EX-99.1 3 termsheet.htm TERM SHEET termsheet.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

Exhibit 99.1

EXHIBIT F

Term Sheet for Parent Shareholders' Agreement1

 
Parties        Polaris Acquisition Corp.("Parent"), as the surviving 
        corporation in the merger of Hughes Telematics, Inc. (the 
        "Company") with and into Parent pursuant to the Amended 
        and Restated Merger Agreement. 
 
        Communications Investors LLC ("Apollo"), who shall serve 
        as the Escrow Representative. 
 
        The entities and individuals listed on Schedule I hereto (which 
        may be expanded before the Closing without the consent of 
        Parent to include such persons who may hereafter become 
        equityholders of the Company and agree to the terms of this 
        agreement) (the "Company Common Shareholders"). 
 
        The entities and individuals who purchase shares of the 
        Company Series B Preferred Stock pursuant to that certain 
        Stock Purchase Agreement, dated as of March 12, 2009 (the 
        Series B Stock Purchase Agreement”), (which may be 
        expanded before the Closing without the consent of Parent to 
        include such persons who may hereafter become preferred 
        equityholders of the Company and agree to the terms of this 
        agreement) (the "Company Preferred Shareholders"). 
 
        Byron Business Ventures XX, LLC, Praesumo Partners, LLC, 
        Moore Holdings, LLC, Vinco Vincere Vici Victum LLC, 
        David F. Palmer, Meritage Farms LLC, Cloobeck Companies, 
        LLC, Granite Creek Partners, L.L.C., Hartz Capital 
        Investments LLC, Odessa, LLC and Roxbury Capital Group 
        LLC Incentive Savings Plan (together, the "Founders"). 
 
Transfer Restrictions
 
Company Common         Each Company Common Shareholder agrees not to sell, 
Shareholders Transfer        transfer or otherwise dispose of, directly or indirectly, any 
Restrictions        Common Transaction Shares or Converted Option Shares 
        underlying Converted Options, in each case for 24 months 
        post-Closing, except (i) by gift to a member of such 
        shareholder's immediate family or to a trust, the beneficiary of 
        which is a Company Common Shareholder or a member of a 
        Company Common Shareholder's immediate family, (ii) by 
 
  
1 Capitalized terms used herein but not defined herein shall have the meanings ascribed thereto in the Second
Amended and Restated Agreement and Plan of Merger, by and between Polaris and the Company, dated as of March
12, 2009 (the "Amended and Restated Merger Agreement"). 


  
        virtue of the laws of descent and distribution upon death of 
        any Company Common Shareholder, or (iii) pursuant to a 
        qualified relations order; provided, however, that such 
        permissive transfers may be implemented only upon the 
        respective transferee's written agreement to be bound by the 
        terms and conditions of the Shareholders' Agreement. 
 
         Each Company Common Shareholder agrees not to sell, 
        transfer or otherwise dispose of, directly or indirectly, any 
        Common Escrowed Earnout Shares (or Converted Option 
        Shares underlying Earnout Options) until (a) with respect to 
        such shares released from escrow upon the achievement of the 
        First Target between the first and second anniversaries 
        (including the second anniversary) of the Closing Date, 12 
        months following the distribution to shareholders of such 
        shares from escrow and (b) with respect to such shares 
        released from escrow upon the achievement of the First 
        Target (after the second anniversary of the Closing Date), the 
        Second Target and the Third Target, the earlier of (i) 6 months 
        following the distribution to shareholders of such shares from 
        escrow or (ii) the fifth anniversary of the Closing Date. 
  
