Austin Ventures Proposes to Acquire 724 Solutions, Inc.AUSTIN, Texas -- Austin Ventures has delivered a letter to the board of directors of 724 Solutions, Inc. outlining a proposal by Austin Ventures to acquire, through investment funds Noun 1. investment funds - money that is invested with an expectation of profit investment assets - anything of material value or usefulness that is owned by a person or company affiliated with Austin Ventures, all of the outstanding equity interests of 724 Solutions not already owned by Austin Ventures for US$3.07 per share in cash. The acquisition would be effected pursuant to a negotiated Canadian plan of arrangement and would be conditioned upon completing due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. , entering into a definitive arrangement agreement and satisfying conditions to be set forth in the agreement, including court and shareholder approval. Austin Ventures, through Austin Ventures VI, L.P., Austin Ventures VI Affiliates Fund, L.P. and Austin Ventures VIII, L.P., beneficially owns 547,854 common shares of 724 solutions and holds approximately US$8.9 million in convertible promissory notes promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. convertible into 2,902,096 common shares of 724 solutions as of the date of this release. Further, individuals affiliated with Austin Ventures beneficially own 5,162 common shares of 724 Solutions. A copy of the text of the letter follows. --------------------------------------------- (LETTERHEAD OF AUSTIN VENTURES) February 27, 2006 CONFIDENTIAL Board of Directors 724 Solutions, Inc. 20 York Mills Road York Mills Road is an east-west route in Toronto, Ontario, Canada named for the community of York Mills or Hoggs Hollow. The name York refers to the former County of York, containing the county town (pre-1834), the forerunner to modern day Toronto and Mills , Suite 201 Toronto, ON Canada M2P M2P MPEG-2 Program Stream Format File 2C2 Gentlemen: We are pleased to submit this letter summarizing the principal terms upon which investment funds affiliated with Austin Ventures ("Austin Ventures") would potentially acquire (the "Acquisition") the entire outstanding equity interests in 724 Solutions, Inc. ("724"). With over $2.9 billion in investment capital, Austin Ventures has invested in over 150 companies and is one of the most active investors in the country. As 724's largest single shareholder and creditor, Austin Ventures has the resources and expertise to close the Acquisition expeditiously ex·pe·di·tious adj. Acting or done with speed and efficiency. See Synonyms at fast1. ex and non-disruptively. 1. Proposed Terms. The Acquisition would be subject to a Plan of Arrangement through which Austin Ventures would acquire all outstanding common shares not currently held by Austin Ventures for a cash amount per share equal to US$3.07. Options to purchase common shares would be cashed-out as part of the Acquisition. The Acquisition would not be subject to any financing condition. 2. Due Diligence. Austin Ventures believes that it has substantial familiarity with 724 and accordingly would only require a limited amount of due diligence. Austin Ventures intends to have its due diligence investigation completed prior to entering into a definitive arrangement agreement. 3. Employee Arrangements. Austin Ventures intends to retain 724's existing management and employees in their respective roles. Austin Ventures anticipates that members of senior management would enter into employment agreements at the time of signing the arrangement agreement to become effective upon the closing of the Acquisition. 4. Transaction Documentation. Austin Ventures would prepare an arrangement agreement and related documentation reflective of a transaction between a company and its largest shareholder. The obligations of the parties to close the Acquisition would be subject to customary closing conditions to be set forth in the definitive agreements including, without limitation, the accuracy of representations and the performance of covenants, the absence of any material and adverse change, the absence of any pending or threatened litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. that could prevent the Acquisition or result in a determination that the conduct of the parties was unlawful, the receipt of requisite corporate approvals, the receipt of a valuation by an independent valuator, the receipt and review of the March 31, 2006 financial statements, and the receipt of all necessary approvals, consents, orders and waivers of courts and other governmental agencies, exchanges and other third parties (and the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of any applicable waiting periods). The agreement would contain other customary provisions including a requirement that the 724 board of directors (subject to its fiduciary obligations) recommends that the shareholders adopt and approve the Plan of Arrangement, a requirement that 724 submit the Plan of Arrangement to its shareholders notwithstanding any change in the recommendation of the board of directors, and standard no-shop provisions subject to a fiduciary out Fiduciary out A provision that permits the Board of Directors to terminate a proposed merger if a better deal arises with another party. , termination fee termination fee The one-time charge for terminating or transferring an individual retirement account. If a financial institution charges a termination fee, the fee must be spelled out in the original agreement that is signed when the account is opened. and reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. of expenses. THE PARTIES SHALL HAVE NO OBLIGATION TO CONSUMMATE To carry into completion; to fulfill; to accomplish. A Common-Law Marriage is consummated when the parties live in a manner intended to bring about public recognition of their relationship as Husband and Wife. THE ACQUISITION UNLESS AND UNTIL A SEPARATE DEFINITIVE ARRANGEMENT AGREEMENT IS EXECUTED AND DELIVERED BY EACH PARTY THERETO there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. AND SUBJECT IN ALL RESPECTS TO THE SATISFACTION OF THE CONDITIONS CONTAINED IN SUCH AGREEMENT AND THIS LETTER. 5. Other Negotiations. 724 will promptly notify Austin Ventures regarding any contact by any third party regarding any offer, proposal or inquiry regarding any such acquisition or financing of 724, including the identity of the contacting party and, if available, any proposed or preliminary terms of an acquisition or financing and any revision thereof. In no event will 724 accept or enter into an agreement or arrangement concerning any such third party transaction until such time as Austin Ventures has a reasonable opportunity to respond. 6. Continuation of Business. 724 agrees to continue to preserve and operate the business of 724 in the ordinary course, consistent with past practices, including preserving its existing business organization, assets, and relations with its employees, suppliers, customer and others with whom it has a business relationship, and 724 will not enter into any transactions or agreement or take any action out of the ordinary course that relates to its business other than as contemplated by this letter. 7. Governing Law. This letter shall be governed by the internal laws of the State of Delaware applicable to contracts wholly executed and performed therein; provided, however, that to the extent this letter and the conduct of the parties in respect hereof are covered by the internal affairs doctrine The internal affairs doctrine is a choice of law rule in corporations law. Simply stated, it provides that the "internal affairs" of a corporation (e.g. conflicts between shareholders and management figures such as the board of directors and corporate officers) will be governed by , the laws of the applicable jurisdiction shall apply. 8. Survival. The provisions of paragraphs 5, 6, 7 and this paragraph 8 shall survive any termination of this letter. Austin Ventures and its advisors are prepared to work diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d towards completing the Acquisition; however, Austin Ventures will not do so if the parties cannot agree to the terms of this proposal by 5:00 p.m. CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. on March 6, 2006. Please contact me at 512-485-1900 if you have any questions regarding the content of this letter. Otherwise, please indicate the concurrence CONCURRENCE, French law. The equality of rights, or privilege which several persons-have over the same thing; as, for example, the right which two judgment creditors, Whose judgments were rendered at the same time, have to be paid out of the proceeds of real estate bound by them. Dict. de Jur. h.t. of 724 with this letter by executing it in the space provided below and returning the executed copy to my attention at your earliest convenience. I look forward to the successful completion of the discussions contemplated by this letter. Very truly yours, /s/ Joseph C. Aragona Joseph C. Aragona General Partner Agreed to and accepted this (blank) day of March, 2006: 724 Solutions, Inc. By: Name: Title: |
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