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 (Amendment No.   )

 

 

 

Filed by the Registrant [X]

 

Filed by a Party other than the Registrant [  ]

 

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I.D. Systems, Inc.
(Name of Registrant as Specified in Its Charter)
 
 
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)

 

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Table of Contents  

 

JOINT PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS

OF I.D. SYSTEMS, INC. AND EXTRAORDINARY GENERAL MEETING OF

SHAREHOLDERS OF POINTER TELOCATION LTD.

AND

PROSPECTUS FOR 32,155,963 SHARES OF COMMON STOCK

OF

POWERFLEET, INC.

 

 

 

 

Dear I.D. Systems, Inc. Stockholders and Pointer Telocation Ltd. Shareholders:

 

On behalf of the boards of directors of I.D. Systems, Inc. and Pointer Telocation Ltd., we are pleased to enclose the joint proxy statement/prospectus for the business combination of Pointer and I.D. Systems and the related facilitating transactions.

 

As previously announced, on March 13, 2019, I.D. Systems and Pointer entered into a merger agreement, which we refer to as the Merger Agreement, for the acquisition of Pointer by I.D. Systems, which we refer to as the Pointer Merger. To facilitate the Pointer Merger, a new holding company was formed, which was named PowerFleet, Inc., or PowerFleet. I.D. Systems and Pointer will each merge with wholly-owned subsidiaries of PowerFleet formed in connection with the contemplated transactions and eventually become wholly-owned subsidiaries of PowerFleet. We refer to the Merger Agreement and Investment Agreement as the Agreements and the transactions contemplated by the Merger Agreement and Investment Agreement as the Transactions,

 

In the Pointer Merger, Pointer shareholders will be entitled to receive $8.50 in cash and 1.272 shares of PowerFleet common stock for each Pointer ordinary share held by them. In the merger between I.D. Systems and the PowerFleet subsidiary, which we refer to as the I.D. Systems Merger, I.D. Systems stockholders will be entitled to receive one share of PowerFleet common stock for each share of I.D. Systems common stock held by them. See “The Merger Agreement—Merger Consideration” beginning on page 127 of the accompanying joint proxy statement/prospectus and “The Investment Agreement—Conversion of Securities” beginning on page 146 of the accompanying joint proxy statement/prospectus.

 

Pursuant to the Transactions, (i) an aggregate of 18,647,275 shares of PowerFleet common stock are expected to be issued to holders of outstanding shares of I.D. Systems and (ii) an aggregate of 10,753,102 shares of PowerFleet common stock and $71,856,419 in cash are expected to be issued to holders of outstanding shares and vested equity awards of Pointer.

 

The shares of PowerFleet common stock are expected to be listed on the Nasdaq Global Market and the Tel Aviv Stock Exchange under the symbol “PWFL.” We believe that the mergers will benefit both the I.D. Systems stockholders and the Pointer shareholders and we ask for your support in voting for the proposals related to the Transactions at our respective special and extraordinary general meetings.

 

The Pointer Merger will be funded by a combination of equity and debt financing. As previously announced, on March 13, 2019, I.D. Systems entered into an investment and transaction agreement, which we refer to as the Investment Agreement, with funds affiliated with ABRY Partners II, LLC, who we refer to as the Investors, to provide a portion of the cash consideration payable in the Pointer Merger. Pursuant to the terms of the Investment Agreement, the Investors have agreed to purchase 50,000 shares of newly created Series A Preferred Stock of PowerFleet for an aggregate purchase price of $50 million. In addition, Bank Hapoalim B.M. has agreed to provide debt financing in an aggregate principal amount of $30 million to finance the remainder of the necessary cash consideration payable in the Pointer Merger.

 

I.D. Systems stockholders are cordially invited to attend a special meeting to be held on August 29, 2019 at the offices of Olshan Frome Wolosky LLP, located at 1325 Avenue of the Americas, New York, New York 10019, at 10:00 a.m., Eastern Time. The matters to be voted on at the special meeting are: (i) the adoption of the Investment Agreement and the approval of the I.D. Systems merger, (ii) the approval of the issuance of the Series A Preferred Stock to the Investors pursuant to the Investment Agreement, (iii) the approval of the issuance of the PowerFleet common stock issuable in connection with the Pointer Merger and (iv) the approval of the authorized capital stock of PowerFleet, in addition to certain other Transaction-related proposals.

 

Pointer shareholders are cordially invited to attend an extraordinary general meeting of Pointer shareholders to be held on August 29, 2019 at the offices of Pointer’s legal counsel, ZAG/S&W, Zysman, Aharoni, Gayer & Co., at “Beit Zion,” 41-45 Rothschild Blvd., 8th Fl., Tel Aviv, Israel, at 9:00 a.m., Israel Time. The matters to be voted on at the extraordinary general meeting will be: the approval and adoption of the Merger Agreement and other proposals relating to the Pointer Merger as well as approval of bonuses to certain Pointer officers contingent upon the closing of the Pointer Merger.

 

Your vote is very important regardless of the number of shares you own. Your proxy is being solicited by the boards of directors of I.D. Systems and Pointer. We cannot consummate the Transactions unless (i) I.D. Systems stockholders adopt the four proposals listed above and (ii) Pointer shareholders approve and adopt the Merger Agreement and other proposals relating to the Pointer Merger. Whether or not you plan to attend the special meeting or the extraordinary general meeting, please vote as soon as possible by following the instructions in the accompanying joint proxy statement/prospectus. More information about the Transactions and the proposals are contained in the accompanying joint proxy statement/prospectus.

 

After careful consideration, the board of directors of I.D. Systems has unanimously approved and declared advisable the Agreements and the Transactions, including the I.D. Systems merger and the Pointer Merger, and determined that the terms and provisions of the Agreements and the Transactions, including the I.D. Systems merger and the Pointer Merger, are fair to, advisable and in the best interests of I.D. Systems and its stockholders. The board of directors of I.D. Systems unanimously recommends that you vote “FOR” each of the proposals described in the accompanying joint proxy statement/prospectus, including a proposal to adjourn the I.D. Systems special meeting in the event there are not sufficient votes to obtain approval of the four proposals described above. In considering the recommendation of the board of directors of I.D. Systems, you should be aware that certain directors and executive officers of I.D. Systems may have interests in the Transactions that may be different from, or in addition to, the interests of I.D. Systems’ stockholders generally. See “Interests of I.D. Systems Directors and Executive Officers in the Transactions” beginning on page 115 of the accompanying joint proxy statement/prospectus.

 

After careful consideration, the board of directors of Pointer has unanimously approved and adopted the Merger Agreement and determined that the terms of the Transactions are advisable and in the best interests of Pointer and its shareholders. The board of directors of Pointer recommends unanimously that you vote “FOR” each of the proposals described in the accompanying joint proxy statement/prospectus. In considering the recommendation of the board of directors of Pointer, you should be aware that certain directors and executive officers of Pointer may have interests in the Transactions that may be different from, or in addition to, the interests of Pointer’s shareholders generally. See “Interests of Pointer Directors and Executive Officers in the Transactions” beginning on page 119 of the accompanying joint proxy statement/prospectus.

 

The accompanying joint proxy statement/prospectus provides important information regarding the I.D. Systems special meeting and Pointer extraordinary general meeting and a detailed description of the Merger Agreement, the Pointer Merger, the Investment Agreement, the I.D. Systems merger, the issuance of shares of Series A Preferred Stock and the PowerFleet common stock, and the other proposals related to the Transactions. We urge you to read carefully and in its entirety the accompanying joint proxy statement/prospectus (including the annexes and any documents incorporated by reference into the accompanying joint proxy statement/prospectus). Please pay particular attention to the section entitled “Risk Factors” beginning on page 34 of the accompanying joint proxy statement/prospectus. You can also obtain information about I.D. Systems and Pointer from documents that I.D. Systems and Pointer previously have filed with the U.S. Securities and Exchange Commission.

 

Whether or not you plan to attend the special meeting or the extraordinary general meeting, please ensure that your shares will be represented and voted at the meeting by submitting a proxy as soon as possible by following the instructions in the accompanying joint proxy statement/prospectus.

 

If I.D. Systems stockholders have any questions or require assistance in voting their shares of I.D. Systems common stock, they should call D.F. King & Co., Inc., I.D. Systems’ proxy solicitor and information agent for its special meeting, toll-free at 212-269-5500 (for banks and brokers) or 866-356-7813 (for all others).

 

If Pointer shareholders have any questions or require assistance in voting their ordinary shares of Pointer, they should call Alliance Advisors LLC, Pointer’s proxy solicitor for its extraordinary general meeting, toll-free at 855-600-8104 or 973-873-7722 for all other callers.

 

We hope to see you at the I.D. Systems special meeting and Pointer extraordinary general meeting and look forward to the successful completion of the Transactions.

 

On behalf of the boards of directors of I.D. Systems and Pointer, we thank you for your consideration and continued support.

 

Very truly yours,   Very truly yours,
     
     
Michael Brodsky   Yossi Ben Shalom
Chairman of the Board of Directors   Chairman of the Board of Directors
I.D. Systems, Inc.   Pointer Telocation Ltd.

 

Neither the Securities and Exchange Commission nor the Israel Securities Authority or any state securities commission has approved or disapproved of the securities to be issued under the accompanying joint proxy statement/prospectus or determined if the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

The accompanying joint proxy statement/prospectus is dated July 25, 2019, and is first being mailed to I.D. Systems stockholders on or about July 29, 2019 and Pointer shareholders on or about August 1, 2019.

 

   
Table of Contents  

 

I.D. SYSTEMS, INC.

123 Tice Boulevard

Woodcliff Lake, New Jersey, 07677

USA

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of I.D. Systems, Inc.:

 

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of I.D. Systems, Inc., a Delaware corporation (“I.D. Systems”), will be held on August 29, 2019 at 10:00 a.m., local time, at the offices of Olshan Frome Wolosky LLP, located at 1325 Avenue of the Americas, New York, New York 10019. Only stockholders who hold shares of I.D. Systems common stock, $0.01 par value per share (“I.D. Systems Common Stock”), at the close of business on July 22, 2019, the record date for the special meeting, are entitled to vote at the special meeting and any adjournments or postponements of the special meeting. You are cordially invited to attend the special meeting to conduct the following items of business:

 

The Transaction Proposal – to consider and vote upon a proposal to adopt the Investment and Transaction Agreement, dated March 13, 2019, as amended by Amendment No. 1 to the Investment and Transaction Agreement, dated as of May 16, 2019 and Amendment No. 2 to the Investment and Transaction Agreement, dated as of June 27, 2019 (as amended, the “Investment Agreement”), by and among I.D. Systems, PowerFleet, Inc., a Delaware corporation and a wholly-owned subsidiary of I.D. Systems (“Parent”), PowerFleet US Acquisition Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“I.D. Systems Merger Sub”) and ABRY Senior Equity V, L.P. and ABRY Senior Equity Co-Investment Fund V, L.P. (collectively, the “Investors”), affiliates of ABRY Partners II, LLC, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annexes B-1 and B-2, and approve the transactions contemplated thereby, including but not limited to the reorganization into a new holding company structure by merging I.D. Systems Merger Sub with and into I.D. Systems, with I.D. Systems surviving as a wholly-owned subsidiary of Parent (the “I.D. Systems Merger”) (“Proposal 1”);

 

The Nasdaq Proposals: The Investment Shares Proposal – to consider and vote upon a proposal to approve the issuance of 50,000 shares of Parent’s newly created Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and any shares of Series A Preferred Stock issuable as dividends unless Parent elects in accordance with the Amended and Restated Certificate of Incorporation of Parent (the “Parent Charter”) that they be paid in cash (collectively, the “Investment Shares”), pursuant to the terms of the Investment Agreement and the issuance of the shares of Parent’s common stock, par value $0.01 per share (“Parent Common Stock”), issuable upon conversion of the Investment Shares (“Proposal 2”);

 

The Nasdaq Proposals: The Acquisition Shares Proposal – to consider and vote upon a proposal to approve the issuance of 10,753,102 shares of Parent Common Stock (the “Acquisition Shares”), pursuant to the terms of the Agreement and Plan of Merger, dated March 13, 2019 (the “Merger Agreement”), by and among I.D. Systems, Parent, Pointer Telocation Ltd., a public company limited by shares formed under the laws of the State of Israel (“Pointer”), Powerfleet Israel Holding Company Ltd., a private company limited by shares formed under the laws of the State of Israel and a wholly-owned subsidiary of Parent (“Pointer Holdco”), and Powerfleet Israel Acquisition Company Ltd., a private company limited by shares formed under the laws of the State of Israel and a wholly-owned subsidiary of Pointer Holdco (“Pointer Merger Sub”), pursuant to which Pointer Merger Sub will merge with and into Pointer, with Pointer surviving as a direct, wholly-owned subsidiary of Pointer Holdco (the “Pointer Merger”), and an indirect, wholly-owned subsidiary of Parent, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex A (“Proposal 3”);

 

The Charter Proposals: Authorized Share Capital – to consider and vote upon a proposal to approve the authorized shares of Parent’s capital stock, consisting of 75,000,000 shares of Parent Common Stock and 150,000 shares of preferred stock, par value $0.01 per share, of which 100,000 shares will be designated as Series A Preferred Stock and 50,000 shares of preferred stock will be undesignated, as described in Article FIFTH of the Parent Charter, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex C (“Proposal 4”);

 

The Charter Proposals: Indemnification – to consider and vote upon a proposal to approve certain provisions set forth in Article ELEVENTH of the Parent Charter, which contain certain mandatory indemnification provisions for the directors and officers of Parent, including, among other things, advancement of expenses, as described in Article ELEVENTH of the Parent Charter, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex C (“Proposal 5”);

 

The Charter Proposals: Corporate Opportunity – to consider and vote upon a proposal to approve certain provisions set forth in Article TWELFTH of the Parent Charter, which provide that certain transactions are not “corporate opportunities” of Parent, as described in Article TWELFTH of the Parent Charter, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex C (“Proposal 6”);

 

The Charter Proposals: Exclusive Forum – to consider and vote upon a proposal to approve certain provisions set forth in Article SIXTEENTH of the Parent Charter, which designates the Chancery Court of the State of Delaware as the exclusive forum for certain legal actions, as described in Article SIXTEENTH of the Parent Charter, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex C (“Proposal 7”);

 

The Plan Amendment Proposal – to consider and vote upon a proposal to approve an amendment to the I.D. Systems 2018 Incentive Plan, to be assumed by Parent in connection with the I.D. Systems Merger, which provides for an increase in the number of shares of I.D. Systems Common Stock available for issuance thereunder and reflects the assumption of the I.D. Systems 2018 Plan by Parent, after which the plan will be renamed the PowerFleet, Inc. 2018 Incentive Plan, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex H (“Proposal 8”);

 

The Advisory Vote on Executive Compensation Proposal to consider and vote on an advisory (non-binding) proposal to approve the compensation that may become payable to certain named executive officers of I.D. Systems in connection with, or following, the consummation of the Transactions (“Proposal 9”); and

 

The Adjournment Proposal – to consider and vote upon a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary, to permit further solicitation of proxies in the event there are insufficient votes present in person or by proxy for, or otherwise in connection with, the approval of each of Proposals 1, 2, 3 and 4 (the “Adjournment Proposal”).