Company Preferred         Each Company Preferred Shareholder agrees not to sell, 
Shareholders Transfer        transfer or otherwise dispose of, directly or indirectly, any 
Restrictions        Preferred Transaction Shares for 6 months post-Closing 
        (provided that (a) all Company Common Shareholders, 
        Founders and all officers and directors of Parent (each, a 
        "Lockup Party") shall have agreed to be at least as restricted 
        with respect to the sale, transfer or other disposition of such 
        persons' securities in Parent and (b) Parent will promptly 
        provide notice to each Company Preferred Shareholder of any 
        discretionary waiver or early termination of the lockup of any 
        Lockup Party and cause each Company Preferred Shareholder 
        to receive, on a proportionate basis, the benefit of any such 
        waiver or termination), except (i) by gift to a member of such 
        shareholder's immediate family or to a trust, the beneficiary of 
        which is a Company Preferred Shareholder or a member of a 
        Company Preferred Shareholder's immediate family, (ii) by 
        virtue of the laws of descent and distribution upon death of 
        any Company Preferred Shareholder, (iii) to an Affiliate or 
        (iv) pursuant to a qualified relations order; provided, however, 
        that such permissive transfers may be implemented only upon 
        the respective transferee's written agreement to be bound by 
        the terms and conditions of the Shareholders' Agreement. For 
        purposes of the foregoing, "Affiliate" means, with respect to a 
        Company Preferred Shareholder, (A) any other person or 
        entity which directly, or indirectly through one or more 
  

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        intermediaries, controls, or is controlled by, or is under 
        common control with, such Company Preferred Shareholder, 
        and (B) any person or entity who shares a common investment 
        advisor. The term "control" (including the terms 
        "controlling," "controlled by" and "under common control 
        with") as used with respect to any person or entity means the 
        possession, direct or indirect, of the power to direct or cause 
        the direction of the management and policies of such person 
        or entity, whether through the ownership of voting securities, 
by contract or otherwise.2
   
        No additional transfer restrictions on Preferred Escrowed 
        Earnout Shares. 
 
Founders Restrictions        Subject to the immediately succeeding bullet and Section 
        2.8(b) of the Parent Disclosure Statement, the Parent common 
        stock and the warrants to purchase Parent common stock (the 
        "Parent Warrants") that are owned by the Founders and held 
        in escrow pursuant to the Stock Escrow Agreement and the 
        Warrant Escrow Agreement, both dated as of January 11, 
        2008, by and among Parent, certain of the Founders and 
        Continental Stock Transfer & Trust Company (the "Founders 
        Escrow Agreements") shall continue to be subject to the 
        restrictions and other provisions of the Founders Escrow 
        Agreements and shall be released to the Founders as and when 
        provided for under the Founders Escrow Agreements. 
 
        Each Founder agrees not to sell, transfer or otherwise dispose 
        of, directly or indirectly, any Escrowed Sponsor Earnout 
        Shares until (a) with respect to such shares released from 
        escrow upon the achievement of the First Target between the 
        first and second anniversaries (including the second 
        anniversary) of the Closing Date, 12 months following the 
        distribution to the Founders of such shares from escrow and 
        (b) with respect to such shares released from escrow upon the 
        achievement of the First Target after the second anniversary 
        of the Closing Date, the earlier of (i) 6 months following the 
        distribution to the Founders of such shares from escrow or (ii) 
        the fifth anniversary of the Closing Date. 
   
 
Governance
 
 
Voting of Escrowed Shares        For any matters brought to a vote of the Parent shareholders 
        during such time when any Escrowed Earnout Shares or 
        Escrowed Sponsor Earnout Shares remain in escrow, each 
  
     
2  Definition of "Affiliate" may need to be revised for other uses of the term within the Shareholders' Agreement.

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        Company Common Shareholder, Company Preferred 
        Shareholder and Founder shall be entitled to vote such shares 
        without restriction (i.e., as if all such shares had been released 
        from escrow). 
 
        The Company Common Shareholders may vote the Escrowed 
        Indemnity Shares without restriction. 
   
 
Initial Composition of the        Simultaneously with the Closing, the Board shall be expanded 
Board of Directors of Parent        to 9 members and shall initially consist of the following 
(the "Board")        members: 
 
            The following 1 person designated by Apollo prior to 
            Closing (or such other person as Apollo shall designate 
  
●    Jeff Leddy 
    
            5 persons to be designated by Apollo prior to Closing, at 
            least one of whom shall be considered "independent" 
            under applicable stock exchange rules. 
 
