

     10,466        12,790        8,443   

Restructuring charges

     574        2,442        6,398   
  

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     29,110        44,285        43,665   
  

 

 

   

 

 

   

 

 

 

Operating income (loss)

     2,969        (5,845     (13,817

Other expense:

      

Interest income, net

     7        25        48   

Other income (expense), net

     (54     191        37   
  

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     2,922        (5,629     (13,732

Income tax benefit (provision)

     (3     4        (14
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 2,919      $ (5,625   $ (13,746
  

 

 

   

 

 

   

 

 

 

See notes to these unaudited condensed financial statements

 

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MiFi BUSINESS

Unaudited Condensed Changes in Inseego’s Net Investment

(in thousands)

 

Balance at December 31, 2013

   $ 26,098   

Net loss

     (13,746

Share-based compensation expense

     2,702   

Net transfers to Inseego

     (2,997
  

 

 

 

Balance at December 31, 2014

     12,057   

Net loss

     (5,625

Share-based compensation expense

     4,824   

Net transfers from Inseego

     2,028   
  

 

 

 

Balance at December 31, 2015

     13,284   

Net income

     2,919   

Share-based compensation expense

     2,786   

Net transfers to Inseego

     (11,926
  

 

 

 

Balance at September 30, 2016

   $ 7,063   
  

 

 

 

See notes to these unaudited condensed financial statements

 

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MiFi BUSINESS

Unaudited Condensed Statements of Cash Flows

(in thousands)

 

     Nine Months Ended     Year Ended  
     September 30,     December 31,  
     2016     2015     2014  

Cash flows from operating activities:

      

Net income (loss)

   $ 2,919      $ (5,625   $ (13,746

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

      

Depreciation and amortization

     1,574        3,070        5,749   

Provision for bad debts, net of recoveries

     (92     249        12   

Provision for excess and obsolete inventory

     2,694        528        1,676   

Share-based compensation expense

     2,786        4,824        2,702   

Other

     162        287        (191

Changes in assets and liabilities:

      

Accounts receivable

     (4,604     8,196        16,070   

Inventories

     11,024        (1,902     (9,399

Prepaid expenses and other assets

     (6,722     2,398        (1,171

Accounts payable

     (118     (6,617     6,550   

Accrued expenses, income taxes and other

     2,663        (6,318     (3,591
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     12,286        (910     4,661   
  

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

      

Purchases of property, plant and equipment

     (360     (1,118     (1,664
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (360     (1,118     (1,664
  

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

      

Transfers from (to) Inseego

     (11,926     2,028        (2,997
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (11,926     2,028        (2,997
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     —          —          —     

Cash and cash equivalents, beginning of period

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ —        $ —        $ —     
  

 

 

   

 

 

   

 

 

 

See notes to these unaudited condensed financial statements

 

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THE MIFI BUSINESS

Notes to Unaudited Condensed Financial Statements

Note 1. Business

The MiFi Business consists of substantially all of the assets and liabilities related to or used in connection with Novatel Wireless, Inc.’s (“NWI”) mobile broadband business, including its related MiFi branded hotspots and USB modem product lines, and related liabilities. NWI is owned by Inseego Corp. (“Inseego”).

Basis of Presentation

The accompanying unaudited condensed financial statements (the “Unaudited Financial Statements”) have been prepared in connection with the pending sale of the MiFi Business as described elsewhere in this proxy statement. They have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and Securities and Exchange Commission (“SEC”) guidance for carve-out financial statements. The term “carve-out” as used herein applies to general purpose financial statements of an operating unit which are derived or carved-out of those of a larger corporate entity. These financial statements, which are presented in a condensed format, do not include all of the information and footnotes required by GAAP, reflect the historical financial position, results of operations and cash flows of the MiFi Business for the periods presented, and includes only the assets, liabilities and operating activities of the MiFi Business. The carrying value of those assets less the carrying value of those liabilities on each of the balance sheet dates represents Inseego’s net investment in the MiFi Business at that date. The historical financial statements have been derived from the consolidated financial statements of Inseego, and include the revenue, costs of revenue, operating and other expenses associated with the MiFi Business. Certain assumptions and allocations have been made in the preparation of these Unaudited Financial Statements to depict the MiFi Business on a standalone basis for the periods presented. As a result, the Unaudited Financial Statements may not be indicative of the financial position, results of operations or cash flows that would have been presented if the MiFi Business had been a standalone entity.

Due to existing functions and facilities shared among Inseego’s other businesses, certain operating expenses, including general corporate overhead expenses, have been allocated to the MiFi Business. Where specific identification of expenses was not practicable, a reasonable method of allocation was applied using underlying activity drivers of such expenses as a basis of allocation, including management’s estimates of the portion of shared employees’ time spent supporting the MiFi Business and the corresponding application of such percentages to compensation and other applicable shared costs. Management believes such allocations are reasonable; however, they may not be indicative of the actual results of the MiFi Business had it been operating as a standalone entity for the periods presented or the amounts that will be incurred in the future. See Note 2 for further information regarding general corporate overhead expense allocations.

Operating results for the nine months ended September 30, 2016 and the years ended December 31, 2015 and 2014 may not be indicative of the results that may be experienced in any future period. In the opinion of management, the Unaudited Financial Statements include all adjustments necessary to present fairly the financial position and operating results of the MiFi Business for the periods presented. The sale of the MiFi Business is subject to approval of Inseego’s stockholders and other closing conditions set forth in the Purchase Agreement.

Note 2. Related Party Funding and Expense Allocation

Inseego has a centralized cash management function which funds its business unit operations as needed. The MiFi Business’s aggregate cash flows from its operating, investing and financing activities are deemed to have been net transfers from or to Inseego. Such transfers have also been reported as a component of the change in Inseego’s net investment in the MiFi Business.

These Unaudited Financial Statements reflect allocated general corporate expenses associated with centralized support functions including, but not limited to, corporate executive management, tax, accounting and finance, information technology, human resources and legal. These costs generally include all payroll and benefit costs as well as overhead costs related to the support functions. Inseego also allocates costs associated with public company costs, office facilities, corporate insurance coverage and medical and other health plan costs for employees participating in Inseego’s sponsored plans. The allocations are based on a combination of factors, including headcount and estimated time spent on each business unit or business line of Inseego.

Note 3. Summary of Significant Accounting Policies

Use of Estimates

 

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The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent liabilities. Actual results could differ materially from these estimates. Significant estimates include allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, royalty costs, provisions relating to litigation and restructuring, provision for warranty costs, income taxes and share-based compensation expense.

Cash and Cash Equivalents

Cash and cash equivalents of the MiFi Business are deemed to have been regularly settled with Inseego and have therefore been included in Inseego’s net investment in the MiFi Business.