 

Each of Proposals 1, 2, 3 and 4 is conditioned on the approval of each of the other proposals among Proposals 1, 2, 3 and 4, but Proposals 1, 2, 3, and 4 are not conditioned on the approval of any of the other proposals set forth in the accompanying joint proxy statement/prospectus. Proposals 5, 6, 7 and 8 are conditioned on the approval of all of Proposals 1, 2, 3 and 4 and will be of no force and effect if any one or more of Proposals 1, 2, 3 and 4 is not approved. Further, the consummation of the transactions, contemplated by the Merger Agreement and the Investment Agreement, is conditioned on, among other things, the approval of the Pointer Merger by the Pointer shareholders.

 

No other business will be conducted at the special meeting. These proposals are described more fully in the accompanying joint proxy statement/prospectus. We urge you to read the joint proxy statement/prospectus, including the Annexes and the documents incorporated by reference in the accompanying joint proxy statement/prospectus carefully and in their entirety. In particular, we urge you to read carefully “Risk Factors” beginning on page 34 of the accompanying joint proxy statement/prospectus. For specific instructions on how to vote your shares, see “The Special Meeting of I.D. Systems’ Stockholders—Voting Your Shares” beginning on page 66 of the accompanying joint proxy statement/prospectus.

 

Your vote is very important, regardless of the number of shares of I.D. Systems Common Stock that you own. The approval of each of Proposals 1, 4, 5, 6 and 7 requires the approval of the holders of a majority of the outstanding shares of I.D. Systems Common Stock entitled to vote thereon as of the record date for the special meeting. The approval of each of Proposals 2, 3, 8, 9 and the Adjournment Proposal requires the affirmative vote of the holders of a majority of votes cast by the stockholders present in person or represented by proxy and entitled to vote thereon at the special meeting.

 

After careful consideration, our board of directors has unanimously determined that the terms and provisions of the Investment Agreement and the Merger Agreement, including the I.D. Systems Merger and the Pointer Merger, are fair to, advisable and in the best interests of I.D. Systems and its stockholders, and unanimously recommends you vote “FOR” Proposals 1 through 9, as well as the Adjournment Proposal.

 

Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy card in the envelope provided, or submit your proxy by telephone or the Internet prior to the special meeting, and thus ensure that your shares will be represented and voted at the special meeting if you later become unable to attend. If your shares are held in a stock brokerage account or by a bank or other nominee, please follow the instructions that you receive from your broker, bank or other nominee to vote your shares.

 

  By order of the board of directors,
   
  Ned Mavrommatis
   
  Corporate Secretary
   
  July 25, 2019

 

   

Table of Contents 

 

POINTER TELOCATION LTD.

14 Hamelacha Street

Rosh Ha’ayin, Israel 4809133

NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
OF POINTER TELOCATION LTD.

 

NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting (the “Meeting”), of the shareholders of Pointer Telocation Ltd. (“Pointer”) will be held at the offices of Pointer’s legal counsel, ZAG/S&W, Zysman, Aharoni, Gayer & Co., at “Beit Zion,” 41-45 Rothschild Blvd., 8th Fl., Tel Aviv, Israel, on August 29, 2019, at 9:00 a.m., Israel Time, and thereafter as it may be adjourned from time to time.

 

At the Meeting, you will be asked to consider and vote on the following proposals:

 

  1. RESOLVED, to approve, pursuant to Section 320 of the Israeli Companies Law, 5759-1999 (the “Companies Law”), the merger of Pointer and Powerfleet Israel Acquisition Company Ltd., a private company limited by shares formed under the laws of the State of Israel and a wholly-owned subsidiary of Powerfleet Israel Holding Company Ltd. (“Pointer Holdco” and “Pointer Merger Sub”, respectively), including approval of: (i) the Merger pursuant to Sections 314 through 327 of the Companies Law, whereby Pointer Merger Sub will merge with and into Pointer, with Pointer surviving as a direct, wholly-owned subsidiary of Pointer Holdco (the “Merger”); (ii) the Agreement and Plan of Merger, dated as of March 13, 2019, by and among Pointer, I.D. Systems, Inc., a Delaware corporation (“I.D. Systems”), PowerFleet, Inc. a Delaware corporation and wholly-owned subsidiary of I.D. Systems (“Parent”), Pointer Holdco and Pointer Merger Sub (the “Merger Agreement”); (iii) the consideration to be received by Pointer’s shareholders in the Merger, such that immediately prior to the Effective Time (as defined in the Merger Agreement), each outstanding ordinary share of Pointer, par value NIS 3.00 per share (the “Pointer Ordinary Share”), will be cancelled in exchange for (a) $ 8.50 in cash; and (b) 1.272 shares of common stock, par value $0.01 per share, of Parent (the “Parent Common Stock”) (together, the “Merger Consideration”), without interest; (iv) the purchase by Pointer of a run-off directors’ and officers’ liability insurance policy, that will provide coverage to the same persons and on substantially the same terms with respect to coverage and amount as under Pointer’s current directors’ and officers’ insurance as approved by Pointer’s shareholders on June 15, 2018, including coverage of up to $15 million at a premium of up to $315,000 for a period of seven years following the effective time of the Merger, as permitted under the Merger Agreement (the “D&O Insurance Policy”); and (v) all other transactions and arrangements contemplated by the Merger Agreement, as described in the accompanying joint proxy statement/prospectus, dated July 25, 2019.

 

  2. RESOLVED, to approve the grant, immediately prior to, and contingent upon the occurrence of the closing of the Merger, the following transaction bonuses (the “Bonuses”): (i) $400,000 worth of Pointer restricted stock units (“Pointer RSUs”) to Mr. David Mahlab, Pointer’s Chief Executive Officer (the “Pointer CEO”); (ii) $200,000 in cash to Mr. Yaniv Dorani, Pointer’s Chief Financial Officer (or in Pointer RSUs, at the election of Mr. Dorani); and (iii) $150,000 worth of Pointer RSUs to Mr. Ilan Goldstein, the head of Pointer’s service division in Israel (the “Pointer Israel GM”). The terms of the bonuses payable by way of grant of Pointer RSUs shall be as follows: The number of Pointer RSUs shall equal the applicable amount (whether $400,000, $200,000 or $150,000), divided by the closing price of Pointer’s Ordinary Shares on Nasdaq on the last practicable date prior to the closing of the Merger (the “Closing”). Such Pointer RSUs shall vest in two equal installments on the following two dates: (i) on the six (6) month anniversary of the Closing, and (ii) on the 12 (twelve) month anniversary of the Closing. The vesting of such Pointer RSUs shall immediately and fully vest upon the occurrence of any one of the events below: (a) sale of all outstanding share capital of Parent, (b) merger of Parent into another corporation under which Parent ceases to exist or becomes wholly-owned by the other corporation, (c) firing of the applicable Pointer RSUs grantee under circumstances whereby Pointer is not entitled to deny such person statutory severance under applicable Israeli law, or (d) resignation of the Pointer RSUs grantee under circumstances were such person is deemed to have been fired under applicable Israeli law. All bonuses described above shall be subject to applicable tax, whether withheld at source or otherwise. The terms of the proposed grants of Pointer RSUs shall be in accordance with Pointer’s Global Share Incentive Plan (2013).

 

The Pointer board of directors has unanimously: (a) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are in the best interests of Pointer and its shareholders and that, considering the financial position of the merging companies, no reasonable concern exists that the surviving corporation will be unable to fulfill the obligations of Pointer to its creditors when they become due; (b) approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement; (c) approved the purchase of a run-off directors’ and officers’ liability insurance policy, and (d) determined to recommend that the shareholders of Pointer approve the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

 

The Pointer board of directors has furthermore determined that the approval of the Bonuses to certain Pointer officers, which shall be contingent upon the occurrence of the Closing of the Merger, is in the best interest of Pointer and its shareholders.

 

POINTER’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL AND ADOPTION OF THE MERGER PROPOSAL AND “FOR” THE APPROVAL OF THE BONUSES.

 

Approval of proposal 1 above (the “Merger Proposal”) requires the affirmative vote of the holders of a majority of outstanding Pointer Ordinary Shares.

 

In addition, pursuant to the Companies Law, if I.D. Systems, Pointer Merger Sub or an I.D. Systems Related Person, as described below, holds Pointer Ordinary Shares, then there is an additional requirement for the approval, namely that a majority of the shares voted at the Meeting (excluding shares held by such persons) shall not have voted against the Merger Proposal. Accordingly, each Pointer shareholder voting on the Merger Proposal is required to inform Pointer, as detailed below, prior to voting at the Meeting whether such shareholder is any of I.D. Systems, Pointer Merger Sub or an I.D. Systems Related Person, or, if such person is voting by proxy, to indicate such matter in the appropriate place in the enclosed proxy, as further detailed below. An “I.D. Systems Related Person” is (a) a person holding, directly or indirectly, either (i) 25% or more of the voting rights of I.D. Systems or Pointer Merger Sub, or (ii) the right to appoint 25% or more of the directors of I.D. Systems or Pointer Merger Sub, or (b) one of such person’s spouse, siblings, parents, grandparents, descendants, spouse’s descendants, siblings or parents or the spouse of any such person, or a corporation controlled by any one or more of such persons or by I.D. Systems or Pointer Merger Sub. I.D. Systems has confirmed that neither it nor Pointer Merger Sub or any I.D. Systems Related Person holds Pointer Ordinary Shares and none of them will hold Pointer Ordinary Shares as of the record date.

 

Approval of proposal 2 (the Bonuses Proposal”), requires the affirmative vote of the holders of Pointer Ordinary Shares present, in person or by proxy, at the Meeting, amounting in the aggregate to at least a majority of the votes actually cast with respect to the Bonuses Proposal, provided that one of the following shall apply: (i) the majority of the votes includes at least a majority of all the votes of shareholders who are not controlling shareholders and do not have a personal interest in the approval of the transaction; abstentions shall not be included in the total of the votes of the aforesaid shareholders; or (ii) the total of opposing votes from among the shareholders said in subsection (i) above does not exceed 2% of all the voting rights in Pointer.

 

Record holders of outstanding Pointer Ordinary Shares as of the close of business on July 29, 2019, which is the record date for the Meeting, are entitled to vote at the Meeting, and are entitled to one vote at the Meeting per Pointer Ordinary Share held for each proposal on the agenda. Pointer Ordinary Shares constitute the only outstanding class of Pointer’s share capital.

 

Enclosed with this notice you will find a joint proxy statement/prospectus, along with a proxy card. The accompanying joint proxy statement/prospectus provides you with detailed information about the Meeting and the matters to be acted upon at the Meeting.

 

PowerFleet, Inc. has filed with the U.S. Securities and Exchange Commission, or the SEC, a Registration Statement on Form S-4 registering the shares of Parent Common Stock to be issued to Pointer’s shareholders in connection with the Merger. The prospectus that is included in the registration statement, which this Proxy Statement forms a part of, contains detailed information about a number of important matters including the business of Pointer, I.D. Systems and Parent, the Merger Agreement, the Merger and the rights of holders of Parent Common Stock following the effective time of the Merger.

 

EACH OF THESE DOCUMENTS CONTAINS IMPORTANT INFORMATION. YOU ARE THEREFORE URGED TO READ THEM CAREFULLY AND IN THEIR ENTIRETY.

 

YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF POINTER ORDINARY SHARES YOU OWN. ACCORDINGLY, YOU ARE REQUESTED TO PROMPTLY COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. SUBMITTING YOUR VOTE IN ADVANCE WILL NOT PREVENT YOU FROM VOTING YOUR POINTER ORDINARY SHARES IN PERSON IF YOU SUBSEQUENTLY CHOOSE TO ATTEND THE MEETING.

 

Please return your proxy card so as to be received by 5:00 p.m., Eastern Time on August 28, 2019 (being 12:00 a.m., Israel Time, on August 29, 2019). Your proxy cards, if properly executed, will be voted in the manner directed by you. Signed and dated proxies received by Pointer without an indication of how the shareholder intends to vote on a proposal will be counted towards the quorum but will not be treated as having been voted in respect of the proposals at Meeting. In addition, a shareholder’s vote will not be counted unless the shareholder indicates, with respect to the Merger Proposal, that such person is not an I.D. Systems Related Person, and with respect to the Bonuses Proposal, that such person has no personal interest in such proposal and that such person is not a controlling shareholder of Pointer, as such terms are defined under the Companies Law. The proxy card to be mailed will include instructions on how to make this indication. Detailed proxy voting instructions are provided both in the proxy statement and on the proxy cards that are being sent to you.

 

Please do not send your certificates representing Pointer Ordinary Shares at this time. If the Merger Proposal is adopted and approved and the Merger is subsequently completed, instructions for surrendering your certificates in exchange for the Merger Consideration will be sent to you.

 

Thank you for your cooperation.

 

 

Very truly yours,

   
  /s/ Yossi Ben Shalom
 

Yossi Ben Shalom

Chairman of the Board of Directors

 

Neither the Securities and Exchange Commission nor the Israel Securities Authority or any state securities commission has approved or disapproved of the securities to be issued under the accompanying joint proxy statement/prospectus or determined if the accompanying joint proxy statement/prospectus is accurate or complete. Any statement to the contrary is a criminal offense.

 

The date of the accompanying joint proxy statement/prospectus is July 25, 2019 and is first being mailed to shareholders of Pointer on or about August 1, 2019.