            The following 1 person who is currently on the Board (or 
            such other person as the Board shall designate prior to the 
            Closing who is reasonably acceptable to the Escrow 
            Representative): 
 
            ●    Marc Byron 
  
            In addition, 2 persons who are considered "independent" 
            under applicable stock exchange rules shall be designated 
            mutually by the Board and the Escrow Representative. For 
            the avoidance of doubt, such right of designation shall not 
            apply to Company Preferred Stockholders. 
     
  
Founder Board Nominations        In the event of the death, disability, disqualification, 
        resignation or removal of Marc Byron, or his failure to be 
        elected, in each case, prior to the expiration of the Escrow 
        Period, Parent shall nominate for election to the Board a 
        replacement (the "Replacement Director") designated by the 
        Founders (as determined by a majority-in-interest (based on 
        fully-diluted ownership of Parent common stock from time to 
        time) of the Founders), who shall be entitled to serve until the 
        expiration of the Escrow Period. Such Replacement Director 
        shall meet any applicable requirements or qualifications under 
        applicable law, stock exchange rules and Parent 
        organizational documents to be a member of the Board. 
        Nothing herein shall be deemed to require that any party 
        hereto, or any affiliate thereof, act or be in violation of any 
        applicable provision of law, legal duty or requirement or stock 
  
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        exchange or stock market rule. 
 
      All of the parties to the Shareholders' Agreement who are 
        entitled to designate directors of the Board shall agree to vote 
        their shares in favor of Marc Byron or the Replacement 
        Director until the earlier of (x) the termination of the Escrow 
        Period and (y) the date when the Founders hold less than 50% 
        of the outstanding Parent common stock held by the Founders 
        at the Closing. For the avoidance of doubt, the foregoing 
        voting agreement does not apply to Company Preferred 
        Shareholders. 
   
 
Unaffiliated Directors        For so long as any Escrowed Earnout Shares or Escrowed 
        Indemnity Shares remain in escrow (the "Escrow Period") 
        pursuant to the Escrow Agreement, each Company Common 
        Shareholder and each Founder agrees to vote his, her or its 
        respective shares of Parent voting stock to effect a Board that 
        at all times includes Marc Byron or the Replacement Director 
        or, if no such person is still a member of the Board, at least 
        one Unaffiliated Director (as defined in Section 7.6 of the 
        Amended and Restated Merger Agreement). For the 
        avoidance of doubt, the foregoing voting agreement does not 
        apply to Company Preferred Shareholders. 
 
Registration Rights
 
 
       
 
Registration Rights of the        The following registration rights shall extend to (A) the 
Company Common        Company Common Shareholders, with respect to their Parent 
Shareholders, the Company        common stock, (B) the Company Preferred Shareholders, with 
Preferred Shareholders and        respect to their Parent common stock and (C) the Founders, 
the Founders        with respect to their Parent common stock, Parent Warrants 
        and shares of Parent common stock underlying the Parent 
        Warrants (such securities of the Company Common 
        Shareholders, the Company Preferred Shareholders and the 
        Founders, together with any shares of Parent common stock 
        issued in respect thereof upon a stock split, distribution or 
        otherwise, the "Registrable Securities"). As to any particular 
        Registrable Securities, such securities shall cease to be 
        Registrable Securities when: (a) a Registration Statement with 
        respect to the sale of such securities shall have become 
        effective under the Securities Act and such securities shall 
        have been sold, transferred, disposed of or exchanged in 
        accordance with such Registration Statement; (b) such 
        securities shall have been otherwise transferred, new 
        certificates for them not bearing a legend restricting further 
        transfer shall have been delivered by Parent and subsequent 
        public distribution of them shall not require registration under 
  

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        the Securities Act; (c) such securities shall have ceased to be 
        outstanding; or (d) the Registrable Securities are saleable 
        under Rule 144 and not subject to the volume restrictions 
        therein; provided that if, within four (4) years after the date of 
        Shareholders' Agreement, any shares of Parent common stock 
        cease to be Registrable Securities by virtue of (d) above and 
        Rule 144 subsequently becomes unavailable to permit the sale 
        thereof, such shares shall once again be considered 
        Registrable Securities. If, four (4) years after the date of 
        Shareholders' Agreement, any shares of Parent common stock 
        cease to be Registrable Securities by virtue of (d) above and 
        Rule 144 subsequently becomes unavailable to permit the sale 
        thereof, such shares shall not be Registrable Securities. 
 