Allowance for Doubtful Accounts Receivable

The MiFi Business provides an allowance for its accounts receivable for estimated losses that may result from its customers’ inability to pay. The MiFi Business determines the amount of the allowance by analyzing known uncollectible accounts, aged receivables, economic conditions, historical losses, and changes in customer payment cycles and a customer’s credit-worthiness. Amounts later determined and specifically identified to be uncollectible are charged or written off against this allowance. To minimize the likelihood of uncollectibility, the MiFi Business reviews its customers’ credit-worthiness periodically based on credit scores generated by independent credit reporting services, its experience with its customers and the economic condition of its customers’ industries. Material differences may result in the amount and timing of expense for any period if the MiFi Business were to make different judgments or utilize different estimates.

Inventories and Provision for Excess and Obsolete Inventory

Inventories are stated at the lower of cost or market. Shipping and handling costs are classified as a component of cost of net revenues. The MiFi Business reviews the components of its inventory and inventory purchase commitments on a regular basis for excess and obsolete inventory based on estimated future usage and sales. Write-downs in inventory value or losses on inventory purchase commitments depend on various items, including factors related to customer demand, economic and competitive conditions, technological advances or new product introductions by the MiFi Business or its customers that vary from its current expectations. Whenever inventory is written down, a new cost basis is established and the inventory is not subsequently written up if market conditions improve.

The MiFi Business believes that, when made, the estimates used in calculating the inventory provision are reasonable and properly reflect the risk of excess and obsolete inventory. If customer demand for the MiFi Business’s inventory is substantially less than its estimates, inventory write-downs may be required, which could have a material adverse effect on its Unaudited Financial Statements.

Property, Plant and Equipment

Property, plant and equipment are initially stated at cost and depreciated using the straight-line method. Test equipment, computer equipment and purchased software, product tooling and furniture and fixtures are depreciated over lives ranging from eighteen months to six years. Leasehold improvements are depreciated over the shorter of the related remaining lease period or useful life.

Expenditures for repairs and maintenance are expensed as incurred. Expenditures for major renewals and betterments that extend the useful lives of existing property, plant and equipment are capitalized and depreciated over the remaining useful life. Upon retirement or disposition of property, plant and equipment, any resulting gain or loss is recognized in other income (expense), net, in the MiFi Business’s statements of operations.

Intangible Assets

Intangible assets include the costs of non-exclusive and perpetual worldwide software technology licenses. These costs are amortized on an accelerated or straight-line basis, depending on the anticipated utilization of the assets, over their estimated useful lives of the assets.

Long-Lived Assets

The MiFi Business periodically evaluates the carrying value of the unamortized balances of its long-lived assets, including property, plant and equipment and intangible assets, to determine whether impairment of these assets has occurred or whether a revision to the related depreciation and amortization periods should be made. When the carrying value of an asset exceeds the associated undiscounted expected future cash flows, the asset is considered to be impaired and is written down to fair value. Fair value is determined based on an evaluation of the assets associated undiscounted future cash flows or appraised value. This evaluation is based on management’s projections of the undiscounted future cash flows associated with each class of asset. If management’s evaluation indicates that the carrying values of these assets are impaired, such impairment is recognized by a reduction of the applicable asset’s carrying value to its estimated fair value and the impairment is expensed as a part of

 

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continuing operations. No impairment charges related to the MiFi Business’s long-lived assets were recognized during the nine months ended September 30, 2016, or the years ended December 31, 2015 and 2014.

Revenue Recognition

The MiFi Business generates the majority of its revenue from the sale of wireless modems to wireless operators, OEM customers and value added resellers and distributors. Revenue is generally recognized upon the delivery of the product to the customer. The MiFi Business has granted price protection to certain customers in accordance with the provisions of the respective contracts. The MiFi Business tracks pricing and other terms offered to customers buying similar products to assess compliance with these provisions. The MiFi Business estimates the amount of price protection for current period product sales utilizing historical experience and information regarding customer inventory levels. To date, the MiFi Business has not incurred material price protection obligations. Revenues from sales to certain customers are subject to cooperative advertising allowances. Cooperative advertising allowances are recorded as an operating expense to the extent that the advertising benefit is separable from the revenue transaction and the fair value of that advertising benefit is determinable. To the extent that such allowances either do not provide a separable benefit to the MiFi Business, or the fair value of the advertising benefit cannot be reliably estimated, such amounts are recorded as a reduction of revenue. The MiFi Business establishes a reserve for estimated product returns in the period in which revenue is recognized. In estimating future product returns, the MiFi Business considers various factors, including its stated return policies and practices and historical trends.

Warranty Costs

The MiFi Business accrues warranty costs based on estimates of future warranty related replacement, repairs or rework of products. The MiFi Business’s warranty policy generally provides one to three years of coverage for products following the date of purchase. The MiFi Business’s policy is to accrue the estimated cost of warranty coverage as a component of cost of net revenues in its statements of operations at the time revenue is recognized. In estimating its future warranty obligations, the MiFi Business considers various factors, including the historical frequency and volume of claims and cost to replace or repair products under warranty. The warranty provision for the MiFi Business’s products is determined by using a financial model to estimate future warranty costs. The MiFi Business’s financial model takes into consideration actual product failure rates, estimated replacement, repair or rework expenses, and potential risks associated with its different products. The risk levels, warranty cost information and failure rates used within this financial model are reviewed throughout the year and updated if and when these inputs change.

Income Taxes

For purposes of the Unaudited Financial Statements, income tax was calculated at statutory rates adjusted for applicable permanent differences, as if the MiFi Business was a separate taxpayer utilizing the “Separate Return Method,” even though it has been included in the consolidated tax return of Inseego.

The MiFi Business utilizes a more-likely-than-not recognition threshold, based on the technical merits of the tax position taken, when it considers the need for a provision related to an uncertain tax provision. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of the tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. The MiFi Business recognizes interest and penalties related to income tax matters in income tax expense.

Since the MiFi Business has been included in Inseego’s consolidated tax return and has a history of net losses for both financial reporting and tax purposes, and because any net operating loss carryforward attributable to the MiFi Business is not included in the Sale, no deferred tax assets or deferred tax liabilities are reflected in the unaudited condensed balance sheets.

Share-Based Compensation

Inseego has granted stock options and restricted stock units to certain employees of the MiFi Business. Inseego also has an employee stock purchase plan (“ESPP”) for eligible employees of the MiFi Business. Compensation cost associated with all share-based payments is measured based on grant date fair values. The fair value of each employee stock option and employee stock purchase right is estimated on the date of grant using an option pricing model that meets certain requirements. The Black-Scholes option pricing model is used to estimate the fair value of its stock options and stock purchase rights. The Black-Scholes model is considered an acceptable model under GAAP but the fair values generated by it may not be indicative of the actual fair values of the equity awards as it does not consider certain factors important to those equity awards to employees, such as continued employment and periodic vesting requirements, as well as limited transferability. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by Inseego’s stock price and a number of assumptions, including expected volatility, expected term, risk-free interest rate and expected dividends.