 


   

Table of Contents 

 

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS AND THE SPECIAL AND EXTRAORDINARY GENERAL MEETINGS 1
SUMMARY 17
  Information about the Companies 17
  The Transactions 18
  Company Structure – Diagrams 19
  Merger Consideration to I.D. Systems Stockholders and to Pointer Shareholders 20
  Treatment of I.D. Systems Stock Options and Restricted Stock Awards 20
  Treatment of Pointer Stock Options and Restricted Stock Unit Awards 20
  Comparative Per Share Data and Dividend Information 21
  Recommendation of the I.D. Systems Board of Directors and I.D. Systems’ Reasons for the Transactions 21
  Opinion of I.D. Systems’ Financial Advisor 22
  Recommendation of the Pointer Board of Directors and Pointer’s Reasons for the Transactions 22
  Opinion of Pointer’s Financial Advisor 23
  Interests of Certain Persons in the Transactions 23
  Certain Governance Matters Following the Transactions 24
  Certain Tax Consequences of the Transactions 24
  No Appraisal Rights 24
  Listing of Parent Common Stock on Stock Exchange 24
  Conditions to the Completion of the Transactions 24
  Termination of the Agreements 26
  Termination Fees 29
  Certain Regulatory Approvals 30
  Additional Financing Relating to the Transactions 31
  Voting and Support Agreements 31
  Registration Rights Agreement 31
  Accounting Treatment 32
  Comparison of the Rights of Holders of Pointer Ordinary Shares and Parent Common Stock 32
  Comparison of the Rights of Holders of I.D. Systems Common Stock and Parent Common Stock 32

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 33
RISK FACTORS 34
  Risk Factors Relating to the Transactions 34
  Additional Risks Relating to Parent after Completion of the Transactions 44
  Additional Risks Relating to I.D. Systems, Pointer and Parent after the Transactions 48
SELECTED HISTORICAL FINANCIAL DATA OF I.D. SYSTEMS 48
SELECTED HISTORICAL FINANCIAL DATA OF POINTER 49
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION 50
COMPARATIVE PER SHARE INFORMATION 58
INFORMATION ABOUT THE COMPANIES 59
  I.D. Systems 59
  Pointer 59
  Parent 60
  Pointer Holdco 60
  Pointer Merger Sub 60
  I.D. Systems Merger Sub 60
  Investors 60
THE SPECIAL MEETING OF I.D. SYSTEMS’ STOCKHOLDERS 61
  Overview 61
  Date, Time and Place of the Special Meeting 61
  Record Date; Outstanding Shares; Shares Entitled to Vote 61
  Attendance 61
  Proposals 61
  Quorum 62
  Vote Required; Recommendation of the I.D. Systems Board of Directors 62
  Share Ownership and Voting by I.D. Systems’ Officers and Directors 65
  Voting Your Shares 66
  Voting Shares Held in Street Name 66
  Voting Shares Held in I.D. Systems 401(k) Plan Account 66
  Revoking Your Proxy 67
  Costs of Solicitation 67
  I.D. Systems Stockholders Should Not Send in Their Stock Certificates with Their Proxy Cards. 67

 

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  Other Business 67
  Assistance 67
THE EXTRAORDINARY GENERAL MEETING OF POINTER’S SHAREHOLDERS 68
  Overview 68
  Date, Time & Place of the Extraordinary General Meeting 68
  Record Date; Outstanding Shares; Shares Entitled to Vote 68
  Attendance 68
  Proposals 68
  Quorum 68
  Vote Required; Recommendation of the Pointer Board of Directors 69
  Ordinary Share Ownership and Voting by Pointer’s Directors and Officers 69
  Voting Your Pointer Ordinary Shares 69
  Voting Pointer Ordinary Shares Held in Street Name 70
  Revoking Your Proxy 70
  Costs of Solicitation 70
  Pointer Shareholders Should Not Send in Their Stock Certificates with Their Proxy Cards. 70
  Other Business 70
  Assistance 70
I.D. SYSTEMS PROPOSAL 1: TO ADOPT THE INVESTMENT AGREEMENT AND APPROVE THE I.D. SYSTEMS MERGER AND POINTER PROPOSAL 1: TO APPROVE THE MERGER AGREEMENT AND RELATED MATTERS 71
  General 71
  Company Structure – Diagrams 71
  Background to the Transactions 76
  Recommendation of the I.D. Systems Board of Directors and I.D. Systems’ Reasons for the Transactions 87
  Recommendation of the Pointer Board of Directors and Pointer’s Reasons for the Transactions 91
  I.D. Systems Unaudited Prospective Financial Information 94
  Pointer Unaudited Prospective Financial Information 96
  Opinion of I.D. Systems’ Financial Advisor 97
  Opinion of Pointer’s Financial Advisor 103
  Interests of I.D. Systems Directors and Executive Officers in the Transactions 115
  Interests of Pointer Directors and Executive Officers in the Transactions 119
  Certain Governance Matters Following the Transactions 119

 

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  Accounting Treatment 119
  No Appraisal Rights 120
CERTAIN TAX CONSEQUENCES OF THE TRANSACTIONS 120
  Material U.S. Federal Income Tax Consequences of the Transactions 120
  Israeli Income Tax Considerations 124
THE MERGER AGREEMENT 126
THE INVESTMENT AGREEMENT 145
CERTAIN REGULATORY APPROVALS 163
ADDITIONAL FINANCING RELATING TO THE TRANSACTIONS 164
  Debt Commitment Letter 164
  Capital Notes 165
VOTING AND SUPPORT AGREEMENTS 165
  Merger Agreement 165
  Investment Agreement 165
REGISTRATION RIGHTS AGREEMENT 166
I.D. SYSTEMS NASDAQ PROPOSALS 167
I.D. SYSTEMS PROPOSAL 2: TO APPROVE THE ISSUANCE OF THE INVESTMENT SHARES AND THE ISSUANCE OF THE SHARES OF PARENT COMMON STOCK ISSUABLE UPON CONVERSION OF THE INVESTMENT SHARES 167
I.D. SYSTEMS PROPOSAL 3: TO APPROVE THE ISSUANCE OF THE ACQUISITION SHARES 168
I.D. SYSTEMS CHARTER PROPOSALS 169
I.D. SYSTEMS PROPOSAL 4: TO APPROVE THE AUTHORIZED SHARES OF PARENT’S CAPITAL STOCK 169
I.D. SYSTEMS PROPOSAL 5: TO APPROVE CERTAIN PARENT CHARTER PROVISIONS CONTAINING MANDATORY INDEMNIFICATION PROVISIONS AND THE ADVANCEMENT OF EXPENSES 170
I.D. SYSTEMS PROPOSAL 6: TO APPROVE CERTAIN PARENT CHARTER PROVISIONS PROVIDING THAT CERTAIN TRANSACTION ARE NOT “CORPORATE OPPORTUNITIES” 171
I.D. SYSTEMS PROPOSAL 7: TO APPROVE CERTAIN PARENT CHARTER PROVISIONS DESIGNATING THE CHANCERY COURT OF THE STATE OF DELAWARE AS THE EXCLUSIVE FORUM FOR CERTAIN LEGAL ACTIONS 172
I.D. SYSTEMS PROPOSAL 8: TO APPROVE AN AMENDMENT TO THE I.D. SYSTEMS 2018 INCENTIVE PLAN 173
  Summary of the I.D. Systems 2018 Plan 173
  Assumption of I.D. Systems 2018 Plan by Parent 178
  Equity Compensation Plan Information 178
I.D. SYSTEMS PROPOSAL 9: TO APPROVE, ON AN ADVISORY (NON-BINDING) BASIS, THE COMPENSATION THAT MAY BECOME PAYABLE TO CERTAIN EXECUTIVES IN CONNECTION WITH THE TRANSACTIONS 179

 

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I.D. SYSTEMS ADJOURNMENT PROPOSAL 180
POINTER PROPOSAL 2: APPROVAL OF TRANSACTION BONUSES 181
LISTING OF PARENT COMMON STOCK ON STOCK EXCHANGE 182
DELISTING AND DEREGISTRATION OF SHARES OF I.D. SYSTEMS COMMON STOCK AND POINTER ORDINARY SHARES 182
COMPARATIVE PER SHARE DATA AND DIVIDEND INFORMATION 182
  Dividends 183
DESCRIPTION OF PARENT CAPITAL STOCK 183
  Authorized Capital Stock 183
  Special Meetings of Stockholders 186
  Quorum for Meetings of Stockholders 186
  Stockholder Action by Written Consent 186
  Choice of Forum 186
  Corporate Opportunity 186
  Exculpation 187
  Indemnification 187
  Anti-Takeover Effect of Delaware Law and Certain Parent Charter Provisions 187
  Listing of Securities 189
  Transfer Agent and Registrar 189
COMPARISON OF THE RIGHTS OF HOLDERS OF POINTER ORDINARY SHARES AND PARENT COMMON STOCK 190
COMPARISON OF THE RIGHTS OF HOLDERS OF I.D. SYSTEMS COMMON STOCK AND PARENT COMMON STOCK 195
LEGAL MATTERS 200
EXPERTS 200
FUTURE STOCKHOLDER PROPOSALS 200
WHERE YOU CAN FIND MORE INFORMATION 201
ANNEXES  
  Annex A – Agreement and Plan of Merger A-1
  Annex B-1 – Investment and Transaction Agreement B-1-1
  Annex B-2 – Amendment No. 1 to Investment and Transaction Agreement B-2-1
  Annex B-3 – Amendment No. 2 to Investment and Transaction Agreement

B-3-1

  Annex C – Form of Amended and Restated Certificate of Incorporation of Parent C-1
  Annex D – Form of Amended and Restated Bylaws of Parent D-1
  Annex E – Opinion of Canaccord Genuity LLC E-1
  Annex F – Opinion of Roth Capital Partners, LLC F-1
  Annex G – I.D. Systems, Inc. 2018 Incentive Plan G-1
  Annex H – First Amendment to I.D. Systems, Inc. 2018 Incentive Plan H-1
  Annex I – Registration Rights Agreement I-1

 

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QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS AND THE SPECIAL AND EXTRAORDINARY GENERAL MEETINGS

 

The following questions and answers are intended to address briefly some commonly asked questions regarding the Transactions and the I.D. Systems special meeting and the Pointer extraordinary general meeting. These questions and answers only highlight some of the information contained in this joint proxy statement/prospectus. They may not contain all the information that is important to you. You should read carefully this entire joint proxy statement/prospectus, including the Annexes and the documents incorporated by reference into this joint proxy statement/prospectus, to understand fully the proposed transactions and the voting procedures for the meetings. See “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus. Unless otherwise indicated or the context requires, all references in this joint proxy statement/prospectus to:

 

the “Acquisition Shares” refer to, pursuant to the terms of the Merger Agreement, an aggregate of 10,753,102 shares of Parent Common Stock issuable to (i) holders of outstanding Pointer Ordinary Shares (other than Pointer Ordinary Shares owned, directly or indirectly, by I.D. Systems, Parent or any of its subsidiaries or Pointer or any of its wholly-owned subsidiaries) at the effective time of the Pointer Merger, (ii) holders of certain vested options to purchase Pointer Ordinary Shares that are outstanding at the effective time of the Pointer Merger and (iii) holders of certain vested restricted stock units of Pointer that are outstanding at the effective time of the Pointer Merger.
   
the “Agreements” refer to the Investment Agreement and the Merger Agreement.
   
“dollars” or “$” refer to U.S. dollars.
   
the “Exchange Act” refer to the Securities Exchange Act of 1934, as amended.
   
“I.D. Systems” refer to I.D. Systems, Inc., a Delaware corporation.
   
the “I.D. Systems Bylaws” refer to the Restated By-Laws of I.D. Systems, as amended.
   
the “I.D. Systems Charter” refer to the Amended and Restated Certificate of Incorporation of I.D. Systems, as amended.
   
“I.D. Systems Common Stock” refer to shares of common stock of I.D. Systems, par value $0.01 per share.
   
the “I.D. Systems Merger” refer to, pursuant to the terms of the Investment Agreement, the merger of I.D. Systems Merger Sub with and into I.D. Systems, with I.D. Systems surviving as a wholly-owned subsidiary of Parent.
   
“I.D. Systems Merger Sub” refer to PowerFleet US Acquisition Inc., a Delaware corporation and wholly-owned subsidiary of Parent.
   
the “I.D. Systems Specified Stockholder Approval” refer to the approval by the stockholders of I.D. Systems of each of I.D. Systems Proposals 1, 2, 3 and 4.
   
the “I.D. Systems Stockholder Approval” refer to the approval by the stockholders of I.D. Systems of I.D. Systems Proposals 1 through 8.
   
the “Investment Agreement” refer to the Investment and Transaction Agreement, dated as of March 13, 2019, as amended by Amendment No. 1 to the Investment and Transaction Agreement, dated as of May 16, 2019, and Amendment No. 2 to the Investment and Transaction Agreement, dated as of June 27, 2019, by and among I.D. Systems, Parent, I.D. Systems Merger Sub and the Investors, copies of which are included as Annexes B-1, B-2 and B-3 to this joint proxy statement/prospectus.
   
the “Investment Documents” refer to the Investment Agreement, the Parent Charter, the Registration Rights Agreement and the schedules and ancillary documents thereto.
   
the “Investment Shares” refer to, pursuant to the terms of the Investment Agreement, an aggregate of 50,000 shares of Series A Preferred Stock issued in the private placement to the Investors, including any shares of Series A Preferred Stock issuable as dividends thereon.
   
the “Investors” refer to ABRY Senior Equity V, L.P. and ABRY Senior Equity Co-Investment Fund V, L.P., affiliates of ABRY Partners II, LLC.

 

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the “Merger Agreement” refer to the Agreement and Plan of Merger, dated as of March 13, 2019, by and among I.D. Systems, Parent, Pointer, Pointer Holdco and Pointer Merger Sub, a copy of which is included as Annex A to this joint proxy statement/prospectus.
   
“our” or “we” refer to I.D. Systems and Pointer, as the context indicates.
   
“Parent” refer to PowerFleet, Inc., a Delaware corporation, initially formed as a wholly-owned subsidiary of I.D. Systems.
   
the “Parent Bylaws” refer to the Amended and Restated Bylaws of Parent, to be effective upon consummation of the Transactions, a copy of which is included as Annex D to this joint proxy statement/prospectus.
   
the “Parent Charter” refer to the Amended and Restated Certificate of Incorporation of Parent, to be effective upon consummation of the Transactions, a copy of which is included as Annex C to this joint proxy statement/prospectus.
   
“Parent Common Stock” refer to shares of common stock of Parent, par value $0.01 per share.
   
“Pointer” refer to Pointer Telocation Ltd., a public company limited by shares incorporated under the laws of the State of Israel.
   
the “Pointer Articles of Association” refer to the Amended and Restated Articles of Association of Pointer.
   
“Pointer Holdco” refer to PowerFleet Israel Holding Company Ltd., a private company limited by shares formed under the laws of the State of Israel and a wholly-owned subsidiary of Parent.
   
the “Pointer Merger” refer to, pursuant to the terms of the Merger Agreement, the merger of Pointer Merger Sub with and into Pointer, with Pointer surviving as a direct, wholly-owned subsidiary of Pointer Holdco and an indirect, wholly-owned subsidiary of Parent.
   
“Pointer Merger Sub” refer to PowerFleet Israel Acquisition Company Ltd., a private company limited by shares formed under the laws of the State of Israel and a wholly-owned subsidiary of Pointer Holdco.
   
“Pointer Ordinary Shares” refer to ordinary shares of Pointer, par value NIS 3.00 per share.
   
the “Pointer Shareholder Approval” refer to the adoption of the Merger Agreement and the approval of the Pointer Merger by the Pointer shareholders and other items included in Pointer Proposal 1 to be voted by the Pointer shareholders.
   
the “Preferred Investment” refer to, pursuant to the terms of the Investment Agreement, the issuance and sale pursuant to a private placement by Parent to the Investors of 50,000 shares of Series A Preferred Stock of Parent at a purchase price of $1,000 per Investment Share, an aggregate purchase price of $50,000,000.
   
the “Registration Rights Agreement” refer to the registration rights agreement to be entered into by and among the Investors and Parent simultaneous with the consummation of the Transactions.
   
the “SEC” refer to the U.S. Securities and Exchange Commission.
   
the “Securities Act” refer to the Securities Act of 1933, as amended.
   
“Series A Preferred Stock” refer to shares of Series A Convertible Preferred Stock of Parent, par value $0.01 per share.
   
the “Transactions” refer to the Pointer Merger, the I.D. Systems Merger and the Preferred Investment, and the additional transactions contemplated by the Merger Agreement and the Investment Agreement.

 

If you are in any doubt about the transactions described herein, you should consult an independent financial advisor.