        This agreement shall replace (A) all existing registration 
        rights that the Company Common Shareholders may have 
        with respect to the Company and (B) the Founders' existing 
        registration rights with Parent. 
 
        Except as provided below under Shelf Rights, the registration 
        rights of the Company Common Shareholders, the Company 
        Preferred Shareholders and the Founders shall be subject to 
        the transfer restrictions on each such holder's Parent securities 
        referenced herein, and no registration rights shall be available 
        for any securities prior to the expiry of such transfer 
restrictions with respect to such securities.
 
Demand Rights        Availability: Beginning after the expiry of the transfer 
        restrictions applicable to the given securities of the Company 
        Common Shareholders, the Company Preferred Shareholders 
        or the Founders, as the case may be, each of (a) the Company 
        Common Shareholders (as a group as determined by a 
        majority-in-interest of such holders' Parent securities), (b) the 
        Company Preferred Shareholders (as a group as determined 
        by the Majority Purchasers (as such term is defined in the 
        Series B Stock Purchase Agreement)) and (c) the Founders (as 
        a group as determined by a majority-in-interest of such 
        holders' Parent securities) may issue to Parent a written 
        request (a "Demand Notice") that Parent effect the registration 
        of all or any portion of their Registrable Securities (a 
        "Demand Registration"). Parent shall not be required to (i) 
        effect more than two (2) Demand Registrations initiated by 
        the Founders, more than two (2) Demand Registrations 
        initiated by the Company Preferred Shareholders or more than 
        four (4) Demand Registrations initiated by the Company 
        Common Shareholders or (ii) effect a Demand Registration 
        (x) requested by the Founders if such Founders request a 
  

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        registration of shares with a value of less than $2,000,000 or 
        (y) requested by the Company Common Shareholders if such 
        Company Common Shareholders request a registration of 
        shares with a value of less than $20,000,000. 
 
        Cutbacks: See "Cutbacks" under "Piggyback Rights." 
  
        Withdrawal: The demanding party (based on the majority-in- 
        interest of such holders' Parent securities or, in the case of the 
        Company Preferred Shareholders, the Majority Purchasers (as 
        such term is defined in the Series B Stock Purchase 
        Agreement)) may withdraw the Demand Notice at any time 
        prior to the effective date of the registration statement filed in 
        response to such Demand Notice if (a) it disapproves of the 
        terms of any underwriting or (b) it is not entitled to include all 
        of its requested Registrable Securities in the offering. Parent 
        shall be responsible for all expenses relating to withdrawn 
        registrations. 
 
        Underwriter: Following the date that is 24 months after the 
        Closing Date, the holders of (A) a majority of Registrable 
        Securities or (B) the Founders as a group, provided that their 
        demand relates to Registrable Securities with a value of 
        $20,000,000 or more, may elect to have an underwritten 
        offering, and may select an underwriter mutually agreed upon 
        with Parent (subject to both parties acting reasonably). 
 
        Underwriter: Following the date that is 12 months after the 
        Closing Date, the Majority Purchasers (as such term is defined 
        in the Series B Stock Purchase Agreement) may elect to have 
        an underwritten offering, and may select an underwriter 
        mutually agreed upon with Parent (subject to both parties 
        acting reasonably). 
   
  
Piggyback Rights        Availability: Company Common Shareholders, Company 
        Preferred Shareholders and the Founders shall have unlimited 
        piggyback rights (including with respect to Demand 
        Registrations initiated hereunder) (beginning after the expiry 
        of the transfer restrictions applicable to the given securities of 
        the Company Common Shareholders, the Company Preferred 
        Shareholders or the Founders, as the case may be); provided 
        that they shall have no piggyback rights (i) for registration 
        statements filed on Form S-8 or otherwise in connection with 
        any employee stock option or other benefit plan, (ii) for 
        registration statements filed on Form S-4 or otherwise for an 
        exchange offer or offering of securities solely to the Parent's 
        existing stockholders, (iii) for an offering of debt that is 
        convertible into equity securities of the Parent, (iv) for a 
 

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      dividend reinvestment plan or (v) in the case of the Company 
      Common Shareholders and the Founders, for a shelf 
      registration initiated by or on behalf of the Company 
      Preferred Shareholders. 
   
