UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant ¨
Check
the
appropriate box:
|
x Preliminary
Proxy Statement
¨ Definitive
Proxy Statement
¨ Definitive
Additional Materials
¨ Soliciting
Material Under Rule 14a-12
|
|
¨ Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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ELECTRONIC
CLEARING HOUSE, INC.
(Name
of Registrant as Specified in its Charter)
Payment
of Filing Fee (Check the appropriate box):
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¨
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No
fee required.
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| x |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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(1)
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Title
of each class of securities to which transaction applies:
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Common
stock, par value $0.01 per share
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(2)
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Aggregate
number of securities to which transaction applies:
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6,836,064
shares of ECHO common stock outstanding as of December 31, 2006
937,275
options to purchase shares of ECHO common stock outstanding as of December
31, 2006 with exercise prices below $18.75
105,000
shares of common stock issuable or deemed issuable pursuant to long-term
restricted stock grants and phantom stock grants
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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The
filing fee was based on the sum of (A) the product of 6,836,064 shares of ECHO
common stock multiplied by the merger consideration of $18.75 per share, (B)
the
product of 937,275 options to purchase shares of ECHO common stock multiplied
by
the merger consideration of $18.75 per share less $5,303,225 (the aggregate
option exercise price) and (C) the product of 105,000 issuable or deemed
issuable shares of ECHO common stock multiplied by the merger consideration
of
$18.75 per share. In accordance with Section 14(g) of the Securities Exchange
Act of 1934, as amended, the filing fee was determined by multiplying 0.000107
by the sum of the preceding sentence.
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(4)
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Proposed
maximum aggregate value of transaction:
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$142,415,631.25
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(5)
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Total
fee paid:
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$15,238.48
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¨
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Fee
paid previously with preliminary materials.
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| ¨ |
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the form or schedule and the date of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
party:
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(4)
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Date
Filed:
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SPECIAL
MEETING OF STOCKHOLDERS
MERGER
PROPOSED - YOUR VOTE IS VERY IMPORTANT
Dear
Electronic Clearing House, Inc. Stockholder:
You
are
cordially invited to attend the special meeting of stockholders of Electronic
Clearing House, Inc. (“ECHO”), which will be held at its executive offices
located at 730 Paseo Camarillo, Camarillo, California, 93010, on [●], 2007 at
9:00 a.m., local time.
At
the
special meeting, you will be asked to consider and vote on a proposal to
approve
a merger agreement that ECHO has entered into with Intuit Inc. and a wholly
owned subsidiary of Intuit. If ECHO stockholders approve the merger agreement,
and the merger is subsequently completed, ECHO will become a wholly owned
subsidiary of Intuit, and you will be entitled to receive $18.75 in cash,
without interest, for each share of ECHO common stock that you own. A copy
of
the merger agreement is attached as Annex
A
to the
accompanying proxy statement, and you are encouraged to read it in its entirety.
After
careful consideration, the Board of Directors of ECHO, by unanimous vote,
determined that the merger is advisable and fair to, and in the best interests
of, ECHO and its stockholders, and approved the merger agreement, the merger
and
the other transactions contemplated by the merger agreement. The Board of
Directors unanimously recommends that you vote "FOR" the approval of the
merger
agreement. In reaching its determination, the Board of Directors considered
a
number of factors that are described more fully in the accompanying proxy
statement.
You
are
also being asked to expressly grant the persons named as proxies authority
to
vote your shares to approve the adjournment of the special meeting, if necessary
or appropriate, to permit the further solicitation of proxies in the event
there
are not sufficient votes at the time of the special meeting to approve the
merger agreement.
The
accompanying document provides a detailed description of the proposed merger,
the merger agreement and related matters. I urge you to read these materials
carefully.
Your
vote is very important.
Because
approval of the merger agreement requires the affirmative vote of the holders
of
a majority of the voting power of the outstanding shares of ECHO common stock
entitled to vote on the merger agreement, if you fail to vote it will have
the
same effect as if you voted against the approval of the merger agreement.
Whether
or not you are able to attend the special meeting in person, please complete,
sign and date the enclosed proxy card and return it in the envelope provided
as
soon as possible or submit a proxy through the Internet or by telephone as
described in these materials. These actions will not limit your right to
vote in
person if you wish to attend the special meeting and vote in person.
If
your
shares are held in the name of your broker, bank or other nominee, please
instruct your broker, bank or other nominee on how to vote your shares in
accordance with the voting directions provided by your broker, bank or other
nominee.
Thank
you
for your cooperation and your continued support of ECHO.
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Sincerely,
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||
 Joel
M. Barry
Chairman
of the Board and Chief Executive
Officer
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This
proxy statement is dated [●], 2007, and is first being mailed to stockholders on
or about [●], 2007.
Neither
the Securities and Exchange Commission nor any state securities regulatory
agency has approved or disapproved the merger, passed upon the merits or
fairness of the merger or passed upon the adequacy or accuracy of the disclosure
in the proxy statement. Any representation to the contrary is a criminal
offense.
ELECTRONIC
CLEARING HOUSE, INC.
____________________________
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
[●],
2007
____________________________
To
the
Stockholders of Electronic Clearing House, Inc.:
You
are
cordially invited to attend a special meeting of the stockholders of Electronic
Clearing House, Inc. to be held at our offices located at 730 Paseo Camarillo,
Camarillo, California, 93010 on [●], 2007 at 9:00 a.m. local time, for the
following purposes:
1. To
consider and vote on a proposal to approve the Agreement and Plan of Merger,
dated as December 14, 2006, by and among Electronic Clearing House, Inc., Intuit
Inc., and Elan Acquisition Corporation (a wholly-owned subsidiary of
Intuit);
2. To
approve the adjournment of the special meeting, if necessary or appropriate,
to
solicit additional proxies if there are insufficient votes at the time of the
special meeting to approve the merger agreement; and
3. To
transact any other business as may properly come before the special meeting
or
any adjournment of the special meeting.
Only
holders of record of our common stock at the close of business on [●], 2007, the
record date for the special meeting, are entitled to receive notice of and
to
attend and vote or submit a proxy to vote at the special meeting or any
adjournment of the special meeting. As of the record date we had [●] shares of
common stock outstanding. Each share of our common stock is entitled to one
vote
on each matter to be voted upon at the special meeting. The affirmative vote
of
a majority of the shares of our outstanding common stock is required to approve
the merger agreement. In connection with the merger, each of our directors
and
our executive officers have entered into voting agreements to, among other
matters, vote their shares in favor of the approval of the merger , and have
granted to the directors of Intuit an irrevocable proxy to vote their shares
in
favor of the merger, at the special meeting.
After
careful consideration, our Board of Directors, by unanimous vote, determined
that the merger is advisable and fair to, and in the best interests of, us
and
our stockholders and approved the merger agreement, the merger and the other
transactions contemplated by the merger agreement. Our Board of Directors
unanimously recommends that you vote "FOR" the approval of the merger
agreement.
For more
information about the merger described above and the other transactions
contemplated by the merger agreement, please review the accompanying proxy
statement and the merger agreement attached to it as Annex A. Our
Board
of Directors also recommends that you expressly grant the authority to the
persons named as proxies to vote your shares to approve the adjournment of
the
special meeting, if necessary or appropriate, to permit the further solicitation
of proxies if there are not sufficient votes at the time of the special meeting
to approve the merger agreement. We are not aware of any other business to
come
before the special meeting.
Stockholders
who do not vote in favor of the approval of the merger agreement will not have
the right to seek appraisal of the fair value of their shares if the merger
is
completed, but will receive the same per share merger consideration as those
stockholders who do vote in favor of the approval of the merger agreement.
Your
vote
is very important. Even if you do not expect to attend the meeting in person,
it
is important that your shares be represented. Please use the enclosed proxy
card
to vote on the matters to be considered at the special meeting by signing and
dating the proxy card and mailing it promptly in the enclosed envelope, or
appoint a proxy over the Internet or by telephone as instructed in these
materials. If your shares are held in the name of your broker, bank or other
nominee, please instruct your broker, bank or other nominee on how to vote
your
shares in accordance with the voting directions provided by your broker, bank
or
other nominee, to ensure that your shares will be represented at the special
meeting. You may revoke your proxy at any time prior to its exercise in the
manner described in this proxy statement. Returning a signed proxy card or
appointing a proxy over the Internet or by telephone will not prevent you from
attending the meeting and voting in person if you wish to do so. If your shares
are held in the name of your broker, bank or other nominee, you must obtain
a
proxy, executed in your favor, from the holder of record to be able to vote
in
person at the special meeting.
Executed
proxies with no instructions indicated thereon will be voted “FOR” the approval
of the merger agreement and, if applicable, “FOR” the adjournment of the special
meeting, provided that no proxy that is specifically marked “AGAINST” the
proposal to approve the merger agreement will be voted in favor of the
adjournment proposal, unless it is specifically marked “FOR” the adjournment
proposal. If you fail to return your proxy or to 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 effectively be counted as
a
vote "AGAINST" the proposal to approve the merger agreement.
You
should not send any certificates representing shares of our common stock with
your proxy card. Upon completion of the merger, you will receive
instructions regarding the procedure to exchange your stock certificates
for the cash merger consideration.
No
person
has been authorized to give any information or to make any representations
other
than those set forth in the proxy statement in connection with the solicitation
of proxies made hereby, and, if given or made, such information must not be
relied upon as having been authorized by us or any other person.
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By
Order of the Board of Directors,
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 |
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DONNA
L. REHMAN
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Corporate
Secretary
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Camarillo,
California
Dated:
[●], 2007
TABLE
OF CONTENTS
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Annexes
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Annex
A-
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Agreement
and Plan of Merger dated December 14, 2006 by and among Intuit
Inc., Elan
Acquisition Corporation and Electronic Clearing House,
Inc.
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A-1
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Annex
B-
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Form
of Voting Agreement between Intuit Inc. and the Officers and Directors
of
Electronic Clearing House, Inc.
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B-1
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Annex
C-
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Opinion
of Wedbush Morgan Securities Inc.
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C-1
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QUESTIONS
AND ANSWERS ABOUT THE
MERGER
The
following questions and answers address briefly some questions you may have
regarding the special meeting and the proposed merger. These questions and
answers may not address all questions that may be important to you as a
stockholder of Electronic Clearing House, Inc. Please refer to the more detailed
information contained elsewhere in this proxy statement, the annexes to this
proxy statement and the documents referred to or incorporated by reference
in
this proxy statement. In this proxy statement, the terms “ECHO,” “Company,”
“we,” “our,” “ours,” and “us” refer to Electronic Clearing House, Inc. We refer
to Intuit Inc. as Intuit and Elan Acquisition Corporation as Merger Sub.
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Q:
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Why
am I receiving this proxy statement?
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A:
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We
have entered into a merger agreement with Intuit. Upon completion
of the
merger, we will become a wholly-owned subsidiary of Intuit and our
common
stock will no longer be listed on the NASDAQ Capital Market. A copy
of the
merger agreement is attached to this proxy statement as Annex A.
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In
order to complete the merger, our stockholders must vote to approve
the
merger agreement. We are providing this proxy statement to give you
information for use in determining how to vote on the proposals submitted
to the stockholders at the special meeting of our stockholders or
any
adjournment of the special meeting. You should read this proxy statement
and the annexes carefully. The enclosed proxy card allows you, as
our
stockholder, to vote your shares without attending the special meeting.
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Q:
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When
and where is the special meeting?
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A:
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The
special meeting of stockholders will take place at our offices located
at
730 Paseo Camarillo, Camarillo, California, 93010 on [●], 2007, at 9:00
a.m. local time.
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|
Q:
|
What
matters will be voted on at the special meeting?
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A:
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You
will vote on a proposal to approve the merger agreement and a proposal
to
adjourn the special meeting for the purpose of soliciting additional
proxies, if necessary or appropriate, if there are not sufficient
votes at
the time of the special meeting to approve the merger agreement.
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Q:
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Who
can vote or submit a proxy to vote and attend the special meeting?
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A:
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Only
stockholders of record at of the close of business on [●], 2007, the
record date for the special meeting, are entitled to receive notice
of and
to attend and vote or submit a proxy to vote at the special meeting
or any
adjournment of the special meeting.
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Q:
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As
a stockholder, what will I be entitled to receive in the merger?
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A:
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At
the effective time of the merger, each share of our common stock
outstanding immediately prior to the effective time of the merger
(including any shares of common stock issued prior to the effective
time
upon the exercise of options), other than shares held by us, Intuit
or
Merger Sub or any of our or their wholly-owned subsidiaries, will
be
automatically converted into the right to receive $18.75 in cash,
without
interest and less any applicable withholding taxes.
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Q:
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Will
I own any shares of ECHO common stock or Intuit common stock after
the
merger?
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A:
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No.
You will be paid cash for your shares of our common stock. You will
not
receive or have the option to receive any Intuit common stock in
exchange
for your shares.
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Q:
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How
will my options to purchase shares of common stock be treated in
the
merger?
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A:
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Prior
to the effective time of the merger, we will cause any unvested options
to
vest immediately prior to the effective time of the merger. All
outstanding options to purchase shares of our common stock will then
be
cancelled at the effective time of the merger and the holder will
receive
a cash payment, without interest and less any applicable withholding
taxes, equal to the product of (i) the excess, if any, of $18.75
over the
applicable option exercise price and (ii) the number of shares of
common
stock subject to the option.
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Q:
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What
will happen to my shares of restricted stock in the
merger?
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A:
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Prior
to the effective time of the merger, we will cause any unvested restricted
stock to be fully vested immediately prior to the effective time
of the
merger. Holders of then-vested restricted stock will receive the
same
consideration as all other holders of our common stock, $18.75 per
share
in cash, without interest and less any applicable withholding
taxes.
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Q:
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How
does our Board of Directors recommend that I vote?
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A:
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Our
Board of Directors recommends that you vote “FOR” the proposal to approve
the merger agreement and “FOR” the proposal to adjourn the special meeting
for the purpose of soliciting additional proxies, if necessary or
appropriate, if there are not sufficient votes at the time of the
special
meeting to approve the merger agreement.
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See
“The Merger—Recommendation of Our Board of Directors; Our Reasons for the
Merger.”
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Q:
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What
vote of our stockholders is required to approve the merger agreement?
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A:
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Holders
of a majority of the voting power of the outstanding shares of our
common
stock entitled to vote on the merger agreement must vote to approve
the
merger agreement. Approval of the adjournment proposal requires a
majority
of the voting power present at the special meeting, in person or
represented by proxy.
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| Q: |
How
many votes am I entitled to cast for each share of ECHO stock I own?
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A:
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For
each share of our common stock that you own at the close of business
on
[●], 2007, the record date for the special meeting, you are entitled
to
cast one vote on each matter voted upon at the special
meeting.
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Q:
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What
is the difference between holding shares as a stockholder of record
and in
“street name”?
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A:
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Most
of our stockholders hold their shares through a broker, bank or other
nominee rather than directly in their own name. As summarized below,
there
are some distinctions between shares held of record and those held
in
“street name”:
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Stockholder
of Record.
If your
shares are registered directly in your name with our transfer agent, you are
considered the stockholder of record with respect to those shares, and these
proxy materials are being sent directly to you by us. As the stockholder of
record, you have the right to grant your voting proxy directly to us or to
vote
in person at the meeting. We have enclosed or sent a proxy card for you to
use.
“Street
Name.”
If your
shares are held by a broker, bank or other nominee, you are considered the
beneficial owner of shares held in “street name”, and these proxy materials are
being forwarded to you by your broker, bank or other nominee which is
considered, with respect to those shares, the stockholder of record. As the
beneficial owner of these shares, you have the right to direct your broker,
bank
or other nominee how to vote and are also invited to attend the special meeting
in person. However, since you are not the stockholder of record, you may not
vote these shares in person at the special meeting unless you obtain a signed
proxy from the record holder giving you the right to vote the shares. Your
broker, bank or other nominee has enclosed or provided voting directions for
you
to use in directing the broker, bank or other nominee how to vote your shares.
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Q:
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How
do I cast my vote if I am a stockholder of record?
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A:
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Before
you vote, you should read this proxy statement in its entirety, including
its annexes and the documents referred to or incorporated by reference
in
this proxy statement, and carefully consider how the merger affects
you.
Then, if you were a holder of record at the close of business on
[●],
2007, you may vote by submitting a proxy for the special meeting.
You can
submit your proxy by completing, signing, dating and returning the
enclosed proxy card in the accompanying pre-addressed envelope or
by
appointing a proxy over the Internet or by telephone as instructed
in
these materials. You may also attend the special meeting and vote
your
shares in person whether or not you sign and return your proxy card.
However, even if you plan to attend the special meeting in person,
we
encourage you to return your signed proxy card, or appoint a proxy
over
the Internet or by telephone, to ensure that your shares are represented
and voted at the special meeting.
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If
you
sign, date and send your proxy card and do not indicate how you want to vote,
your proxy will be voted “FOR” the approval of the merger agreement and “FOR”
the proposal to adjourn the special meeting for the purpose of soliciting
additional proxies, if necessary. However, no proxy that is
specifically marked “AGAINST” the proposal to approve the merger agreement will
be voted in favor of the adjournment proposal, unless it is specifically marked
“FOR” the adjournment proposal.
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Q:
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How
do I cast my vote if my ECHO shares are held in “street name” by my bank,
broker or other nominee?
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A:
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If
you hold your shares in “street name,” you must provide the record holder
of your shares with instructions on how to vote your shares in accordance
with the voting directions provided by your broker, bank or other
nominee.
Before you provide the record holder of your shares with instructions
on
how to vote your shares, you should read this proxy statement in
its
entirety, including its annexes and the documents referred to or
incorporated by reference in this proxy statement, and carefully
consider
how the merger affects you. If you do not provide your broker, bank
or
other nominee with instructions on how to vote your shares, it will
not be
permitted to vote your shares. This will have the same effect as
voting
against the proposal to approve the merger agreement and the adjournment
proposal. Please refer to the voting instructions provided by your
broker,
bank or other nominee to see if you may submit voting instructions
using
the Internet or telephone.
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|
Q:
|
How
can I attend the special meeting if my ECHO shares are held in “street
name” by my bank, broker or other nominee?
|
|
A:
|
If
you want to attend the special meeting or any adjournment of the
special
meeting and your shares are held in an account at a brokerage firm,
bank
or other nominee, you will need to bring a copy of your brokerage
statement or the voting directions provided by your broker, bank
or other
nominee reflecting your stock ownership as of the record date.
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|
Q:
|
Can
I change my vote after I have delivered my proxy?
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A:
|
Yes,
you may revoke and change your vote on a proposal at any time before
the
conclusion of voting on such proposal. If you are a stockholder of
record,
you can do this in one of three ways:
|
|
§
|
first,
you can provide a written notice to our corporate secretary prior
to 11:59
p.m. Pacific Time on [●], 2007 stating that you would like to revoke your
proxy;
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|
§
|
second,
you can complete and submit a later dated proxy in writing, provided
the
new proxy is received by 11:59 p.m. Pacific Time on [●], 2007. If you
submitted the proxy you are seeking to revoke via the Internet or
telephone, you may submit this later-dated new proxy using the same
method
of transmission (Internet or telephone) as the proxy being revoked,
provided that the new proxy is received by 11:59 p.m. Pacific Time
on [●],
2007; or
|
|
§
|
third,
you can attend the special meeting and vote in person, which will
automatically cancel any proxy previously given, or you may revoke
your
proxy in person; your attendance alone, however, will not revoke
any proxy
that you have previously given.
|
Any
written notice of revocation or subsequent proxy should be delivered to our
corporate secretary at 730 Paseo Camarillo, Camarillo, California, 93010,
Attention: Corporate Secretary, at or before the time and date specified above.
If
you
have instructed a broker, bank or other nominee to vote your shares, you must
follow the directions received from your broker, bank or other nominee to change
those instructions.
|
Q:
|
What
will happen if I abstain from voting or fail to vote?
|
|
A:
|
If
you abstain from voting, fail to cast your vote in person or by proxy
or
fail to give voting instructions to your broker, bank or other nominee,
it
will have the same effect as a vote against the proposal to approve
the
merger agreement and a vote against the proposal to adjourn the special
meeting for the purpose of soliciting additional proxies, if such
a
proposal to adjourn the special meeting is necessary or appropriate,
if
there are not sufficient votes at the time of the special meeting
to
approve the merger agreement.
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Q:
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What
rights do I have if I oppose the merger?
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A:
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Under
applicable Nevada law, ECHO stockholders are not entitled to any
dissenters’ rights with respect to the merger.
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Q:
|
Is
the merger contingent upon Intuit obtaining financing?
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A:
|
No.
The completion of the merger is not contingent upon Intuit obtaining
financing.
|
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Q:
|
Is
the merger expected to be taxable to me?
|
|
A:
|
Generally,
yes. The receipt of cash for each share of our common stock pursuant
to
the merger will be a taxable transaction for U.S. federal income
tax
purposes. For U.S. federal income tax purposes, you will generally
recognize gain or loss as a result of the merger measured by the
difference, if any, between the amount of cash per share that you
receive
and your adjusted tax basis in that share.
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You
should read “The Merger—Material U.S. Federal Income Tax Consequences” for a
more complete discussion of the U.S. federal income tax consequences of the
merger. Tax matters can be complicated, and the tax consequences of the merger
to you will depend on your particular tax situation. We urge you to consult
your
tax advisor on the tax consequences of the merger to you.
|
Q:
|
Should
I send in my share certificates now?
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A:
|
No.
After the merger is completed, you will be sent a letter of transmittal
with written instructions for exchanging your share certificates
for the
cash consideration. These instructions will tell you how and where
to send
in your certificates for your cash consideration. You will receive
your
cash payment after the paying agent receives your stock certificates
and
any other documents requested in the instructions included with the
letter
of transmittal.
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Q:
|
When
do you expect the merger to be completed?
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A:
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We
currently expect to complete the merger as promptly as practicable
after
the special meeting and after all the conditions to the merger are
satisfied or waived, including stockholder approval of the merger
agreement at the special meeting and the expiration or termination
of the
waiting period under U.S. antitrust laws. However, we cannot assure
you
that all conditions to the merger will be satisfied or, if satisfied,
as
to the date by which they will be satisfied.