 

Q: What are the Agreements and the Transactions?

 

A: On March 13, 2019, I.D. Systems, Pointer, Parent and the other parties thereto entered into the Merger Agreement, pursuant to which Pointer Merger Sub will merge with and into Pointer, with Pointer surviving as a direct, wholly-owned subsidiary of Pointer Holdco and an indirect, wholly-owned subsidiary of Parent, in exchange for consideration consisting of $8.50 in cash (the “Cash Consideration”) and 1.272 shares of Parent Common Stock (the “Stock Consideration”, and, collectively with the Cash Consideration, the “Pointer Merger Consideration”), per Pointer Ordinary Share.

 

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Also on March 13, 2019, and in connection with the Merger Agreement, I.D. Systems, Parent, I.D. Systems Merger Sub and the Investors entered into the Investment Agreement, pursuant to which I.D. Systems will reorganize into a new holding company structure by merging I.D. Systems Merger Sub with and into I.D. Systems, with I.D. Systems surviving as a wholly-owned subsidiary of Parent and pursuant to which Parent will issue and sell to the Investors in a private placement 50,000 shares of Parent’s newly created Series A Preferred Stock for an aggregate purchase price of $50,000,000 to finance a portion of the Cash Consideration payable in the Pointer Merger. In the I.D. Systems Merger, each outstanding share of I.D. Systems Common Stock will be exchanged for one share of Parent Common Stock.

 

On May 16, 2019, I.D. Systems, Parent, I.D. Systems Merger Sub and the Investors entered into Amendment No. 1 to the Investment Agreement (the “Investment Agreement First Amendment”) to, among other things, revise the form of the Parent Charter based on feedback received from the Israel Securities Authority (the “ISA”). Pursuant to the Investment Agreement First Amendment, the Parent Charter was revised to provide that (i) except as required by applicable law or as otherwise specifically set forth in the Parent Charter, the holders of Series A Preferred Stock will not be entitled to vote on any matter presented to the stockholders of Parent unless and until any holder of Series A Preferred Stock provides written notice to Parent electing, on behalf of all holders of Series A Preferred Stock, to activate their voting rights and thereby render the Series A Preferred Stock voting capital stock of Parent, and (ii) after the delivery of any such notice, all holders of Series A Preferred Stock will be and continue to be entitled to vote their shares of Series A Preferred Stock unless and until such time as the holders of at least a majority of the outstanding shares of Series A Preferred Stock provide further written notice to Parent that they elect to deactivate their voting rights. In addition, the Parent Charter was amended to fix the initial conversion price of the Series A Preferred Stock at $7.319 (based on the 30-day volume weighted average trading price of I.D. Systems Common Stock prior to the signing of the Investment Agreement First Amendment), in lieu of having the conversion price based on the volume weighted average trading price of I.D. Systems Common Stock during a defined period prior to either the signing or the closing of the Transactions.

 

On June 27, 2019, following discussions with representatives of the Nasdaq Stock Market regarding the listing of the Parent Common Stock on the Nasdaq Global Market, I.D. Systems, Parent, I.D. Systems Merger Sub and the Investors entered into Amendment No. 2 to the Investment Agreement (the “Investment Agreement Second Amendment”). Pursuant to the Investment Agreement Second Amendment, the Parent Charter was revised to provide, among other things, that (i) to the extent voting rights of the Series A Preferred Stock have been activated, any holder of Series A Preferred Stock shall not be entitled to cast votes for the number of shares of Parent Common Stock issuable upon conversion of shares of Series A Preferred Stock held by such holder that exceeds the quotient of (A) the aggregate Series A Issue Price for such shares of Series A Preferred Stock divided by (B) the closing bid price of the I.D. Systems Common Stock on the last trading day immediately prior to the consummation date of the Transactions (subject to adjustment for stock splits, stock dividends, combinations, reclassifications and similar events, as applicable), and (ii) in the event that the holders of the Series A Preferred Stock are entitled to designate one non-voting observer to attend meetings of the board of directors and committees of Parent, the observer may be excluded from executive sessions of any committee at the discretion of such committee. The revisions were made to ensure compliance with the Voting Rights Policy of the Nasdaq Stock Market and related staff interpretations with respect to board observer rights.

 

As a result of the Transactions, I.D. Systems and Pointer Holdco will each become direct, wholly-owned subsidiaries of Parent, and Pointer will become an indirect, wholly-owned subsidiary of Parent. The stockholders of I.D. Systems and shareholders of Pointer will become stockholders of Parent. Immediately prior to the effective time of the I.D. Systems Merger, Parent’s existing certificate of incorporation will be amended and restated in the form included as Annex C to this joint proxy statement/prospectus to provide for, among other things, the designations, powers, preferences and rights of the Series A Preferred Stock.

 

See “I.D. Systems Proposal 1: To Adopt the Investment Agreement and Approve the I.D. Systems Merger and Pointer Proposal 1: To Approve the Merger Agreement and Related Matters—General” beginning on page 71 of this joint proxy statement/prospectus and “I.D. Systems Proposal 1: To Adopt the Investment Agreement and Approve the I.D. Systems Merger and Pointer Proposal 1: To Approve the Merger Agreement and Related Matters—Company Structure - Diagrams” beginning on page 71 of this joint proxy statement/prospectus.

 

Q: Why am I receiving this joint proxy statement/prospectus?

 

A: This joint proxy statement/prospectus serves as the proxy statement through which I.D. Systems and Pointer will solicit proxies to obtain the necessary stockholder and shareholder approvals for the Transactions. It also serves as the prospectus by which Parent will issue the Acquisition Shares and the shares of Parent Common Stock issuable in the I.D. Systems Merger pursuant to the Investment Agreement. I.D. Systems is holding a special meeting of stockholders (the “I.D. Systems special meeting”) in order to obtain the I.D. Systems Specified Stockholder Approval necessary to (i) adopt the Investment Agreement and approve the I.D. Systems Merger, (ii) approve the issuance of the Investment Shares and the shares of Parent Common Stock issuable upon conversion of the Investment Shares, (iii) approve the issuance of the Acquisition Shares, and (iv) approve the authorized shares of Parent capital stock as stated in the Parent Charter as well as the other proposals related to the Transactions described herein. I.D. Systems stockholders will also be asked to approve the adjournment of the I.D. Systems special meeting (if necessary or appropriate to solicit additional proxies if there are not sufficient votes to obtain the I.D. Systems Specified Stockholder Approval) and to approve, on an advisory (non-binding) basis, the compensation arrangements for certain of I.D. Systems’ named executive officers in connection with the Transactions and certain other proposals related to the Parent Charter as described herein. Pointer is holding an extraordinary general meeting of shareholders (the “Pointer extraordinary general meeting”), in order to obtain the shareholder approval necessary to approve the Pointer Merger and to adopt the Merger Agreement and to approve, as part of the approval of the Pointer Merger and the Merger Agreement, the purchase of a run-off insurance policy to cover certain potential liabilities of Pointer’s directors and officers in connection with and as permitted under the Merger Agreement. Pointer shareholders will also be asked to approve special bonuses to be granted to certain officers of Pointer, which will be subject to the occurrence of the closing of the Merger.

 

You are receiving this joint proxy statement/prospectus because you were a holder of record of I.D. Systems Common Stock and/or Pointer Ordinary Shares as of the close of business on the record date for the I.D. Systems special meeting or the Pointer extraordinary general meeting, as applicable, and are therefore entitled to vote at the I.D. Systems special meeting and/or Pointer extraordinary general meeting.

 

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This joint proxy statement/prospectus contains important information about the Transactions, the Merger Agreement and the Investment Agreement, copies of which are included with this joint proxy statement/prospectus as Annexes A and B, respectively, and the I.D. Systems special meeting and Pointer extraordinary general meeting. You should read this information carefully and in its entirety. The enclosed voting materials allow you to vote your shares without attending the I.D. Systems special meeting or the Pointer extraordinary general meeting, as applicable. Your vote is very important and we encourage you to submit your proxy as soon as possible.

 

Q: When were the enclosed solicitation materials first made available to I.D. Systems stockholders and Pointer shareholders?

 

A: The enclosed materials were first made available to I.D. Systems stockholders on or about July 29, 2019 and to Pointer shareholders on or about August 1, 2019.

 

Q: When and where will the I.D. Systems special meeting and Pointer extraordinary general meeting be held?

 

A: The I.D. Systems special meeting will be held at the offices of Olshan Frome Wolosky LLP, located at 1325 Avenue of the Americas, New York, New York 10019, on August 29, 2019 at 10:00 a.m., local time. The Pointer extraordinary general meeting will be held at the offices of Pointer’s legal counsel, ZAG/S&W, Zysman, Aharoni, Gayer & Co., at “Beit Zion,” 41-45 Rothschild Blvd., 8th Fl., Tel Aviv, Israel, on August 29, 2019 at 9:00 a.m., local time.

 

Q: What will I.D. Systems stockholders receive as consideration in the I.D. Systems Merger?

 

A: At the effective time of the I.D. Systems Merger (the “I.D. Systems Merger Effective Time”), each share of I.D. Systems Common Stock outstanding immediately prior to such time, other than any I.D. Systems Common Stock owned by I.D. Systems immediately prior to the I.D. Systems Merger Effective Time, will be converted automatically into the right to receive one share of Parent Common Stock.

 

See “The Investment Agreement—Conversion of Securities” beginning on page 146 of this joint proxy statement/prospectus.

 

Q: What will Pointer shareholders receive as consideration in the Pointer Merger?

 

A: At the effective time of the Pointer Merger (the “Pointer Merger Effective Time”), each outstanding Pointer Ordinary Share, other than Pointer Ordinary Shares owned, directly or indirectly, by I.D. Systems, Parent or any of their subsidiaries or Pointer or any of its wholly-owned subsidiaries immediately prior to the Pointer Merger Effective Time, will be cancelled in exchange for $8.50 in cash, without interest, and 1.272 shares of Parent Common Stock.

 

See “The Merger Agreement—Merger Consideration” beginning on page 127 of this joint proxy statement/prospectus.

 

Q: What will happen to outstanding I.D. Systems equity awards in the Transactions?

 

A: At the I.D. Systems Merger Effective Time, each option to purchase shares of I.D. Systems Common Stock outstanding under any of the I.D. Systems equity plans, whether or not vested or exercisable, will be converted automatically into a stock option to purchase an identical number of shares of Parent Common Stock, on the same terms and conditions as applied to such option immediately prior to the I.D. Systems Merger Effective Time, and as set forth in the documentation relating to such option. At the I.D. Systems Merger Effective Time, each restricted stock award with respect to shares of I.D. Systems Common Stock outstanding under any of the I.D. Systems equity plans, whether or not vested, will be converted automatically into a restricted stock award with respect to shares of Parent Common Stock, on the same terms and conditions as applied to such I.D. Systems restricted stock award immediately prior to the I.D. Systems Merger Effective Time, and as set forth in the documentation relating to such restricted stock award of I.D. Systems.

 

See “The Investment Agreement—Treatment of I.D. Systems Stock Options and Restricted Stock Awards” beginning on page 146 of this joint proxy statement/prospectus.

 

Q: What will happen to outstanding Pointer equity awards in the Transactions?

 

A: Treatment of Pointer Stock Options

 

At the Pointer Merger Effective Time, each award of options to purchase Pointer Ordinary Shares that is outstanding and unvested immediately prior to such time will be cancelled and substituted with options to purchase shares of Parent Common Stock under the I.D. Systems 2018 Incentive Plan (“I.D. Systems 2018 Plan”) on the same material terms and conditions as were applicable to the corresponding option immediately prior to the Pointer Merger Effective Time, except that (i) the number of shares of Parent Common Stock underlying such substituted option will equal the product of (A) the number of Pointer Ordinary Shares underlying such option immediately prior to the Pointer Merger Effective Time multiplied by (B) 2.544, with any fractional shares rounded down to the nearest whole number of shares of Parent Common Stock, and (ii) the per-share exercise price will equal the quotient obtained by dividing (A) the exercise price per Pointer Ordinary Share subject to such option immediately prior to the Pointer Merger Effective Time by (B) 2.544 (rounded up to the nearest whole cent).

 

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At the Pointer Merger Effective Time, each award of options to purchase Pointer Ordinary Shares that is outstanding and vested immediately prior to such time will be cancelled in exchange for the right to receive the product of (i) the excess, if any, of (A) the Pointer Merger Consideration (allocated between the Cash Consideration and the Stock Consideration in the same proportion as for holders of Pointer Ordinary Shares), over (B) the exercise price per Pointer Ordinary Share subject to such option, multiplied by (ii) the total number of Pointer Ordinary Shares underlying such option. If the exercise price of a vested option is equal to or greater than the consideration payable in respect of a vested option, such option will be cancelled without payment.

 

See “The Merger Agreement—Treatment of Pointer Share-Based Plans—Pointer Options” beginning on page 129 of this joint proxy statement/prospectus.

 

Treatment of Pointer Restricted Stock Unit Awards

 

At the Pointer Merger Effective Time, each award of restricted stock units of Pointer (a “Pointer RSU”) that is outstanding and vested immediately prior to such time will be cancelled in exchange for the right to receive the Pointer Merger Consideration (allocated between the Cash Consideration and the Stock Consideration in the same proportion as for holders of Pointer Ordinary Shares). Each Pointer RSU that is outstanding and unvested immediately prior to such time will be cancelled and substituted with restricted stock units under the I.D. Systems 2018 Plan representing the right to receive, on the same material terms and conditions as were applicable under such Pointer RSU immediately prior to the Pointer Merger Effective Time, that number of shares of Parent Common Stock equal to the product of (i) the number of Pointer Ordinary Shares underlying such Pointer RSU immediately prior to the Pointer Merger Effective Time multiplied by (ii) 2.544, with any fractional shares rounded down to the nearest lower whole number of shares of Parent Common Stock.

 

See “The Merger Agreement—Treatment of Pointer Share-Based Plans—Pointer Restricted Stock Units” beginning on page 129 of this joint proxy statement/prospectus.

 

Q: Who is entitled to vote?

 

A: I.D. Systems: The board of directors of I.D. Systems has set July 22, 2019 as the record date for the I.D. Systems special meeting (the “I.D. Systems Record Date”). If you were an I.D. Systems stockholder of record as of the close of business on the I.D. Systems Record Date, you are entitled to receive notice of and to vote at the I.D. Systems special meeting and any adjournments thereof.

 

Pointer: The board of directors of Pointer has set July 29, 2019 as the record date for the Pointer extraordinary general meeting (the “Pointer Record Date”). If you were a Pointer shareholder of record as of the close of business on the Pointer Record Date, you are entitled to receive notice of and to vote at the Pointer extraordinary general meeting and any adjournments thereof.

 

Q: What if I sell my shares of I.D. Systems Common Stock before the I.D. Systems special meeting, or my Pointer Ordinary Shares before the Pointer extraordinary general meeting?