For grants of stock options, Inseego uses a blend of historical and implied volatility for traded options on its stock in order to estimate the expected volatility assumption required in the Black-Scholes model. Inseego’s use of a blended volatility estimate in computing the expected volatility assumption for stock options is based on its belief that while the implied volatility is

 

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representative of expected future volatility, the historical volatility over the expected term of the equity award is also an indicator of expected future volatility. Due to the short duration of stock purchase rights under the ESPP, Inseego utilizes historical volatility in order to estimate the expected volatility assumption of the Black-Scholes model.

The expected term of stock options granted is estimated using Inseego’s historical experience. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of the equity awards. The dividend yield assumption is based on Inseego’s history and expectation of no dividend payouts. Inseego estimates forfeitures at the time of grant and revises these estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Inseego estimates its forfeiture rate assumption for all types of share-based compensation awards based on historical forfeiture rates related to each category of award.

Compensation cost associated with grants of restricted stock units are measured at fair value, which has historically been the closing price of Inseego’s stock on the date of grant.

The MiFi Business recognizes share-based compensation expense over the requisite service period of each individual equity award, which generally equals the vesting period, using the straight-line method for equity awards that contain only service conditions. For equity awards that contain performance conditions, the MiFi Business recognizes the share-based compensation expense on a straight-line basis for each vesting tranche.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”), which are adopted by the MiFi Business as of the specified date. Unless otherwise discussed, management believes the impact of recently issued standards, which are not yet effective, will not have a material impact on its Unaudited Financial Statements upon adoption.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The new standard will require revenue recognized to represent the transfer of promised goods or services to customers in an amount that reflects the consideration in which a business expects to receive in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of Effective Date. The standard defers the effective date of adoption of ASU 2014-09 to interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted but not before the original effective date of December 15, 2016. The MiFi Business is currently assessing the impact of this guidance.

In April 2015, the FASB issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. Under this standard, if a cloud computing arrangement includes a software license, the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. The MiFi Business implemented this guidance during the first quarter of 2016. This guidance did not have a material impact on the MiFi Business’s unaudited condensed consolidated financial statements upon adoption.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. Under this standard, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The standard defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. The MiFi Business elected to early adopt this guidance during the fourth quarter of 2015.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The MiFi Business is currently assessing the impact of this guidance.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which affects entities that issue share-based payment awards to their employees. The guidance is designed to identify areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This guidance is effective

 

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prospectively for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The MiFi Business is currently assessing the impact of this guidance.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The MiFi Business is currently assessing the impact of this guidance.

Note 4. Financial Statement Details

Accounts Receivable

Accounts receivable consist of the following (in thousands):

 

     September 30,      December 31,  
     2016      2015      2014  

Trade receivables

   $ 13,232       $ 8,506       $ 16,710   

Less: allowance for doubtful accounts

     (333      (303      (62
  

 

 

    

 

 

    

 

 

 
   $ 12,899       $ 8,203       $ 16,648   
  

 

 

    

 

 

    

 

 

 

Inventories

Inventories consist of the following (in thousands):

 

     September 30,      December 31,  
     2016      2015      2014  

Finished goods

   $ 11,199       $ 21,989       $ 24,143   

Raw materials and components

     2,528         5,456         1,928   
  

 

 

    

 

 

    

 

 

 
   $ 13,727       $ 27,445       $ 26,071   
  

 

 

    

 

 

    

 

 

 

Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands):

 

     September 30,      December 31,  
     2016      2015      2014  

Test equipment

   $ 46,302       $ 46,415       $ 51,837   

Computer equipment and purchased software

     8,850         8,690         10,043   

Product tooling

     3,398         3,398         3,242   

Furniture and fixtures

     1,140         1,140         1,756   

Leasehold improvements

     3,854         3,583         4,007   
  

 

 

    

 

 

    

 

 

 

Total assets

     63,544         63,226         70,885   

Less: accumulated depreciation and amortization

     (62,031      (60,678      (66,353
  

 

 

    

 

 

    

 

 

 
   $ 1,513       $ 2,548       $ 4,532   
  

 

 

    

 

 

    

 

 

 

Depreciation and amortization expense relating to property, plant and equipment was $1.5 million, $2.9 million and $5.6 million for the nine months ended September 30, 2016, and for the years ended December 31, 2015 and 2014, respectively.

Intangible Assets

At September 30, 2016, December 31, 2015 and December 31, 2014, the MiFi Business had net acquired software licenses and other intangibles of $0.1 million, $0.3 million and $0.3 million, respectively. The acquired software licenses represent rights to use certain software necessary for the development and commercial sale of the MiFi Business’s products.

 

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Amortization expense relating to acquired software licenses and other intangibles was $0.1 million, $0.2 million and $0.1 million for the nine months ended September 30, 2016 and for the years ended December 31, 2015 and 2014, respectively. Amortization expense related to licenses obtained for research purposes is included in research and development expense in the unaudited condensed statements of operations. Amortization expense related to licenses obtained for commercial products is recorded in cost of net revenues in the unaudited condensed statements of operations. At September 30, 2016, the weighted-average remaining useful life of the MiFi Business’s acquired software licenses and other intangibles was 1.3 years.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

 

     September 30,      December 31,  
     2016      2015      2014  

Royalties

   $ 4,010       $ 1,644       $ 3,199   

Payroll and related expenses

     2,510         1,843         5,107   

Warranty obligations

     249         317         827   

Market development funds and price protection

     2,513         2,781         2,502   

Professional fees

     279         61         52   

Deferred revenue

     —           22         387   

Other

     711         908         1,484   
  

 

 

    

 

 

    

 

 

 
   $ 10,272       $ 7,576       $ 13,558   
  

 

 

    

 

 

    

 

 

 

Accrued Warranty Obligations

Accrued warranty obligations consist of the following (in thousands):

 

     September 30,      December 31,  
     2016      2015      2014  

Warranty liability at beginning of period

   $ 317       $ 827       $ 1,905   

Additions charged to operations

     337         643         939   

Deductions from liability

     (405      (1,153      (2,017
  

 

 

    

 

 

    

 

 

 

Warranty liability at end of period

   $ 249       $ 317       $ 827   
  

 

 

    

 

 

    

 

 

 

Note 5. Income Taxes

The MiFi Business has a sustained history of net losses. For tax purposes, the MiFi Business has been included in Inseego’s consolidated federal income tax return. The provision for income taxes for the nine months ended September 30, 2016 and for the years ended December 31, 2015 and 2014 is comprised solely of state income and franchise taxes.