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Q:
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What
should I do if I receive more than one set of voting materials?
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A.
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You
may receive more than one set of voting materials, including multiple
copies of this proxy statement and multiple proxy cards or voting
instruction cards. For example, if you hold your shares in more than
one
brokerage account, you will receive a separate voting instruction
card for
each brokerage account in which you hold shares. If you are a holder
of
record and your shares are registered in more than one name, you
will
receive more than one proxy card. Please complete, sign, date and
return
each proxy card and voting instruction card that you receive.
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Q:
|
Who
can help answer my questions?
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A:
|
If
you have any questions about the merger or how to submit your proxy,
or if
you need additional copies of this proxy statement or the enclosed
proxy
card, please call our proxy solicitor, Morrow & Company, Inc.
at:
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Morrow
& Company, Inc.
470
West
Avenue, 3rd Floor
Stamford,
CT 06902
[●]
[●]
Attn:
Gerard J. Mucha or Fred Marquardt
If
you
would like additional copies, without charge, of this proxy statement, you
should contact:
Electronic
Clearing House, Inc.
Corporate
Secretary and Investor Relations
730
Paseo
Camarillo,
Camarillo,
CA 93010
(800)
233-0406 ext. 8533
corp@ECHO-inc.com
SUMMARY
TERM
SHEET
This
summary term sheet, together with the section of this proxy statement entitled
“Questions and Answers About the Merger”, highlights selected information from
this proxy statement and may not contain all of the information that may be
important to you as an ECHO stockholder or that you should consider before
voting on the proposal to approve the merger agreement. To better understand
the
merger, you should read carefully this entire proxy statement and all of its
annexes, including the merger agreement, which is attached as Annex A and the
documents referred to or incorporated by reference in this proxy statement,
before voting on the proposal to approve the merger agreement. Each item in
this
summary includes a reference directing you to a more complete description of
that item.
Information
about Electronic Clearing House, Inc., Intuit
Inc. and Elan Acquisition Corporation
Electronic
Clearing House, Inc.
730
Paseo
Camarillo,
Camarillo,
CA 93010
(800)
262-3246
ECHO
provides a complete solution for the payment processing needs of merchants,
banks and collection agencies. ECHO's services include debit and credit card
processing, check guarantee, check verification, check conversion, check
re-presentment and check collection. See “The Companies - Electronic Clearing
House, Inc.”
Intuit
Inc.
2700
Coast Avenue
Mountain
View, CA 94043
(650)
944-6000
Founded
in 1983, Intuit Inc. is a leading provider of business, financial management
and
tax solutions for small businesses, consumers and accountants. Intuit’s flagship
products and services, including QuickBooks, TurboTax, Lacerte, ProSeries and
Quicken, simplify small business management, tax preparation and filing, and
personal finance. Intuit is publicly traded on the NASDAQ Global Select Market
under the symbol “INTU.” See “The Companies - Intuit Inc.”
Elan
Acquisition Corporation
c/o
Intuit Inc.
2700
Coast Avenue
Mountain
View, CA 94043
(650)
944-6000
Merger
Sub is a Nevada corporation and a wholly-owned subsidiary of Intuit. Merger
Sub
was organized solely for the purpose of entering into the merger agreement
with
Intuit and completing the merger and has not conducted any business operations
other than those incident to its formation. If the merger is completed, Merger
Sub will cease to exist following its merger with and into ECHO. See “The
Companies - Elan Acquisition Corporation.”
We
have
agreed to be acquired by Intuit pursuant to the terms of the merger agreement
that is described in this proxy statement and attached as Annex A. We encourage
you to read the merger agreement carefully and in its entirety. It is the
principal document governing the merger.
The
merger agreement provides that Merger Sub will merge into ECHO, with ECHO
continuing as the surviving corporation and a wholly-owned subsidiary of Intuit.
At the effective time of the merger, each share of our common stock outstanding
immediately prior to the effective time of the merger (including any shares of
common stock issued prior to the effective time upon exercise of options),
other
than shares held by us, Intuit or Merger Sub or any of our or their wholly-owned
subsidiaries, will be automatically converted into the right to receive $18.75
in cash, without interest and less any applicable withholding
taxes.
Upon
completion of the merger, we will be a wholly-owned subsidiary of Intuit and
will no longer be a public company. You will cease to have any ownership
interest in ECHO and will not participate in any future earnings and growth
of
ECHO.
See
“The
Merger Agreement.”
Recommendation
of Our Board of
Directors
Our
Board
of Directors, by the unanimous vote of all directors:
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·
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declared
the merger to be advisable and fair to, and in the best interests
of, us
and our stockholders; and
|
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·
|
approved
the merger agreement, the merger and the other transactions contemplated
by the merger agreement on the terms and conditions set forth in
the
merger agreement.
|
Our
Board
of Directors recommends that our stockholders vote “FOR” the proposal to approve
the merger agreement and “FOR” the proposal to adjourn the special meeting for
the purpose of soliciting additional proxies, if necessary or appropriate,
if
there are not sufficient votes at the time of the special meeting to approve
the
merger agreement. To review the background of the merger and the factors that
our Board of Directors considered when deciding whether to approve the merger
agreement, the merger and the other transactions contemplated by the merger
agreement, see “The Merger - Recommendation of Our Board of Directors; Our
Reasons for the Merger.”
Interests
of Our Directors and Executive Officers in the
Merger
When
considering our Board of Directors’ recommendation that you vote in favor of the
proposal to approve the merger agreement, you should be aware that members
of
our Board of Directors and our executive officers may have interests in the
merger that differ from, or are in addition to, those of our other stockholders.
For example:
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·
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with
the exception of Mr. Joel Barry and Ms. Alice Cheung, all of our
executive
officers are expected to take employment positions with Intuit pursuant
to
offer letters entered into with Intuit;
|
|
·
|
Ms.
Cheung is expected to take on a consulting role for a period of time
following consummation of the
merger;
|
|
·
|
pursuant
to separation agreements previously entered into with us in May 2006,
certain executives will receive accelerated vesting of all outstanding
equity awards, and may become entitled to certain payments or benefits,
including, payment of a portion of anticipated bonuses and a potential
lump-sum in the event such executive is terminated without cause
(as
defined in each agreement), or ceases to provide services to us or
Intuit
as a result of an involuntary termination (as defined in each agreement)
within the two year period following the consummation of the merger;
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·
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certain
executives will receive accelerated vesting of certain long-term
incentive
equity grants; and
|
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·
|
our
directors and officers will continue to have the benefit of liability
insurance for six years after completion of the
merger.
|
See
“The
Merger - Interests of Our Directors and Executive Officers in the
Merger.”
Shares
Owned by Our Directors and Executive
Officers
As
of the
close of business on [●], 2007, our directors and executive officers
beneficially owned [●] shares of common stock (excluding options exercisable
within 60 days) entitled to vote at the meeting, or approximately [●]% of our
total voting power outstanding on that date.
See
“The
ECHO Special Meeting - Shares Owned by Our Directors and Executive
Officers.”
Reasons
for the Merger
In
the
course of reaching its decision to approve the merger, the merger agreement
and
the transactions contemplated by the merger agreement, our Board of Directors
considered a number of factors in its deliberations.
See
“The
Merger—Recommendation of Our Board of Directors; Our Reason for the
Merger.”
Opinion
of
ECHO’s Financial Advisor
In
connection with the merger, our Board of Directors received a written opinion
from Wedbush Morgan Securities Inc., our financial advisor, as to the fairness,
from a financial point of view, of the merger consideration to be received
by
the public holders of our common stock. The full text of the written opinion
of
Wedbush Morgan, dated as of December 14, 2006, is attached to this proxy
statement as Annex C. Holders of our equity securities are encouraged to read
this opinion carefully in its entirety for a description of the procedures
followed, assumptions made, matters considered and qualifications and
limitations of the review undertaken. Wedbush
Morgan's opinion was intended for the use and benefit of our Board of Directors
in connection with their evaluation of the merger, does not address our
underlying business decision to enter into the merger agreement or complete
the
merger or the relative merits of the merger compared to any alternative business
strategies that may exist for us and does not constitute a recommendation to
the
Board of Directors or any stockholders as to how that person should vote on
the
merger or any related matter. Wedbush Morgan has acted as financial advisor
to
us and has received a customary fee from us for its services, the payment of
which is not contingent upon the conclusions reached in its opinion, and will
also receive an additional fee if the proposed merger is consummated.
See
“The
Merger - Opinion of ECHO’s Financial Advisor.”
Delisting
and Deregistration of Our Common
Stock
If
the
merger is completed, our common stock will no longer be listed on the NASDAQ
Capital Market and will be deregistered under the Securities Exchange Act of
1934 (or Exchange Act), and we will no longer file periodic reports with the
Securities and Exchange Commission.
See
“The
Merger - Delisting and Deregistration of Our Common Stock.”
The
Merger Agreement
Conditions
to the Completion of the Merger.
Each
party’s obligation to effect the merger is subject to the satisfaction or waiver
of specified conditions set forth in the merger agreement.
Limitation
on Considering Other Acquisition Proposals.
We have
agreed that, except under specified circumstances set forth in the merger
agreement, we and our subsidiaries will not, and will not knowingly authorize
or
permit any of our respective officers, directors, affiliates or employees or
any
of our investment bankers, attorneys, accountants or other advisors or
representatives to, and they will direct their respective representatives not
to, directly or indirectly,
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·
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solicit,
initiate, knowingly encourage, support, facilitate or induce the
making,
submission or announcement of, any acquisition proposal;
|
|
·
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participate
in any negotiations or discussions regarding, or furnish to any person
any
non-public information with respect to any acquisition proposal or
any
proposal or inquiry that could reasonably be expected to lead to,
any
acquisition proposal;
|
|
·
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approve,
endorse or recommend any acquisition proposal;
or
|
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·
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enter
into any letter of intent or similar document or any contract
contemplating or otherwise relating to any acquisition
transaction.
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Change
of Recommendation.
Our
Board of Directors may withdraw, amend, change or modify its recommendation
in
favor of approval of the merger agreement or approve or recommend an acquisition
proposal only under certain circumstances set forth in the merger agreement,
but
our Board of Directors may terminate the merger agreement only if specified
conditions set forth in the merger agreement are met.
Termination
of the Merger Agreement.
Each
party can terminate the merger agreement under specified circumstances set
forth
in the merger agreement.
Termination
Fee.
The
merger agreement requires us to pay Intuit a termination fee of $4,271,000
if
the merger agreement is terminated under certain circumstances described in
the
merger agreement.
See
“The
Merger Agreement.”
All
executive officers and directors of ECHO, in their capacity as stockholders
of
the Company, have entered into voting agreements in substantially the form
attached hereto as Annex B, pursuant to which each such stockholder has agreed,
among other things, to vote their shares in favor of the merger, and have
granted irrevocable proxies to the directors of Intuit to vote their shares
in
favor of approval of the merger. These officers and directors own in the
aggregate, [●] shares of our common stock, representing [●]% of the votes
entitled to be cast at the special meeting.
See
“Voting Agreements.”
Regulatory
Matters
Under
the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (referred to in this proxy
statement as the HSR Act), we cannot complete the merger until we and Intuit
have notified the Antitrust Division of the U.S. Department of Justice (referred
to in this proxy statement as the Antitrust Division) and the U.S. Federal
Trade
Commission (referred to in this proxy statement as the FTC), of the merger,
furnished them with certain information and materials and allowed the applicable
waiting period to terminate or expire. We and Intuit filed notification and
report forms under the HSR Act with the Antitrust Division and the FTC on [●],
2007.
See
“The
Merger - Regulatory Matters.”
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This
proxy statement and the documents to which we refer you in this proxy statement
contain “forward-looking statements” within the meaning of the safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934, as amended.
Statements other than statements of historical fact are forward-looking
statements for purposes of federal and state securities laws, including
projections of earnings, revenue or other financial items; statements regarding
future economic conditions or performance; statements regarding the expected
completion and timing of the merger; statements of belief; and statements of
assumptions. Forward-looking statements may include the words “may,” “could,”
“will,” “should,” “would,” “estimate,” “intend,” “continue,” “believe,” “expect”
or “anticipate” or other similar words.
These
forward-looking statements are expressed in good faith and believed to have
a
reasonable basis but present our estimates and assumptions only as of the date
of this proxy statement. Except for our ongoing reporting obligations under
any
securities law, we do not intend, and undertake no obligation, to update any
forward-looking statement. Actual results could differ materially from those
projected or assumed in any of our forward-looking statements. Our future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and to inherent risks and uncertainties.
Risks
and uncertainties pertaining to the following factors, among others, could
cause
actual results to differ materially from those described in the forward-looking
statements:
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·
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our
ability to obtain the stockholder and regulatory approvals required
for
the merger;
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·
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the
occurrence or non-occurrence of the other conditions to the closing
of the
merger;
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·
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the
occurrence of any event, change or other circumstance that could
give rise
to the termination of the merger
agreement;
|
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·
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the
timing of the closing of the merger and receipt by stockholders of
the
merger consideration;
|
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·
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legislative
or regulation developments that could have the effect of delaying
or
preventing the merger;
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·
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our
ability to retain our significant customers and vendors;
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·
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potential
litigation regarding the merger;
|
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·
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uncertainty
concerning the effects of our pending transaction with Intuit; and
|
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·
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additional
risks and uncertainties not presently known to us or that we currently
deem immaterial.
|
You
should consider the cautionary statements contained or referred to in this
section in connection with any subsequent written or oral forward-looking
statements that may be issued by us or persons acting on our behalf. We do
not
undertake any obligation to release publicly any revisions to any
forward-looking statements contained herein to reflect events or circumstances
that occur after the date of this proxy statement or to reflect the occurrence
of unanticipated events, except as we are required to do by law.
THE
ECHO SPECIAL MEETING
We
are
furnishing this proxy statement to our stockholders as part of the solicitation
of proxies by our Board of Directors for use at the special meeting.
We
will
hold the special meeting at our offices located at 730 Paseo Camarillo,
Camarillo, California, 93010 on [●], 2007, at 9:00 a.m. local time.
Purpose
of the Special Meeting
At
the
special meeting, we are asking holders of record of our common stock at the
close of business on [●], 2007, to consider and vote on the following proposals:
1. to
approve the Agreement and Plan of Merger, dated as of December 14, 2006, by
and
among Electronic Clearing House, Inc., Intuit Inc., and Elan Acquisition
Corporation, a wholly-owned subsidiary of Intuit, Inc;
2. to
approve the adjournment of the special meeting, if necessary or appropriate,
to
solicit additional proxies if there are insufficient votes at the time of the
special meeting to approve the merger agreement; and
3. to
transact any other business as may properly come before the special meeting
or
any adjournment of the special meeting.
Recommendation
of Our Board of
Directors
Our
Board
of Directors has unanimously determined that the merger is advisable and fair
to, and in the best interests of, us and our stockholders, and approved the
merger agreement, the merger and the transactions contemplated by the merger
agreement.
Our
Board of Directors unanimously recommends that our stockholders vote “FOR” the
approval of the merger agreement and “FOR” the proposal to adjourn the special
meeting for the purpose of soliciting additional proxies, if necessary or
appropriate, if there are not sufficient votes at the time of the special
meeting to approve the merger agreement. See “The Merger—Recommendation of Our
Board of Directors; Our Reasons for the Merger.”
Quorum;
Record Date; Stockholders Entitled to Vote; Vote
Required
A
quorum
of stockholders is necessary to hold the special meeting. The required quorum
for the transaction of business at the special meeting is the presence, either
in person or represented by proxy, of the holders of a majority of the voting
power of our outstanding common stock entitled to vote on the merger agreement.
Abstentions and “broker non-votes”, discussed below, count as present for
establishing a quorum.
You
are
entitled to notice of, and to attend and vote or submit a proxy to vote at,
the
special meeting or any adjournment of the special meeting if you owned shares
of
our common stock at the close of business on [●], 2007, the record date for the
special meeting. For each share of our common stock that you owned on the record
date, you are entitled to cast one vote on each matter voted upon at the special
meeting.
Approval
of the merger agreement requires the affirmative vote of the holders of a
majority of the voting power of the outstanding shares of our common stock
entitled to vote on the merger agreement.
Because
the vote on the proposal to approve the merger agreement is based on the voting
power of the total number of shares outstanding, failure to vote your
shares and broker non-votes will have the same effect as voting against the
approval of the merger agreement.
Approval
of the adjournment proposal requires a majority of the voting power present
at
the special meeting, in person or represented by proxy. Because the vote on
the
adjournment proposal is based on the voting power present at the meeting,
failure to vote your shares and broker non-votes will have the same effect
as
voting against the adjournment proposal.
Shares
Owned by Our Directors and Executive
Officers
As
of the
close of business on [●], 2007, our directors and executive officers,
beneficially owned [●] shares of common stock (excluding options exercisable
within 60 days) entitled to vote at the meeting, or approximately [●]% of our
total voting power outstanding on that date.
All
executive officers and directors of ECHO, in their capacity as stockholders
of
the Company, have entered into voting agreements in substantially the form
attached hereto as Annex B, pursuant to which each such stockholder has agreed,
among other things, to vote their shares in favor of the merger, and have
granted irrevocable proxies to the directors of Intuit to vote their shares
in
favor of the merger. These officers and directors own in the aggregate, [●]
shares of our common stock, representing [●]% of the votes entitled to be cast
at the special meeting.
If
you
plan to attend the special meeting and wish to vote in person, you will be
given
a ballot at the special meeting. Please note, however, that if your shares
are
held in “street name,” which means your shares are held of record by a broker,
bank or other nominee, and you wish to vote at the special meeting or any
adjournment of the special meeting, you must bring to the special meeting a
proxy from the record holder of the shares (your broker, bank or nominee)
authorizing you to vote in person at the special meeting or adjournment of
the
special meeting.
All
shares held by record holders of our common stock represented by properly
executed proxies received in time for the special meeting will be voted at
the
special meeting in the manner specified by the stockholders giving those
proxies. Properly executed proxies that do not contain voting instructions
will
be voted “FOR” the proposal to approve the merger agreement and “FOR” the
proposal to adjourn the special meeting for the purpose of soliciting additional
proxies, if necessary or appropriate, if there are not sufficient votes at
the
time of the special meeting to approve the merger agreement, provided that
no
proxy that is specifically marked “AGAINST” the proposal to approve the merger
agreement will be voted in favor of the adjournment proposal, unless it is
specifically marked “FOR” the adjournment proposal.
To
vote,
please complete, sign, date and return the enclosed proxy card.
Only
shares affirmatively voted for the proposal to approve the merger agreement
and
the adjournment proposal, and properly executed proxies that do not contain
voting instructions, will be counted as votes “FOR” the proposals. Shares of our
stock held by persons attending the special meeting but abstaining from voting,
and shares of our stock for which we received proxies directing an abstention,
will have the same effect as votes against the approval of the merger agreement
and the adjournment proposal.
Shares
represented by proxies that reflect a “broker non-vote” will be counted for
purposes of determining whether a quorum exists, but those proxies will have
the
same effect as votes against the proposal to approve the merger agreement and
the adjournment proposal. A “broker non-vote” occurs when a nominee holding
shares for a beneficial owner has not received instructions from the beneficial
owner and does not have discretionary authority to vote the shares. If you
hold
your shares in “street name,” which means your shares are held of record by a
broker, bank or other nominee, you must provide the record holder of your shares
with instructions on how to vote your shares in accordance with the voting
directions provided by your broker, bank or other nominee. If you do not provide
your broker, bank or other nominee with instructions on how to vote your shares,
it will not be permitted to vote your shares and will result in a broker
non-vote.
You
should not send any certificates representing shares of our common stock with
your proxy card. Upon completion of the merger, you will receive instructions
regarding the procedure to exchange your stock certificates for the cash merger
consideration.
Voting
over the Internet or by
Telephone
You
may
also grant a proxy to vote your shares over the Internet or by telephone.
Stockholders granting a proxy to vote over the Internet or by telephone should
understand that there may be costs associated with electronic access, such
as
usage charges from Internet access providers and telephone companies, which
must
be borne by the stockholder.
For
Shares Registered in Your Name. Stockholders
of record who own shares directly in their own name may go to the website
www.proxyvote.com
to grant
a proxy to vote their shares over the Internet. Have your proxy card in hand
when you access the web site and follow the instructions to obtain your records
and to create an electronic voting instruction form. Any stockholder using
a
touch-tone telephone may also grant a proxy to vote shares by calling the
telephone number on your voting instruction form or proxy card and following
the
recorded instructions.
For
Shares Registered in the Name of a Broker, Bank or Other Nominee
Beneficial
owners whose stock is held in “street name” through a broker, bank or other
nominee must provide the record holder of their shares with instructions on
how
to vote their shares. Please check the voting directions provided by your
broker, bank or other nominee (rather than from our proxy card) to see if you
may use the Internet or the telephone to provide instructions on how to vote
your shares.
General
Information for All Shares Voted over the Internet or by Telephone.
Votes
submitted over the Internet or by telephone must be received by 11:59 p.m.,
Pacific Time, on [●], 2007. Submitting your proxy over the Internet or by
telephone will not affect your right to vote in person should you decide to
attend the special meeting.
Adjournment
Although
it is not currently expected, if the proposal to approve the adjournment of
the
special meeting, if necessary or appropriate, to permit the further solicitation
of proxies if there are not sufficient votes at the time of the special meeting
to approve the merger agreement, is approved, the special meeting may be
adjourned for the purpose of soliciting additional proxies to approve the
proposal to approve the merger agreement. Other than for the purposes of
adjournment to solicit additional proxies, whether or not a quorum exists,
holders of a majority of the outstanding voting power of our common stock
entitled to vote on the merger agreement, present in person or represented
by
proxy at the special meeting and entitled to vote thereat may adjourn the
special meeting. Any signed proxies received by us in which no voting
instructions are provided on such matter will be voted in favor of an
adjournment in these circumstances.
Any
adjournment may be made without notice (if the adjournment is not for more
than
thirty days), other than by an announcement made at the special meeting of
the
time, date and place of the adjourned meeting. Any adjournment of the special
meeting for the purpose of soliciting additional proxies will allow our
stockholders who have already sent in their proxies to revoke them at any time
prior to their use at the special meeting as adjourned.