 

A: The I.D. Systems Record Date is earlier than the date of the I.D. Systems special meeting and the date that the Transactions are expected to be completed. If you transfer your shares after the I.D. Systems Record Date but before the I.D. Systems special meeting, you will retain your right to attend and vote at the I.D. Systems special meeting, but will have transferred the right to receive Parent Common Stock in exchange for I.D. Systems Common Stock pursuant to the Investment Agreement. In order to receive Parent Common Stock, you must hold your shares through the I.D. Systems Merger Effective Time.

 

The Pointer Record Date is also earlier than the date of the Pointer extraordinary general meeting and the date that the Transactions are expected to be completed. If you transfer your shares after the Pointer Record Date but before the Pointer extraordinary general meeting, you will retain your right to attend and vote at the Pointer extraordinary general meeting, but will have transferred the right to receive the Pointer Merger Consideration pursuant to the Merger Agreement. In order to receive the Pointer Merger Consideration, you must hold your shares through the Pointer Merger Effective Time.

 

Q: How do I vote?

 

A: I.D. Systems: If you are an I.D. Systems stockholder of record as of the I.D. Systems Record Date, you may vote your shares of I.D. Systems Common Stock at the I.D. Systems special meeting in one of the following ways:

 

  by mailing your completed and signed proxy card in the enclosed return envelope;

 

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  by voting by telephone or Internet as instructed on the enclosed proxy card; or
     
  by attending the I.D. Systems special meeting and voting in person.

 

Pointer: If you are a Pointer shareholder of record as of the Pointer Record Date, you may vote your Pointer Ordinary Shares at the Pointer extraordinary general meeting in one of the following ways:

 

  by mailing your completed and signed proxy card in the enclosed return envelope;
     
  by voting by telephone or Internet as instructed on the enclosed proxy card;
     
  by attending the Pointer extraordinary general meeting and voting in person; or
     
  if your Pointer Ordinary Shares are held on the Tel Aviv Stock Exchange (“TASE”), your vote (in person or by proxy) must be accompanied by a confirmation of ownership (ishur baalut) issued by the applicable TASE member, confirming your ownership of the Pointer Ordinary Shares as of the Pointer Record Date. Alternatively, you may vote electronically via the electronic voting system of the ISA, up to six hours before the scheduled time of the Pointer extraordinary general meeting.

 

Q: How do I vote shares held in my I.D. Systems 401(k) plan account?

 

A: If you have money invested in the I.D. Systems employer stock fund of the I.D. Systems 401(k) Plan, you may provide voting instructions as to the number of shares allocated to your account as of the close of business of the I.D. Systems Record Date. However, you have an earlier deadline for submitting voting instructions. Your voting instructions must be received by 11:59 p.m., Eastern Time, on August 26, 2019. You may vote over the Internet, by telephone or by mail as described in the section entitled “The Special Meeting of I.D. Systems’ Stockholders—Voting Your Shares” beginning on page 66 of this joint proxy statement/prospectus, but you may not vote shares allocated to your I.D. Systems 401(k) Plan accounts in person at the I.D. Systems special meeting. The plan trustee will vote such shares in accordance with your voting instructions if they are received in a timely manner. If you do not send instructions by the August 26, 2019 deadline, or you do not vote, or you return your proxy card with unclear voting instructions or no voting instructions, the plan trustee will not vote the shares allocated to your I.D. Systems 401(k) Plan account. Your voting instructions will be kept confidential under the terms of the plan.

 

Q: What proposals are being voted on at the I.D. Systems special meeting, and what stockholder vote is required?

 

A: You are being asked to consider and vote on:

 

Proposal 1 - the adoption of the Investment Agreement and approval of the I.D. Systems Merger;
   
Proposal 2 - the approval of the issuance of the Investment Shares, pursuant to the terms of the Investment Agreement and the issuance of the shares of Parent Common Stock issuable upon conversion of the Investment Shares;
   
Proposal 3 - the approval of the issuance of the Acquisition Shares, pursuant to the terms of the Merger Agreement;
   
Proposal 4 - the approval of the authorized shares of Parent capital stock, as described in the Parent Charter;
   
Proposal 5 - the approval of certain provisions set forth in Article ELEVENTH of the Parent Charter, which contains certain mandatory indemnification provisions for the directors and officers of Parent;
   
Proposal 6 - the approval of certain provisions set forth in Article TWELFTH of the Parent Charter, which provides that certain transactions are not “corporate opportunities” of Parent;
   
Proposal 7 - the approval of certain provisions set forth in Article SIXTEENTH of the Parent Charter, which designates the Chancery Court of the State of Delaware as the exclusive forum for certain legal actions;
   
Proposal 8 - the approval of an amendment to the I.D. Systems 2018 Plan;
   
Proposal 9 - the approval on an advisory (non-binding) basis of the compensation that may become payable to certain named executive officers of I.D. Systems in connection with, or following, the consummation of the Transactions; and
   
The Adjournment Proposal - the approval to adjourn the I.D. Systems special meeting, or any adjournments thereof, to another time or place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve and adopt Proposals 1, 2, 3 and 4.

 

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Proposals 1, 4, 5, 6, and 7 require the affirmative vote of a majority of the outstanding shares of I.D. Systems Common Stock entitled to vote thereon, provided a quorum is present. Abstentions and broker-non votes will have the effect of a vote AGAINST Proposals 1, 4, 5, 6 and 7.

 

Proposals 4, 5, 6 and 7 are referred to as the “Charter Proposals”.

 

Proposals 2, 3, and 8 require the affirmative vote of a majority of the votes cast at the I.D. Systems special meeting, as does Proposal 9, which is an advisory (non-binding) vote, provided a quorum is present. The Adjournment Proposal also requires the affirmative vote of a majority of the votes cast, but does not require the presence of a quorum. Abstentions and broker non-votes will have no effect on the outcome of Proposals 2, 3, 8, 9 and the Adjournment Proposal.

 

See “The Special Meeting of I.D. Systems’ Stockholders—Vote Required; Recommendation of the I.D. Systems Board of Directors” beginning on page 62 of this joint proxy statement/prospectus.

 

Q: What proposals are being voted on at the Pointer extraordinary general meeting, and what shareholder vote is required to approve such proposals?

 

A: You are being asked to consider and vote on:

 

Proposal 1 – the approval and adoption of the Pointer Merger, the Merger Agreement and other matters relating to the consummation of the Transactions, including the purchase by Pointer of a run-off directors’ and officers’ liability insurance policy (“Pointer Proposal 1”); and
   
Proposal 2 – the approval of the grant of bonuses to certain executives of Pointer in connection with the consummation of the Transactions, in an aggregate amount of $750,000, payable in a combination of Pointer RSUs and cash (“Pointer Proposal 2”).

 

Pointer Proposal 1 requires the affirmative vote of a majority of the outstanding Pointer Ordinary Shares entitled to vote thereon, provided that such majority includes at least a majority of the votes cast by Pointer shareholders that are not any of I.D. Systems, Pointer Merger Sub, or a I.D. Systems Related Person (as such term is defined in this joint proxy statement/prospectus), who are present and voting. Failure by a Pointer shareholder to indicate whether such person is any of I.D. Systems, Pointer Merger Sub, or an I.D. Systems Related Person, shall render such vote as invalid and it will not be counted. Accordingly, such votes, as well as abstentions and broker-non votes will have the effect of a vote AGAINST Pointer Proposal 1.

 

Pointer Proposal 2 requires the affirmative vote of the holders of a majority of outstanding Pointer Ordinary Shares present, in person or by proxy, at the Pointer extraordinary general meeting, amounting in the aggregate to at least a majority of the votes actually cast with respect to such proposal, provided that one of the following shall apply: (i) the majority of the votes includes at least a majority of all the votes of shareholders who are not controlling shareholders and do not have a personal interest in the approval of the Transactions; abstentions shall not be included in the total of the votes of the aforesaid shareholders; or (ii) the total of opposing votes from among the shareholders said in subsection (i) above does not exceed 2% of all the voting rights in Pointer. Failure by a Pointer shareholder to indicate whether such shareholder is a controlling shareholder of Pointer or otherwise has a personal interest in the approval of the Transactions shall render such vote invalid and it will not be counted. Abstentions and broker non-votes will have no effect on the outcome of Pointer Proposal 2.

 

See “The Extraordinary General Meeting of Pointer’s Shareholders—Vote Required; Recommendation of the Pointer Board of Directors” beginning on page 69 of this joint proxy statement/prospectus.

 

Q: What are “broker non-votes”?

 

A: If you are a beneficial owner of shares registered in the name of your broker, bank or other agent acting as nominee, your shares are held by your broker, bank or other agent as your nominee, or in “street name,” and you will need to obtain a proxy form from the organization that holds your shares and follow the instructions included on that form regarding how to instruct the organization to vote your shares. Banks, brokers and other agents acting as nominees are permitted to use discretionary voting authority to vote proxies for proposals that are deemed “routine” by the New York Stock Exchange, but are not permitted to use discretionary voting authority to vote proxies for proposals that are deemed “non-routine” by the New York Stock Exchange. A “broker non-vote” occurs when a proposal is deemed “non-routine” and a nominee holding shares for a beneficial owner does not have discretionary voting authority with respect to the matter being considered and has not received instructions from the beneficial owner. The determination of which proposals are deemed “routine” versus “non-routine” may not be made by the New York Stock Exchange until after the date on which this joint proxy statement/prospectus has been mailed to you. As such, it is important that you provide voting instructions to your bank, broker or other nominee, if you wish to determine the voting of your shares. If the New York Stock Exchange determines any of the I.D. Systems proposals to be “non-routine,” a failure to vote, or to instruct your broker how to vote any shares held for you in your broker’s names will have the same effect as a vote AGAINST Proposals 1, 4, 5, 6 and 7 at the I.D. Systems special meeting and will have no effect with respect to Proposals 2, 3, 8, 9 and the Adjournment Proposal at the I.D. Systems special meeting. If the New York Stock Exchange determines any of the Pointer proposals to be “non-routine,” a failure to vote, or to instruct your broker how to vote any shares held for you in your broker’s names will have the same effect as a vote AGAINST Pointer Proposal 1 at the Pointer extraordinary general meeting. We expect that all of the I.D. Systems proposals and Pointer proposals will be deemed “non-routine.”

 

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Q: If my shares of I.D. Systems Common Stock or Pointer Ordinary Shares are held in “street name” or a “nominee account” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote my shares of I.D. Systems Common Stock or Pointer Ordinary Shares for me?

 

A: No. If your shares are held in “street name” your bank, broker or other nominee will not vote your shares of I.D. Systems Common Stock or Pointer Ordinary Shares if you do not provide your bank, broker or other nominee with a signed voting instructions card with respect to your shares of I.D. Systems Common Stock or Pointer Ordinary Shares. Therefore, you should instruct your bank, broker or other nominee to vote your shares of I.D. Systems Common Stock or Pointer Ordinary Shares by following the directions your bank, broker or other nominee provides.

 

Brokers do not have discretionary authority to vote on any of the I.D. Systems proposals or on the Pointer proposals. If you fail to instruct your broker, bank or other nominee to vote your shares and the broker, bank or other nominee submits an unvoted proxy, the resulting “broker non-votes” will not be counted toward a quorum at the I.D. Systems special meeting, and they will not be voted on any of the proposals and will have the same effect as a vote against Proposals 1, 4, 5, 6 and 7 at the I.D. Systems special meeting. If you fail to instruct your broker, bank or other nominee to vote your shares and the broker, bank or other nominee submits an unvoted proxy, the resulting “broker non-votes” will be counted toward a quorum at the Pointer extraordinary general meeting, but they will not be voted on any of the proposals and will have the same effect as a vote against the adoption of the Merger Agreement at the Pointer extraordinary general meeting.

 

See “The Special Meeting of I.D. Systems’ Stockholders—Voting Shares Held in Street Name” and “The Extraordinary General Meeting of Pointer’s Shareholders—Voting Pointer Ordinary Shares Held in Street Name” beginning on pages 66 and 70, respectively of this joint proxy statement/prospectus.

 

Q: What is the effect of an abstention or a broker non-vote at the meetings?

 

A: I.D. Systems: Abstentions and broker non-votes will have the same effect as a vote “AGAINST” Proposals 1, 4, 5, 6 and 7. Abstentions and broker non-votes are not counted as votes cast, and therefore will have no effect on the outcome of Proposals 2, 3, 8, 9 and the Adjournment Proposal.

 

Pointer: Abstentions and broker non-votes will be counted for purposes of determining whether there is a quorum for the Pointer extraordinary general meeting but will not be treated as having been voted in respect of Pointer Proposal 1. Consequently, assuming a quorum is present at the Pointer extraordinary general meeting, broker non-votes and abstentions will have the effect of voting against Pointer Proposal 1. Abstentions and broker non-votes are not counted as votes cast and therefore will have no effect on the outcome of Pointer Proposal 2.

 

See “The Special Meeting of I.D. Systems’ Stockholders—Vote Required; Recommendation of the I.D. Systems Board of Directors” and “The Extraordinary General Meeting of Pointer’s Shareholders—Vote Required; Recommendation of the Pointer Board of Directors” beginning on pages 62 and 69, respectively, of this joint proxy statement/prospectus.

 

Q: What constitutes a quorum?

 

A: I.D. Systems: The presence at the I.D. Systems special meeting, in person or by proxy, of the holders of a majority of the total outstanding shares of I.D. Systems Common Stock is necessary to constitute a quorum for the transaction of business at the meeting.

 

Abstentions are counted as present and entitled to vote for purposes of determining whether a quorum is present. A “broker non-vote” on a matter occurs when a broker, bank or representative may not vote on a particular matter because it does not have discretionary voting authority and has not received instructions from the beneficial owner. If brokers do not have discretionary authority to vote on any of the proposals, a share held by a broker without any voting instructions will not be deemed present or represented by proxy at the I.D. Systems special meeting and will not count towards establishing a quorum.

 

Pointer: The presence of no less than two Pointer shareholders in person or by proxy, and holding or representing between them Pointer Ordinary Shares conferring in the aggregate at least 25% of the voting rights of Pointer, shall constitute a quorum at the Pointer extraordinary general meeting. If within one-half hour from the time appointed for the holding of the Pointer extraordinary general meeting a quorum is not present, the meeting shall be adjourned to the following week, at the same time and place, or to such time and place as the chairperson of the meeting shall determine. At any such adjourned meeting, if a quorum is not present within one-half hour from the specified time, any shareholders present in person or by proxy shall constitute a quorum even if they hold or represent Pointer Ordinary Shares conferring less than 25% of the voting rights of Pointer.

 

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In determining whether there is a quorum for the Pointer extraordinary general meeting and whether the required number of votes for Pointer Proposal 1 has been cast, Pointer Ordinary Shares subject to abstentions or to broker non-votes are counted for purposes of determining whether there is a quorum for the Pointer extraordinary general meeting but, with regard to Pointer Proposal 1, are not counted as having been voted in respect thereof and accordingly have the effect of voting against such proposal.

 

Q: How many votes do I have?

 

A: I.D. Systems: You are entitled to one vote for each share of I.D. Systems Common Stock that you owned as of the close of business on the I.D. Systems Record Date. As of the close of business on the I.D. Systems Record Date, 18,425,024 shares of I.D. Systems Common Stock were outstanding and entitled to vote at the I.D. Systems special meeting.