 

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Note 6. Share-based Compensation

Certain employees of the MiFi Business have been granted awards under Inseego’s various incentive compensation and employee stock purchase plans (the “Plans”). The compensation committee of Inseego’s Board of Directors (the “Compensation Committee”) administers the Plans.

The MiFi Business included the following amounts for share-based compensation expense in the unaudited condensed statements of operations for the nine months ended September 30, 2016 and for the years ended December 31, 2015 and 2014 (in thousands):

 

     Nine Months Ended      Years Ended  
     September 30,      December 31,  
     2016      2015      2014  

Cost of revenues

   $ 127       $ 199       $ 4   

Research and development

     468         678         379   

Sales and marketing

     401         371         111   

General and administrative

     1,790         2,602         1,029   

Restructuring charges

     —           974         1,179   
  

 

 

    

 

 

    

 

 

 
   $ 2,786       $ 4,824       $ 2,702   
  

 

 

    

 

 

    

 

 

 

Note 7. Commitments and Contingencies

Operating Leases

The MiFi Business leases its office space and certain equipment under non-cancellable operating leases with various terms through 2020. The minimum annual rent on the MiFi Business’s office space is subject to increases based on stated rental adjustment terms, property taxes and operating costs and contains rent concessions. For financial reporting purposes, rent expense is recognized on a straight-line basis over the term of the lease. Accordingly, rent expense recognized in excess of rent paid is reflected as deferred rent. Rent expense under operating leases for the nine months ended September 30, 2016 and for the years ended December 31, 2015 and 2014 was $1.6 million, $2.0 million and $2.0 million, respectively. The MiFi Business’s office space lease contains incentives in the form of reimbursement from the landlord for a portion of the costs of leasehold improvements incurred by the MiFi Business which are recorded to rent expense on a straight-line basis over the term of the lease.

The future minimum payments under non-cancellable operating leases were as follows at September 30, 2016 (in thousands):

 

2016 (quarter ended December 31, 2016)

   $ 321   

2017

     987   

2018

     870   

2019

     857   

2020

     97   
  

 

 

 

Total

   $ 3,132   
  

 

 

 

The future minimum payments above have not been reduced by minimum sublease rental income of $0.1 million due in the future under noncancellable subleases.

Employee Retention Matters

In connection with the MiFi Business’s turnaround efforts, and to retain and encourage employees to assist the MiFi Business with its efforts, the Compensation Committee approved an all-employee retention bonus plan in 2014 (“Retention Bonus Plan”) based on achieving certain financial and cash targets. The financial metrics had to be met for two consecutive quarter periods during the three quarter periods ending March 31, 2015. At December 31, 2014, the MiFi Business accrued approximately $3.4 million of the maximum total target bonus expense based on the MiFi Business’s financial results for the quarter ended December 31, 2014 and the assessment of the probability of the achievement of the remaining metrics in March 31, 2015. The total Retention Bonus Plan expense of approximately $6.8 million was recognized over the requisite service

 

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period, $3.4 million of which was recognized during the year ended December 31, 2015. In the third quarter of 2015, the MiFi Business paid U.S. employees their bonuses with shares of Inseego’s common stock.

Legal

The MiFi Business is, from time to time, party to various legal proceedings arising in the ordinary course of business. The MiFi Business records a loss when information indicates that a loss is both probable and estimable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the MiFi Business records the minimum estimated liability related to the claim. As additional information becomes available, the MiFi Business assesses the potential liability related to the MiFi Business’s pending litigation and revises its estimates, if necessary. The MiFi Business expenses litigation costs as incurred.

The MiFi Business is currently named as a defendant or co-defendant in some patent infringement lawsuits in the U.S. and is indirectly participating in other U.S. patent infringement actions pursuant to its contractual indemnification obligations to certain customers. Based on an evaluation of these matters and discussions with the MiFi Business’s intellectual property litigation counsel, the MiFi Business believes that liabilities arising from or sums paid in settlement of these existing matters would not have a material adverse effect on its results of operations or financial condition.

Note 8. Concentrations of Risk

Concentrations of Risk

Substantially all of the MiFi Business’s net revenues are derived from sales of wireless access products. Any significant decline in market acceptance of the MiFi Business’s products or in the financial condition of the MiFi Business’s customers would have an adverse effect on the MiFi Business’s results of operations and financial condition.

A significant portion of the MiFi Business’s net revenues comes from a small number of customers. For the nine months ended September 30, 2016 and for the years ended December 31, 2015 and 2014, sales to the MiFi Business’s largest customer accounted for approximately 88%, 78% and 64% of net revenues, respectively.

A significant portion of the MiFi Business’s accounts receivables comes from a small number of customers. At September 30, 2016 and December 31, 2015 and 2014, the MiFi Business had one customer who accounted for approximately 80%, 38% and 67% of total accounts receivable, respectively.

The MiFi Business outsources its manufacturing to several third-party manufacturers. If these third-party manufacturers were to experience delays, disruptions, capacity constraints or quality control problems in their manufacturing operations, product shipments to the MiFi Business’s customers could be delayed or the MiFi Business’s customers could consequently elect to cancel their underlying orders, which would negatively impact the MiFi Business’s net revenues and results of operations.

Note 9. Retirement Savings Plans

Inseego has a defined contribution 401(k) retirement savings plan (the “Plan”). Substantially all of the MiFi Business’s U.S. employees are eligible to participate in the Plan after meeting certain minimum age and service requirements. Inseego suspended the employer matching portion of the Plan on August 1, 2014. Effective January 1, 2016 Inseego reinstated the employer matching portion of the Plan and on that date the MiFi Business began matching 50% of the first 6% of an employee’s designated deferral of their eligible compensation. Employees may make discretionary contributions to the Plan subject to Internal Revenue Service limitations. Employer matching contributions under the Plan amounted to approximately $0.4 million for the nine months ended September 30, 2016 and $0.5 million for the year ended December 31, 2014. There were no employer matching contributions under the Plan during the year ended December 31, 2015. Employer matching contributions vested over a two-year period prior to January 1, 2016 and vest immediately beginning January 1, 2016.

Note 10. Restructuring

In September 2013, the MiFi Business commenced certain restructuring initiatives including the closure of the MiFi Business’s development site in Calgary, Canada, and the consolidation of certain supply chain management activities (the “2013 Initiatives”). The 2013 Initiatives are expected to be completed in December 2016.

In June 2014, the MiFi Business commenced certain restructuring initiatives relating to the reorganization of executive level management (the “2014 Initiatives”), which included, among other actions, the replacement of the former Chief Executive Officer. The 2014 Initiatives were completed during the first quarter of 2015.