Revocation
of Proxies
Submitting
a proxy on the enclosed form does not preclude a stockholder from voting in
person at the special meeting. If you are a stockholder of record (i.e., your
shares are registered in your name), you may revoke and change your vote on
a
proposal at any time before the conclusion of voting on such proposal. If you
are a stockholder of record, you can do this in one of three ways:
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first,
you can provide a written notice to our corporate secretary prior
to 11:59
p.m. Pacific Time on [●], 2007 stating that you would like to revoke your
proxy;
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second,
you can complete and submit a later dated proxy in writing, provided
the
new proxy is received by 11:59 p.m. Pacific Time on [●], 2007. If you
submitted the proxy you are seeking to revoke via the Internet or
telephone, you may submit this later-dated new proxy using the same
method
of transmission (Internet or telephone) as the proxy being revoked,
provided that the new proxy is received by 11:59 p.m. Pacific Time
on [●],
2007; or
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third,
you can attend the special meeting and vote in person, which will
automatically cancel any proxy previously given, or you may revoke
your
proxy in person; your attendance alone, however, will not revoke
any proxy
that you have previously given.
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Any
written notice of revocation or subsequent proxy should be delivered to our
corporate secretary at 730 Paseo Camarillo, Camarillo, California, 93010,
Attention: Corporate Secretary, at or before the time and date specified above.
If
you
have instructed a broker, bank or other nominee to vote your shares, you must
follow the directions received from your broker, bank or other nominee to change
those instructions.
Solicitation
of Proxies
We
and
our proxy solicitation firm, Morrow & Company, Inc., are soliciting proxies
for the special meeting from our stockholders. We will bear the entire cost
of
soliciting proxies from our stockholders, which includes the payment of
$7,500.00 to Morrow & Company for its services. We will also reimburse
Morrow & Company for its expenses incurred in connection with its engagement
as our proxy solicitor.
In
addition, we may reimburse brokerage firms and other firms representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to the beneficial owners. Proxies may also be solicited by certain
of
our directors, officers and regular employees, without additional compensation,
either personally or by telephone, Internet, telegram, facsimile or special
delivery letter.
No
person
has been authorized to give any information or to make any representations
other
than those set forth in the proxy statement in connection with the solicitation
of proxies made hereby, and, if given or made, such information must not be
relied upon as having been authorized by us or any other person.
We
do not
expect that any matter other than the proposal to approve the merger agreement
and, if required, the proposal to adjourn will be brought before the special
meeting. If, however, other matters are properly presented at the special
meeting, the persons named as proxies will vote in accordance with their best
judgment with respect to those matters.
Under
applicable Nevada law, ECHO stockholders are not entitled to any dissenters’
rights with respect to the merger.
If
you
need assistance in completing your proxy card or have questions regarding the
special meeting, please contact:
Electronic
Clearing House, Inc.
Corporate
Secretary and Investor Relations
730
Paseo
Camarillo,
Camarillo,
CA 93010
(800)
233-0406 ext. 8533
corp@ECHO-inc.com
OR
Morrow
& Company, Inc.
470
West
Avenue, 3rd Floor
Stamford,
CT 06902
[●]
[●]
Attn:
Gerard J. Mucha or Fred Marquardt
PROPOSAL
1—APPROVAL OF THE MERGER
AGREEMENT
THE
MERGER
We
are
asking our stockholders to approve the merger agreement. If we complete the
merger, we will become a wholly-owned subsidiary of Intuit, and our stockholders
will have the right to receive $18.75 in cash, without interest and less any
applicable withholding taxes, for each share of common stock that is outstanding
immediately prior to the effective time of the merger.
Electronic
Clearing House, Inc.
Electronic
Clearing House, Inc. is an electronic payment processor that provides for the
payment processing needs of merchants, banks and collection agencies. We derive
the majority of our revenue from two main business segments: 1) bankcard and
transaction processing services (“bankcard services”), whereby we provide
solutions to merchants and banks to allow them to accept credit and debit card
payments from consumers; and 2) check-related products (“check services”),
whereby we provide various services to merchants and banks to allow them to
accept and process check payments from consumers. The principal services we
offer within these two segments include, debit and credit card processing,
check
guarantee, check verification, check conversion, check re-presentment and check
collection. We operate our services under the following brands:
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MerchantAmerica,
our retail provider of all credit card, debit card and check payment
processing services to both the merchant and bank markets;
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National
Check Network (“NCN”), our proprietary database of negative and positive
check writer accounts (i.e., accounts that show delinquent history
in the
form of non-sufficient funds and other negative transactions), for
check
verification, check conversion capture services, and for membership
to
collection agencies;
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XPRESSCHEX,
Inc. for check collection services;
and
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ECHO,
for wholesale credit card and check processing
services.
|
We
were
incorporated in Nevada in December 1981. Our principal executive office is
located at 730 Paseo Camarillo, Camarillo, California 93010, and our telephone
number is (800) 233-0406.
Intuit
Inc.
Founded
in 1983, Intuit Inc. is a leading provider of business, financial management
and
tax solutions for small businesses, consumers and accountants. Intuit’s flagship
products and services, including QuickBooks, TurboTax, Lacerte, ProSeries and
Quicken, simplify small business management, tax preparation and filing, and
personal finance. Intuit is publicly traded on the NASDAQ Global Select Market
under the symbol “INTU.”
Intuit
was incorporated in California in March 1984. In March 1993, Intuit
reincorporated in Delaware and completed its initial public offering. Intuit’s
principal executive office is located at 2700 Coast Avenue, Mountain View,
California, 94043, and its telephone number at that location is (650)
944−6000.
Merger
Sub is a Nevada corporation and a wholly-owned subsidiary of Intuit. Merger
Sub
was organized solely for the purpose of entering into the merger agreement
with
Intuit and completing the merger and has not conducted any business operations
other than those incident to its formation. If the merger is completed, Merger
Sub will cease to exist following its merger with and into ECHO.
Merger
Sub’s principal office is located at Intuit's principal executive office at c/o
Intuit Inc., 2700 Coast Avenue, Mountain View, CA 94043 and its telephone number
is (650) 944-6000.
Background
of
the Merger
We
continually assess strategic opportunities and potential business transactions
as a part of our ongoing evaluation of our business, technologies and
industries.
We
were
first contacted by Intuit in July 2005 when a representative of
Intuit called Kris Winckler, our Senior Vice President of Strategy
and Marketing. Intuit initially contacted us to discuss potentially establishing
a commercial business relationship where we would provide check processing
related products and/or services to Intuit. In connection with these
conversations, on July 20, 2005, we and Intuit executed a mutual nondisclosure
agreement. On July 25, 2005, Mr. Winckler met with representatives of Intuit
to
discuss the potential commercial relationship. On January 10, 2006, a
representative of Intuit telephoned Mr. Winckler to follow up on those
discussions.
Over
the
following months, there were discussions between our representatives and
representatives of Intuit to discuss the status of Intuit’s interest in a
potential commercial transaction with us.
On
April
14, 2006, Joe Kaplan, a Vice President of Intuit and Division President of
Intuit’s Innovative Merchant Solutions business, and Randy Tinsley, Intuit’s
Vice President of Corporate Development, met with Charles J. Harris, our
President and Chief Operating Officer, at the offices of Intuit’s Innovative
Merchant Solutions business in Calabasas, California to explore potential
business opportunities between the two companies, including a possible business
combination. During this meeting, Intuit indicated that it may be interested
in
a broader relationship with us. Both parties agreed to consider such strategic
opportunities, although at this time our objectives remained focused on
developing a commercial relationship with Intuit and our Board of Directors
and
management continued to operate ECHO pursuant to our long-term strategy to
grow our business.
On
May
10, 2006, representatives of Intuit met with Mr. Harris and Mr. Winckler at
an
industry conference in San Diego, California and discussed our current and
future products and how we could help to expand Intuit’s current product
offerings.
On
May
17, 2006, the parties entered into a new mutual nondisclosure agreement to
facilitate the expanded scope of the discussions between the parties. After
the
execution of the new nondisclosure agreement, a follow up meeting was held
that
day at our offices in Camarillo, California, to review our capabilities and
Intuit’s corporate objectives and to continue the parties’ discussions regarding
potential business opportunities, including a possible business combination.
Present at this meeting were Mr. Kaplan, Mr. Tinsley and other representatives
of Intuit and Mr. Harris, Alice L. Cheung, our Chief Financial Officer and
Treasurer, William Wied, our Chief Information Officer, Steve Hoofring, Sharat
Shankar, Patricia A. Williams and Mr. Winckler, each Senior Vice Presidents
of
ECHO.
On
June
5, 2006, Mr. Tinsley called Mr. Harris to propose a potential business
combination transaction and to discuss the terms upon which Intuit was prepared
to enter into discussions regarding such a transaction. On June 6, 2006, we
received from Intuit a draft of a proposed exclusivity
agreement, requesting that we would negotiate exclusively with
Intuit, and a draft of a non-binding term sheet outlining terms for a possible
business combination as described on the June 5, 2006 telephone call between
Mr.
Harris and Mr. Tinsley. Between June 7, 2006 and June 12, 2006, all of our
directors were notified that Intuit was interested in entering into discussions
regarding a potential business combination.
Between
June 7, 2006 and June 13, 2006, Messrs. Tinsley and Harris had several
telephonic discussions concerning Intuit’s proposed exclusivity agreement and
non-binding term sheet.
On
June
14, 2006, Mr. Tinsley, on behalf of Intuit, sent Mr. Harris a written
non-binding proposal to acquire 100% of our fully diluted equity on the terms
that were previously discussed between Mr. Tinsley and Mr. Harris. In addition,
Intuit stated that a condition to its proposal was that we agree to negotiate
exclusively with Intuit. Mr. Harris notified the members of our Board of
Directors of the proposal. Thereafter, our Board of Directors began to
evaluate it with our outside counsel and also to consider the possibility
of retaining a financial advisor.
Our
Board
of Directors held a special telephonic meeting on June 21, 2006, for the purpose
of discussing Intuit’s proposal and retaining a financial advisor. Our legal
counsel discussed the Board of Directors' fiduciary duties and our Board of
Directors determined that further financial analysis would be necessary before
they could respond to Intuit’s proposal. After consideration of multiple
candidates, our Board of Directors approved a resolution to engage Wedbush
Morgan as our exclusive financial advisor in connection with any potential
business combination transaction with Intuit. Following the adoption of this
resolution, our Board of Directors directed Wedbush Morgan to analyze Intuit’s
proposal and advise our management and our Board of Directors on the matter.
Wedbush Morgan was formally retained by us pursuant to a letter agreement dated
June 30, 2006.
Our
Board
of Directors held another special telephonic meeting on June 26, 2006 for the
sole purpose of discussing Intuit’s proposal. At this meeting, Wedbush Morgan
presented an analysis and evaluation of Intuit’s proposal, as well as various
alternatives available to us. At that time, our Board of Directors authorized
Wedbush Morgan to initiate discussions with Intuit concerning the consideration
and other terms of a proposed transaction, with the principal goal of obtaining
the highest per share price for shareholders and providing us the ability to
respond to unsolicited alternative acquisition proposals. Our Board of Directors
also directed management and Wedbush Morgan to condition our willingness to
provide confidential information to Intuit on Intuit entering into a standstill
agreement pursuant to which Intuit would agree not to acquire or publicly offer
to acquire our securities without the consent of our Board of Directors.
On
June
30, 2006, Wedbush Morgan provided Intuit with a revised nondisclosure agreement
including standstill provisions as requested by our Board of Directors. Later
that day, representatives of our outside counsel had discussions with members
of
Intuit’s legal department regarding the content of the nondisclosure
agreement.
On
July
7, 2006, Mr. Tinsley had several telephone calls with representatives of Wedbush
Morgan regarding the purchase price. Intuit also advised us that it was not
prepared to enter into a new nondisclosure agreement and provided us with a
proposed amendment to the May 17, 2006 nondisclosure agreement containing
revised standstill provisions. On this day, Intuit also provided us with a
revised non-binding term sheet which indicated Intuit’s willingness to increase
its proposed purchase price.
During
the period between July 7, 2006 and July 21, 2006, Mr. Harris and Wedbush
Morgan continued to engage in discussions with Mr. Tinsley regarding purchase
price and other terms set forth in Intuit’s proposal. In connection with those
discussions, Intuit made certain information requests of us. Our management
and
legal counsel also participated in several informal telephone calls with members
of our Board of Directors during this period, updating our Board of Directors
on
developments in our discussions with Intuit and answering questions posed
regarding various legal requirements.
Between
July 7, 2006 and July 10, 2006, Wedbush Morgan and Mr. Tinsley corresponded
regarding the terms of the standstill provisions to be included in the amendment
to the nondisclosure agreement. On July 10, 2006, Mr. Tinsley proposed that
the
parties focus on the purchase price instead of the amendment to the
nondisclosure agreement and standstill provisions.
On
July
11, 2006 Wedbush Morgan participated in a telephonic meeting with Mr. Tinsley
to
address Intuit’s questions relating to purchase price and valuation.
On
July
21, 2006, Mr. Tinsley provided Wedbush Morgan with a revised exclusivity
agreement, requesting that we would not discuss, negotiate or enter into
another agreement with a third party relating to the acquisition of us
(with specified exceptions to permit our Board of Directors to exercise its
fiduciary duties), and non-binding term sheet reflecting an increased proposed
purchase price.
Wedbush
Morgan presented Intuit’s revised proposal to our Board of Directors informally
at a dinner held on July 23, 2006 and formally at a meeting of our Board of
Directors held on July 24, 2006. At this meeting, our Board of Directors
considered and discussed various factors regarding the transaction, including,
among others, the proposed purchase price relative to our then-current market
price, the comparability of other market valuations, that the transaction
consisted of all cash consideration, that there were no proposed material
contingencies (apart from shareholder approval), and that the proposed purchase
price reflected anticipated synergies between the companies, including Intuit’s
anticipated ability to leverage our products, services and technology through
its more recognizable brand and its extensive distribution network. Our Board
of
Directors also discussed negative aspects of the potential transaction,
including those described in “The Merger—Recommendation of Our Board of
Directors; Our Reasons for the Merger.” Following a substantial discussion, our
Board of Directors directed Wedbush Morgan to continue its negotiations with
Intuit to see if any higher purchase price could be achieved.
Between
the July 24, 2006 Board of Directors' meeting and July 28, 2006, Wedbush Morgan
continued its discussions with Mr. Tinsley regarding purchase price and other
transaction terms, and we continued an ongoing internal analysis of the proposed
transaction. On July 25, 2006, we sent Intuit a revised exclusivity agreement
and non-binding term sheet reflecting an increased proposed purchase price.
On
July 27, 2006, Intuit provided our legal counsel with a revised exclusivity
agreement and non-binding term sheet reflecting the purchase price that we
proposed to Intuit in our July 25, 2006 non-binding term sheet. Wedbush Morgan
provided Intuit with comments to the other deal terms reflected
in Intuit’s revised proposal later that day. On July 28, 2006, Intuit’s
outside legal counsel had discussions with our outside legal counsel regarding
the terms of the exclusivity agreement and non-binding term sheet. Later that
day, Intuit provided us with a revised non-binding term sheet responding to
our
comments and the parties entered into an exclusivity agreement providing that
until September 12, 2006, we would not discuss, negotiate, or enter into another
agreement with a third party relating to the acquisition of us with
specified exceptions to permit our Board of Directors to exercise its fiduciary
duties.
After
the
execution of the exclusivity agreement, we had discussions with representatives
of Intuit regarding coordinating its due diligence review of our company. On
August 4, 2006, Intuit and its representatives received access to an electronic
data room containing due diligence information relating to our
company.
On
August
7, 2006, Mr. Harris, Mr. Kaplan and Alex Lintner, Intuit's Senior Vice
President, Strategy and Corporate Development, met in Los Angeles, California
to
discuss the payments industry and strategic aspects of the potential
transaction.
On
or
about August 8, 2006, Mr. Harris and Michael McNeal, Intuit’s Vice President of
Talent Acquisitions, met in Calabasas, California to review, identify and
discuss a retention strategy for our key employees. During the period from
this meeting until signing, Mr. McNeal had conversations with Mr. Harris
and other members of our management to discuss employee retention, employment
packages and related matters.
Beginning
on August 9, 2006, Intuit and its legal counsel, accounting advisors and other
outside consultants began an extensive due diligence investigation of our
company, including a review of our corporate and financial records and meetings
and telephone calls with our management, independent auditors and technology
personnel. Intuit also sent
several follow-up informational requests. This due diligence investigation
included meetings on August 10 and 11, 2006, at a hotel near our offices in
Camarillo, California, at which Mr. Kaplan and several other representatives
of
Intuit and Intuit’s outside advisors, our management team and several other
ECHO employees, and representatives of Wedbush Morgan, were present. Intuit’s
due diligence investigation, including various telephone calls between the
parties, continued in parallel with the negotiation of the definitive
transaction documents until execution of the merger agreement.
On
August
10, 2006, Intuit’s legal counsel provided us with a draft definitive merger
agreement.
On
August
17, 2006, our legal counsel provided Intuit with comments on Intuit’s proposed
draft definitive merger agreement. Following receipt of these comments, the
parties and their legal counsel exchanged several drafts and negotiated the
terms of the definitive merger agreement, including provisions relating
to our Board of Directors’ ability to respond to and/or negotiate
alternative acquisition proposals and any potential termination
fees.
During
this period management also kept our Board of Directors updated via regular
communications and informal telephonic conferences, which included discussions
of the principal terms of the merger agreement and our Board of Directors'
fiduciary duties.
On
August
24, 2006, Mr. Harris and Mr. Kaplan had a dinner meeting in Calabasas,
California at which they discussed employee-related matters and other issues
related to the transaction.
On
August
25, 2006, Intuit’s legal counsel provided our legal counsel with a draft voting
agreement, pursuant to which members of our management and Board of Directors
would agree to vote their shares of common stock in favor of the
merger.
On
September 5, 2006, Steve Bennett, Intuit’s President and Chief Executive
Officer, met with Mr. Harris at a restaurant near our offices in Camarillo,
California to discuss general business objectives and share market
observations.
Also
on
September 5, 2006, Intuit’s legal counsel provided our legal counsel with a
draft form of non-competition agreement, pursuant to which certain members
of
our management would agree not to compete with Intuit following the closing
of the merger. Negotiation of the non-competition agreement and the voting
agreement continued between us and Intuit and their respective legal advisors
in
parallel with the negotiation of the merger agreement.
On
September 6, 2006, Intuit provided Mr. Harris with employment offer letters
to
be distributed to our executives, which the parties negotiated in parallel
with
the merger agreement and other transaction documents.
On
September 8, 2006, Messrs. Harris, Barry and Kaplan met in Las Vegas with a
select ECHO merchant (subject to a nondisclosure agreement) to conduct customer
due diligence.
On
September 11, 2006, the parties entered into an amendment to the July 28
exclusivity agreement extending the exclusivity period to September 19,
2006.
On
September 14, 2006, our legal counsel provided Intuit’s legal counsel a list of
the remaining open issues on the definitive merger agreement and the parties
and
their counsel engaged in telephone calls to negotiate these open
issues.
Later on
September 14, 2006, Messrs. Kaplan and Tinsley contacted Mr. Harris and
representatives of Wedbush Morgan and advised them that Intuit had determined
to
lower its proposed purchase price in light of certain issues identified in
its
due diligence investigation. At this time, we instructed our outside counsel
to
cease negotiating the terms of the merger agreement.
On
September 15, 2006, Mr. Tinsley communicated, through discussions with Wedbush
Morgan, Intuit’s proposed revised purchase price.
In
light
of the proposed revised purchase price, our Board of Directors held a special
telephonic meeting on September 15, 2006. At this meeting, our Board of
Directors engaged in an extensive discussion of the due diligence findings
identified by Intuit and the various matters reviewed, key business issues
involved in the transaction, and the terms of the draft merger agreement. After
analyzing the issues raised, our Board of Directors instructed Wedbush Morgan
to
negotiate an increase to Intuit’s proposed revised purchase price.
Between
September 15, 2006 and 18, 2006, Wedbush Morgan and our management had
discussions with representatives of Intuit relating to purchase price, but
Intuit indicated that it would not increase its proposed purchase price beyond
what it had proposed on September 15, 2006.
On
September 19, 2006, the exclusivity agreement expired and was not
renewed.
After
further deliberation among the individual members of our Board of Directors
with
representatives of our management and legal counsel and Wedbush Morgan, all
of
which occurred between September 20, 2006 and September 22, 2006, each of
the members of our Board of Directors indicated that they supported moving
forward with negotiations at the reduced purchase price proposed by Intuit.
Our
Board of Directors' analysis in this regard considered all of the costs and
benefits arising from the proposed transaction, an analysis of the due diligence
matters identified by Intuit, a consideration of the fact that the reduced
purchase price was still a significant premium to the then current market price
and the market price prior to entering into negotiations with Intuit, and
discussions with Wedbush Morgan concerning the fairness of the transaction,
from
a financial point of view, to the public holders of our common stock. Following
our Board of Directors' decision to move forward, the
parties resumed their due diligence activities and the negotiation of the
definitive merger agreement and related agreements.
On
September 30, 2006, the Unlawful Internet Gambling Enforcement Act of 2006
(the “Internet Gaming Bill”) was passed by Congress. The Internet Gaming Bill
prohibits gambling businesses from accepting any payment instrument, including
credit cards, ACH and other check transactions, for Internet gambling. The
Internet Gaming Bill directs the United States Federal Reserve, the Department
of the Treasury and the Department of Justice to develop regulations, within
270
days of the Internet Gaming Bill becoming law, which would direct financial
transaction providers, including payment processors, to identify and block
certain types of financial transactions connected with Internet
gambling.
Thereafter,
we undertook to determine the impact of the Internet Gaming Bill on our business
and engaged special counsel to assist in determining its application and effect.
We determined that the Internet Gaming Bill would have a significant negative
impact on our Internet wallet (“eWallet”) business and our future outlook. On
October 4, 2006, our Board of Directors had a meeting to discuss the Internet
Gaming Bill and its impact on our business. Following this meeting, at the
direction of our Board of Directors, we provided Intuit with information on
the
potential impact of the Internet Gaming Bill on our business. The information
we
provided to Intuit was consistent with the information we provided to the public
in our subsequently filed Annual Report on Form 10-K and the information
provided to Wedbush Morgan in connection with its analysis as described in
“Opinion of ECHO’s Financial Advisor.”
