Note 9 — Pending Merger with CoStar
Merger Agreement with CoStar Group, Inc.
On April 27, 2011, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CoStar Group, Inc., a Delaware corporation (“CoStar”) and Lonestar
Acquisition Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of CoStar (“Merger Subsidiary”), pursuant to which Merger Subsidiary will be merged with and into the Company (the “Merger”), with the Company surviving
as a wholly-owned subsidiary of CoStar.
Subject to the terms and conditions of the Merger Agreement, at the effective time of
the Merger, each outstanding share of the Company’s common stock will be converted into the right to receive a unit consisting of (i) $16.50 in cash, without interest, and (ii) 0.03702 shares of CoStar common stock (the “Common
Stock Consideration”). The holders of the Company’s Series A Preferred Stock will receive the Common Stock Consideration on an as-converted basis.
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each of the Company’s outstanding equity awards (including stock options and restricted stock units),
whether vested or unvested, will be cancelled in exchange for cash and/or shares of CoStar common stock (depending on the type of award and the exercise price of the award, if any) based on the Common Stock Consideration less, in the case of a stock
option, the per share exercise price.
The Company’s board of directors has unanimously approved the Merger Agreement. On
July 11, 2011, at a special meeting of the Company’s stockholders, the Merger was approved by the holders of a majority of the outstanding shares of the Company’s common stock and Series A Preferred Stock, voting together as a
single class on an as-converted basis.
As previously disclosed in the proxy statement/prospectus dated June 6, 2011,
both CoStar and the Company filed notification and report forms with the Department of Justice and the Federal Trade Commission (the “FTC”) pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the “HSR Act”), on
May 31, 2011. As a result, the waiting period under the HSR Act with respect to the proposed merger between CoStar and the Company was scheduled to expire on June 30, 2011. As previously announced, on June 30, 2011, CoStar and the
Company each received a request for additional information (commonly referred to as a “second request”) from the FTC with respect to the proposed Merger. CoStar and the Company have been working cooperatively with the FTC in connection
with its review and expect to certify substantial compliance with the second request shortly. At the FTC’s request, CoStar and the Company have agreed to extend the waiting period imposed by the HSR Act from 30 to 60 days after the date of
substantial compliance with the second request unless that period is extended voluntarily by the parties or terminated sooner by the FTC. While the parties remain hopeful that the FTC will complete its review in a time frame that would permit
the Merger to close by the end of 2011, the current timing is such that it is quite possible that the Merger may not close by such time. Consummation of the Merger remains subject to the expiration or termination of the waiting period under the
HSR Act and other customary closing conditions. Consummation of the Merger is not subject to any financing condition.
Merger Agreement contains customary representations, warranties and covenants by each of the Company and CoStar.
Agreement contains termination rights for both the Company and CoStar, including for the Company if its board of directors changes its recommendation of the Merger to its stockholders in connection with a superior proposal. Upon termination of the
Merger Agreement under certain circumstances, the Company may be obligated to pay CoStar a termination fee of $25,800,000. Upon termination of the Merger Agreement in the event necessary antitrust approval is not obtained, CoStar may be obligated to
pay the Company a termination fee of $51,600,000.
Concurrently with the execution of the Merger Agreement, the Company’s
directors and certain of its executive officers and significant stockholders entered into a voting and support agreement (the “Support Agreement”) with CoStar and the Company, and agreed, in their capacities as stockholders of the Company,
to, among other things, vote their shares of the Company’s capital stock in favor of the Merger and the Merger Agreement.
The foregoing description of the Merger, the Merger Agreement and the Support Agreement is qualified in its entirety by reference to the
Merger Agreement and the Support Agreement, copies of which are attached as Exhibit 2.1 and Exhibit 2.2, respectively, to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”)
on April 28, 2011 and which are incorporated by reference herein.
The Company cannot guarantee that the Merger will be
completed or that, if completed, it will be exactly on the terms as set forth in the Merger Agreement.