On August 3, 2015, the MiFi Business approved a restructuring initiative to better position the MiFi Business to operate in current market conditions and more closely align operating expenses with revenues, which included employee severance costs, which were paid in full during the third quarter of 2015. In the fourth quarter of 2015, the MiFi Business commenced certain initiatives relating to the reorganization of executive level management, which included, among other

 

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actions, the replacement of Inseego’s former Chief Executive Officer (collectively, the “2015 Initiatives”). The 2015 Initiatives are expected to be completed in October 2017.

During the year ended December 31, 2015, the MiFi Business recorded reductions in restructuring related charges resulting from a re-evaluation in the first quarter of 2015 of its expected remaining restructuring accrual for facility exit related costs and employment contract costs related to the 2013 Initiatives and 2014 Initiatives, respectively.

In July 2016, the MiFi Business commenced certain restructuring initiatives intended to improve its strategic focus on its most profitable business lines while de-prioritizing certain hardware-only product lines to non-carrier customers, including a reduction-in-force (the “2016 Initiatives”). The 2016 Initiatives are expected to cost a total of approximately $0.3 million and were completed in September 2016.

The MiFi Business accounts for facility exit costs in accordance with ASC 420, Exit or Disposal Cost Obligations, which requires that a liability for such costs be recognized and measured initially at fair value on the cease-use date based on remaining lease rentals, adjusted for the effects of any prepaid or deferred items recognized, reduced by the estimated sublease rentals that could be reasonably obtained even if the MiFi Business does not intend to sublease the facilities.

The MiFi Business is required to estimate future sublease income and future net operating expenses of the facilities, among other expenses. The most significant of these estimates relate to the timing and extent of future sublease income which reduce lease obligations, and the probability that such sublease income will be realized. The MiFi Business based estimates of sublease income, in part, on information from third party real estate experts, current market conditions and rental rates, an assessment of the time period over which reasonable estimates could be made, and the location of the respective facility, among other factors. Further adjustments to the facility exit liability accrual will be required in future periods if actual exit costs or sublease income differ from current estimates. Exit costs recorded by the MiFi Business under these provisions are neither associated with, nor do they benefit, continuing activities.

 

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PROPOSAL NO. 2: THE NWI CHARTER AMENDMENT PROPOSAL

Overview

The Inseego Board has unanimously approved the NWI Charter Amendment Proposal to eliminate the provision of NWI’s current amended and restated certificate of incorporation that requires Inseego stockholders (in addition to NWI’s stockholders) to approve certain actions that are taken by NWI, including actions taken after the completion of the Sale. If retained, such provision would have the effect of inhibiting Purchaser’s ability to operate the MiFi Business following the completion of the Sale and would undermine the parties’ intent of the Purchase Agreement. The text of the form of proposed amendment to the NWI amended and restated certificate of incorporation is attached to this proxy statement as Annex C.

Reasons for the Amendment

As discussed elsewhere in this proxy statement, on November 8, 2016, NWI completed the Reorganization pursuant to Section 251(g) of the DGCL. In connection with the Reorganization and pursuant to Section 251(g) of the DGCL, NWI was required to amend its then existing amended and restated certification of incorporation to provide that any act or transaction by or involving NWI, other than the election or removal of directors of NWI, that requires for its adoption under the DGCL or NWI’s organizational documents the approval of NWI’s stockholders, also be approved by the Inseego stockholders. In other words, after the completion of the Reorganization and even after the completion of the Sale, the approval of both the NWI stockholders and the Inseego stockholders would be required in order for NWI to take certain corporate actions.

We undertook the Reorganization for the purpose of facilitating the sale of the MiFi Business to Purchasers and relied on Section 251(g) of the DGCL to conduct the Reorganization because such provision does not require stockholder approval, and thus was the fastest, most efficient option available. However, following the closing of the Sale, the Restrictive Voting Provision would inhibit Purchaser’s ability to operate the MiFi Business and would undermine the parties’ intent of the Purchase Agreement.

In addition, the deletion of the Restrictive Voting Provision will put Inseego in the same position as substantially all other public companies that operate through multiple subsidiaries. It is uncommon in business organizations that operate in a holding company structure for the stockholders of the holding company to have direct voting rights as to matters that affect only subsidiaries of the holding company. By lifting this requirement, Inseego will gain the flexibility and efficiency currently realized by nearly all other companies who operate under the same, or similar, holding company and subsidiary structure.

Specifically, the proposed amendment would eliminate the following section (i.e., the Restrictive Voting Provision) from NWI’s amended and restated certificate of incorporation:

“Any act or transaction by or involving the Corporation, other than the election or removal of directors of the Corporation, that requires for its adoption under the General Corporation Law of the State of Delaware or this Certificate of Incorporation the approval of the stockholders of the Corporation shall, in accordance with Section 251(g) of the General Corporation Law of the State of Delaware, require, in addition, the approval of the stockholders of Inseego Corp. (or any successor thereto by merger), by the same vote as is required by the General Corporation Law of the State of Delaware and/or this Certificate of Incorporation.”

The Inseego Board believes that the proposed amendment to NWI’s amended and restated certificate of incorporation is in the best interests of Inseego and its stockholders based on the factors and considerations listed above, including the ability to effect the Sale.

Impact on Rights of Inseego Stockholders

The proposed amendment would have no effect on the right of Inseego stockholders to vote on matters relating to Inseego, such as a merger or consolidation of Inseego, a sale of all or substantially all of Inseego’s assets, amendments to Inseego’s certificate of incorporation, or any other acts or transactions requiring the approval of Inseego’s stockholders under applicable law.

 

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Required Vote; Recommendation of the Inseego Board

Approval of this NWI Charter Amendment Proposal requires the affirmative vote of the holders of a majority of Inseego common stock outstanding and entitled to vote on the matter at the special meeting. If Inseego’s stockholders approve the NWI Charter Amendment Proposal, NWI will promptly file the amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to delete the Restrictive Voting Provision. For purposes of the vote on this NWI Charter Amendment Proposal, an abstention, a “broker non-vote,” or a failure to submit a proxy card or vote at the special meeting will have the same effect as voting “AGAINST” this NWI Charter Amendment Proposal.

THE INSEEGO BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE NWI CHARTER AMENDMENT PROPOSAL.

 

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PROPOSAL NO. 3: THE SALE-RELATED COMPENSATION PROPOSAL

In accordance with Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to certain of Inseego’s named executive officers in connection with the Sale, including the agreements and understandings pursuant to which such compensation may be paid or become payable. As required by Section 14A of the Exchange Act, we are asking our stockholders to vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to certain of Inseego’s named executive officers in connection with the Sale and the agreements and understandings pursuant to which such compensation may be paid or become payable, as disclosed in the table entitled “Golden Parachute Compensation” in the section entitled “Proposal No. 1: The Sale Proposal—Interests of Certain Persons in the Sale,” including the associated narrative discussion and footnotes, is hereby APPROVED.”