Between
October 4, 2006 and October 11, 2006, Messrs. Kaplan and Tinsley had several
telephonic discussions with Mr. Harris and representatives of Wedbush Morgan
concerning the potential impact of the Internet Gaming Bill on our business
and
certain other due diligence matters. On or around this time, the parties stopped
negotiating the terms of the merger agreement and other transaction
documents. On October 11, 2006, Mr. Tinsley and Mr. Kaplan advised us that,
in light of the anticipated impact of the Internet Gaming Bill on our business,
Intuit was further reducing its proposed purchase price.
On
October 11, 2006, after market close, we issued a press release announcing
that
a portion of our business and future results of operations would be impacted
by
the Internet Gaming Bill. The press release also indicated that eWallet services
accounted for less than 10% of our total revenues in 2006 and that the Internet
Gaming Bill would have a significant negative effect on our business and results
of operations in fiscal 2007.
On
October 12, 2006, Wedbush Morgan, at the direction of our Board of Directors
and
after consultation with our management, told Mr. Tinsley that while we were
prepared to engage in discussions regarding a reduced purchase price to reflect
the impact of the Internet Gaming Bill on our business, the proposed reduction
by Intuit was too large and would not be acceptable to our Board of
Directors.
On
October 13, 2006, Mr. Tinsley and another representative of Intuit had further
discussions with representatives of Wedbush Morgan regarding revisions to the
proposed purchase price to reflect the impact of the Internet Gaming Bill on
our
business.
On
October 16, 2006, Intuit provided our Board of Directors with a letter
indicating that Intuit’s “best and final” proposal to acquire us was at a price
per share of $18.75 in cash. The revised proposal reflected a smaller reduction
in the proposed purchase price than the reduction proposed by Intuit on October
11, 2006. Intuit’s revised proposal had an expiration date of October 18, 2006,
which Intuit subsequently extended to October 20, 2006 at our request.
On
October 20, 2006, representatives of Wedbush Morgan, acting at the direction
of
our Board of Directors, informed Mr. Tinsley that we needed additional time
to
fully analyze and assess the impact of the Internet Gaming Bill on our
business and that our Board of Directors would consider Intuit’s revised
proposal only after management’s analysis was complete. Wedbush Morgan requested
that Intuit extend the expiration of its revised proposal by several weeks
to
allow us to complete this analysis. Mr. Tinsley responded that Intuit was not
prepared to allow its proposal to remain open for an extended period and that
Intuit intended to explore other strategic opportunities. Mr. Tinsley indicated
that if our Board of Directors was ready to re-engage in discussions following
the expiration of Intuit’s proposal, Intuit would reevaluate its interest in
acquiring us at that time.
On
October 27, 2006, our Board of Directors participated in a telephonic conference
call to discuss the results of management’s analysis of the Internet Gaming Bill
and whether we should continue discussions with Intuit. As a result of such
discussions and at the direction of our Board of Directors, Wedbush Morgan
contacted Mr. Tinsley later that day to inform Intuit that we had completed
our
analysis and our Board of Directors was now prepared to consider a proposal
on
the terms proposed by Intuit on October 16, 2006, if that proposal remained
open.
On
November 7, 2006, Mr. Tinsley notified Wedbush Morgan that Intuit remained
interested in proceeding with an acquisition of us on the terms proposed by
Intuit on October 16, 2006, including a purchase price of $18.75 per share,
subject to additional due diligence on specified issues previously identified
by
Intuit. Our Board of Directors was then notified of Intuit’s continued
interest, and a Board of Directors meeting was scheduled for November 13, 2006
in order to consider Intuit’s proposal.
Beginning
on November 9, 2006, the parties and their advisors re-engaged on due diligence
and the negotiation of the definitive merger agreement and other transaction
documents.
On
November 12, 2006, our Board of Directors met over dinner during which they
informally discussed Intuit’s latest proposal of $18.75 per share.
On
November 13, 2006, our Board of Directors met to consider Intuit’s latest
proposal. Wedbush Morgan presented to our Board of Directors a preliminary
overview of its financial analysis of Intuit’s latest proposal, including the
valuation considerations made, its market trading analysis, public comparable
company analysis, premium public comparable company analysis and merger and
acquisition transaction analysis, as well as the assumptions made, matters
considered and qualifications and limitations of its review. The valuation
analysis and methodologies were discussed, including a discounted cash flow
analysis. Wedbush Morgan informed our Board of Directors that based on its
financial analysis, it was then able to render to our Board of Directors an
opinion that the $18.75 per share purchase price was fair, from a financial
point of view, to the public holders of our common stock. Our Board of Directors
then continued a discussion of the valuation and other transaction related
matters, including open issues relating to the provisions of the merger
agreement which govern our ability to consider alternative acquisition proposals
and the circumstances under which we would be obligated to pay Intuit a break-up
fee, the timing of the transaction, the intention of Intuit to retain almost
all
of our employees and senior management, the significant synergies between the
companies and the extensive diligence done by Intuit before making its most
recent proposal. Following this extensive discussion, our Board of Directors
authorized management to continue discussions with Intuit at a purchase price
of
$18.75 per share and to negotiate the remaining terms of the transaction with
Intuit.
On
November 14, 2006, our legal counsel called Intuit’s legal counsel to discuss
the remaining open issues related to the merger agreement. Also on November
14,
2006, our representatives and representatives of Intuit and Intuit’s legal
counsel had a conference call to discuss the status of the remaining open issues
in Intuit’s ongoing due diligence investigation.
Between
November 14 and December 14, we and Intuit and our respective representatives
and legal counsel continued negotiating the definitive merger agreement and
other transaction documents. During that time, Intuit continued its due
diligence review and we worked to resolve the diligence issues identified by
Intuit.
After
resolution of outstanding due diligence issues and issues relating to the
definitive agreements, drafts of the definitive transaction documents were
prepared and delivered to all of our directors on December 13, 2006.
On
December 14, 2006, our Board of Directors held a special telephonic meeting.
Representatives of our legal counsel and Wedbush Morgan also attended the
meeting. At the meeting, management and our legal counsel updated our Board
of
Directors on the status of negotiations with Intuit, the terms of the definitive
agreements and the resolution of issues discussed at the prior Board of
Directors meeting, including the provisions of the merger agreement relating
to
our ability to consider alternative acquisition proposals and the circumstances
under which we would be obligated to pay a break-up fee to Intuit. Our Board
of
Directors then asked questions of management and our legal counsel and discussed
the terms of the transaction agreements that had been negotiated with Intuit.
Following that discussion, Wedbush Morgan presented to our Board of Directors
its financial analysis of the per share purchase price of $18.75, including
the
valuation considerations made, their market trading analysis, public comparable
company analysis, premium public comparable company analysis and merger and
acquisition transaction analysis, as well as the assumptions made, matters
considered and qualifications and limitations of its review, see "Opinion of
ECHO's Financial Advisor." The valuation analysis and methodologies were
discussed, including a discounted cash flow analysis. Following questions by
our
Board of Directors to Wedbush Morgan relating to its analysis, Wedbush Morgan
presented its oral opinion to our Board of Directors, which was subsequently
confirmed in a written opinion dated December 14, 2006, that the $18.75 per
share to be paid by Intuit in the merger was fair, from a financial point of
view, to the public holders of our common stock. The full text of Wedbush
Morgan’s written opinion, which sets forth the procedures followed, assumptions
made, matters considered, and qualifications and limitations of the review
undertaken in connection with the opinion, is attached as Annex C hereto.
Following the delivery of the Wedbush Morgan opinion, additional discussion
ensued, including a discussion of the communications plan for announcement
of
the transaction, and our Board of Directors adopted resolutions, among other
things, approving the merger agreement and the transactions contemplated by
the
merger agreement and recommending that the our shareholders adopt the merger
agreement at a special meeting.
Following
the resolution of all outstanding issues relating to the definitive agreements,
after the close of the market on December 14, 2006, the parties executed the
merger agreement and related documents and issued a joint press release
announcing the execution of the merger agreement.
Recommendation
of Our Board of Directors; Our Reasons for
the Merger
Recommendation
of Our Board of Directors
Our
Board
of Directors, by the unanimous vote of all directors:
|
·
|
declared
the merger to be advisable and fair to, and in the best interests
of, us
and our stockholders; and
|
|
·
|
approved
the merger agreement, the merger and the other transactions contemplated
by the merger agreement on the terms and conditions set forth in
the
merger agreement.
|
Accordingly,
our Board of Directors unanimously recommends that you vote “FOR” the approval
of the merger agreement.
Reasons
for
the Merger
In
reaching its unanimous determination to approve the merger agreement, the merger
and the other transactions contemplated by the merger agreement and to
unanimously recommend that you vote in favor of the proposal to approve the
merger agreement, our Board of Directors consulted with our management, as
well
as our legal and financial advisors and considered a number of factors,
including but not limited to the following factors:
Factors
Relating to the Transaction Generally:
|
·
|
ECHO’s
business, financial performance and condition, technology, operations,
business strategy and future prospects, including the risks that
may
adversely impact its prospects, all of which led the Board of Directors
to
conclude that the merger presented an opportunity for ECHO stockholders
to
realize greater value than the value likely to be realized by stockholders
in the event ECHO remained
independent;
|
|
·
|
an
analysis of the nature of ECHO’s competitive position within the industry
in which it competes, and current industry, economic and global market
conditions and trends, both on a historical and on a prospective
basis,
and our Board of Directors' determination that such conditions and
trends
would present significant obstacles to increasing the value of ECHO
to a
level equal to or greater than the value of the consideration to
be
received by its stockholders in the
merger;
|
|
·
|
the
risks and uncertainties of pursuing other strategic options available
to
us, including remaining independent and continuing to implement our
business plan or pursuing other strategic alternatives, such as pursuing
a
strategy of growth through acquisitions and/or pursuing corporate
alliances, the value to stockholders of such alternatives, the costs,
timing and likelihood of actually achieving additional value from
these
alternatives, and our Board of Directors' assessment that none of
these
alternatives was reasonably likely to result in value for stockholders
greater than the consideration to be received in the
merger;
|
|
·
|
the
general risks associated with ECHO remaining an independent company,
including increased competition and the significant and increasing
cost of
complying with ECHO’s obligations as a publicly traded company;
and
|
|
·
|
the
adverse affect the Unlawful Internet Gambling Enforcement Act of
2006
would have on ECHO’s Internet wallet business and ECHO’s future outlook,
including potential downward pressure on the public market price
of ECHO’s
common stock.
|
Factors
Relating to the Specific Terms of the Merger Agreement with Intuit:
|
·
|
the
merger consideration of $18.75 per share of our common stock represents
a
substantial premium to historical trading prices of our common stock.
The
per share common stock merger consideration represents a 26.17% premium
over the closing price of our common stock on December 13, 2006,
the last
trading day prior to the approval of the transaction by our Board
of
Directors. Further the per share common stock merger
consideration represents a 44% premium over our volume
weighted average common stock price for the 30 day period ending
December 12, 2006.
|
|
·
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the
belief by our Board of Directors that ECHO had obtained the highest
price
per share that Intuit was willing to pay, taking into account the
terms
resulting from extensive negotiations between the parties;
|
|
·
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the
conclusion by our Board of Directors that the merger consideration
was
likely the highest price reasonably attainable for ECHO stockholders
in a
merger or other acquisition transaction involving any third party;
|
|
·
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the
presentation by Wedbush Morgan on December 14, 2006 and its opinion
that,
as of December 14, 2006, and based upon the assumptions made, matters
considered, and qualifications and limitations of the review set
forth in its opinion, the consideration to be offered to the public
holders of our common stock in the merger was fair, from a financial
point
of view, to such stockholders (see “Opinion of ECHO’s Financial
Advisor”);
|
|
·
|
the
fact that the merger consideration consists solely of cash, which
provides
certainty of value to our stockholders compared to a transaction
in which
stockholders would receive stock;
|
|
·
|
the
fact that Intuit has expressed its intent to hire most of our employees,
subject to Intuit’s standard hiring
policies;
|
|
·
|
the
terms of the merger agreement, as reviewed by our Board of Directors
with
our legal advisors, including (see “The Merger Agreement”):
|
|
o
|
the
ability of our Board of Directors, under certain circumstances, to
furnish
information to and conduct negotiations with a third party and, upon
the
payment to Intuit of a termination fee of $4,271,000, to terminate
the
merger agreement to accept a superior proposal;
|
|
o
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our
Board of Directors’ belief that the $4,271,000 termination fee payable to
Intuit was reasonable in the context of termination fees that were
payable
in other comparable transactions and would not be likely to preclude
another party from making a superior proposal;
|
|
o
|
the
likelihood that the merger will be consummated in light of the conditions
to Intuit's obligation to complete the merger, Intuit's financial
capability and the absence of any financing condition to Intuit's
obligation to complete the merger; and
|
|
o
|
the
negotiated exclusions to the definition of a "material adverse effect"
in
the merger agreement;
|
|
·
|
the
fact that the completion of the merger is subject to the approval
of the
merger agreement by our stockholders and if a superior proposal for
an
alternative transaction were to be made prior to the approval of
the
merger agreement by our stockholders at the special meeting, our
stockholders (other than ECHO executive officers and directors who
are
entitled to vote approximately [●]% of the outstanding voting power of our
common stock) would be free to reject the transaction with Intuit
by
voting against the approval of the merger
agreement;
|
|
·
|
the
view of our Board of Directors, after receiving advice of management
and
after consultation with our legal counsel, concluded that regulatory
approvals necessary to complete the merger are likely to be obtained;
and
|
|
·
|
the
relatively short time period that is likely necessary to close the
transaction.
|
Potential
Negative Factors Relating to the Transaction:
During
the course of its deliberations, our Board of Directors also considered a
variety of potential drawbacks or risks relating to the merger, including the
following risks and other countervailing factors:
|
·
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we
will no longer exist as an independent company and our stockholders
will
no longer participate in our growth as an independent company and
also
will not participate in any synergies resulting from the merger;
|
|
·
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the
merger agreement precludes us from actively soliciting alternative
proposals;
|
|
·
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we
are obligated to pay Intuit a termination fee of $4,271,000 if we
terminate or if Intuit terminates the merger agreement under certain
circumstances;
|
|
·
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there
can be no assurance that all conditions to the parties’ obligations to
complete the merger will be satisfied, and as a result, it is possible
that the merger may not be completed even if the merger agreement
is
approved by our stockholders;
|
|
·
|
if
the merger does not close, we may incur significant risks and costs,
including the possibility of disruption to our operations, diversion
of
management and employee attention, employee attrition and a potentially
negative effect on business and customer
relationships;
|
|
·
|
certain
of our directors and officers may have conflicts of interest in connection
with the merger, as they may receive certain benefits that are different
from, and in addition to, those of our other stockholders (see “The Merger
- Interests of Our Directors and Executive Officers in the Merger”);
and
|
|
·
|
the
gain from an all-cash transaction would be taxable to our tax-paying
stockholders for United States federal income tax
purposes.
|
After
taking into account all of the factors set forth above, as well as others,
and
consulting with its legal and financial advisors, our Board of Directors
unanimously agreed that the benefits of the merger outweigh the risks and that
the transactions contemplated by the merger agreement, including the merger,
are
advisable, fair to and in the best interests of us and our stockholders. Our
Board of Directors has unanimously approved the merger agreement, the merger
and
the other transactions contemplated by the merger agreement and unanimously
recommends that our stockholders vote to approve the merger agreement at the
special meeting.
The
foregoing discussion is not intended to be exhaustive, but we believe it
addresses the principal information and factors considered by our Board of
Directors in its consideration of the merger. In view of the number and variety
of factors and the amount of information considered, our Board of Directors
did
not find it practicable to, and did not make specific assessments of, quantify
or otherwise assign relative weights to, the specific factors considered in
reaching its determination. In addition, our Board of Directors did not
undertake to make any specific determination as to whether any particular
factor, or any aspect of any particular factor, was favorable or unfavorable
to
its ultimate determination. Rather, our Board of Directors made its
recommendation based on the totality of information presented to and the
investigation conducted by it. In considering the factors discussed above
individual members of our Board of Directors may have given different weights
to
different factors.
Opinion
of ECHO’s Financial Advisor
Scope
of the Assignment
Our
Board
of Directors engaged Wedbush Morgan to serve as the exclusive financial advisor
to us in connection with the potential sale of ECHO to Intuit and to render
an
opinion as to whether the consideration to be paid in the merger was fair,
from
a financial point of view, to the public holders of our common stock. Wedbush
Morgan rendered its oral and written opinion to our Board of Directors that,
as
of December 14, 2006, and based upon the assumptions made, matters considered,
and qualifications and limitations of the review set forth in its written
opinion, the merger consideration of $18.75 per share to be received by our
public stockholders pursuant to the merger agreement was fair from a financial
point of view to such stockholders.
The
full
text of Wedbush Morgan’s written opinion, which sets forth the procedures
followed, assumptions made, matters considered, and qualifications and
limitations of the review undertaken in connection with the opinion, is attached
as Annex C and is incorporated by reference. Wedbush Morgan’s opinion was
intended for the use and benefit of our Board of Directors in connection with
their evaluation of the merger. Wedbush Morgan’s opinion does not address our
underlying business decision to enter into the merger agreement or complete
the
merger or the relative merits of the merger compared to any alternative business
strategies that may exist for us and does not constitute a recommendation to
the
Board of Directors or any stockholder as to how that person should vote on
the
merger or any related matter. The following summary of Wedbush Morgan’s opinion
is qualified in its entirety by reference to the full text of the opinion,
and
our stockholders are urged to read the opinion in its entirety.
For
purposes of its opinion and in connection with its review of the merger, Wedbush
Morgan has, among other things:
|
·
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reviewed
a draft of the merger agreement dated December 13, 2006, which Wedbush
Morgan assumed would be similar in all material respects to the final
form
of the merger agreement;
|
|
·
|
reviewed
certain publicly available business and financial information relating
to
us that Wedbush Morgan deemed to be
relevant;
|
|
·
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reviewed
certain internal information, primarily financial in nature, including
financial projections and other financial and operating data furnished
to
Wedbush Morgan by us;
|
|
·
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reviewed
certain publicly available and other information concerning the reported
prices and trading history of, and the trading market for, our common
stock;
|
|
·
|
reviewed
certain publicly available information with respect to other companies
Wedbush Morgan believed to be comparable in certain respects to
us;
|
|
·
|
considered
the financial terms, to the extent publicly available, of selected
recent
business combinations of companies in the electronic payment processing
industry which Wedbush Morgan deemed to be comparable, in whole or
in
part, to the merger; and
|
|
·
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made
inquiries regarding and discussed the merger agreement and other
matters
related thereto with our counsel.
|
In
addition to the foregoing, Wedbush Morgan discussed with our management our
views on financial and other information described in the bullet points above
and conducted such other analyses and examinations and considered such other
financial, economic and market criteria as Wedbush Morgan deemed appropriate
to
arrive at its opinion.
In
arriving at its opinion, Wedbush Morgan assumed and relied upon the accuracy
and
completeness of all financial and other information provided to or reviewed
by
it or publicly available, and did not assume any responsibility for independent
verification of any such information. With respect to financial projections
and
other information provided to or reviewed by it, Wedbush Morgan was advised
by
our management that such projections and other information were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of our management as to our expected future financial performance.
Wedbush Morgan further relied on the assurances of our management that we are
unaware of any facts that would make the information or projections provided
to
Wedbush Morgan incomplete or misleading. Wedbush Morgan did not make and was
not
provided with any independent evaluations or appraisals of any of our assets,
properties, liabilities or securities, nor did Wedbush Morgan make any physical
inspection of our properties or assets. Wedbush Morgan does not have any opinion
on any financial forecast or the assumptions upon which they were based, by
our
management, nor does it have any opinion as to the price of our common stock
in
the future. Wedbush Morgan assumed that the final form of the merger agreement
would be similar in all material respects to the draft reviewed by
it.
The
opinion is based on economic, market and other conditions as in effect on,
and
the information made available to Wedbush Morgan as of, the date of the opinion.
Wedbush Morgan has also relied on the accuracy and completeness of our
representations and warranties in the merger agreement. Events occurring after
the date of the opinion could materially affect the assumptions used in
preparing the opinion. Wedbush Morgan has not undertaken to reaffirm or revise
the opinion or otherwise comment upon any events occurring after the date of
the
opinion.
Wedbush
Morgan is an investment banking firm and a member of The New York Stock Exchange
and other principal stock exchanges in the United States, and is regularly
engaged as part of its business in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements, secondary distributions of listed and
unlisted securities, and valuations for corporate, estate and other purposes.
Wedbush Morgan was selected by our Board of Directors based on Wedbush Morgan’s
experience, expertise, reputation and familiarity with us.
Wedbush
Morgan has acted as financial advisor to us and has received a customary
fee from us for its services, the payment of which is not contingent upon the
conclusions reached in its opinion, and will also receive an additional fee
if
the proposed merger is consummated. In the ordinary course of its business,
Wedbush Morgan and its affiliates may actively trade our common stock and the
common stock of Intuit for its own account and for the accounts of its customers
and, accordingly, it may at any time hold a long or short position in our common
stock and the common stock of Intuit.
In
October 2006, the Unlawful Internet Gambling Enforcement Act of 2006 (the
“Internet Gaming Bill”) which prohibits acceptance of any payment instrument
including credit cards for Internet gambling, was passed and signed into law.
This new legislation prohibits gambling businesses from accepting any financial
instrument in connection with inappropriate Internet gambling. Since many online
gambling sites utilized Internet wallets as a form of payment, we had estimated
that revenue affected by the Internet Gaming Bill accounted for approximately
$7
million of our fiscal 2006 revenues, which represented approximately 9% of
our
fiscal 2006 total revenues. Wedbush Morgan noted that based on earnings per
share (“EPS”) estimates reported by independent research analyst reports,
referred to as “Street Estimates” and the forecast provided to Wedbush Morgan by
us, the Street Estimates may have underestimated the impact of the Internet
Gaming Bill on our EPS and therefore, we may not meet market expectations and
this could have an adverse effect on our common stock price in the future.