      Notice: Parent shall give notice of an intended registered 
      offering to the Company Common Shareholders, the 
      Company Preferred Shareholders and Founders as soon as 
      practicable, but no less than 15 business days prior to 
      anticipated filing date (after which such holders shall have at 
      least 10 business days to respond). 
   
      Cutbacks: Cutbacks will be permitted in an underwritten 
      offering if the underwriter determines in good faith that 
      selling the dollar amount or number of shares requested to be 
      included in the offering would materially and adversely affect 
      the initial requesting party's ability to sell the shares at the 
      desired offering price. If the offering is for Parent's account, 
      then priority will be given, first, to the shares being sold by 
      Parent, second, to the Company Preferred Shareholders, third, 
      to the Company Common Shareholders, and, fourth, to the 
      Founders (pro rata based on the number of shares that each 
      elects to include in the registration), then to other holders of 
      Parent shares. If the offering is initiated by Parent 
      shareholders other than the Company Common Shareholders, 
      the Company Preferred Shareholders or the Founders, priority 
      shall be, first, to those other shareholders, second, to the 
      Company Preferred Shareholders, third, to the Company 
      Common Shareholders, and, fourth, to the Founders (pro rata 
      based on the number of shares that each elects to include in 
      the registration), then to the shares being sold by Parent. If 
      the offering is initiated by the Company Common 
      Shareholders, the Company Preferred Shareholders or the 
      Founders pursuant to a Demand Notice, then priority shall be 
      to the demanding party, then to the non-demanding parties in 
      the same order of priority set forth above, then to shares being 
      sold by Parent, and then to other shareholders; provided that 
      in the case of a demand by either party with respect to which 
      another party has exercised piggyback rights, if the 
      underwriter has determined there should be a cutback, the 
      party exercising piggyback rights may convert its piggyback 
      election to a demand, such that the converting party and the 
      demanding party will be treated pro rata in such cutback 
      (based on the number of shares that each elects to include in 
      the registration); provided, further, that in the event a party 
      converts a piggyback election to demand election, such 
      conversion shall be counted as a demand. 
 

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        Withdrawal: Any Company Common Shareholder, Company 
        Preferred Shareholder or Founder may withdraw from a 
        piggyback registration at any time prior to the effective date 
        of the registration statement. Parent shall be responsible for 
        all expenses relating to withdrawn registrations. 
  
Shelf Rights        Availability to Company Common Shareholders and 
        Founders: Shelf registration rights shall be available to the 
        Company Common Shareholders (as a group as determined 
        by a majority-in-interest of such holders' Parent securities) 
        and the Founders (as a group as determined by a majority-in- 
        interest of such holders' Parent securities) after such time as 
        Parent becomes S-3 eligible (and beginning after the expiry of 
        the transfer restrictions applicable to the given securities of 
        the Company Common Shareholders or the Founders, as the 
        case may be). The number and frequency of takedown 
        demands (a "Shelf Notice") to which the Company Common 
        Shareholders (as a group as determined by a majority-in- 
        interest of such holders' Parent securities) and the Founders 
        (as a group as determined by a majority-in-interest of such 
        holders' Parent securities) are entitled shall be the same as the 
        entitlement for demand registrations. Parent shall not be 
        required to effect a shelf registration through an underwritten 
        offering. Parent shall not be required to give effect to a Shelf 
        Notice if (a) Form S-3 is not available for such an offering or 
        (b) the holders requesting participation in the offering propose 
        to sell securities valued at less than $2,000,000 (with respect 
        to the Founders) or $20,000,000 (with respect to the Company 
        Common Shareholders). 
 