Stockholders should note that this non-binding proposal regarding certain Sale-related executive compensation arrangements is merely an advisory vote which will not be binding on Inseego, the Inseego Board or Purchaser. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the Sale is completed and other conditions are satisfied, certain of our named executive officers will be eligible to receive the various payments in accordance with the terms or conditions applicable to those payments.

Required Vote; Recommendation of the Inseego Board

Approval of the Sale-Related Compensation Proposal requires the affirmative vote of the holders of a majority of Inseego common stock present in person or by proxy and entitled to vote on the matter at the special meeting. For purposes of the vote on this this Sale-Related Compensation Proposal, an abstention will have the same effect as voting “AGAINST” the Sale-Related Compensation Proposal, but the failure to sign and return your proxy card or vote by telephone, over the Internet or in person at the special meeting will have no effect on the outcome of the proposal. Broker non-votes will also have no effect on the outcome of the proposal.

THE INSEEGO BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE SALE-RELATED COMPENSATION PROPOSAL.

 

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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The tables below provide information regarding the beneficial ownership of Inseego’s common stock as of November 18, 2016 by: (i) each of Inseego’s directors; (ii) Inseego’s named executive officers; (iii) all of Inseego’s current directors and executive officers as a group; and (iv) each beneficial owner of more than five percent of Inseego’s common stock.

Beneficial ownership is determined in accordance with SEC rules and regulations, and generally includes voting power or investment power with respect to securities held. Unless otherwise indicated and subject to applicable community property laws, we believe that each of the Inseego stockholders named in the table below has sole voting and investment power with respect to the shares shown as beneficially owned. Securities that may be beneficially acquired within 60 days after November 18, 2016 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the ownership of such person, but are not treated as outstanding for the purpose of computing the ownership of any other person.

The tables below list the number and percentage of shares beneficially owned based on 54,356,715 shares of Inseego common stock outstanding as of November 18, 2016.

Directors and Named Executive Officers

 

Name of Beneficial Owner

   Directly
or
Indirectly
Held (#)
     Option
Awards
(#)(1)
     Stock
Awards
(#)(2)
     Total Shares
of Inseego
Common
Stock
Beneficially
Owned (#)
     Percentage  

Sue Swenson

     73,852         515,424         —           589,276         1.08

Michael Newman

     181,795         203,730         —           385,525             

Stephen Sek

     82,809         59,167         —           141,976             

Lance Bridges

     31,666         55,555         —           87,221             

James Ledwith

     131,815         38,746         —           170,561             

Philip Falcone

     38,589         —           —           38,589             

Robert Pons

     38,589         —           —           38,589             

David Werner

     138,783         38,746         —           177,529             

Alex Mashinsky(3)

     885,973         —           —           885,973             

Slim Souissi(4)

     525,466         —           —           525,466             

John Carney(5)

     96,000         —           —           96,000             

All current directors and executive officers as a group of 8 persons

     717,898         911,368         —           1,629,266         3.00

 

*

Less than 1%.

(1)

Represents shares of Inseego common stock that may be acquired pursuant to stock options that are or will become exercisable within 60 days after November 18, 2016.

(2)

Represents shares of Inseego common stock to be issued upon the vesting of restricted stock units within 60 days after November 18, 2016.

(3)

Mr. Mashinsky was terminated from his position as Chief Executive Officer effective as of October 27, 2015. According to the Form 4 filed with the SEC by Mr. Mashinsky on September 16, 2015, Mr. Mashinsky has sole voting power and sole dispositive power with respect to 885,973 shares of Inseego common stock.

(4)

Dr. Souissi resigned from his position as President and Chief Operations Officer effective as of June 11, 2015. According to the Form 4 filed with the SEC by Dr. Souissi on June 3, 2015, Dr. Souissi has sole voting and sole dispositive power with respect to 525,466 shares of Inseego common stock.

(5)

Mr. Carney resigned from his position as Executive Vice President, Sales and Marketing, effective as of December 1, 2015. According to the Form 4 filed with the SEC by Mr. Carney on April 22, 2015, Mr. Carney has sole voting power and sole dispositive power over 96,000 shares of Inseego common stock.

 

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Five Percent Holders

The following table sets forth information regarding the number and percentage of shares of Inseego common stock held by all persons and entities known by us to beneficially own five percent or more of our outstanding common stock. The information regarding beneficial ownership of the persons and entities identified below is included in reliance on reports filed by the persons and entities with the SEC, except that the percentage is based upon our calculations made in reliance upon the number of shares reported to be beneficially owned by such person or entity in such report and the number of shares of Inseego common stock outstanding on November 18, 2016.

 

Name and Address of Beneficial Owner

   Shares of Inseego Common
Stock Beneficially Owned (#)
     Percentage  

HC2 Holdings 2, Inc.(1)

505 Huntmar Park Drive, Suite 325

Herndon, VA 20170

     13,067,382         24.04

Bruce A. Karsh(2)

333 S. Grand Ave., Suite 2800

Los Angeles, CA 90071

     4,590,945         8.45

Timothy Maguire(3)

1819 Ocean Way

Laguna Beach, CA 92651

     3,154,922         5.80

North Sound Management, Inc. (4)

North Sound Trading, LP

115 East Putnam Avenue

Greenwich, CT 06830

     3,808,296         7.01

 

(1)

According to a Schedule 13D/A filed by HC2 Holdings 2, Inc. with the SEC on March 22, 2016, HC2 Holdings 2, Inc. has shared voting power and shared dispositive power with respect to 13,067,382 shares of Inseego common stock, the Continental Insurance Group, Ltd. and the Continental Insurance, Inc. have shared voting power and shared dispositive power with respect to 11,473,799 shares of Inseego common stock, the United Teacher Associates Insurance Company has shared voting power and shared dispositive power with respect to 8,338,270 shares of Inseego common stock and the Continental General Insurance Company has shared voting power and shared dispositive power with respect to 3,135,529 shares of Inseego common stock.

(2)

According to a Schedule 13D/A filed by Bruce A. Karsh with the SEC on February 26, 2015, Mr. Karsh has sole voting power and sole dispositive power with respect to 3,264,945 shares of Inseego common stock, and shared voting power and shared dispositive power with respect to 1,326,000 shares of Inseego common stock. The 1,326,000 shares of Inseego common stock with shared voting and shared dispositive power are also beneficially owned by The Karsh Family Foundation, the trustees of which are Mr. Karsh and his wife Martha L. Karsh.