Summary
of Analyses
The
following is a summary of the financial analyses performed by Wedbush Morgan
in
connection with reaching its opinion:
|
·
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Market
Trading Analysis
|
|
·
|
Public
Comparable Company Analysis
|
|
·
|
Premium
Public Comparable Company Analysis
|
|
·
|
Merger
and Acquisition Transaction
Analysis
|
|
·
|
Discounted
Cash Flow Analysis
|
While
the
following summaries describe some analyses and examinations that Wedbush Morgan
deems material to the opinion, they are not a comprehensive description of
all
analyses and examinations actually conducted by Wedbush Morgan. The preparation
of an opinion necessarily is not susceptible to partial analysis or summary
description. Wedbush Morgan believes that such analyses and the following
summaries must be considered as a whole and that selecting portions of such
analyses and of the factors considered, without considering all such analyses
and factors, would create an incomplete view of the process underlying the
analyses.
In
performing its analyses, Wedbush Morgan made numerous assumptions with respect
to industry performance and general business and economic conditions such as
industry growth, inflation, interest rates and many other matters, many of
which
are beyond our control and the control of Wedbush Morgan. Any estimates
contained in Wedbush Morgan’s analyses are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable
than
suggested by such analyses.
The
financial analyses summarized below include information presented in tabular
format. In order to understand Wedbush Morgan’s analyses, the tables must be
read together with the text of each summary. The tables alone do not constitute
a complete description of the analyses. Considering the data described below
without considering the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Wedbush Morgan’s
analyses.
Market
Trading Analysis
Wedbush
Morgan reviewed the average daily closing price and average daily trading volume
of our common stock for each of the quarters of our fiscal years 2004 to 2007.
The average daily closing price of our common stock increased 68.8% from $7.76
for the quarter ended December 31, 2003 to $13.10 for the first quarter in
fiscal 2007 (through December 13, 2006). The average daily closing price for
this period ranged from a low of $7.76 to a high of $15.35, compared to the
value of the merger consideration of $18.75 per share. The high and low prices
over this period were $18.19 and $6.15, respectively. The average daily trading
volume of our common stock for the three-year period from October 1, 2003 to
December 13, 2006 was 22,739 shares, which indicated a low number of actively
traded shares.
Public
Comparable Company Analysis
Using
publicly available information, Wedbush Morgan compared selected financial
data
of us with similar data of selected publicly-traded electronic payment
processors considered by Wedbush Morgan to be comparable to us. In this regard,
Wedbush Morgan noted that although such companies were considered similar,
none
of the companies has the same management, makeup, size or combination of
business we have. Wedbush Morgan reviewed and analyzed the following
publicly-traded companies, which Wedbush Morgan deemed to be comparable to
us:
Alliance Data Systems, Inc., eFunds Corporation, First Data Corporation, Global
Payments Inc., Heartland Payment Systems, Inc., Total Systems Services, Inc.,
and Transaction Network Services, Inc. (collectively, the “Comparable
Companies”).
Wedbush
Morgan analyzed the following financial data for us and each of the Comparable
Companies:
|
·
|
the
“enterprise value” (defined as the market value of the common equity, plus
total debt and preferred stock, less cash) as a multiple of: (i)
gross and
net revenues for the latest twelve months (four most recent fiscal
quarters) for which revenues figures had been reported (“LTM”); (ii) LTM
earnings before interest, taxes and depreciation and amortization
(“EBITDA”); and (iii) 2006 and 2007 estimated EBITDA (which EBITDA
estimates reflected a mean consensus of research analysts’ EBITDA
estimates as reported by the Institutional Brokers Estimate Service
(“IBES”)); and
|
|
·
|
the
closing price of the common stock of the Comparable Companies on
December
11, 2006 as a multiple of: (i) EPS for the latest twelve months for
which
EPS had been publicly reported; and (ii) 2006 and 2007 estimated
EPS
(which EPS estimates reflected a mean consensus of research analysts’ EPS
estimates as reported by IBES).
|
The
analysis indicated that our public valuation multiples, based on the merger
consideration price of $18.75 per share, are above all the mean and median
trading multiples of the Comparable Companies, except for: (i) the “enterprise
value”/calendar year 2007 EBITDA multiple, for which our multiple is equal to
the median of the Comparable Companies’ multiple, and (ii) the “enterprise
value”/LTM revenue multiples, for which our multiple is lower than the
Comparable Companies’ multiples on both a gross and net basis. Since companies
in the electronic payment processing sector report revenues on either a “gross”
revenue or a “net” revenue (gross revenue less interchange fees) basis, Wedbush
Morgan compared our “enterprise value” to LTM’s gross and net revenue
separately.
Wedbush
Morgan performed valuation analyses by applying certain market trading
statistics of the Comparable Companies to our historical and estimated financial
results. As of December 11, 2006, the Comparable Companies were trading at
the
following median valuation multiples:
|
Implied
Company Valuation
|
||||||||||
|
Valuation
Metric
|
Multiple
|
Equity
Value
|
Price
Per Share
|
|||||||
|
EV
to LTM Gross Revenues
|
2.0x
|
$
|
158.4
|
$
|
20.13
|
|||||
|
EV
to LTM Net Revenues
|
3.2x
|
$
|
156.9
|
$
|
19.95
|
|||||
|
EV
to LTM EBITDA
|
12.8x
|
$
|
113.9
|
$
|
14.48
|
|||||
|
EV
to CY 2006 estimated EBITDA
|
11.0x
|
$
|
126.0
|
$
|
16.02
|
|||||
|
EV
to CY 2007 estimated EBITDA
|
9.9x
|
$
|
143.3
|
$
|
18.21
|
|||||
|
Price
to LTM EPS
|
24.0x
|
$
|
66.1
|
$
|
8.41
|
|||||
|
Price
to CY 2006 estimated EPS
|
22.8x
|
$
|
80.8
|
$
|
10.27
|
|||||
|
Price
to CY 2007 estimated EPS
|
19.2x
|
$
|
84.4
|
$
|
10.73
|
|||||
|
Average
|
$
|
116.2
|
$
|
14.77
|
||||||
As
a
result of this valuation analyses, Wedbush Morgan derived an average implied
market value of approximately $116.2 million, or $14.77 per share, for our
common stock, compared to the merger consideration of $18.75 per share, as
of
December 11, 2006. The range of values for the various analyses was $8.41 to
$20.13 per share, and therefore the merger consideration of $18.75 per share
is
close to the high end of the range of values.
Wedbush
Morgan noted that it believes that the Street
Estimates may have underestimated the impact of the Internet Gaming Bill on
our
EPS and therefore we may not meet market expectations and this could have an
adverse effect on our common stock price in the future. If the Street Estimates
fully incorporated the impact of the Internet Gaming Bill, Wedbush Morgan
believes that the EBITDA projections for 2007 would be lower, thus making the
"enterprise value"/calendar year 2007 EBITDA multiple higher than the mean
and median multiples of the Comparable Companies. The Comparable Companies'
revenues and earnings are also at a lower risk than ours since the Comparable
Companies are larger and their revenue is more diversified. These factors
contribute to certain of our multiples described above being lower than the
Comparable Companies' multiples.
Premium
Public Comparable Company
Analysis
Wedbush
Morgan reviewed selected merger and acquisition transactions to analyze the
premiums paid compared to the sellers’ stock price at various times prior to the
announcement of the acquisition. As a result of its analysis, Wedbush Morgan
estimated a 20% acquisition premium to be appropriate. For purposes of this
analysis, Wedbush Morgan used the same Comparable Companies as in its “Public
Company Comparable Analysis” above. Wedbush Morgan compared the Comparable
Companies’ common stock public valuation multiples, which included a 20%
acquisition premium applied to the Comparable Companies’ market value.
The
analysis indicated that our common stock public valuation multiples, based
on
the merger consideration price of $18.75 per share, are above all the mean
and
median trading multiples of the Comparable Companies, including a 20%
acquisition premium applied to the Comparable Companies' market value except
for: (i) the "enterprise value"/revenue multiples, on both a gross and net
basis, (ii) the "enterprise value"/calendar year 2006 EBITDA and "enterprise
value"/calendar year 2007 EBITDA multiples, all for which our multiple is lower
than the Comparable Companies' multiples. Wedbush Morgan noted that it believes
that the Street Estimates may have underestimated the impact of the Internet
Gaming Bill on our EPS and therefore we may not meet market expectations and
this could have an adverse effect on our common stock price in the future.
If
the Street Estimates fully incorporated the impact of the Internet Gaming Bill,
Wedbush Morgan believes that the EBITDA projections for 2007 would be lower,
thus making the "enterprise value"/calendar year 2007 EBITDA multiple
higher than the mean and median multiples of the Comparable Companies. The
Comparable Companies' revenues and earnings are also at a lower risk than ours
since the Comparable Companies are larger and their revenue is more diversified.
These factors contribute to certain of our multiples described above being
lower
than the Comparable Companies' multiples.
Merger
and Acquisition Transaction
Analysis
Wedbush
Morgan reviewed certain publicly available information relating to 30 selected
merger and acquisition transactions (the “Comparable Transactions”) from January
1, 2003 to December 11, 2006 involving electronic payment processing companies,
and all technology-related company mergers and acquisition transactions (the
“Technology Transactions”) for the same period. Wedbush Morgan also reviewed a
subset of the Comparable Transactions and the Technology Transactions, which
included mergers and acquisitions of companies with revenues of $25 million
to
$200 million and transactions ranging from $100 million to $400 million. The
Comparable Transactions considered were as follows:
|
Company
|
Buyer
|
|
Retail
Decisions plc
|
Palamon
Capital
|
|
Moneyline
SA
|
Ingenico
|
|
Princeton
eCom
|
Online
Resources
|
|
iPayment
|
iPayment
Management (MBO)
|
|
First
Horizon Merchant Services
|
Nova
Information Systems
|
|
Goldleaf
Technologies
|
Private
Business
|
|
Verus
Financial Management
|
Sage
Group
|
|
PhoneCharge
|
Checkfree
|
|
VeriSign
Payment Gateway
|
eBay
(Paypal)
|
|
Certegy
|
Fidelity
National Information
|
|
BISYS
Information Services Group
|
Open
Solutions
|
|
i-flex
Solutions
|
Oracle
|
|
BillMatrix
Corporation
|
Fiserv
|
|
Certegy
Merchant Acquiring
|
Nova
Information Systems
|
|
Intelidata
Technologies
|
Corillian
|
|
Tranvia
|
Comdata
|
|
Intrieve
|
Harland
Financial Solutions
|
|
ClearCommerce
|
eFunds
|
|
First
Data Merchant Portfolio
|
iPayment
|
|
Lynk
Incorporated
|
Royal
Bank of Scotland Group
|
|
National
Processing
|
Bank
of America
|
|
re:Member
Data Services
|
Open
Solutions
|
|
Retriever
Payment Systems
|
GTCR
Golder Rauner
|
|
NYCE
|
Metavante
|
|
Fifth
Third Bank Processing Solutions
|
TransFirst
(GTCR)
|
|
Authorize.net
|
Lightbridge
|
|
Aurum
Technology
|
Fidelity
National Financial
|
|
Innovative
Merchant Solutions
|
Intuit
|
|
National
Commerce Financial, Credit Card Portfolio
|
Nova
Information Systems
|
|
Concord
EFS
|
First
Data
|
Information
reviewed in the selected merger and acquisition transactions consisted of,
if
available, (i) “enterprise value” (defined as the market value of the common
equity plus book value of total debt and preferred stock, less cash), divided
by, if available, LTM net revenues and LTM EBITDA, as of the time of the
announcement of the acquisition. Wedbush Morgan noted that the median
“enterprise value” multiples for these transactions were 2.6x LTM Revenues and
14.0x LTM EBITDA. Based on an average of the median multiples paid in these
merger and acquisition transactions, Wedbush Morgan derived an implied $126.6
million equity value, or $16.09 per share, for our common stock, compared to
the
merger consideration of $18.75 per share.
A
summary
of the average multiples utilizing the merger and acquisition analysis is as
follows:
|
Median
Multiple
|
||||||||||
|
EV
/
LTM
Revenue
|
EV
/
LTM
EBITDA
|
Transactions
Examined
|
||||||||
|
TRANSACTION
CATEGORIES
|
||||||||||
|
Comparable
Transactions(1)
|
2.6x
|
14.0x
|
30
|
|||||||
|
Comparable
Transactions: Companies with Revenues of $25 million to $200
million(1)
|
4.0x
|
15.0x
|
19
|
|||||||
|
Comparable
Transactions: Transaction Size of $100 million to $400 million(1)
|
4.2x
|
15.0x
|
11
|
|||||||
|
Technology
Transactions(2)
|
1.4x
|
8.3x
|
2,338
|
|||||||
|
Technology
Transactions: Companies with Revenues of $25 million to $200
million(2)
|
1.3x
|
11.4x
|
757
|
|||||||
|
Technology
Transactions: Transaction Size of $100 million to $400 million(2)
|
2.0x
|
12.4x
|
425
|
|||||||
_____________________________________________________________________________
(1)
Electronic payment processing revenue multiples based on net revenue in all
cases where the information is made publicly available.
(2)
Source: FactSet Research (FactSet is an online investment research and database
service used by many financial institutions): Technology sector transactions
between December 11, 2003 and December 11, 2006.
Wedbush
Morgan noted that an analysis of the results necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of us and the companies included in the Comparable Transactions,
market conditions at the date of announcement, and other factors that could
affect the acquisition value of the companies to which we are being compared.
Mathematical analyses such as determining the median or average is not in itself
a meaningful method of using comparable transaction data.
Wedbush
Morgan also reviewed the Comparable Transactions and Technology Transactions,
as
well as transactions involving acquisitions of public companies (“Public to
Public Transactions”), where pricing information was available, to analyze
premiums paid compared to the seller’s stock price at various times prior to the
announcement of the acquisition. Based on this review, Wedbush Morgan noted
that
for the period from one day prior, to 30 days prior, to the announcement of
the
transaction, the Comparable Transactions had premiums ranging from 12% to 25%,
the Technology Transactions had premiums ranging from 29% to 37%, and the Public
to Public Transactions of $100 million to $500 million in size had premiums
ranging from 24% to 33%. This was in comparison to a premium ranging from 23%
to
58% for our common stock, and a premium ranging from 28% to 44% for our common
stock on a volume weighted average price basis, in both cases assuming an
announcement date of December 13, 2006, and based on the merger consideration
of
$18.75 per share.
Discounted
Cash Flow Analysis
Wedbush
Morgan reviewed the discounted cash flow methodology, which assumes that the
present value of our common stock is equal to the sum of the present value
of
the projected available cash flow streams to the equity holders and the terminal
value of the equity. Wedbush Morgan noted that it assumed we remained
independent during the term of the analysis.
Using
financial projections furnished by our management for the five years ending
September 30, 2007 through 2011, Wedbush Morgan calculated projected cash flow
available for distributions, and our projected future values of our common
stock
by applying assumed EBITDA multiples of 8.0x, 9.0x and 10.0x to our projected
EBITDA for the year ending September 30, 2011. The projected future values
were
then discounted using a range of discount rates of 12.0% to 15.0% (our weighted
average cost of capital was calculated at 12.9%), which yielded an implied
range
of discounted equity present values of $131.7 million to $175.3 million
representing $16.74 to $22.28 per share.
In
determining the discount rates used in the discounted present value analysis,
Wedbush Morgan noted, among other things, factors such as inflation, prevailing
market interest rates, the inherent business risk and rates of return required
by investors. In determining the appropriate EBITDA multiple used in calculating
our projected future equity value, Wedbush Morgan noted, among other things,
the
multiples at which public companies which Wedbush Morgan deemed comparable
to us
historically traded, and the multiples observed in historical mergers and
acquisition transactions which Wedbush Morgan deemed relevant.
Conclusion
Based
upon its analyses, and subject to the assumptions made, matters considered,
and
qualifications and limitations of the review undertaken in connection with
the
opinion, Wedbush Morgan is of the opinion that, as of the date of the opinion,
the merger consideration to be received by the public holders of our common
stock as provided in the merger agreement is fair to such holders from a
financial point of view.
Interests
of Our Directors and Executive Officers in the
Merger
In
considering the recommendation of our Board of Directors with respect to the
merger agreement, you should be aware that our directors and executive officers
may have interests in the merger and have arrangements that are different from,
or in addition to, those of our stockholders generally. Our Board of Directors
was aware of these interests and considered them, among other matters, in
reaching its decisions to approve the merger agreement and to recommend that
our
stockholders vote in favor of the approval of the merger agreement.
Change
of Control Payments Under Existing
Agreements
Equity
Awards
All
unvested and restricted stock held by our employees, including our executive
officers, will vest immediately prior to the merger and will receive merger
consideration in the same manner as otherwise vested options and stock. Our
executive officers hold, in the aggregate, unvested options to purchase [●]
shares of our common stock, with exercise prices ranging from $[●] to $[●].
Accordingly, upon the consummation of the merger, our executive officers will
receive an aggregate of $[●] resulting from the accelerated vesting of such
options. Our executive officers hold, in the aggregate, [●] restricted shares of
our common stock. Accordingly, upon the consummation of the merger, our
executive officers will receive an aggregate of $[●] resulting from the
accelerated vesting of such restricted stock.
Certain
of our executive officers have previously received long-term incentive equity
awards, entitling them to future grants of an aggregate of 95,000 restricted
shares of our common stock. Such awards provide that the rights to receive
restricted stock will accelerate immediately prior to the merger, which such
shares of restricted stock will then, as described above, immediately vest.
Accordingly, pursuant to the acceleration of these long-term incentive equity
awards, our executive officers will receive a total of $[●] upon the
consummation of the merger.
Separation
Arrangements
In
May
2006, we entered into separation agreements with each of our principal executive
officers (Chief Executive Officer, Chief Financial Officer and Chief Operating
Officer) and each of our senior vice presidents whereby, in the event of a
change in control of ECHO (as defined in each agreement) each such executive
officer would be entitled, to the extent they remain employed by us at the
time
of such change in control, to the following: (i) an acceleration of vesting
in
full, immediately prior to the merger, with respect to all stock option and
restricted stock grants then outstanding and not yet vested, which such equity
awards, once vested, will receive merger consideration in the same manner as
otherwise vested options and stock and (ii) a portion of such
executive’s anticipated cash for the fiscal year in which the change in control
occurred.
In
addition, the separation agreements provide that, in the event that the
executive is terminated without cause (as defined in each agreement), or ceases
to provide services to us (or our successor) as a result of an involuntary
termination (as defined in each agreement) within the two year period following
the change in control, then the executive would be entitled to a one-time lump
sum cash payment equal to a percentage of the executive’s anticipated total
compensation for the fiscal year in which the change in control occurred, plus
continued medical benefits for a period of time following such termination
- The
amount of lump sum payout ranges from 1 ½ to 2 times the executive’s total
compensation for the fiscal year prior to the date of termination, and duration
of continued medical benefits ranges between 1 ½ and 2 years depending on
position held by the principal executive or senior vice president. The
consummation of the merger would be deemed a change in control under these
agreements.
With
respect to each of Mr. Barry and Mr. Charles Harris, our Chief Executive Officer
and Chief Operating Officer, respectively, in the event of their termination
without cause or involuntary termination within the two year period following
the change in control, they would each be entitled to a one-time lump sum
payment equal to two times their total compensation for the fiscal year prior
to
the date of termination, plus continued medical benefits for a period of two
years following such termination. Mr. Barry’s service with us will terminate
upon consummation of the merger, and thus he will thus receive a cash separation
payment of $[●] pursuant to these provisions. Mr. Harris is expected to take an
employment position with Intuit following the merger (as described below),
which
employment arrangement will provide that these separation benefits would only
be
payable only in the event of an applicable termination with respect to service
with Intuit, rather than with us.
With
respect to Ms. Cheung, our Chief Financial Officer, in the event of her
termination without cause or involuntary termination within the two year period
following the change in control, she would be entitled to a one-time lump sum
payment equal to one and one-half times her total compensation for the fiscal
year prior to the date of termination, plus continued medical benefits for
a
period of one and one-half years following such termination. Ms. Cheung’s
service with us will terminate upon consummation of the merger, and thus she
will thus receive a cash separation payment of $[●] pursuant to these
provisions.
With
respect to our senior vice presidents, Karl Asplund, Steve Hoofring, Sharat
Shankar, Rick Slater, Patricia Williams, Jack Wilson, and Kris Winkler, and
our
Chief Information Officer, William Wied, in the event of their termination
without cause or involuntary termination within the two year period following
the change in control, they would each be entitled to a one-time lump sum
payment equal to one and one-half times the respective executive’s total
compensation for the fiscal year prior to the date of termination, plus
continued medical benefits for a period of one and one-half years following
such
termination. Each of these executives is expected to take an employment position
with Intuit following the merger (as described below), which employment
arrangement will provide that these separation benefits would only be payable
only in the event of an applicable termination with respect to service with
Intuit, rather than with us.
The
provision regarding the acceleration of vesting for previously issued stock
option grants is consistent with the standard terms and conditions of our 2003
Incentive Stock Option Plan, as amended, which already provides for such
accelerated vesting.
Pursuant
to the terms of the separation agreements as described above, the consummation
of the merger will result in immediate payments to our executive officers as
follows:
|
Executive
Name
|
Cash
Payment Triggered on Consummation of Merger
|
|||
|
Joel
Barry
|
$
|
857,705.00
|
||
|
Charles
Harris
|
$
|
80,140.50
|
||
|
Alice
Cheung
|
$
|
376,132.00
|
||
|
Karl
Asplund
|
$
|
14,343.50
|
||
|
Steve
Hoofring
|
$
|
23,678.00
|
||
|
Sharat
Shankar
|
$
|
33,877.50
|
||
|
Rick
Slater
|
$
|
25,135.00
|
||
|
Patricia
Williams
|
$
|
27,320.50
|
||
|
Jack
Wilson
|
$
|
27,320.50
|
||
|
Kris
Winckler
|
$
|
24,953.00
|
||
|
William
Wied
|
$
|
29,415.00
|
||
Additionally,
pursuant to signed offer letters with respect to those executive officers to
be
retained by Intuit following the consummation of the merger as described below,
the termination of an executive officer without cause by Intuit or an
involuntary termination by such executive officer within two years following
the
consummation of the merger will result in payments to our executive officers
pursuant to the separation agreements as described below.