 

Pointer: You are entitled to one vote for each Pointer Ordinary Share that you owned as of the close of business on the Pointer Record Date. As of the close of business on July 22, 2019, 8,188,616 Pointer Ordinary Shares were outstanding and entitled to vote at the Pointer extraordinary general meeting.

 

Q: What are the recommendations of the I.D. Systems and Pointer boards of directors regarding the proposals being put to a vote at their respective special and extraordinary general meetings?

 

A: I.D. Systems: The board of directors of I.D. Systems has unanimously approved and declared advisable the Agreements and the Transactions, including the I.D. Systems Merger and the Pointer Merger, and determined that the terms and provisions of the Agreements and the Transactions, including the I.D. Systems Merger and the Pointer Merger, are fair to, advisable and in the best interests of I.D. Systems and its stockholders.

 

The I.D. Systems board of directors unanimously recommends that I.D. Systems stockholders vote:

 

FOR the adoption of the Investment Agreement and approval of the I.D. Systems Merger;
   
FOR the approval of the issuance of the Investment Shares, pursuant to the terms of the Investment Agreement and the issuance of the shares of Parent Common Stock issuable upon conversion of the Investment Shares;
   
FOR the approval of the issuance of the Acquisition Shares, pursuant to the terms of the Merger Agreement;
   
FOR the approval of the authorized shares of Parent capital stock, as described in the Parent Charter;
   
FOR the approval of certain provisions set forth in Article ELEVENTH of the Parent Charter, which contains certain mandatory indemnification provisions for the directors and officers of Parent;
   
FOR the approval of certain provisions set forth in Article TWELFTH of the Parent Charter, which provides that certain transactions are not “corporate opportunities” of Parent;
   
FOR the approval of certain provisions set forth in Article SIXTEENTH of the Parent Charter, which designates the Chancery Court of the State of Delaware as the exclusive forum for certain legal actions;
   
FOR the approval of an amendment to the I.D. Systems 2018 Plan;
   
FOR the approval on an advisory (non-binding) basis of the compensation that may become payable to certain named executive officers of I.D. Systems in connection with, or following, the consummation of the Transactions; and
   
FOR the approval to adjourn the I.D. Systems special meeting, or any adjournments thereof, to another time or place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the I.D. Systems special meeting to obtain the I.D. Systems Specified Stockholder Approval.

 

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See “The Special Meeting of I.D. Systems’ Stockholders—Vote Required; Recommendation of the I.D. Systems Board of Directors” and “Recommendation of the I.D. Systems Board of Directors and I.D. Systems Reasons for the Transactions” beginning on pages 62 and 87, respectively, of this joint proxy statement/prospectus.

 

Pointer: The board of directors of Pointer has unanimously approved the Merger Agreement and determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Pointer Merger, are in the best interests of Pointer and its shareholders.

 

The Pointer board of directors unanimously recommends that Pointer shareholders vote:

 

FOR the approval and adoption of the Pointer Merger, the Merger Agreement and other matters relating to the consummation of the Transactions, including the purchase by Pointer of a run-off directors’ and officers’ liability insurance policy; and
   
FOR the approval of the grant of bonuses to certain executives of Pointer in connection with the consummation of the Transactions, in an aggregate amount of $750,000, payable in a combination of Pointer RSUs and cash.

 

See “The Extraordinary General Meeting of Pointer’s Shareholders—Vote Required; Recommendation of the Pointer Board of Directors” and “Recommendation of the Pointer Board of Directors and Pointer’s Reasons for the Transactions” beginning on pages 69 and 91, respectively, of this joint proxy statement/prospectus.

 

Q: What happens if I sign and return my proxy card without indicating how I want to vote?

 

A: I.D. Systems: Signed and dated proxies received by I.D. Systems without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each of the proposals presented to the stockholders in accordance with the recommendation of the board of directors of I.D. Systems. The proxyholders may use their discretion to vote on any other matters which properly come before the I.D. Systems special meeting.

 

Pointer: Signed and dated proxies received by Pointer without an indication of how the shareholder intends to vote on a proposal will be counted towards the quorum but will not be treated as having been voted in respect of the proposals at the Pointer extraordinary general meeting. In addition, a shareholder’s vote on the resolutions set forth under Pointer Proposal 1 will not be counted even if such vote is indicated in the proxy card unless the shareholder indicates whether such shareholder is any of I.D. Systems, Pointer Merger Sub, or an I.D. Systems Related Person. Also, a shareholder’s vote on the resolutions set forth in Pointer Proposal 2 will not be voted “FOR” such resolutions, even if so indicated on the proxy card, unless the shareholder indicates that such person has no personal interest in the proposal and that such person is not a controlling shareholder, as such term is defined under the Israeli Companies Law (the “Companies Law”). The proxy card to be mailed will include instructions on how to make this indication.

 

See “The Special Meeting of I.D. Systems’ Stockholders—Voting Your Shares” and “The Extraordinary General Meeting of Pointer’s Shareholders—Voting Your Ordinary Shares” beginning on pages 66 and 69, respectively, of this joint proxy statement/prospectus.

 

Q: What if I hold shares in both I.D. Systems and Pointer?

 

A: If you are both a stockholder of I.D. Systems and a shareholder of Pointer, you will receive two separate packages of proxy materials. A vote as an I.D. Systems stockholder for the proposal to adopt the Investment Agreement will not constitute a vote as a Pointer shareholder for the proposal to approve the Merger Agreement, or vice versa.

 

Q: Are the I.D. Systems proposals conditioned on one another?

 

A: Each of Proposals 1, 2, 3 and 4 at the I.D. Systems special meeting is conditioned on the approval of each of the other proposals among Proposals 1, 2, 3 and 4, but Proposals 1, 2, 3, and 4 are not conditioned on the approval of any of the other proposals set forth in the accompanying joint proxy statement/prospectus. Proposals 5, 6, 7 and 8 at the I.D. Systems special meeting are each conditioned on the approval of all of Proposals 1, 2, 3 and 4 and will be of no force and effect if any one or more of Proposals 1, 2, 3 and 4 is not approved. Further, the consummation of the Transactions is conditioned on, among other things, the Pointer Shareholder Approval.

 

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Q: Why is I.D. Systems proposing the Charter Proposals?

 

A: Pursuant to interpretative guidance issued by the SEC, stockholders of an acquiror in a merger, acquisition or similar transaction should have an opportunity to express their views separately on material provisions that will establish their substantive rights as stockholders. Accordingly, I.D. Systems is asking its stockholders to consider and vote upon four separate proposals to approve certain material differences between the I.D. Systems Charter and the Parent Charter. These votes, however, will not actually result in stockholders of I.D. Systems approving the Parent Charter but instead will simply approve the aforementioned material differences between the I.D. Systems Charter and the Parent Charter. In the judgment of the I.D. Systems board of directors, these provisions are necessary to adequately address the needs of Parent upon consummation of the Transactions. Furthermore, the approval of each of Proposals 1, 2 and 3 are conditioned on the approval of Proposal 4, which is one of the Charter Proposals and the failure to approve Proposal 4 will result in the failure to complete the Transactions.

 

See “I.D. Systems Charter Proposals” beginning on page 169 of this joint proxy statement/prospectus.

 

Q: Why is I.D. Systems proposing an Adjournment Proposal at the I.D. Systems special meeting?

 

A: I.D. Systems is proposing an Adjournment Proposal to allow the board of directors of I.D. Systems to adjourn the I.D. Systems special meeting if necessary to solicit additional proxies if there are not sufficient votes to obtain the I.D. Systems Specified Stockholder Approval at the time of I.D. Systems special meeting or any adjournments or postponements thereof.

 

See “I.D. Systems Adjournment Proposal” beginning on page 180 of this joint proxy statement/prospectus.

 

Q: How will the parties to voting agreements with I.D. Systems and Pointer vote on the proposals?

 

A: In connection with the Merger Agreement, Pointer, together with I.D. Systems and the Investors, entered into a Voting and Support Agreement (the “Pointer Voting Agreement”) with DBSI Investments Ltd. (“DBSI”), pursuant to which DBSI has agreed to vote in favor of (i) granting the Pointer Shareholder Approval and (ii) any proposal to adjourn a meeting of Pointer’s shareholders at which the Pointer Shareholder Approval is sought which Pointer supports. As of July 22, 2019, DBSI was the beneficial owner of and had the right to vote approximately 18.2% of the outstanding share capital of Pointer.

 

In connection with the Investment Agreement, I.D. Systems, together with the Investors and Pointer, entered into a Voting and Support Agreement (the “I.D. Systems Voting Agreement”) with Emancipation Management LLC and certain of its affiliates (collectively, “Emancipation Capital”), pursuant to which Emancipation Capital has agreed to vote in favor of (i) granting the I.D. Systems Stockholder Approval and (ii) any proposal to adjourn a meeting of the I.D. Systems’ stockholders at which the I.D. Systems Stockholder Approval is sought which I.D. Systems supports. As of July 22, 2019, Emancipation Capital was the beneficial owner of and had the right to vote approximately 9.3% of the outstanding shares of I.D. Systems.

 

See “Voting and Support Agreements” beginning on page 165 of this joint proxy statement/prospectus.

 

Q: Do any of the directors or executive officers of I.D. Systems or Pointer have any interests in the Transactions that may be different from, or in addition to, my interests as an I.D. Systems stockholder or Pointer shareholder?

 

A: In considering the proposals to be voted on at the respective meetings, you should be aware that the directors and executive officers of I.D. Systems or Pointer may have interests that may be different from, or in addition to, the interests of the I.D. Systems stockholders or Pointer shareholders generally. These interests include the continued employment of certain executive officers of I.D. Systems and Pointer by Parent, the continued service of certain directors of I.D. Systems as directors of Parent, and the indemnification of I.D. Systems and Pointer executive officers and directors by Parent and the surviving corporations. With respect to certain Pointer executive officers, these interests also include full acceleration of vesting of equity grants and transaction bonuses payable in Pointer RSUs or cash. With respect to I.D. Systems executive officers, these interests also include transaction-related grants of I.D. Systems equity awards and severance payments upon qualifying terminations of employment.

 

See “Interests of I.D. Systems Directors and Executive Officers in the Transactions” and “Interests of Pointer Directors and Executive Officers in the Transactions” beginning on pages 115 and 119, respectively, of this joint proxy statement/prospectus for a more detailed description of these interests.

 

Q: When are the Transactions expected to be completed?

 

A: As of the date of this joint proxy statement/prospectus, the Transactions are expected to be completed by October 31, 2019. However, no assurance can be provided as to when or if the Transactions will be completed. The I.D. Systems Specified Stockholder Approval and the Pointer Shareholder Approval must be obtained, as well as other conditions specified in the Agreements must be satisfied or, to the extent applicable, waived prior to the consummation of the Transactions.

 

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Q: What conditions must be satisfied to complete the Transactions?

 

A: The Merger Agreement. The obligations of each of Parent, Pointer Holdco, Pointer Merger Sub, and Pointer to complete the Pointer Merger are subject to the satisfaction (or waiver to the extent permissible under the Merger Agreement or applicable law) on or prior to the Pointer Merger Effective Time of various conditions, including the following:

 

  Pointer having obtained the Pointer Shareholder Approval;
     
  I.D. Systems obtaining the I.D. Systems Specified Stockholder Approval;
     
  the closing of the transactions contemplated by the Investment Agreement;
     
  the Parent Common Stock to be issued in the Pointer Merger having been approved for listing on the Nasdaq Global Market (“Nasdaq”), subject to official notice of issuance;
     
  no law or order having been promulgated, entered, enforced, enacted or issued or made applicable to the Pointer Merger or the issuance of the Parent Common Stock as part of the Pointer Merger Consideration by any governmental entity that prohibits, restrains or makes illegal the consummation of the Pointer Merger or such issuance of the Parent Common Stock;
     
  the registration statement of which this joint proxy statement/prospectus forms a part having become effective, and not subject to any stop order or any proceeding seeking a stop order;
     
  the parties having made any material filing required to obtain all material governmental authorizations applicable to the Pointer Merger and the transactions contemplated by the Merger Agreement and obtaining all such governmental authorizations, including the lapse of any applicable waiting period; and
     
  obtaining the applicable exemptions under the Israeli Securities Law, 1968 and the regulations promulgated thereunder, as amended (the “Israeli Securities Laws”).

 

See “The Merger Agreement—Conditions to the Pointer Merger” beginning on page 139 of this joint proxy statement/prospectus.

 

The Investment Agreement.

 

Conditions to the Investors’ Obligations

 

The obligations of each of the Investors to purchase the Investment Shares is subject to the satisfaction (or waiver to the extent permissible under the Investment Agreement or applicable law) on or prior to the closing date of the transactions contemplated by the Investment Agreement of various conditions, including the following:

 

  I.D. Systems obtaining the I.D. Systems Specified Stockholder Approval;
     
  the Parent Common Stock to be issued in the I.D. Systems Merger having been approved for listing on Nasdaq, subject to official notice of issuance;
     
  no law or order having been promulgated, entered, enforced, enacted or issued or made applicable to the I.D. Systems Merger, the issuance of the Investment Shares or any of the other transactions contemplated by the Investment Agreement by any governmental authority that prohibits, restrains or makes illegal the consummation of the I.D. Systems Merger, the issuance of the Investment Shares or any of the other transactions contemplated by the Investment Agreement;
     
  the registration statement of which this joint proxy statement/prospectus forms a part having become effective, and not subject to any stop order or any proceeding seeking a stop order;
     
  the parties having made any material filing required to obtain all material governmental authorizations applicable to the Transactions and obtaining all such governmental authorizations, including the lapse of any applicable waiting period;
     
  a $1,000,000 facility fee having been paid by Parent or I.D. Systems to the Investors;

 

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  the fees and expenses of Investors having been paid by Parent or I.D. Systems;
     
  I.D. Systems and the subsidiaries of I.D. Systems having cash and cash equivalents no less than $8,500,000 prior to giving effect to the issuance and sale of the Investment Shares and the receipt of the purchase price therefor; and
     
  the closing of the Pointer Merger and the other transactions contemplated by the Merger Agreement.

 

Conditions to I.D. Systems’ and Parent’s Obligations

 

In addition, the obligations of I.D. Systems and Parent to issue the Investment Shares and to consummate the other transactions contemplated by the Investment Agreement is subject to the satisfaction (or waiver to the extent permissible under the Investment Agreement or applicable law) on or prior to the closing date of the transactions contemplated by the Investment Agreement of various conditions, including the following:

 

  I.D. Systems having obtained the I.D. Systems Specified Stockholder Approval;
     
  the Parent Common Stock to be issued in the I.D. Systems Merger having been approved for listing on Nasdaq, subject to official notice of issuance;
     
  Parent having received a duly executed counterpart of the Registration Rights Agreement from each of the Investors;
     
  no law or order having been promulgated, entered, enforced, enacted or issued or made applicable to the I.D. Systems Merger, the issuance of the Investment Shares or any of the other transactions contemplated by the Investment Agreement by any governmental authority that prohibits, restrains or makes illegal the consummation of the I.D. Systems Merger, the issuance of the Investment Shares or any of the other transactions contemplated by the Investment Agreement;
     
  the registration statement of which this joint proxy statement/prospectus forms a part having become effective, and not subject to any stop order or any proceeding seeking a stop order;
     
  the parties having made any material filing required to obtain all material governmental authorizations applicable to the Transactions and obtaining all such governmental authorizations, including the lapse of any applicable waiting period; and
     
  the closing of the Pointer Merger and the other transactions contemplated by the Merger Agreement.