(3)

According to a Schedule 13D/A filed by Timothy Maguire, Maguire Asset Management, LLC, Maguire Financial, LP, the Timothy Maguire Foundation, and the Timothy J. and Julia Maguire 2015 Family Trust (the “Maguire Reporting Group”) with the SEC on October 19, 2016, the Maguire Group beneficially owns 3,154,922 shares of Inseego common stock. Maguire Asset Management, LLC, Maguire Financial, LP and Mr. Maguire have the sole power to vote or direct the vote of and to dispose or direct the disposition of the shares owned by Maguire Financial, LP. The Timothy Maguire Foundation and Mr. Maguire have the sole power to vote or direct the vote of and to dispose or direct the disposition of the shares owned by the Timothy Maguire Foundation. The Timothy J. and Julia Maguire 2015 Family Trust and Mr. Maguire have the sole power to vote or direct the vote of and to dispose or direct the disposition of the shares owned by The Timothy J. and Julia Maguire 2015 Family Trust.

(4)

According to a Schedule 13D filed by North Sound Management, Inc. and North Sound Trading, LP with the SEC on September 15, 2016, North Sound Management, Inc. and North Sound Trading, LP have shared voting power and share dispositive power with respect to 3,808,296 shares of Inseego common stock.

 

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STOCKHOLDER PROPOSALS FOR THE 2017 ANNUAL MEETING OF STOCKHOLDERS

Stockholder Proposals for Inclusion in the 2017 Proxy Statement. In order to be included in Inseego’s proxy materials for its 2017 annual meeting of Inseego’s stockholders, a stockholder proposal or information about a proposed director candidate must be timely received in writing by Inseego at Inseego Corp., Attention: Secretary, 9645 Scranton Road, Suite 205, San Diego, California 92121, by December 30, 2016, and otherwise comply with all requirements of the SEC, the DGCL and Inseego’s bylaws.

Stockholder Proposals to be presented at the 2017 Annual Meeting of Inseego Stockholders. If you do not wish to submit a proposal or information about a proposed director candidate for inclusion in next year’s proxy materials, but instead wish to present it directly at the 2017 annual meeting of Inseego stockholders, you must give timely written notice of the proposal to Inseego’s Secretary. To be timely, the notice must be received no earlier than February 16, 2017 and no later than March 18, 2017. The notice must describe the stockholder proposal in reasonable detail and provide certain other information required by Inseego’s bylaws, a copy of which is available upon request from Inseego’s Secretary at the above address.

DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS

A number of brokers with account holders who are Inseego stockholders will be “householding” Inseego’s proxy materials. A single proxy statement will be delivered to multiple Inseego stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement, please notify your broker, direct your written request to Inseego Corp., 9645 Scranton Road, Suite 205, San Diego, California 92121, Attn: Secretary, or contact Inseego’s Secretary by telephone at (858) 812-3400 and we will promptly deliver such separate copy. Inseego stockholders who currently receive multiple copies of the proxy materials at their address and would like to request “householding” of their communications should contact their broker. In addition, upon written or oral request to the address or telephone number set forth above, we will promptly deliver a separate copy of the proxy materials to any Inseego stockholder at a shared address to which a single copy of the documents was delivered.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

Inseego files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any of this information at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or (202) 942-8088 for further information regarding the public reference room. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding issuers, including Inseego, who file electronically with the SEC. The reports and other information filed by us with the SEC are also available at our website. The address of the site is www.inseego.com. The web addresses of the SEC and Inseego have been included as inactive textual references only. The information contained on those websites is specifically not incorporated by reference into this proxy statement.

In addition, the SEC allows us to disclose important information to you by referring you to other documents filed separately with the SEC. This information is considered to be a part of this proxy statement, except for any information that is superseded by information included directly in this proxy statement or incorporated by reference subsequent to the date of this proxy statement as described below.

This proxy statement incorporates by reference the documents listed below that we have previously filed with the SEC (other than, in each case, documents or information deemed to have been furnished and not filed in accordance with SEC rules). They contain important information about Inseego and its financial condition.

 

    our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 14, 2016;

 

    our Quarterly Reports on Form 10-Q for the periods ended March 31, 2016, June 30, 2016 and September 30, 2016 filed with the SEC on May 10, 2016, August 5, 2016 and November 7, 2016, respectively; and

 

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our Current Reports on Form 8-K (including amended Current Reports on Form 8-K/A) filed with the SEC on December 17, 2015, January 11, 2016, February 18, 2016, February 22, 2016, April 13, 2016, May 9, 2016, June 20, 2016, August 3, 2016, September 22, 2016, November 3, 2016, and November 9, 2016.

To the extent that any information contained in any report on Form 8-K, or any exhibit thereto, was furnished to, rather than filed with, the SEC by Inseego, such information or exhibit is specifically not incorporated by reference.

In addition, Inseego incorporates by reference any future filings it may make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and before the date of the special meeting (excluding any current reports on Form 8-K to the extent disclosure is furnished and not filed). Those documents are considered to be a part of this proxy statement, effective as of the date they are filed. In the event of conflicting information in these documents, the information in the latest filed document should be considered correct.

You can obtain any of the other documents of Inseego listed above from the SEC, through the SEC’s website at the address described above, or from us directly by requesting them in writing or by telephone at the following address and telephone number:

Inseego Corp.

9645 Scranton Road, Suite 205

San Diego, California 92121

(858) 812-3400

If you are an Inseego stockholder and would like to request documents, please do so by 5:00 p.m. Eastern Time on [●], 2017 to receive them before the special meeting.

These documents are available from Inseego, without charge, excluding any exhibits to them, unless the exhibit is specifically listed as an exhibit to the registration statement of which this proxy statement forms a part. You can also find information about Inseego at its website at www.inseego.com. Information contained on this website is specifically not incorporated by reference into this proxy statement.

This document is a proxy statement of Inseego for the special meeting. We have not authorized anyone to give any information or make any representation about the Sale, Inseego or NWI that is different from, or in addition to, the information or representations contained in this proxy statement or in any of the materials that we have incorporated by reference into this proxy statement. Therefore, if anyone does give you information or representations of this sort, you should not rely on it or them. The information contained in this proxy statement speaks only as of the date of this document unless the information specifically indicates that another date applies.

MISCELLANEOUS AND OTHER MATTERS

The Inseego Board knows of no other matters to be presented for Inseego stockholder action at the special meeting. However, if other matters do properly come before the special meeting or any adjournment or postponements thereof, the Inseego Board intends that the persons named in the proxies will vote upon such matters in accordance with their best judgment.

By Order of the Board of Directors,

Lance Bridges

Senior Vice President, General Counsel and Secretary

San Diego, California

[●], 2016

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE SPECIAL MEETING. THANK YOU FOR YOUR ATTENTION IN THIS MATTER. YOUR PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE SPECIAL MEETING.