        Availability to Company Preferred Shareholders: Following 
        the Closing, the Company shall file a shelf registration 
        statement covering all of the Company Preferred 
        Shareholders' Registrable Securities and cause it to be 
        declared effective, and to have such shares listed for trading 
        on the Company's primary exchange (to the extent it is 
        permitted to do so under applicable listing requirements and 
        guidelines), on or prior to the date that is six (6) months after 
        the Closing (the "Effectiveness Deadline"). If the Company 
        fails to cause a registration statement covering all of the 
        Company Preferred Shareholders' Registrable Securities to be 
        declared effective and to have such shares listed for trading 
        (to the extent it is permitted to do so under applicable listing 
        requirements and guidelines) as of the Effectiveness Deadline 
        (an "Effectiveness Failure"), within three business days 
        following the Effectiveness Deadline and on the last business 
        day of each 30-day period thereafter, until such time as such 
  

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        registration statement is declared effective and such shares are 
        listed for trading, the Company shall pay to each Company 
        Preferred Shareholder, an amount in cash and/or, at the 
        Company’s option additional shares of Parent common stock 
        (based on the Fair Market Value thereof) equal to (a) 1% of 
        the Fair Market Value of one share of Parent common stock, 
        multiplied by (b) the number of shares of Registrable 
        Securities held by such Company Preferred Shareholder, 
        further multiplied by, if applicable (c) a fraction, the 
        numerator of which is the number of days which have elapsed 
        during such 30-day period, and the denominator of which is 
        30. Parent shall not be required to effect a shelf takedown 
        through an underwritten offering. For purposes hereof, “Fair 
        Market Value” means (i) for purposes of clause (a) above and 
        calculating the penalty amount, $10, and (ii) if the Company 
        elects to pay any portion of such penalty in additional shares 
        of Parent common stock, then the average closing price of a 
        share of Polaris common stock as reported on the principal 
        exchange, electronic trading network or recognized quotation 
        system on which the Parent common stock is then listed or 
        quoted over the ten trading days ending on, as the case may 
        be, the 6-month anniversary of the closing of the merger, the 
        last business day of each 30-day period thereafter or the date 
        the registration statement is declared effective. In the event 
        the shares are not listed for trading on an exchange or quoted 
        on an electronic trading network or recognized quotation 
        system, the Fair Market Value shall be determined in good 
        faith by the Board of Directors, subject to reasonable and 
        customary appraisal rights of the Company Preferred 
        Shareholders. 
   
 
Registration Procedures;        The registration procedures and indemnification applicable to 
Indemnification and        registrations hereunder shall be acceptable to the Company 
Contribution        Preferred Shareholders and at least as favorable to the holders 
        of Registrable Securities as set forth in Sections 3 and 4 of the 
        Founders Registration Rights Agreement and at least as 
        favorable to the holders of Registrable Securities as set forth 
        in Sections 7 and 9 of the Company Amended and Restated 
        Registration Rights Agreement. 
   
  
Other 
 
       
  
Charter and Bylaws        The parties shall take or cause to be taken all lawful action 
        necessary to ensure at all times as of and following the 
        Closing Date that the certificate of incorporation and by-laws 
        of Parent are not inconsistent with the provisions of this 
 

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        agreement or the transactions contemplated hereby. 
   
Termination        This agreement shall terminate (a) with respect to the 
        Company Common Shareholders and the Company Preferred 
        Shareholders, on the date when the Company Common 
        Shareholders and the Company Preferred Shareholders, as a 
        group, hold less than 10% of the outstanding Parent common 
        stock and (b) with respect to all parties, on the date of a 
        change of control of Parent, provided that, in any case, (i) the 
        registration rights of the Company Common Shareholders and 
        Company Preferred Shareholders shall survive until the 
        Company Common Shareholders and Company Preferred 
        Shareholders no longer own any Parent common stock, and 
        the registration rights of the Founders shall survive until the 
        Founders no longer own any Parent common stock or Parent 
        warrants, and the related indemnification provisions shall 
        survive any termination, and (ii) the right to vote escrowed 
        shares shall survive any termination. 
  

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