 

See “The Investment Agreement—Conditions to the Investment Agreement” beginning on page 158 of this joint proxy statement/prospectus.

 

Q: Who will serve as the management of Parent following the Transactions?

 

A: Following the consummation of the Transactions, Parent’s board of directors will consist of seven members, comprised of two representatives from the Investors, Anders Bjork and John Hunt (the “Series A Directors”), and Chris Wolfe, Michael Brodsky, Michael Casey, Charles Frumberg, and David Mahlab. The executive officers of Parent will be: Chris Wolfe - Chief Executive Officer, David Mahlab - Chief Executive Officer International, Ned Mavrommatis - Chief Financial Officer and Yaniv Dorani – Deputy to Chief Executive Officer International.

 

Q: Following the Transactions, will I.D. Systems Common Stock or Pointer Ordinary Shares continue to trade on a stock exchange?

 

A: No. Following the consummation of the Transactions, shares of I.D. Systems Common Stock will be delisted from Nasdaq and deregistered under the Exchange Act and Pointer Ordinary Shares will be delisted from TASE and the Nasdaq Capital Market and deregistered under the Exchange Act. Parent Common Stock is currently not traded or quoted on a stock exchange or quotation system. Parent expects that, as of the effective time of the Transactions, Parent Common Stock will be listed for trading under the symbol “PWFL” on Nasdaq and the TASE. Additionally, if the Parent Common Stock is approved for listing on the TASE, Parent will have the exclusive right to delist its stock from the TASE, provided it furnishes notice thereof three months in advance of such delisting, or the Parent Common Stock may become subject to delisting in the event an Investor at any time elects to activate the voting rights for the Series A Preferred Stock. The Investors have not undertaken to refrain from activating their voting rights for any minimum period of time. See the risk factor entitled “While the Parent Common Stock is expected to be listed on the TASE, there is no guarantee as to how long such listing will be maintained” beginning on page 35 of this joint proxy statement/prospectus.

 

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Q: What are the U.S. federal income tax consequences of the Transactions?

 

A: For U.S. federal income tax purposes, it is the opinion (as set forth in Exhibit 8.1 to the registration statement of which this joint proxy statement/prospectus forms a part) of Olshan Frome Wolosky LLP, counsel to I.D. Systems, that, with respect solely to the holders of I.D. Systems Common Stock, (i) the I.D. Systems Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and (ii) the I.D. Systems Merger, taken together with the Pointer Merger and the Preferred Investment, qualifies as a transaction described in Section 351 of the Code. Based on the foregoing, it is the opinion (as set forth in Exhibit 8.1 to the registration statement of which this joint proxy statement/prospectus forms a part) of Olshan Frome Wolosky LLP that, with respect solely to the holders of I.D. Systems Common Stock, a U.S. holder (as defined in “Material U.S. Federal Income Tax Consequences of the Transactions” beginning on page 120 of this joint proxy statement/prospectus) of I.D. Systems Common Stock will not recognize gain or loss for U.S. federal income tax purposes as a result of the exchange of its I.D. Systems Common Stock for Parent Common Stock in the I.D. Systems Merger.

  

For U.S. federal income tax purposes, with respect to the holders of Pointer Ordinary Shares, the Pointer Merger, taken together with the I.D. Systems Merger and the Preferred Investment, is intended to qualify as a transaction described in Section 351 of the Code. In such case, a U.S. holder of Pointer Ordinary Shares will recognize gain, but not loss, for U.S. federal income tax purposes as a result of the exchange of its Pointer Ordinary Shares for Parent Common Stock and cash consideration in the Pointer Merger in an amount equal to the lesser of (1) the amount by which the sum of the fair market value of the Parent Common Stock and cash received by such U.S. holder exceeds such U.S. holder’s tax basis in its Pointer Ordinary Shares surrendered in exchange therefor, and (2) the amount of cash received by such U.S. holder in the Pointer Merger.

 

For a more complete discussion of the U.S. federal income tax consequences of the Transactions, including tax consequences relating to tax basis and holding periods, see “Material U.S. Federal Income Tax Consequences of the Transactions” beginning on page 120 of this joint proxy statement/prospectus. Tax matters relating to the Transactions can be complicated, and the tax consequences of the Transactions to a particular holder will depend on such holder’s particular facts and circumstances. All holders should consult with their own tax advisors to determine the specific U.S. federal, state or local or foreign income or other tax consequences of the transactions to them.

 

Q: What are the Israeli tax consequences of the Transactions?

 

A: In general, under the Israeli Income Tax Ordinance (New Version), 5721-1961 and the rules and regulations promulgated thereunder, (the “Ordinance”), the disposition of shares of an Israeli resident company is deemed to be a sale of capital assets, unless such shares are held for the purpose of trading.

 

In respect to Israeli resident individuals, the tax rate applicable to the real capital gain derived after January 1, 2012 is generally 25%, or 30% in case such shareholder is considered a “Significant Shareholder” at any time during the 12-month period preceding such disposition. (i.e., such shareholder holds directly or indirectly, alone or together with another person who collaborates with such person on a permanent basis, at least 10% of any means of control in the company). The tax rate applicable to the real capital gain derived before January 1, 2003 is subject to marginal tax rates (up to 47%). Capital gains derived from January 1, 2003 until January 1, 2012 is subject to a 20% tax rate (for shareholders, which are not Significant Shareholders) or a 25% tax rate (for Significant Shareholders).

 

However, in case the individual shareholder claims a deduction for financing expenses in connection with such shares, the capital gain is subject to 30% tax rate.

 

The foregoing tax rates will not apply to: (a) individual shareholders dealing in securities or (b) individual shareholders to whom such income is otherwise taxable as ordinary business income (such individual shareholders are taxed at their marginal tax rates applicable to business income).

 

Additionally, individuals who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at the rate of 3% on annual taxable income from all source of income in Israel exceeding NIS 649,560 in 2019.

 

Companies are subject to tax on their real capital gain at the rate of 23% in 2019 (equal to the ordinary corporate tax rate).

 

Shareholders of a company whose shares are traded on an authorized stock exchange, such as Pointer, who are non-Israeli residents (individuals or corporations), should generally be exempt from Israeli capital gains tax, provided that certain conditions are met (including that the capital gain is not derived through a permanent establishment of the non-Israeli resident shareholder in Israel). However, a non-Israeli corporation will not be entitled to the foregoing exemption if more than 25% of its means of control are held, directly or indirectly, by Israeli residents, or Israeli residents are entitled to 25% or more of the revenues or profits of the corporation, directly or indirectly. In addition, such exemption would not be available to a person whose gains from selling or otherwise disposing of the securities are deemed to be business income.

 

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In addition, such sale may be exempt from Israeli capital gain tax (or be subject to a reduced tax rate) under the provisions of an applicable tax treaty between Israel and the seller’s country of residence (subject to the receipt of a valid certificate from the Israel Tax Authority allowing for an exemption or a reduced tax rate).

 

Exempt trusts, provident funds and tax-free entities under Section 9(2) of the Ordinance, are exempt from capital gains tax on the sale of securities under certain conditions stipulated in that statute.

 

Israeli Tax Ruling

 

Pointer has filed, on behalf of its shareholders and other security holders, an application for a tax ruling from the Israel Tax Authority with respect to (i) a deferral of the obligation of Israeli tax resident holders of Pointer Ordinary Shares to pay Israeli tax on the exchange of the Pointer Ordinary Shares for shares of Parent Common Stock in the Pointer Merger in accordance with the provisions of Section 104H of the Ordinance, (ii) instructions regarding Israeli tax withholding obligations on Parent and (iii) the Israeli tax treatment applicable to holders of options to purchase Pointer Ordinary Shares and Pointer RSUs, issued to certain employees under Section 102 of the Ordinance.

 

Regardless of whether Pointer obtains the requested tax ruling from the Israel Tax Authority, any holder of Pointer Ordinary Shares who believes that it is entitled to an exemption from Israeli tax (or a reduced tax rate) may separately apply to the Israel Tax Authority to obtain a certificate of exemption from withholding or an individual tax ruling providing for no withholding or withholding at a reduced rate, and submit such certificate of exemption or ruling to the exchange agent at least five business days prior to the date that is 180 days following the closing date. If Parent or the exchange agent receives a valid exemption certificate or tax ruling (as determined in Parent’s or the exchange agent’s discretion) at least five business days prior to the date that is 180 days following the closing date, then the withholding (if any) of any amounts under the Ordinance, from the Pointer Merger Consideration payable will be made in accordance with the provisions of such Israeli tax certificate or tax ruling.

 

See “Israeli Income Tax Considerations” beginning on page 124 of this joint proxy statement/prospectus.

 

Q: Who will solicit and pay the cost of soliciting proxies for the meetings?

 

A: I.D. Systems will bear all costs and expenses in connection with the solicitation of proxies, including the costs of preparing, printing and mailing this joint proxy statement/prospectus for the I.D. Systems special meeting. I.D. Systems has engaged D.F. King & Co., Inc. to serve as information agent and assist in the solicitation of proxies for the I.D. Systems special meeting and will pay an aggregate initial fee of approximately $65,000, plus any additional fees to be determined at the conclusion of the solicitation and reimbursement of reasonable out-of-pocket expenses.

 

Pointer will bear all costs and expenses in connection with the solicitation of proxies, including the costs of preparing, printing and mailing this joint proxy statement/prospectus for the Pointer extraordinary general meeting. Pointer has engaged Alliance Advisors LLC to assist in the solicitation of proxies for the Pointer extraordinary general meeting and will pay an initial fee of approximately $7,000, plus any additional fees to be determined at the conclusion of the solicitation and reimbursement of reasonable out-of-pocket expenses.

 

Q: May I change my vote after I have mailed my signed proxy card or voted by telephone or over the Internet?

 

A: Yes, you may change your vote any time before your proxy is voted at the I.D. Systems special meeting or the Pointer extraordinary general meeting. If you are a holder of record, you can do this if you:

 

  timely deliver a valid, later-dated proxy by mail;
  timely submit revised voting instructions by telephone or over the Internet by following the instructions set forth on the applicable proxy card;
  timely deliver written notice that you have revoked your proxy to the secretary of I.D. Systems or Pointer, as applicable, at the address provided immediately below; or
  attend the Pointer extraordinary general meeting or I.D. Systems special meeting and vote in person.

 

I.D. Systems, Inc.

123 Tice Boulevard

Woodcliff Lake, New Jersey, 07677

Attn: Ned Mavrommatis, Corporate Secretary

 

Pointer Telocation Ltd.

14 Hamelacha Street,

Rosh Ha’ayin, 4809133, Israel

Attn: Yaniv Dorani, Chief Financial Officer

 

If your shares are held in “street name” and you have instructed your bank, broker or other nominee to vote your shares, you must follow the directions received from your bank, broker or other nominee to change your vote or revoke your proxy. Please note that if you hold Pointer Ordinary Shares in “street name” through a TASE member, if you voted electronically via the electronic voting system of the ISA, you may change or revoke your vote using the electronic voting system up to the time by which you may submit a vote using such system (i.e., up to six hours prior to the scheduled time of the applicable meeting).

 

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Q: Do I need to do anything about my certificates representing I.D. Systems Common Stock or Pointer Ordinary Shares?

 

A: No. After the Transactions are consummated, if you held certificates representing I.D. Systems Common Stock prior to the Transactions, you will receive instructions for exchanging your shares for shares of Parent Common Stock, and if you held certificates representing Pointer Ordinary Shares prior to the Transactions, you will receive instructions for exchanging your shares for the Pointer Merger Consideration.

 

Q: What do I need to do now?

 

A: You are urged to read carefully and consider the information contained in this joint proxy statement/​prospectus, including the Annexes, and to consider how the Transactions will affect you as a stockholder or shareholder. You should then vote as soon as possible, in accordance with the instructions provided in this joint proxy statement/prospectus and on the enclosed voting materials, or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee. You should note specific instructions for voting with respect to shares held through a TASE member.

 

Q: Who can help answer my questions?

 

A: I.D. Systems stockholders or Pointer shareholders who have questions about the Merger Agreement, the Investment Agreement, the Transactions or the other matters to be voted on at the I.D. Systems special meeting or Pointer extraordinary general meeting, who need assistance submitting their proxy or voting shares or who desire additional copies of this joint proxy statement/prospectus or additional proxy cards should contact:

 

I.D. Systems

D.F. King & Co., Inc.

48 Wall Street

New York, NY 10005

Banks and Brokers Call: (212) 269-5550

All Others Call: (866) 356-7813

Email: idsy@dfking.com

 

Pointer

Alliance Advisors LLC

200 Broadacres Drive, 3rd Floor

Bloomfield, NJ 07003

Toll-Free: 855-600-8104

All Others Call: 973-873-7722

Email: pointer@allianceadvisors.com

 

Q: Where can I find more information about I.D. Systems and Pointer?

 

A: You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus.

 

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SUMMARY

 

This summary highlights selected information contained in this joint proxy statement/prospectus and may not contain all of the information that may be important to you. Accordingly, you should read carefully this entire joint proxy statement/prospectus, including the Annexes and the documents referred to or incorporated by reference in this joint proxy statement/prospectus. The page references have been included in this summary to direct you to a more complete description of the topics presented below. See “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus.

 

Information about the Companies (Page 59)

 

I.D. Systems

 

I.D. Systems was incorporated in the State of Delaware in 1993. I.D. Systems, together with its subsidiaries, develops, markets and sells wireless machine-to-machine solutions for managing and securing high-value enterprise assets, including industrial vehicles such as forklifts and airport ground support equipment, rental vehicles, transportation assets such as dry van trailers, refrigerated trailers, railcars and containers, tractors and trucks. I.D. Systems’ patented systems utilize radio frequency identification (“RFID”), Wi-Fi, Bluetooth, satellite or cellular communications, and sensor technology and software to address the needs of organizations to control, track, monitor and analyze their assets. I.D. Systems’ solutions enable customers to achieve tangible economic benefits by making timely, informed decisions that increase the safety, security, revenue, productivity and efficiency of their operations.

 

The principal executive offices of I.D. Systems are located at 123 Tice Boulevard, Woodcliff Lake, New Jersey 07677.

 

Pointer

 

Pointer was formed under the laws of the State of Israel in 1991. Pointer is a leading provider of innovative telematics and mobile Internet of Things (“IoT”) solutions to the automotive logistics (cargo, assets and containers) and insurance industries. Pointer’s cloud-based software-as-a-service (“SaaS”) platform, which has more than 276,000 monthly subscriber units, extracts and captures data from an organization’s mission critical mobility vehicles and assets, including drivers, routes, points-of-interest, logistics network, vehicles and trailers, containers and cargo and additional statuses from the monitored asset. Pointer’s platform then analyzes and converts this data into actionable intelligence optimizing customers’ assets and improving profitability.