 

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Annex A

STOCK PURCHASE AGREEMENT

among

Vanilla Technologies, Inc.,

Novatel Wireless, Inc.,

T.C.L. Industries Holdings (H.K.) Limited

and

Jade Ocean Global Limited

dated as of

September 21, 2016


Table of Contents

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

     A-1   

ARTICLE II PURCHASE AND SALE

     A-18   

Section 2.01

 

Purchase and Sale

     A-18   

Section 2.02

 

Purchase Price

     A-18   

Section 2.03

 

Post-Closing Purchase Price Adjustment

     A-19   

Section 2.04

 

Transactions to be Effected at the Closing

     A-21   

Section 2.05

 

Closing

     A-22   

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES

     A-22   

Section 3.01

 

Organization and Authority of Seller

     A-22   

Section 3.02

 

Organization, Authority and Qualification of the Company

     A-23   

Section 3.03

 

Capitalization

     A-24   

Section 3.04

 

Subsidiaries

     A-24   

Section 3.05

 

No Conflicts; Consents

     A-25   

Section 3.06

 

Takeover Statutes

     A-25   

Section 3.07

 

SEC Matters

     A-25   

Section 3.08

 

Restructuring

     A-26   

Section 3.09

 

Financial Information

     A-32   

Section 3.10

 

Undisclosed Liabilities

     A-32   

Section 3.11

 

Absence of Certain Changes, Events and Conditions

     A-32   

Section 3.12

 

Material Contracts

     A-35   

Section 3.13

 

Title to and Sufficiency of Assets; Real Property

     A-36   

Section 3.14

 

Environmental Matters

     A-36   

Section 3.15

 

Intellectual Property

     A-38   

Section 3.16

 

Insurance

     A-40   

Section 3.17

 

Legal Proceedings; Governmental Orders

     A-40   

Section 3.18

 

Compliance With Laws; Permits

     A-40   

Section 3.19

 

Employment Matters

     A-41   

Section 3.20

 

Taxes

     A-42   

Section 3.21

 

Brokers

     A-44   

Section 3.22

 

Vote Required

     A-44   

Section 3.23

 

Significant Transactions

     A-44   

Section 3.24

 

Compliance with OFAC; No Blocked Persons

     A-44   

Section 3.25

 

No Regulatory Restrictions

     A-45   

Section 3.26

 

Inventory

     A-46   

Section 3.27

 

Employee Benefit Matters

     A-46   

Section 3.28

 

Books and Records

     A-48   

Section 3.29

 

No Other Representations and Warranties

     A-48   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASERS

     A-48   

Section 4.01

 

Organization and Authority of Purchasers

     A-48   

 

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Section 4.02

 

No Conflicts; Consents

     A-49   

Section 4.03

 

Investment Purpose

     A-49   

Section 4.04

 

Not Interested Stockholder

     A-50   

Section 4.05

 

Brokers

     A-50   

Section 4.06

 

Sufficiency of Funds

     A-50   

Section 4.07

 

Legal Proceeding

     A-50   

Section 4.08

 

Independent Investigation

     A-50   

ARTICLE V COVENANTS

     A-50   

Section 5.01

 

Conduct of Business Prior to the Closing

     A-50   

Section 5.02

 

The Restructuring; Employee Interviews

     A-52   

Section 5.03

 

Access to Information; Cooperation

     A-52   

Section 5.04

 

Supplement to Disclosure Schedules

     A-53   

Section 5.05

 

Resignations

     A-53   

Section 5.06

 

Plant Closings and Mass Layoffs

     A-54   

Section 5.07

 

Director and Officer Indemnification and Insurance

     A-54   

Section 5.08

 

Confidentiality

     A-55   

Section 5.09

 

Governmental Approvals and Other Third-Party Consents

     A-55   

Section 5.10

 

Closing Conditions

     A-57   

Section 5.11

 

Public Announcements

     A-57   

Section 5.12

 

Transfer Taxes

     A-57   

Section 5.13

 

No Cash Dividends, Share Repurchases and Prepayment of Indebtedness

     A-58   

Section 5.14

 

Escrow of Purchaser Termination Fee

     A-58   

Section 5.15

 

Competition.

     A-58   

Section 5.16

 

Litigation Matters

     A-59   

Section 5.17

 

Omitted Assets or Liabilities

     A-62   

Section 5.18

 

Seller Stockholder Meeting

     A-62   

Section 5.19

 

No Solicitation; Other Offers

     A-64   

Section 5.20

 

Tax Matters

     A-68   

Section 5.21

 

Section 338(h)(10) Elections

     A-70   

Section 5.22

 

Transferred FSAs

     A-71   

ARTICLE VI CONDITIONS TO CLOSING

     A-72   

Section 6.01

 

Conditions to Obligations of All Parties

     A-72   

Section 6.02

 

Conditions to Obligations of Purchasers

     A-73   

Section 6.03

 

Conditions to Obligations of Seller

     A-73   

ARTICLE VII INDEMNIFICATION

     A-74   

Section 7.01

 

Indemnification By Seller

     A-74   

Section 7.02

 

Indemnification By Purchasers

     A-74   

Section 7.03

 

Claim Procedure/Notice of Claim

     A-75   

Section 7.04

 

Survival of Representations, Warranties and Covenants; Determination of Losses

     A-77   

Section 7.05

 

Limitations on Indemnification Obligations

     A-78   

 

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Section 7.06

 

Tax Treatment of Indemnification Payments

     A-80   

Section 7.07

 

Exclusive Remedy

     A-80   

ARTICLE VIII TERMINATION

     A-80   

Section 8.01

 

Termination

     A-80   

Section 8.02

 

Notice of Termination; Effect of Termination

     A-82   

Section 8.03

 

Company Termination Fee

     A-82   

Section 8.04

 

Purchaser Termination Fee

     A-83   

ARTICLE IX MISCELLANEOUS

     A-84   

Section 9.01

 

Amendment and Modifications

     A-84   

Section 9.02

 

Waiver of Compliance; Consents

     A-84   

Section 9.03

 

Notices

     A-84   

Section 9.04

 

Expenses

     A-86   

Section 9.05

 

Assignment and Successors

     A-86   

Section 9.06

 

Third-Party Beneficiaries

     A-86   

Section 9.07

 

Governing Law; Consent to Jurisdiction

     A-86   

Section 9.08

 

Specific Performance; Remedies

     A-86   

Section 9.09

 

WAIVER OF JURY TRIAL

     A-87   

Section 9.10

 

Attorney Conflict Waiver; Privilege

     A-87   

Section 9.11

 

Severability

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