For
purposes of the separation agreements,
|
(a)
|
termination
for “cause” means termination by reason of:
|
|
(i)
|
any
act or omission knowingly undertaken or omitted by the executive
with the
intent of causing damage to ECHO or its affiliates, its properties,
assets
or business, or its stockholders, officers, directors or employees,
|
|
(ii)
|
any
act of the executive involving a material personal profit to the
executive, including, without limitation, any fraud, misappropriation
or
embezzlement, involving properties, assets or funds of ECHO or any
of its
subsidiaries,
|
|
(iii)
|
the
executive's consistent failure to perform his normal duties or any
obligation under any provision of the relevant separation agreement,
in
either case, as directed by our Board of Directors,
|
|
(iv)
|
the
conviction of, or pleading nolo contendere to, (A) any crime or offense
involving monies or other property of ECHO; (B) any felony offense;
or (C)
any crime of moral turpitude, or
|
|
(v)
|
the
chronic or habitual use or consumption of drugs or alcoholic beverages;
and
|
|
(b)
|
“involuntary
termination” means the executive's cessation of the provision of services
to ECHO following
|
|
(i)
|
a
material reduction in the executive's function, authority, duties,
or
responsibilities, without the executive's express written consent;
or
|
|
(ii)
|
a
material reduction in salary.
|
Employment
Arrangements Following the
Merger
Karl
Asplund, Charles Harris, Steve Hoofring, Sharat Shankar, William Wied, Patricia
Williams, Jack Wilson, and Kris Winkler are expected to take employment
positions with Intuit and have entered into offer letters with Intuit setting
forth the terms of those employment arrangements. Pursuant to the signed
offer letters with Intuit, the executives will be entitled to increased
salaries, potential option and restricted stock grants, as well as participation
in Intuit’s cash incentive compensation program, as set forth in the following
table:
|
Salary
|
Potential
Equity
Grants
in Intuit
|
Target
Cash
Incentive
|
||||||||||||||
|
Executive
Name
|
Pre-Closing
|
Post-Closing
|
Options
|
RSU’s
|
Compensation
|
|||||||||||
|
Karl
Asplund
|
$
|
175,000
|
$
|
185,000
|
6,000
|
1,500
|
$
|
46,250
|
||||||||
|
Charles
Harris
|
275,000
|
325,000
|
28,000
|
7,000
|
130,000
|
|||||||||||
|
Steve
Hoofring
|
130,000
|
150,000
|
4,000
|
1,000
|
37,500
|
|||||||||||
|
Sharat
Shankar
|
155,000
|
175,000
|
6,000
|
1,500
|
52,500
|
|||||||||||
|
William
Wied
|
190,000
|
200,000
|
4,000
|
1,000
|
60,000
|
|||||||||||
|
Patricia
Williams
|
150,000
|
156,000
|
2,400
|
600
|
39,000
|
|||||||||||
|
Jack
Wilson
|
150,000
|
156,000
|
2,400
|
600
|
39,000
|
|||||||||||
|
Kris
Winckler
|
137,000
|
160,000
|
4,000
|
1,000
|
48,000
|
|||||||||||
In
addition, the offer letters provide for amendments to the separation agreements,
described above, such that the executives will receive benefits upon certain
of
events of termination with respect to their service with Intuit, rather than
with us, within two years following the consummation of the merger. In the
event
of termination of any of these executive officers by Intuit without cause or
an
involuntary termination by such an executive officer within two years following
consummation of the merger, such executive officer will be entitled to the
following payments:
|
Executive
Name
|
Payment
Upon Involuntary or Without Cause Termination from Intuit
|
|||
|
Charles
Harris
|
870,562.00
|
|||
|
Karl
Asplund
|
62,044.50
|
|||
|
Steve
Hoofring
|
258,534.00
|
|||
|
Sharat
Shankar
|
332,257.50
|
|||
|
Rick
Slater
|
280,155.00
|
|||
|
Patricia
Williams
|
247,164.00
|
|||
|
Jack
Wilson
|
303,211.50
|
|||
|
Kris
Winckler
|
275,859.00
|
|||
|
William
Wied
|
288,109.50
|
|||
Ms.
Cheung is expected to take on a consulting role with Intuit for a period of
up
to three months following consummation of the merger. Pursuant to this
consulting arrangement, she would receive a monthly consulting fee of
$16,350.
The
merger agreement provides that our directors and officers will continue to
have
the benefit of liability insurance for six years after completion of the
merger.
Delisting
and Deregistration of Our Common
Stock
If
the
merger is completed, we will become a wholly-owned subsidiary of Intuit, our
common stock will be delisted from the NASDAQ Capital Market and deregistered
under the Exchange Act, and we will no longer file periodic reports with the
Securities and Exchange Commission.
Material
U.S.
Federal Income Tax
Consequences
The
following is a summary of certain material U.S. federal income tax consequences
of the merger relevant to United States Holders (as defined below) of our common
stock whose shares are converted into the right to receive cash under the
merger. This summary is based on the Internal Revenue Code of 1986, as amended
(or, the Code), applicable Treasury Regulations, and administrative and judicial
interpretations thereof, each as in effect as of the date hereof, all of which
may change, possibly with retroactive effect. This summary assumes that shares
of our common stock are held as capital assets within the meaning of Section
1221 of the Code. This summary is for general information only and does not
address all of the tax consequences that may be relevant to particular holders
in light of their personal circumstances, or to other types of holders,
including, without limitation:
|
·
|
banks,
insurance companies or other financial institutions;
|
|
·
|
broker-dealers
or traders in securities;
|
|
·
|
retirement
plans;
|
|
·
|
expatriates;
|
|
·
|
tax-exempt
organizations;
|
|
·
|
Non-United
States Holders (as defined below);
|
|
·
|
persons
that are, or are holding our common stock through, S-corporations,
partnerships or other pass through entities;
|
|
·
|
persons
who are subject to alternative minimum tax;
|
|
·
|
persons
who hold their shares of our common stock as a position in a “straddle” or
as part of a “hedging” or “conversion” transaction;
|
|
·
|
persons
that have a functional currency other than the U.S. dollar; or
|
|
·
|
persons
who acquired their shares of our common stock upon the exercise of
stock
options or otherwise as compensation.
|
In
addition, this discussion does not address any state, local or foreign tax
consequences of the merger.
We
urge
each holder of our common stock to consult his or her tax advisor regarding
the
U.S. federal income or other tax consequences of the merger to such holder.
For
purposes of this discussion, a “United States Holder” means a holder that is:
|
·
|
an
individual citizen or resident of the United States;
|
|
·
|
a
corporation (or another entity treated as a corporation for U.S.
federal
income tax purposes) created or organized in or under the laws of
the
United States, any state thereof or the District of Columbia;
|
|
·
|
an
estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
|
|
·
|
a
trust (i) if (a) the administration over which a U.S. court can exercise
primary supervision and all of the substantial decisions of which
one or
more United States persons have the authority to control and (b)
certain
other trusts considered United States Holders for federal income
tax
purposes or (ii) if it has a valid election in effect under the applicable
Treasury Regulations to be treated as a U.S. person.
|
A
“Non-United States Holder” is a holder other than a United States Holder.
Consequences
of the Merger
The
receipt of cash in exchange for shares of our common stock pursuant to the
merger will be a taxable transaction for U.S. federal income tax purposes.
In
general, a United States Holder who receives cash in exchange for shares of
our
common stock pursuant to the merger will recognize capital gain or loss for
United States federal income tax purposes equal to the difference, if any,
between the amount of cash received and the holder’s adjusted tax basis in the
shares of our common stock exchanged for cash pursuant to the merger. Any such
gain or loss would be long-term capital gain or loss if the holding period
for
the shares of our common stock exceeded one year. Long-term capital gains of
noncorporate taxpayers are generally subject to tax at a reduced rate. Capital
gains of corporate stockholders are generally taxable at the regular tax rates
applicable to corporations. The deductibility of capital losses is subject
to
limitations.
Backup
withholding may apply to payments made in connection with the merger. Backup
withholding will not apply, however, to a holder who (1) furnishes a correct
taxpayer identification number and certifies it is not subject to backup
withholding on the substitute Form W-9 or successor form included in the letter
of transmittal to be delivered to holders of our common stock prior to
completion of the merger, or (2) is otherwise exempt from backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be allowed as a refund or a credit against such
holder’s United States federal income tax liability provided the required
information is furnished to the Internal Revenue Service in a timely manner.
THE
FOREGOING DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF THE POTENTIAL TAX
CONSIDERATIONS RELATING TO THE MERGER, AND IS NOT TAX ADVICE. THEREFORE, HOLDERS
OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY OF FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
Under
the
HSR Act, we cannot complete the merger until we and Intuit have notified the
Antitrust Division and the FTC, of the merger, furnished them with certain
information and materials and allowed the applicable waiting period to terminate
or expire. We and Intuit filed notification and report forms under the HSR
Act
with the Antitrust Division and the FTC on [●], 2007.
Although
we do not believe the transaction requires additional foreign regulatory
approvals, we and Intuit have agreed to obtain additional regulatory approvals
from, or make additional regulatory notifications to, various state and foreign
competition authorities, if required.
The
FTC,
the Antitrust Division or other similar regulatory authority could take action
under antitrust laws with respect to the merger, including seeking to enjoin
the
completion of the merger or seeking the divestiture by Intuit of all or part
of
our shares or assets, or of other business conducted by Intuit, or their
affiliates, or seeking to subject us, Intuit or our respective affiliates to
operating conditions. We cannot assure you that an antitrust challenge to the
merger will not be made and, if such a challenge is made, we cannot predict
the
result.
Despite
our general obligation to use commercially reasonable efforts to obtain
necessary consents and approvals, Intuit is not required to offer or commit
to
divest any business or assets or to agree to any limitation on the conduct
of
its or any of its subsidiaries’ businesses in connection with obtaining
necessary approvals to consummate the merger.
Under
applicable Nevada law, ECHO stockholders will not be entitled to any dissenters’
rights with respect to the merger.
This
section describes material provisions of the merger agreement. Because the
description of the merger agreement contained in this document is a summary,
it
does not contain all of the information that may be important to you. You should
carefully read the entire copy of the merger agreement attached as Annex A
to
this document, which is incorporated into this document by reference, before
you
decide how to vote.
The
following summary description of the material provisions of the merger agreement
does not purport to be complete and is qualified in its entirety by reference
to
the full text of the merger agreement. A copy of the merger agreement is
attached as Annex A to this document. However, you are cautioned that the
following summary and the copy of the merger agreement included with this
document are not intended to provide you with information concerning the
condition (financial or otherwise) of any of the parties to the merger
agreement. Specifically, although the merger agreement contains various
representations and warranties of the parties, the assertions embodied in those
representations and warranties were made for purposes of the merger agreement
and closing conditions thereunder and are subject to qualifications and
limitations agreed to by the respective parties in connection with negotiating
the terms of the merger agreement (including exceptions to the representations
and warranties that were set forth in schedules that are not included with
this
document). In addition, certain representations and warranties were made as
of a
specific date, may be subject to a contractual standard of materiality different
from what might be viewed as material to ECHO stockholders, or may have been
used for purposes of allocating risk between the respective parties rather
than
establishing matters of fact. Accordingly, you should not look to or rely on
the
representations and warranties in the merger agreement for information about
the
parties to the merger agreement. Investors should read the merger agreement
together with the other information concerning Intuit and ECHO that each company
publicly files in reports and statements with the Securities and Exchange
Commission.
Structure
of the Merger
The
merger agreement provides for the merger of Merger Sub, a newly-formed and
wholly owned Nevada subsidiary of Intuit, with and into ECHO. After the merger,
ECHO will continue as the surviving corporation and will become a wholly owned
subsidiary of Intuit.
Completion
and
Effectiveness of the
Merger
Subject
to the satisfaction or waiver of the other conditions to the merger, the merger
will be completed as promptly as practicable. The merger will become effective
at a closing, which will take place at a time mutually designated by Intuit
and
ECHO, but not later than the second business day after the last of the
conditions to completion of the merger is satisfied or waived.
At
the
effective time of the merger, each share of our common stock outstanding
immediately prior to the effective time of the merger (including any shares
of
common stock issued prior to the effective time upon exercise of options),
other
than shares held by us, Intuit or Merger Sub or any of our or their wholly-owned
subsidiaries, will be automatically converted into the right to receive $18.75
in cash, without interest and less any applicable withholding
taxes.
The
merger agreement provides that prior to the effective time of the merger, we
will cause any unvested options to vest immediately prior to the effective
time
of the merger. All outstanding options to purchase shares of our common stock
will then be cancelled at the effective time of the merger and the holder will
receive a cash payment, without interest and less any applicable withholding
taxes, equal to the product of (i) the excess, if any, of $18.75 over the
applicable option exercise price and (ii) the number of shares of common stock
subject to the option.
Additionally,
the merger agreement provides that prior to the effective time of the merger,
we
will cause any unvested restricted stock to be fully vested immediately prior
to
the effective time of the merger. Holders of then-vested restricted stock will
receive the same consideration as all other holders of our common stock, $18.75
per share in cash, without interest and less any applicable withholding
taxes.
You
should not send stock certificates with your proxy card and should not surrender
stock certificates prior to the completion of the merger and the receipt of
a
letter of transmittal. The payment agent for the merger will mail out letters
of
transmittal as soon as reasonably practicable after the effective time of the
merger, which will include instructions for surrender of your ECHO stock
certificates.
Conditions
to the Completion of the
Merger
Each
party’s obligation to effect the merger is subject to the satisfaction or waiver
of various conditions, which include the following:
Intuit
and we are obligated to effect the merger only if the following conditions
are
satisfied or waived:
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the
holders of the number of the outstanding shares of our common stock
required under applicable law must have voted in favor of approving
the
merger agreement;
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no
governmental entity has enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary
or
permanent) which is in effect and which has the effect of making
the
merger illegal or otherwise prohibiting consummation of the
merger;
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no
order suspending the use of this proxy statement or any part thereof
may
be in effect and no proceeding for that purpose may have been initiated
or
threatened in writing by the SEC and be continuing;
and
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the
applicable waiting period under the HSR Act has expired or terminated,
any
applicable waiting periods under foreign antitrust laws have expired
or
terminated, and all foreign antitrust approvals required to be obtained
prior to the effective time of the merger have been
obtained.
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Intuit
will not be obligated to effect the merger unless the following conditions
are
satisfied or waived:
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each
of our representations and warranties contained in the merger agreement
must have been true and correct as of the date of the merger agreement,
and must be true and correct on and as of the closing date of the
merger
with the same force and effect as if made on and as of the closing
date of
the merger, except (i) in each case, or in the aggregate, as would
not reasonably be expected to constitute a material adverse effect
on us
(provided,
however,
that this material adverse effect qualifier will be inapplicable
with
respect to our representations and warranties as to capitalization,
which
must be true and correct in all material respects), and (ii) for
those representations and warranties which address matters only as
of a
particular date (which representations and warranties must have been
true
and correct (subject to the qualifications as set forth in the preceding
clause (i)) as of that particular date) (it being understood that,
for purposes of determining the accuracy of our representations and
warranties, all “material adverse effect” qualifications and other
qualifications based on the word “material” or similar phrases contained
in those representations and warranties will be
disregarded);
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we
must have performed or complied in all material respects with all
agreements and covenants required to be performed by us under the
merger
agreement at or prior to the closing date of the
merger;
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no
material adverse effect with respect to us and our subsidiaries shall
have
occurred since the date of the merger
agreement;
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we
must have obtained certain consents, waivers and approvals required
in
connection with the transactions contemplated by the merger
agreement;
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there
must be no pending or threatened suit, action or proceeding asserted
by
any governmental entity that challenges or seeks to restrain or prohibit
the consummation of the merger or any of the other transactions
contemplated by the merger agreement, the effect of which restraint
or
prohibition if obtained would make the merger illegal or otherwise
prohibit the consummation of the merger, or would require Intuit
or us or
any of their or our respective subsidiaries or affiliates to effect
an
action of divestiture;
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our
President and Chief Operating Officer and at least five (5) of our
identified key employees must be employees of ECHO or one of our
subsidiaries immediately prior to the closing date of the merger,
and none
of those identified key employees shall have notified (whether formally
or
informally) Intuit or us of his or her intention of leaving the employ
of
Intuit or one of its subsidiaries following the closing date, and
at least
90% of our other employees must be employees of ECHO or one of our
subsidiaries immediately prior to the closing date and no more than
90% of
our other employees must have notified (whether formally or informally)
Intuit or us of their intention of leaving the employ of Intuit or
one of
its subsidiaries following the closing
date;
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the
non-competition agreements entered into in connection with execution
of
the merger agreement must be in full force and effect, and the individuals
that entered into a non-competition agreement must not have attempted
to
terminate or otherwise repudiate their agreement or indicated an
intention
to terminate or otherwise repudiate their
agreement;
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unless
Intuit has provided written notice to us that our 401(k) plan should
not
be terminated, we must provide Intuit with evidence reasonably
satisfactory to Intuit that the our 401(k) plan has been terminated;
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we
must provide written documentation in a form reasonably acceptable
to
Intuit that all current consultants and independent contractors who
contribute or have at any time contributed to the creation or development
of our material intellectual property prior to the closing of the
merger
have executed valid written assignments to us (or one of our subsidiaries)
of all right, title and interest they may have in or to our material
intellectual property and that all current consultants and independent
contractors are obligated to assign to us (or one of our subsidiaries)
all
of their right in or to any future intellectual property created
by those
consultants and independent contractors for us or on our behalf or
on
behalf of any of our subsidiaries after the
closing;
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there
must not have been any restatement of any of our consolidated financial
statements, and we must not have been notified by any governmental
entity
or any of our present or former auditors of any effect that could
reasonably be expected to result in any restatement of any of our
consolidated financial statements, our current auditors must not
have
resigned or threatened to resign, no auditor whose report is included
in
our annual report on Form 10-K for the fiscal year ended
September 30, 2006 shall have revoked, or notified us of its
intention to revoke, its report or consent included in our Form 10-K,
there must not be any pending or threatened investigation or inquiry
by
any governmental entity questioning the accuracy of any of our financial
statements or their conformity with the published rules and regulations
of
the SEC or with GAAP or our historical stock-based compensation practices,
nor shall any governmental entity have requested any information
in
connection with any of the
foregoing;
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if
the effective time of the merger is on or after February 8, 2007, we
must have filed with the SEC our quarterly report on Form 10-Q for
our
fiscal quarter ended December 31, 2006, which Form 10-Q, as so filed
with the SEC, must comply as to form with the rules and regulations
of the
SEC applicable to quarterly reports on Form
10-Q;
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we
must have obtained and delivered to Intuit an unqualified audit of
our
consolidated financial statements for our fiscal year ended September
30,
2006; and
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Intuit
must have received a written resignation from each of our directors
and
officers and the directors and officers of each of our subsidiaries
(in
their capacities as such) effective as of immediately prior to the
effective time of the merger.
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We
will
not be obligated to effect the merger unless the following conditions are
satisfied or waived:
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each
representation and warranty of Intuit and Merger Sub contained in
the
merger agreement must have been true and correct as of the date of
the
merger agreement, and must be true and correct on and as of the date
of
the closing of the merger with the same force and effect as if made
on the
closing date of the merger, except (i) in each case, or in the
aggregate, as would not reasonably be expected to constitute an Intuit
material adverse effect, and (ii) for those representations and
warranties which address matters only as of a particular date (which
representations and warranties must have been true and correct (subject
to
the qualifications as set forth in the preceding clause (i)) as of
that
particular date) (it being understood that, for purposes of determining
the accuracy of Intuit’s representations and warranties, all “Intuit
material adverse effect” qualifications and other qualifications based on
the word “material” or similar phrases contained in Intuit’s
representations and warranties will be disregarded);
and
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Intuit
and Merger Sub must have performed or complied in all material respects
with all agreements and covenants required by the merger agreement
to be
performed or complied with by them on or prior to the closing date
of the
merger.
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Material
Adverse Effect
Material
Adverse Effect on ECHO.
The
merger agreement provides that a “material adverse effect” means, when used in
connection with us, any change, event, violation, inaccuracy, circumstance
or
effect, individually or when aggregated with other such effects, that is or
would be reasonably likely to be materially adverse to the business, properties,
assets (including intangible assets), liabilities (including contingent
liabilities), capitalization, condition (financial or otherwise) or results
of
operations of us and our subsidiaries taken as a whole, or to have a material
adverse effect on our ability to perform our obligations under the merger
agreement or to consummate any of the transactions contemplated by the merger
agreement without any material delay.
However,
the effects arising from or relating to any of the following will not be deemed
in and of itself, either alone or in combination, to constitute, and will not
be
taken into account in determining whether there has been or will be a material
adverse effect on us:
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conditions
affecting the industries in which we participate, the United States
economy as a whole or foreign economies in any locations where we
or any
of our subsidiaries have material operations or sales (which effects,
in
each case, do not disproportionately affect us or our subsidiaries,
as the
case may be);
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any
failure by us to meet any projections or forecasts for any period
ending
(or for which revenues or earnings are released) on or after the
date of
the merger agreement in and of itself (but for the avoidance of doubt,
this will not preclude Intuit or Merger Sub from taking the underlying
cause of any such failure into account in determining whether there
has
been or will be a material adverse
effect);
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any
change in GAAP after the date of the merger
agreement;
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any
attack on, or by, outbreak or escalation of hostilities or acts of
terrorism involving, the United States, or any declaration of war
by the
United States Congress; or
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any
loss of revenue, not to exceed ten percent (10%) of our total revenues,
from internet wallet customers which we successfully bear the burden
of
proving resulted from
the Internet Gaming Bill and
the regulations to be promulgated
thereunder.
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Intuit
Material Adverse Effect.
The
merger agreement provides that an “Intuit material adverse effect” means a
material adverse effect on the ability of Intuit or Merger Sub to perform their
respective obligations under the merger agreement or consummate the transactions
contemplated by the merger agreement without any material
delay.
We
have
agreed we and our subsidiaries will not, and will not knowingly authorize or
permit any of our respective officers, directors, affiliates or employees or
any
of our investment bankers, attorneys, accountants or other advisors or
representatives to, and they will direct their respective representatives not
to, directly or indirectly:
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solicit,
initiate, knowingly encourage, support, facilitate or induce the
making,
submission or announcement of, any acquisition proposal;
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participate
in any negotiations or discussions regarding, or furnish to any person
any
non-public information with respect to any acquisition proposal or
any
proposal or inquiry that could reasonably be expected to lead to,
any
acquisition proposal;
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approve,
endorse or recommend any acquisition proposal;
or
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enter
into any letter of intent or similar document or any contract
contemplating or otherwise relating to any acquisition
transaction.
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The
merger agreement does provide that, in response to an unsolicited written
acquisition proposal submitted by a person or group, we may:
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furnish
non-public information with respect to us and our subsidiaries to
the
person making the takeover proposal (and its representatives) to
that
person or group;
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enter
into a confidentiality agreement with that person or group;
or
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enter
into negotiations or discussions with that person or
group;
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provided
that,
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neither
the we nor our subsidiaries have materially violated any of the covenants
prohibiting solicitation or alternative transactions in connection
with
that acquisition proposal;
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our
Board of Directors concludes in good faith, after consultation with
its
outside legal counsel, that the action is required in order for our
Board
of Directors to comply with its fiduciary duties to our stockholders
under
applicable law;
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at
least two business days prior to furnishing any non-public information
to,
or entering into negotiations or discussions with, that person or
group,
we give Intuit written notice of the identity of that person or group
and
of our intention to furnish information to, or enter into negotiations
or
discussions with, that person or group, and we receive from that
person or
group an executed confidentiality agreement containing terms and
conditions which are not less favorable to us than the confidentiality
agreement we entered into with Intuit;
and
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as
soon as practicable (and in any event no later than 24 hours) after
furnishing any non-public information to that person or group, we
furnish
the same information to Intuit.
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We
have
also agreed to provide Intuit with at least 48 hours prior written notice (or
any lesser prior notice as the longest notice provided to any member of our
Board of Directors) of a meeting of our Board of Directors at which it is
reasonably expected to consider any acquisition proposal and, together with
that
notice, a copy of any documentation (subject to certain confidential information
exclusions) relating to the acquisition proposal.
We
have
agreed to promptly advise Intuit, orally (within one business day) and in
writing, of any request received by us for non-public information with respect
to an acquisition proposal, the receipt by us of any acquisition proposal,
the
material terms of that request or acquisition proposal, the identity of the
person making the takeover proposal and a copy of all written materials (other
than third party confidential information) provided by or on behalf of that
person or group in connection with that request or acquisition proposal. We
have
also agreed to keep Intuit reasonably informed in all material respects of
the
status and details of such request or acquisition proposal and will promptly
provide Intuit a copy of all written materials (other than third party
confidential information) subsequently provided by or on behalf of that person
or group in connection with the request or acquisition proposal.
Our
Board
of Directors may withdraw, amend, change or modify its recommendation in favor
of approval of the merger agreement or approve or recommend an acquisition
proposal, but our Board of Directors may terminate the merger agreement only
if
all of the following conditions are met:
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an
acquisition proposal is made to us and is not withdrawn and our Board
of
Directors determines that the acquisition proposal constitutes a
superior
offer;
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neither
we nor any of our subsidiaries nor any of our respective representatives
will have materially violated any of the restrictions contained in
the
covenants in the merger agreement related to holding our stockholder
meeting and prohibiting solicitation of alternative transactions;
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we
must have delivered to Intuit written notice at least three business
days
prior to effecting the change of recommendation, which must state
expressly that we have received a superior offer and that we intend
to
effect a change of recommendation, include a copy of any definitive
documentation relating to that superior offer and such other documentation
reflecting the final terms and conditions of that superior offer
as being
considered by our Board of Directors, and disclose the identity of
the
person or group making that superior offer;
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after
delivering the change of recommendation notice described in the prior
bullet point, we must provide Intuit with a reasonable opportunity
to make
adjustments in the terms and conditions of the merger agreement during
that three business day period, and negotiate in good faith with
Intuit
with respect thereto during that three business day period; and
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our
Board of Directors must conclude in good faith, after consultation
with
its outside legal counsel, that in light of that superior offer,
and after
considering any adjustments or negotiations with Intuit, the change
of
recommendation is required in order for our Board of Directors to
comply
with its fiduciary duties to our stockholders under applicable
law.
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The
merger agreement provides that the term “acquisition proposal” means any offer
or proposal (other than an offer or proposal by Intuit or Merger Sub) relating
to any acquisition transaction.
The
merger agreement provides that the term “acquisition transaction” means any
transaction or series of related transactions involving:
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any
acquisition or purchase from us by any third party of more than a
twenty
percent (20%) interest in the total outstanding voting securities
of us or
any of our subsidiaries or any tender offer or exchange offer that
if
consummated would result in any third party beneficially owning twenty
percent (20%) or more of the total outstanding voting securities
of us or
any of our subsidiaries or any merger, consolidation, business combination
or similar transaction involving us pursuant to which our stockholders
immediately preceding the transaction hold less than eighty percent
(80%)
of the equity interests in the surviving or resulting entity of the
transaction;
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any
sale, lease, exchange, transfer, license, acquisition or disposition
to
any third party of more than twenty percent (20%) of the fair market
value
of our assets and the assets of our subsidiaries, taken as a whole
(including capital stock of our subsidiaries); or
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our
liquidation or dissolution.
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The
merger agreement provides that the term “superior offer” means any unsolicited,
bona fide written acquisition proposal on terms that our Board of Directors
determines in good faith in its reasonable judgment (after consultation with
Wedbush Morgan or another financial advisor of nationally recognized reputation)
to be more favorable to our stockholders from a financial point of view than
the
terms of the merger (taking into account any revisions or modifications made
by
Intuit and all other relevant factors).
The
merger agreement provides that the term “third party” means any person
(including a “group” as defined in Section 13(d)-3 of the Exchange Act) other
than Intuit or Merger Sub or any of their respective affiliates or
subsidiaries.
The
merger agreement may be terminated under certain circumstances,
including:
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by
mutual written consent duly authorized by the boards of directors
of
Intuit and us;
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by
either Intuit or us, if the merger has not been completed by May
9, 2007
(as may be extended by mutual agreement of Intuit and us) for any
reason;
provided,
however,
that the right to terminate the merger agreement will not be available
to
any party whose action or failure to act has been a principal cause
of or
resulted in the failure of the merger to be completed by May 9, 2007
and
that action or failure to act constitutes a breach of the merger
agreement;
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by
either Intuit or us, if a governmental entity issues an order, decree
or
ruling or takes any other action, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the merger,
which order, decree, ruling or other action is final and nonappealable;
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by
either Intuit or us, if the required approval of our stockholders
contemplated by the merger agreement has not been obtained by reason
of
the failure to obtain the required vote at the stockholders’ meeting or at
any adjournment thereof; provided,
however,
that this right to terminate the merger agreement is not available
to
either Intuit or us where the failure to obtain our stockholder approval
is caused by the action or failure to act of Intuit and/or us, as
the case
may be, and that action or failure to act constitutes a breach by
that
party of the merger agreement;
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by
us, at any time prior to the approval of the merger agreement by
our
stockholders, if our Board of Directors has effected a change of
recommendation pursuant to and in compliance with the terms of the
merger
agreement, we have made full payment of the termination fee, and
concurrently or within two calendar days of that termination, we
enter
into a definitive agreement with respect to the superior offer that
was
the subject of that change of
recommendation;
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by
us, upon a breach of any representation, warranty, covenant or agreement
on the part of Intuit set forth in the merger agreement, or if any
representation or warranty of Intuit has become untrue, in either
case
such that the conditions set forth in the merger agreement relating
to
Intuit’s representations, warranties, covenants and agreements would not
be satisfied as of the time of the breach or as of the time the
representation or warranty has become untrue (subject to a 30 calendar
day
cure period in certain instances);
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by
Intuit, upon a breach of any representation, warranty, covenant or
agreement on our part as set forth in the merger agreement, or if
any of
our representations or warranties has become untrue, in either case
such
that the conditions set forth in the merger agreement relating to
our
representations, warranties, covenants and agreements would not be
satisfied as of the time of the breach or as of the time the
representation or warranty becomes untrue (subject to a 30 calendar
day
cure period in certain instances);
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by
Intuit, if a material adverse effect with respect to us and our
subsidiaries has occurred since the date of the merger agreement
(subject
to a 30 calendar day cure period in certain
instances);
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by
Intuit, if there has been any restatement of any of our consolidated
financial statements; we have been notified by any governmental entity
or
any present or former auditor of any effect that could reasonably
be
expected to result in any such restatement; our auditors have resigned
or
threatened to resign; any auditor whose report is included in our
annual
report on Form 10-K for the fiscal year ended September 30, 2006 has
revoked, or notified us of its intention to revoke, such auditor’s report
or consent to include such report in such Form 10-K; or there is
any
pending or threatened investigation or inquiry by any governmental
entity
questioning the accuracy of any of our financial statements or their
conformity with the published rules and regulations of the SEC or
with
GAAP or our historical stock-based compensation practices or any
governmental entity has requested any information in connection with
any
of the foregoing (subject to a 30 calendar day cure period in certain
instances); or
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by
Intuit, if a triggering event has
occurred.
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The
merger agreement provides that the term “triggering event” means if any of the
following has occurred:
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our
Board of Directors or any committee of our Board of Directors makes
a
change of recommendation for any
reason;
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we
fail to include in this proxy statement the recommendation of our
Board of
Directors that stockholders vote in favor of and approve the merger
agreement;
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our
Board of Directors fails to reaffirm (publicly, if so requested)
its
recommendation in favor of the approval of the merger agreement within
ten
(10) calendar days after Intuit requests in writing that the
recommendation be reaffirmed; provided that Intuit may only request
a
reaffirmation following the public announcement by a third party
of an
acquisition proposal or an intent to make an acquisition
proposal;
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our
Board of Directors or any committee of our Board of Directors approves,
endorses or recommends any acquisition
proposal;
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we
enter into any letter of intent or similar document or any contract
accepting any acquisition proposal;
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a
tender or exchange offer relating to our securities is commenced
by a
person unaffiliated with Intuit and we do not send to its securityholders
pursuant to Rule 14e-2 promulgated under the Securities Act, within
ten (10) business days after that tender or exchange offer is first
published sent or given, a statement disclosing that our Board of
Directors recommends rejection of that tender or exchange offer;
or
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we
intentionally materially breach our covenants of the merger agreement
relating to our stockholders’ meeting or prohibiting solicitation of
alternative transactions.
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We
have
agreed in the merger agreement to hold our stockholders’ meeting to approve the
merger agreement as promptly as practicable and, subject to our right to adjourn
the stockholders’ meeting in accordance with the merger agreement, in any event
within thirty (30) calendar days following the mailing of the definitive proxy
statement. The merger agreement provides that we must use our commercially
reasonable efforts to solicit from our stockholders proxies in favor of the
approval of the merger agreement and take all other action necessary or
advisable to secure the vote or consent of our stockholders required by the
rules of the NASDAQ or Nevada law.
Conduct
of Business Pending the Merger
Under
the
merger agreement, we have agreed that prior to the effective time of the merger,
subject to certain exceptions, unless we obtain Intuit’s written consent (and
Intuit’s decision with respect to that consent may not be unreasonably withheld)
we will and will cause each of our subsidiaries to:
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carry
on our business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and in compliance in all
material
respects with all applicable legal
requirements;
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pay
our liabilities and taxes when due (subject to good faith disputes
over
those liabilities or taxes);
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pay
or perform our other obligations when due;
and
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maintain
insurance in amounts and against risks and losses consistent with
insurance maintained by us and our subsidiaries as of the date of
the
merger agreement.
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Further,
under the merger agreement, we have agreed to use our commercially reasonable
efforts consistent with past practices and policies to:
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preserve
intact our present business
organization;
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keep
available the services of our present officers and employees;
and
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preserve
our relationships with customers, suppliers, distributors, consultants,
licensors, licensees and others with which we have significant business
dealings.
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We
have
also agreed to promptly notify Intuit of any material event involving our
business or operations occurring outside the ordinary course of
business.
In
addition, without the prior written consent of Intuit, except as specifically
permitted or required by the merger agreement or as disclosed to Intuit, during
the period from the date of the merger agreement and continuing until the
earlier of the termination of the merger agreement pursuant to its terms or
the
effective time of the merger, we may not, and may not permit our subsidiaries
to, do any of the following:
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cause,
permit or submit to a vote of our stockholders any amendments to
our
charter documents (or similar governing instruments of any of our
subsidiaries);
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issue,
deliver, sell, authorize or designate (including by certificate of
designation) or pledge or otherwise encumber, or propose any of the
foregoing with respect to any of the shares of the capital stock
of us or
our subsidiaries or any securities convertible into shares of capital
stock of us or our subsidiaries, or subscriptions, rights, warrants
or
options to acquire any shares of capital stock of us or our subsidiaries
or any securities convertible into shares of capital stock of us
or our
subsidiaries, or enter into other agreements or commitments of any
character obligating it to issue any such shares or convertible
securities, other than the issuance, delivery and/or sale of shares
of our
common stock pursuant to the exercise of our stock options outstanding
as
of the date of the merger agreement which are either vested on the
date of
the merger agreement or vest after the date of the merger agreement
in
accordance with their terms, in each case as disclosed to
Intuit;
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declare,
set aside or pay any dividends on or make any other distributions
(whether
in cash, securities or property) in respect of any capital stock
of us or
our subsidiaries or split, combine or reclassify any capital stock
of us
or our subsidiaries or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for any capital
stock of us or our subsidiaries;
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purchase,
redeem or otherwise acquire, directly or indirectly, any shares of
capital
stock of us or our subsidiaries or any other securities of us or
our
subsidiaries or any options, warrants, calls or rights to acquire
any such
shares or other securities, except repurchases of unvested shares
at or
below cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase
agreements in effect on the date of the merger agreement, provided
that no
such repurchase may be permitted in the event the per share repurchase
price is greater than the merger
consideration;
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waive
any stock repurchase rights, accelerate, amend or change the period
of
exercisability of any equity award, reprice any of our stock options,
or
authorize cash payments in exchange for any equity
award;
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grant
or pay any severance or termination pay or any bonus or other special
remuneration (whether in cash, securities or property) or any increase
thereof to any director, officer, consultant or employee except pursuant
to written agreements outstanding on the date of the merger agreement
and
disclosed to Intuit;
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adopt
any new severance plan, or amend or modify or alter in any manner
any
severance plan, agreement or arrangement existing on the date of
the
merger agreement;
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grant
any equity-based compensation, whether payable in cash, securities
or
property;
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enter
into any agreement the benefits of which are contingent or the terms
of
which are materially altered upon the occurrence of a transaction
involving us of the nature contemplated by the merger
agreement;
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grant
any loans or advances to employees, officers, directors or other
third
parties, make any investments in or capital contributions to any
person,
incur any indebtedness for borrowed money or guarantee any indebtedness
for borrowed money of another person, issue or sell any debt securities
or
options, warrants, calls or other rights to acquire any debt securities
of
us, enter into any “keep well” or other agreement to maintain any
financial statement condition or enter into any arrangement having
the
economic effect of any of the foregoing other than in connection
with the
financing of ordinary course trade payables consistent with past
practice;
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increase
the compensation or benefits payable or to become payable to officers,
directors, consultants, or employees (other than as disclosed to
Intuit);
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enter
into any new or amend any existing employee plan, employment agreement,
indemnification, collective bargaining, or similar agreement, except
in
the ordinary course of business (provided doing so does not materially
increase the cost associated with that plan or agreement) and except
as
required by applicable legal
requirements;
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hire
any employee at or above the level of manager or for a total annual
compensation (including bonus opportunity) of equal to or more than
$50,000;
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hire
any employee below the level of manager and for a total annual
compensation (including bonus opportunity) of less than $50,000,
other
than in the ordinary course of
business;
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terminate
any employee (except termination for
cause);
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enter
into, amend in any material respect or terminate (other than any
termination as the result of the expiration of the term of any agreement),
or waive or assign any material right under, any of the contracts
disclosed to Intuit in connection with the merger agreement (or any
contract that would have been required to be disclosed to Intuit
if it
existed as of the date of the merger agreement), or any contract
with one
or more of our affiliates;
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make
or commit to make any capital expenditures in excess of $100,000
individually or $500,000 in the aggregate;
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acquire
or agree to acquire by merging or consolidating with, or by purchasing
any
equity interest in or a portion of the assets of, or by any other
manner,
any business or any corporation, partnership, association or other
business organization or division thereof or any ownership interest
in any
of the foregoing, or otherwise acquire or agree to enter into any
joint
ventures, strategic partnerships or similar
alliances;
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waive
the benefits of, agree to modify in any manner, terminate, release
any
person from or knowingly fail to enforce the confidentiality or
nondisclosure provisions of any contract to which we or any of our
subsidiaries are a party or of which we or any of our subsidiaries
are a
beneficiary;
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sell,
lease, license, encumber or otherwise dispose of any properties or
assets
except sales of inventory in the ordinary course of business consistent
with past practice, dispositions of obsolete and unsaleable inventory
or
equipment, and transactions described in the following bullet
point;
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other
than in the ordinary course of business consistent with past practice,
sell, lease, license, transfer or otherwise dispose of, or otherwise
extend, amend or modify in any material respect, any rights to our
products or other intellectual property, or otherwise extend, amend
or
modify or forfeit or allow to lapse any right
thereto;
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issue
or agree to issue any refunds, credits, allowances or other concessions
with customers with respect to amounts collected by or owed to us
or any
of our subsidiaries in excess of $50,000 individually or $250,000
in the
aggregate;
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enter
into any new line of business;
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except
as required by GAAP, revalue any of our assets or make any change
in
accounting methods, principles or
practices;
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make
any material tax election, settle or compromise any material tax
liability
or refund, file any amendment to a material return, enter into any
closing
agreement or consent to any extension or waiver of any limitation
period
with respect to material taxes;
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take
any action, or fail to take any action, with the intention of causing
any
representation or warranty made by us contained in the merger agreement
to
become untrue or inaccurate in any material
respect;
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commence
or settle any pending or threatened litigation, proceeding or
investigation (whether or not commenced prior to the date of the
merger
agreement), other than any litigation to enforce any of our rights
under
the merger agreement, a settlement fully reimbursable from insurance
(subject to any applicable deductible) or calling solely for a cash
payment in an aggregate amount less than $100,000 and in any case
including a full release of us and our subsidiaries, as applicable,
or
collection actions brought by us in the ordinary course of business
to
collect amounts not in excess of $100,000; or
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agree
in writing or otherwise to take any of the actions described in the
previous bullet points.
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Commercially
Reasonable
Efforts
Upon
the
terms and subject to the conditions set forth in the merger agreement, each
of
we, Intuit and Merger Sub has agreed to use its commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done,
and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by the merger agreement,
including using reasonable efforts to accomplish the following:
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the
taking of all reasonable acts necessary to cause the conditions precedent
to the merger to be satisfied;
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the
obtaining of all necessary actions or nonactions, waivers, consents,
approvals, orders and authorizations from governmental entities and
the
making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with governmental entities,
if
any) and the taking of all reasonable steps as may be necessary to
avoid
any suit, claim, action, investigation or proceeding by any governmental
entity;
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the
obtaining of all consents, approvals or waivers from third parties
required as a result of the transactions contemplated in the merger
agreement;
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the
defending of any suits, claims, actions, investigations or proceedings,
whether judicial or administrative, challenging the merger agreement
or
the consummation of the transactions contemplated by the merger agreement,
including seeking to have any stay or temporary restraining order
entered
by any court or other governmental entity vacated or reversed;
and
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the
execution or delivery of any additional instruments reasonably necessary
to consummate the transactions contemplated by, and to fully carry
out the
purposes of, the merger agreement.
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However,
neither Intuit nor any of its subsidiaries or affiliates is bound under the
merger agreement to:
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agree
to any divestiture by Intuit or us or any of Intuit’s or our affiliates of
shares of capital stock or of any business, assets or property, or
the
imposition of any limitation on the ability of any of them to conduct
their business or to own or exercise control such assets, properties
and
stock (any such action is referred as an action of divestiture in
this
proxy statement); or
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utilize
commercially reasonable efforts, or otherwise, in responding to formal
requests for additional information or documentary material pursuant
to
the HSR Act, or any other antitrust law, for a period of time exceeding
60
days from the receipt of any initial
request.
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Amendment; Extension and Waiver
The
merger agreement may be amended by the parties at any time by execution of
an
instrument in writing signed on behalf of each of Intuit and us.
At
any
time prior to the effective time of the merger, any party may, to the extent
legally allowed:
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extend
the time for the performance of any of the obligations or other acts
of
the other parties to the merger
agreement;
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waive
any inaccuracies in the representations and warranties made to that
party
contained in the merger agreement or in any document delivered pursuant
to
the merger agreement; and
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waive
compliance with any of the agreements or conditions for the benefit
of
that party contained in the merger agreement, provided that the mutual
closing conditions to the merger may not be waived without the express
written consent of Intuit.
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Any
extension or waivers must be in writing. Delay in exercising any right under
the
merger agreement does not constitute a waiver of that right.
Expenses
The
merger agreement provides that regardless of whether the merger is consummated,
all fees and expenses incurred by the parties will be borne by the party
incurring those fees and expenses, provided that Intuit and we will share
equally any filing fee for any notification and report form filed with the
FTC
and the Antitrust Division pursuant to the HSR Act, and any appropriate
pre-merger notifications under the antitrust laws of any foreign jurisdiction,
as reasonably agreed by the parties to be appropriate, in each case pursuant
to
the terms of the merger agreement.
Termination
Fee
The
merger agreement requires that we pay Intuit a termination fee of $4,271,000
if:
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the
merger agreement is terminated by Intuit because a triggering event
has
occurred;
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our
Board of Directors effects a change of recommendation pursuant to
and in
compliance with the terms of the merger agreement and concurrently
or
within two calendar days of that termination, we enter into a definitive
agreement with respect to the superior offer that was the subject
of that
change of recommendation; or
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the
merger agreement is terminated by Intuit because (i) the effective
time of
the merger has not occurred by May 9, 2007 (provided that date has
not
been extended by mutual agreement of the parties), or (ii) the required
approval of our stockholders contemplated by the merger agreement
is not
obtained by reason of the failure to obtain the required vote at
the
stockholders’ meeting, in either case pursuant to the terms of the merger
agreement, and any of the following
occur:
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following
the date of the merger agreement and prior to the termination of
the
merger agreement, a third party announces, and does not publicly
definitively withdraw at least five business days prior to that
termination, an acquisition proposal and within 12 months following
the
termination of the merger agreement any company acquisition is
consummated; or
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if
following the date of the merger agreement and prior to the termination
of
the merger agreement, a third party announces, and does not publicly
definitively withdraw at least five business days prior to that
termination, an acquisition proposal and within 12 months following
the
termination of the merger agreement we enter into a letter of intent
or
similar document or any written contract providing for any company
acquisition or publicly announce our intent to enter into a company
acquisition, and that company acquisition is subsequently consummated
within 9 months thereafter.
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If
the
merger agreement is terminated by Intuit pursuant to its termination right
based
on a breach by us of a covenant or agreement, and prior to that termination,
we
receive, or a third party announces, an acquisition proposal and that breach
is
intended to facilitate that acquisition proposal or benefit the third party
making that acquisition proposal without similarly benefiting Intuit, we must
pay Intuit an amount equal to the out of pocket fees and expenses incurred
by
Intuit and Merger Sub in connection with the negotiation, execution and delivery
of the merger agreement and the merger (including, without limitation,
reasonable attorney fees and expenses, reasonable advisor fees and expenses,
travel costs, filing fees, printing, mailing and solicitation costs and
expenses).
If
we
fail to pay in a timely manner the amounts due pursuant to the merger agreement
and, in order to obtain that payment, Intuit makes a claim that results in
a
judgment against us for the amounts set forth in the merger agreement, we must
pay to Intuit its reasonable costs and expenses (including reasonable attorneys’
fees and expenses) in connection with that suit, together with interest on
the
those amounts at the prime rate of Citibank N.A. in effect on the date that
payment was required to be made.
Payment
of the termination fee by us constitutes liquidated damages, and Intuit’s right
to receive a termination fee in the circumstances provided in the merger
agreement is the exclusive remedy available to Intuit for any failure of the
merger to be consummated, and we have no further liability with respect to
the
merger agreement or the merger; provided that in no event will a termination
fee
be in lieu of damages incurred as a result of any intentional or willful breach
of, or any intentional misrepresentation made in, the merger agreement. However,
the payment by us of any Intuit expenses does not constitute liquidated damages
with respect to any claim which Intuit or Merger Sub would be entitled to assert
against us or our assets, or against any of our directors, officers, employees
or stockholders, with respect to any such breach, and does not constitute the
sole and exclusive remedy with respect to any such breach.
The
merger agreement provides that the term “company acquisition” means any of the
following transactions (other than the transactions contemplated by the merger
agreement):
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a
merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving us pursuant
to
which our stockholders immediately preceding the transaction hold
less
than a majority of the aggregate equity interests in the surviving
or
resulting entity of the transaction;
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a
sale or other disposition by us of all or more than a majority of
the
assets of us and our subsidiaries, taken as a whole; or
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the
acquisition by any person or group (including by way of a tender
offer or
an exchange offer or issuance by us), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of
shares
representing in excess of a majority of the voting power of the then
outstanding shares of our capital
stock.
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Representations
and
Warranties
The
merger agreement contains customary representations and warranties relating
to;
among other things:
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corporate
organization and similar matters with respect to each of Intuit,
Merger
Sub and us;
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our
subsidiaries;
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our
charter documents;
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our
capital structure;
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authorization,
execution, delivery, performance and enforceability of the merger
agreement and related matters with respect to each of Intuit and
us;
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required
consents, approvals, orders and authorizations of, and notices to,
governmental authorities and third parties relating to the merger
agreement and related matters with respect to each of Intuit and
us;
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our
compliance with applicable laws and
permits;
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documents
we have filed with the Securities and Exchange Commission, the accuracy
of
the financial statements and other information contained in those
documents, and our internal
controls;
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the
absence of undisclosed liabilities by
us;
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absence
of certain changes in our business since June 30,
2006;
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pending
or threatened litigation against us and pending or threatened government
investigations;
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our
employee benefit plans and matters relating to the Employee Retirement
Income Security Act with respect to
us;
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the
accuracy of information supplied by each of Intuit and us in connection
with this proxy statement;
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restrictions
on our business activities;
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tax
matters with respect to us;
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environmental
matters with respect to us;
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brokerage,
finders and financial advisory fees and expenses payable by us in
connection with the merger agreement and the transactions contemplated
by
the merger agreement;
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our
intellectual property;
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certain
of our contracts;
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our
largest customers and suppliers;
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our
insurance policies;
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receipt
by us of the fairness opinion of Wedbush
Morgan;
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our
Board of Directors’ approval of the merger
agreement;
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required
vote of our stockholders;
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applicability
of certain state takeover statutes’ requirements to us and the amendment
of our existing stockholders rights
agreement;
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transactions
with our affiliates;
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illegal
payments by us;
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compliance
by us with applicable privacy laws and our privacy
policies;
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compliance
by us with payment industry standards and card association rules
and
regulations and ownership by us of our merchant
accounts;
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the
inapplicability to us of certain Federal Reserve
Regulations;
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sufficiency
of Intuit’s funds to perform its obligations under the merger agreement,
including payment of the merger
consideration;
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interim
operations of Merger Sub; and
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Intuit’s
failure to be an “interested stockholder” of ours within the meaning of
Nevada law.
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ECHO
Articles of Incorporation
As
of the
effective time of the merger, our articles of incorporation, as amended, will
be
amended and restated to read the same as the articles of incorporation of Merger
Sub, as in effect immediately prior to the effective time of the merger, until
thereafter amended in accordance with Nevada law and those articles of
incorporation, provided that our
name
will continue to be “Electronic Clearing House, Inc.”
ECHO
By-Laws
The
merger agreement provides that as of the effective time of the merger, by virtue
of the merger and without any action on the part of Merger Sub or us, the bylaws
of the surviving corporation will be amended and restated to read the same
as
the bylaws of Merger Sub, as in effect immediately prior to the effective time
of the merger, until thereafter amended in accordance with Nevada law, the
articles of incorporation of the surviving corporation and those
bylaws.
Contemporaneously
with the execution and delivery of the merger agreement, Aristides W.
Georgantas, Herbert Lucas, Carl R. Terzian, Richard D. Field, H. Eugene
Lockhart, Alice Cheung, Stephen D. Hoofring, Patricia M. Williams, Richard
Lee
Slater, Karl J. Asplund, Joel M. Barry, Charles Harris, Kris Winckler, William
J. Wied, Jack Wilson, Sharat Shankar and Donna Rehman, who were the directors
and executive officers of ECHO as of the date of the merger agreement, in their
capacity as stockholders of ECHO, entered into voting agreements with Intuit.
Approximately [●]% of the outstanding ECHO shares on the record date for the
ECHO special meeting are subject to the voting agreements. The shares covered
by
the voting agreements are referred to in this proxy statement as the “subject
ECHO shares.”
The
following is a summary description of the voting agreements. The form of voting
agreement is attached as Annex B to this proxy statement, which is hereby
incorporated into this document by reference.
Agreement
to Vote and Proxy
Each
individual who entered into a voting agreement with Intuit agreed to vote the
subject ECHO shares at the ECHO special meeting:
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in
favor of approval of the merger;
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against
approval of any proposal made in opposition to, or in competition
with,
consummation of the merger and the transactions contemplated by the
merger
agreement, and against any action or agreement that would result
in a
breach of any representation, warranty, covenant, agreement or other
obligation of ECHO in the merger agreement;
and
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against
any acquisition proposal (as defined in the merger agreement) or,
other
than those actions that relate to the merger and the transactions
contemplated by the merger agreement, any other: (i) merger,
consolidation, business combination, sale of assets, reorganization
or
recapitalization of ECHO or any subsidiary of ECHO with any party,
(ii) sale, lease or transfer of any significant part of the assets of
ECHO or any subsidiary of ECHO, (iii) reorganization,
recapitalization, dissolution, liquidation or winding up of ECHO
or any
subsidiary of ECHO, (iv) material change in the capitalization of
ECHO or any subsidiary of ECHO, or the corporate structure of ECHO
or any
subsidiary of ECHO, or (v) action that is intended, or could reasonably
be
expected to, impede, interfere with, delay, postpone, discourage
or
adversely affect the merger or any of the other transactions contemplated
by the merger agreement.
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These individuals also agreed to grant to Intuit a proxy and appointed the directors of Intuit as their proxy to vote the subject ECHO shares on any of the foregoing matters at the ECHO special meeting.
The
individuals singing voting agreements have agreed that they will be bound by
the
non-solicitation provisions of the merger agreements described above under
“The
Merger AgreementំNo Solicitation.” These individuals further agreed to certain
restrictions on the transfer of their subject ECHO shares.
PROPOSAL
2—ADJOURNMENT OF THE SPECIAL
MEETING
The
Adjournment Proposal
If
at or
prior to the special meeting of stockholders, the number of shares of our common
stock present or represented and voting in favor of approval of the merger
agreement is insufficient to approve that proposal under Nevada law, we intend
to move to adjourn the special meeting in order to enable our Board of Directors
to solicit additional proxies in respect of such proposal. In that event, we
will ask our stockholders to vote only upon the adjournment proposal, and not
the proposal regarding the approval of the merger agreement.
In
this
proposal, we are asking you to authorize the holder of any proxy solicited
by
our Board of Directors to vote in favor of granting Charles Harris and Alice
Cheung, as proxies, the authority to adjourn the special meeting to another
time
and place for the purpose of soliciting additional proxies. If the stockholders
approve the adjournment proposal, our management could adjourn the special
meeting and any adjourned session of the special meeting and use the additional
time to solicit additional proxies, including the solicitation of proxies from
stockholders that have previously voted. Among other things, approval of the
adjournment proposal could mean that, even if we had received proxies
representing a sufficient number of votes against the approval of the merger
agreement to defeat that proposal, our management could adjourn the special
meeting without a vote on the merger agreement and seek to convince the holders
of those shares to change their votes to votes in favor of approval of the
merger agreement.
Vote
Required and Board Recommendation
Approval
of the proposal to adjourn the special meeting for the purpose of soliciting
additional proxies, if necessary or appropriate, requires a majority of the
voting power present at the meeting, in person or represented by proxy. Properly
executed proxies that do not contain voting instructions will be voted “FOR” the
adjournment proposal. No proxy that is specifically marked “AGAINST” approval of
the merger agreement will be voted in favor of the adjournment proposal, unless
it is specifically marked “FOR” the adjournment proposal. Shares of our stock
held by persons attending the special meeting but abstaining from voting and
broker non-votes will have the effect of voting against the adjournment
proposal.
Our
Board
of Directors believes that if the number of shares of our common stock present
or represented at the special meeting and voting in favor of approval of the
merger agreement is insufficient to approve that proposal, it is in the best
interests of us and our stockholders to enable our Board of Directors to
continue to seek to obtain a sufficient number of additional votes in favor
of
approval of the merger agreement.
Our
Board
of Directors recommends that you vote “FOR” the adjournment proposal.
MARKET
PRICE AND DIVIDEND DATA
Since
January 17, 1986, we have been trading on the over-the-counter market under
the
name Electronic Clearing House, Inc. On October 2, 1989, we were accepted for
listing on the National Association of Securities Dealers Automated Quotation
System (“NASDAQ”) and trade under the symbol of “ECHO”
on the
NASDAQ Capital Market. The following table sets forth the range of high and
low
closing prices for each quarter for our common stock during the fiscal periods
indicated, as reported on the NASDAQ Capital Market.
|
FISCAL
YEAR ENDED SEPTEMBER
30
|
High
|
Low
|
|||||
|
2007
|
|||||||
|
First
Quarter (through [●] )
|
$
|
[●] |
$
|
[●] | |||
|
2006
|
|||||||
|
First
Quarter
|
$
|
11.00
|
$
|
9.00
|
|||
|
Second
Quarter
|
$
|
13.66
|
$
|
10.01
|
|||
|
Third
Quarter
|
$
|
18.19
|
$
|
12.51
|
|||
|
Fourth
Quarter
|
$
|
18.08
|
$
|
13.16
|
|||
|
2005
|
|||||||
|
First
Quarter
|
$
|
9.65
|
$
|
7.42
|
|||
|
Second
Quarter
|
$
|
9.22
|
$
|
7.99
|
|||
|
Third
Quarter
|
$
|
10.35
|
$
|
7.10
|
|||
|
Fourth
Quarter
|
$
|
9.36
|
$
|
8.00
|
|||
The
prices set forth above are not necessarily indicative of liquidity of the
trading market. Trading in our common stock is limited and sporadic, as
indicated by the average monthly trading volume of approximately 275,000 shares
during our fiscal year ended September 30, 2006.
The
following table sets forth the closing per share sales price of our common
stock, as reported on the NASDAQ Capital Market on December 13, 2006, the last
full trading day before the public announcement of the proposed merger, and
on
[●], 2007, the latest practicable trading day before the printing of this
proxy statement:
ECHO
COMMON STOCK
|
Closing
Price
|
||
|
December
13, 2006
|
$14.86
|
|
|
[●],
2007
|
|
$[●] |
We
have
not paid any dividends in the past and have no current plan to pay any
dividends. We intend to devote all funds to the operation of our businesses.
Following the consummation of the merger there will be no further market for
our
common stock.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As
of
December 31, 2006, there were 6,836,064 shares of our Common Stock outstanding.
Based on our review of Forms 4 and Schedules 13D, 13G and 13F filed with the
Securities and Exchange Commission on the dates noted, the following persons
have beneficial ownership or control over 5% or more of our outstanding Common
Stock:
|
Amount
and
|
Percentage
of
|
|||
|
Nature
of Beneficial
|
Outstanding
Stock
|
|||
|
Name
and Address
|
Ownership
|
At
12/31/06
|
||
|
Melvin
Laufer
|
519,839
|
7.60%
|
||
|
136
Beach 140th
Street
|
||||
|
Far
Rockaway, NY 11694
|
||||
|
Schedule
13D/A filed September 3, 2004
|
||||
|
William
Blair and Company LLC
|
973,512
|
14.24%
|
||
|
222
W. Adams Street
|
|
|||
|
Chicago,
IL 60606
|
||||
|
Schedule
13F filed September 30, 2006
|
||||
|
Discovery
Equity Partners LP; Discovery
|
821,454
|
12.02%
|
||
|
Group
I LLC; Daniel J. Donoghue;
|
||||
|
Michael
R. Murphy
|
||||
|
71
South Wacker Drive
|
||||
|
Chicago,
IL 60606
|
||||
|
Forms
4 filed November 20, 2006
|
The
following table sets forth the number of shares of Common Stock owned
beneficially by our (i) directors, (ii) the Named Executive Officers (as defined
below), and (iii) the executive officers and directors as a group, as of
December 31, 2006. Such figures are based upon information furnished by the
persons named.
|
Amount
and
|
Percentage
of
|
|||
|
Nature
of Beneficial
|
Outstanding
Stock[1]
|
|||
|
Name
and Address
|
Ownership
|
At 12/31/06
|
||
|
Joel
M. Barry
|
328,119[2]
|
4.68%
|
||
|
730
Paseo Camarillo
|
||||
|
Camarillo,
CA 93010
|
||||
|
Charles
Harris
|
65,000[2]
|
0.95%
|
||
|
730
Paseo Camarillo
|
||||
|
Camarillo,
CA 93010
|
||||
|
Alice
L. Cheung
|
82,500[2]
|
1.20%
|
||
|
730
Paseo Camarillo
|
||||
|
Camarillo,
CA 93010
|
|
Jack
Wilson
|
67,475[2][5]
|
0.98%
|
|
|
730
Paseo Camarillo
|
|||
|
Camarillo,
CA 93010
|
|
||
|
Sharat
Shankar
|
49,400[2]
|
0.72%
|
|
|
730
Paseo Camarillo
|
|
||
|
Camarillo,
CA 93010
|
|
||
|
|
|||
|
Rick
Slater
|
37,300[2]
|
0.54%
|
|
|
730
Paseo Camarillo
|
|
||
|
Camarillo,
CA 93010
|
|
||
|
|
|||
|
Richard
Field
|
203,696[3]
|
2.98%
|
|
|
49
Locust Avenue
|
|
||
|
New
Canaan, CT 06840
|
|
||
|
|
|||
|
Aristides
W. Georgantas
|
16,521
|
0.24%
|
|
|
180
Springdale Road
|
|
||
|
Princeton,
NJ 08540
|
|
||
|
|
|||
|
H.
Eugene Lockhart
|
4,514
|
0.07%
|
|
|
280
Park Avenue
|
|||
|
New
York, NY 10017
|
|||
|
Herbert
L. Lucas, Jr.
|
57,880[4]
|
0.85%
|
|
|
12011
San Vicente Blvd.
|
|||
|
Los
Angeles, CA 90049
|
|||
|
Carl
R. Terzian
|
3,031
|
0.04%
|
|
|
12400
Wilshire Blvd.
|
|||
|
Los
Angeles, CA 90025
|
|||
|
|
|||
|
All
executive officers and directors as a group (16 persons)
|
1,097,243[6]
|
14.98%
|
______________________________
| [1] |
Under
Rule 13d-3, certain shares may be deemed to be beneficially owned
by more
than one person (if, for example, persons share the power to vote
or the
power to dispose of the shares). In addition, shares are deemed to
be
beneficially owned by a person if the person has the right to acquire
the
shares (for example, upon exercise of an option) within 60 days of
the
date as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed
to
include the amount of shares beneficially owned by such person (and
only
such person) by reason of these acquisition rights. As a result,
the
percentage of outstanding shares of any person as shown in this table
does
not necessarily reflect the person’s actual ownership or voting power with
respect to the number of shares of Common Stock actually outstanding
at
December 31, 2006.
|
| [2] |
Includes
stock options according to the terms of the 1992 Officers and Key
Employees Incentive Stock Option Plan and the 2003 Incentive Stock
Option
Plan, which for the following number of shares and for the following
individuals could be acquired within 60 days through the exercise
of stock
options: Joel M. Barry, 180,000 shares; Alice Cheung, 60,000 shares;
Jack
Wilson, 57,400 shares; Sharat Shankar, 49,400 shares; and Rick Slater,
22,800.
|
| [3] |
Includes
103,400 shares which are in an IRA account in Mr. Field’s
name.
|
| [4] |
Includes
17,972 shares indirectly owned by Mr. Lucas through a trust for his
wife.
|
| [5] |
Includes
530 shares indirectly owned by Mr. Wilson through his
wife.
|
| [6] |
Includes
shares and stock options according to the terms of the 1992 Officers
and
Key Employees Incentive Stock Option Plan and the 2003 Incentive
Stock
Option Plan, which for the following number of shares and for the
following individuals could be acquired within 60 days through the
exercise of stock options: Patricia Williams, 40,400 shares; Steven
Hoofring, 36,000 shares; and Kris Winckler, 42,400
shares.
|
STOCKHOLDER
PROPOSALS FOR 2007 ANNUAL
MEETING
We
will
hold our 2007 annual meeting of stockholders only if the merger is not
consummated because following the merger our common stock will be delisted
from
the NASDAQ Capital Market, our common stock will be deregistered under the
Exchange Act and we will no longer be a publicly-held company. Any stockholder
wishing to have a proposal considered for inclusion in our 2007 annual meeting
proxy solicitation materials must set forth such proposal in writing and file
it
with our secretary a reasonable period of time before we print and mail our
2007
annual meeting proxy materials. We will publicly notify you of the expected
date
that we plan to print and mail our 2007 annual meeting proxy materials at the
time we establish a date for such meeting if the merger is not consummated.
Proposals received after such date shall be considered untimely and shall not
be
included in our annual meeting proxy solicitation materials. Our Board of
Directors will review any timely submitted stockholder proposals which are
filed
as required and will determine whether such proposals meet applicable criteria
for inclusion in our 2007 annual meeting proxy solicitation materials.
If
you
wish to submit a proposal for consideration at our next annual general meeting
of stockholders but that is not to be included in our proxy statement, you
must
deliver the proposal in writing (and otherwise comply with the requirements
in
our by-laws relating to the submission of proposals) to: 730 Paseo Camarillo,
Camarillo, California, 93010, Attention: Secretary.
OTHER
MATTERS
As
of the
date of this proxy statement, our Board of Directors knows of no other matters
that will be presented for consideration at the special meeting other than
as
described in this proxy statement. However, if any other matter is presented
properly for consideration and action at the meeting, it is intended that the
proxies will be voted with respect thereto in accordance with the best judgment
and in the discretion of the proxy holders.
Intuit
and Merger Sub are not participants in the solicitation made by this proxy
statement. None of Intuit or Merger Sub has any interest in the solicitation
other than as a result of Intuit’s agreement to acquire all of the outstanding
shares of our common stock pursuant to the terms of the merger agreement.
INCORPORATION
OF INFORMATION BY
REFERENCE
The
Securities and Exchange Commission allows us to “incorporate by reference”
information into this proxy statement, which means that we can disclose
important information to you by referring you to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is considered part of this proxy statement, except
for
any information superseded by information contained directly in this proxy
statement or in later filed documents incorporated by reference in this proxy
statement.
This
proxy statement incorporates by reference the documents set forth below that
we
have previously filed with the Securities and Exchange Commission.
|
ECHO’s
Securities and Exchange Commission filings
|
Period
|
|
Annual
Report on Form 10-K
|
Year
ended September 30, 2006, as filed on December 14, 2006
|
|
Current
Report on Form 8-K
|
Filed
on December 14, 2006
|
We
also
incorporate by reference additional documents that may be filed with the
Securities and Exchange Commission between the date of this proxy statement
and
the date of the special meeting of stockholders or, if sooner, the termination
of the merger agreement. These include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
as
well as proxy statements.
If
you
are a stockholder, we may have sent you some of the documents incorporated
by