 

The principal executive offices of Pointer are located at 14 Hamelacha Street, Rosh Ha’ayin 4809133, Israel.

 

Parent

 

Parent is a wholly-owned subsidiary of I.D. Systems, formed solely for the purpose of effectuating the Transactions. Upon the closing of the Transactions, Parent will become the parent entity of both I.D. Systems and Pointer. Parent was incorporated as a Delaware corporation on February 21, 2019. Parent has no material assets and does not operate any business. To date, Parent has not conducted any activities, other than those incidental to its formation, the execution of the Transactions and the preparation of applicable filings under U.S. and Israeli securities laws and regulatory filings made in connection with the Transactions.

 

The mailing address of Parent’s principal executive office is, and will remain after the consummation of the Transactions, 123 Tice Boulevard, Woodcliff Lake, New Jersey 07677.

 

Pointer Holdco

 

Pointer Holdco is a wholly-owned subsidiary of Parent formed solely for the purpose of effectuating the Transactions. Pointer Holdco is a private company limited by shares formed under the laws of the State of Israel on February 20, 2019. Pointer Holdco has no material assets and does not operate any business. To date, Pointer Holdco has not conducted any activities, other than those incidental to its formation and the execution of the Merger Agreement.

 

The mailing address of Pointer Holdco’s principal executive office is 98 Yigal Alon Street, Tel Aviv, Israel, 6789141. After the consummation of the Transactions, its principal executive office will be that of I.D. Systems.

 

 

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Pointer Merger Sub

 

Pointer Merger Sub is a wholly-owned subsidiary of Pointer Holdco formed solely for the purpose of effectuating the Transactions. Pointer Merger Sub is a private company limited by shares formed under the laws of the State of Israel on February 20, 2019. Pointer Merger Sub has no material assets and does not operate any business. To date, Pointer Merger Sub has not conducted any activities other than those incidental to its formation and the execution of the Merger Agreement. After the consummation of the Transactions, it will cease to exist.

 

The mailing address of Pointer Merger Sub’s principal executive office is 98 Yigal Alon Street, Tel Aviv, Israel, 6789141.

 

I.D. Systems Merger Sub

 

I.D. Systems Merger Sub is a wholly-owned subsidiary of Parent formed solely for the purpose of effectuating the Transactions. I.D. Systems Merger Sub was incorporated as a Delaware corporation on February 21, 2019. I.D. Systems Merger Sub has no material assets and does not operate any business. To date, I.D. Systems Merger Sub has not conducted any activities other than those incidental to its formation and the execution of the Investment Agreement. After the consummation of the Transactions, it will cease to exist.

 

The mailing address of I.D. Systems Merger Sub’s principal executive office is 123 Tice Boulevard, Woodcliff Lake, New Jersey 07677.

 

Investors

 

ABRY Senior Equity V, L.P. and ABRY Senior Equity Co-Investment Fund V, L.P. are funds managed by ABRY Partners II, LLC, which is a registered investment adviser with the SEC. Founded in 1989 and headquartered in Boston, Massachusetts, ABRY Partners II, LLC is an experienced private equity investment firm focused on media, communications, insurance, business and information services.

 

The Transactions

 

On March 13, 2019, I.D. Systems, Pointer, Parent, Pointer Holdco and Pointer Merger Sub entered into the Merger Agreement, pursuant to which Pointer Merger Sub will merge with and into Pointer, with Pointer surviving as a direct, wholly-owned subsidiary of Pointer Holdco and an indirect, wholly-owned subsidiary of Parent, in exchange for the Pointer Merger Consideration.

 

Also on March 13, 2019, and in connection with the Merger Agreement, I.D. Systems, Parent, the Investors and the other parties thereto entered into the Investment Agreement, pursuant to which I.D. Systems will reorganize into a new holding company structure by merging I.D. Systems Merger Sub with and into I.D. Systems, with I.D. Systems surviving as a wholly-owned subsidiary of Parent and pursuant to which, Parent will issue and sell to the Investors in a private placement 50,000 shares of Parent’s newly created Series A Preferred Stock for an aggregate purchase price of $50,000,000 to finance a portion of the Cash Consideration payable in the Pointer Merger. In the I.D. Systems Merger, each outstanding share of I.D. Systems Common Stock will be exchanged for one share of Parent Common Stock.

 

On May 16, 2019, I.D. Systems, Parent, I.D. Systems Merger Sub and the Investors entered into the Investment Agreement First Amendment, to, among other things, revise the form of the Parent Charter based on feedback received from the ISA. Pursuant to the Investment Agreement First Amendment, the Parent Charter was revised to provide that (i) except as required by applicable law or as otherwise specifically set forth in the Parent Charter, the holders of Series A Preferred Stock will not be entitled to vote on any matter presented to the stockholders of Parent unless and until any holder of Series A Preferred Stock provides written notice to Parent electing, on behalf of all holders of Series A Preferred Stock, to activate their voting rights and thereby render the Series A Preferred Stock voting capital stock of Parent, and (ii) after the delivery of any such notice, all holders of Series A Preferred Stock will be and continue to be entitled to vote their shares of Series A Preferred Stock unless and until such time as the holders of at least a majority of the outstanding shares of Series A Preferred Stock provide further written notice to Parent that they elect to deactivate their voting rights. In addition, the Parent Charter was amended to fix the initial conversion price of the Series A Preferred Stock at $7.319 (based on the 30-day volume weighted average trading price of I.D. Systems Common Stock prior to the signing of the Investment Agreement First Amendment), in lieu of having the conversion price based on the volume weighted average trading price of I.D. Systems Common Stock during a defined period prior to either the signing or the closing of the Transactions.

 

On June 27, 2019, following discussions with representatives of the Nasdaq Stock Market regarding the listing of the Parent Common Stock on the Nasdaq Global Market, I.D. Systems, Parent, I.D. Systems Merger Sub and the Investors entered into the Investment Agreement Second Amendment. Pursuant to the Investment Agreement Second Amendment, the Parent Charter was revised to provide, among other things, that (i) to the extent voting rights of the Series A Preferred Stock have been activated, any holder of Series A Preferred Stock shall not be entitled to cast votes for the number of shares of Parent Common Stock issuable upon conversion of shares of Series A Preferred Stock held by such holder that exceeds the quotient of (A) the aggregate Series A Issue Price for such shares of Series A Preferred Stock divided by (B) the closing bid price of the I.D. Systems Common Stock on the last trading day immediately prior to the consummation date of the Transactions (subject to adjustment for stock splits, stock dividends, combinations, reclassifications and similar events, as applicable), and (ii) in the event that the holders of the Series A Preferred Stock are entitled to designate one non-voting observer to attend meetings of the board of directors and committees of Parent, the observer may be excluded from executive sessions of any committee at the discretion of such committee.

 

As a result of the Transactions, I.D. Systems and Pointer Holdco will each become direct, wholly-owned subsidiaries of Parent, and Pointer will become an indirect, wholly-owned subsidiary of Parent. The stockholders of I.D. Systems and shareholders of Pointer will become stockholders of Parent. Immediately prior to the I.D. Systems Merger Effective Time, Parent’s existing certificate of incorporation will be amended and restated in the form included as Annex C to this joint proxy statement/prospectus to provide for, among other things, the designations, powers, preferences and rights of the Series A Preferred Stock.

 

 

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Company Structure – Diagrams (Page 71)

 

Upon consummation of the Transactions, I.D. Systems will become a direct, and Pointer will become an indirect, wholly-owned subsidiary of Parent. The following diagrams illustrate in simplified terms the current structure of I.D. Systems and Pointer and the expected structure of Parent following the consummation of the Transactions.

 

Current Structure of the Companies

 

 

Post-Closing Structure*

 

 

* Percentages reflect ownership immediately after consummation of the Transactions on a fully-diluted basis.

 

 

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Merger Consideration to I.D. Systems Stockholders and to Pointer Shareholders

 

Merger Agreement (Page 126)

 

At the Pointer Merger Effective Time, each outstanding Pointer Ordinary Share, other than Pointer Ordinary Shares owned, directly or indirectly, by I.D. Systems, Parent or any of their subsidiaries or Pointer or any of its wholly-owned subsidiaries immediately prior to the Pointer Merger Effective Time, will be cancelled in exchange for $8.50 in cash and 1.272 shares of Parent Common Stock.

 

Investment Agreement (Page 145)

 

At the I.D. Systems Merger Effective Time, each share of I.D. Systems Common Stock outstanding immediately prior to such time, other than any I.D. Systems Common Stock owned by I.D. Systems immediately prior to the I.D. Systems Merger Effective Time, will be converted automatically into the right to receive one share of Parent Common Stock.

 

Treatment of I.D. Systems Stock Options and Restricted Stock Awards

 

Treatment of I.D. Systems Stock Options (Page 146)

 

At the I.D. Systems Merger Effective Time, each option to purchase shares of I.D. Systems Common Stock outstanding under any of the I.D. Systems equity plans, whether or not vested or exercisable, will be converted automatically into a stock option to purchase an identical number of shares of Parent Common Stock, on the same terms and conditions as applied to such option immediately prior to the I.D. Systems Merger Effective Time, and as set forth in the documentation relating to such option.

 

Treatment of I.D. Systems Restricted Stock Awards (Page 146)

 

At the I.D. Systems Merger Effective Time, each restricted stock award with respect to shares of I.D. Systems Common Stock outstanding under any of the I.D. Systems equity plans, whether or not vested, will be converted automatically into a restricted stock award with respect to shares of Parent Common Stock, on the same terms and conditions as applied to such I.D. Systems restricted stock award immediately prior to the I.D. Systems Merger Effective Time, and as set forth in the documentation relating to such restricted stock award of I.D. Systems.

 

Assumption of I.D. Systems Equity Plans (Page 147)

 

From and after the I.D. Systems Merger Effective Time, I.D. Systems has agreed to assign to Parent and Parent agreed to assume all obligations of I.D. Systems pursuant to (i) the I.D. Systems 2018 Plan, the I.D. Systems, Inc. 2015 Equity Compensation Plan, the I.D. Systems, Inc. 2009 Non-Employee Director Equity Compensation Plan, as amended, and the I.D. Systems, Inc. 2007 Equity Compensation Plan, as amended (collectively, the “I.D. Systems Equity Plans”) and (ii) each stock option agreement, restricted stock award agreement and any other similar agreement entered into pursuant to the I.D. Systems Equity Plans.

 

At or promptly following the I.D. Systems Merger Effective Time, the award agreements will be amended to reflect the assignment to and assumption by Parent of the I.D. Systems Equity Plans and the award agreements.

 

Treatment of Pointer Stock Options and Restricted Stock Unit Awards

 

Treatment of Pointer Stock Options (Page 129)

 

At the Pointer Merger Effective Time, each award of options to purchase Pointer Ordinary Shares that is outstanding and unvested immediately prior to such time will be cancelled and substituted with options to purchase shares of Parent Common Stock under the I.D. Systems 2018 Plan on the same material terms and conditions as were applicable to the corresponding option immediately prior to the Pointer Merger Effective Time, except that (i) the number of shares of Parent Common Stock underlying such substituted option will equal the product of (A) the number of Pointer Ordinary Shares underlying such option immediately prior to the Pointer Merger Effective Time multiplied by (B) 2.544, with any fractional shares rounded down to the nearest whole number of shares of Parent Common Stock, and (ii) the per-share exercise price will equal the quotient obtained by dividing (A) the exercise price per Pointer Ordinary Share subject to such option immediately prior to the Pointer Merger Effective Time by (B) 2.544 (rounded up to the nearest whole cent).

 

 

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At the Pointer Merger Effective Time, each award of options to purchase Pointer Ordinary Shares that is outstanding and vested immediately prior to such time will be cancelled in exchange for the right to receive the product of (i) the excess, if any, of (A) the Pointer Merger Consideration (allocated between the Cash Consideration and the Stock Consideration in the same proportion as for holders of Pointer Ordinary Shares), over (B) the exercise price per Pointer Ordinary Share subject to such option, multiplied by (ii) the total number of Pointer Ordinary Shares underlying such option. The consideration payable for such options that were granted under Section 102(b)(2) and Section 102(b)(3) of the Israeli Income Tax Ordinance (New Version), 1961 and the rules and regulations promulgated thereunder, as amended (the “Ordinance”) will be transferred by the exchange agent immediately following the Pointer Merger Effective Time to the appointed trustee for the benefit of the beneficial owners thereof and will be released by such trustee to the beneficial holder of such option, in accordance with the applicable requirements of the Ordinance, and subject to the execution by such holder of a waiver and acknowledgement letter in a customary form acceptable to Parent and Pointer. If the exercise price of a vested option is equal to or greater than the consideration payable in respect of a vested option, such option will be cancelled without payment.

 

Treatment of Pointer Restricted Stock Unit Awards (Page 129)

 

At the Pointer Merger Effective Time, each Pointer RSU that is outstanding and vested immediately prior to such time will be cancelled in exchange for the right to receive the Pointer Merger Consideration (allocated between the Cash Consideration and the Stock Consideration in the same proportion as for holders of Pointer Ordinary Shares). The Pointer Merger Consideration payable for vested Pointer RSUs granted under Section 102(b)(2) and Section 102(b)(3) of the Ordinance will be transferred by the exchange agent immediately following the Pointer Merger Effective Time to the appointed trustee for the benefit of the beneficial owners thereof and shall be released by such trustee to the beneficial holders of such Pointer RSU, in accordance with the applicable requirements of the Ordinance, and subject to the execution by such holder of a waiver and acknowledgement letter in a customary form acceptable to Parent and Pointer.

 

Each Pointer RSU that is outstanding and unvested immediately prior to such time will be cancelled and substituted with restricted stock units under the I.D. Systems 2018 Plan representing the right to receive, on the same material terms and conditions as were applicable under such Pointer RSU immediately prior to the Pointer Merger Effective Time, that number of shares of Parent Common Stock equal to the product of (i) the number of Pointer Ordinary Shares underlying such Pointer RSU immediately prior to the Pointer Merger Effective Time multiplied by (ii) 2.544, with any fractional shares rounded down to the nearest lower whole number of shares of Parent Common Stock.

 

Comparative Per Share Data and Dividend Information (Page 182)

 

Shares of I.D. Systems Common Stock are listed on the Nasdaq Global Market under the symbol “IDSY”. Pointer Ordinary Shares are listed on the Nasdaq Capital Market and the TASE under the symbol “PNTR”. The following table shows the closing prices of shares of I.D. Systems Common Stock and Pointer Ordinary Shares as reported on Nasdaq and the Nasdaq Capital Market, respectively, on March 12, 2019, the last trading day before the Merger Agreement was announced, and on July 22, 2019, the last practicable day before the date of this joint proxy statement/prospectus.

 

   I.D. Systems Common Stock   Pointer Ordinary Shares 
March 12, 2019  $6.24   $14.50 
July 22, 2019  $

6.05

  $15.12

 

Recommendation of the I.D. Systems Board of Directors and I.D. Systems’ Reasons for the Transactions (Page 87)

 

The board of directors of I.D. Systems has unanimously approved and declared advisable the Agreements and the Transactions, including the I.D. Systems Merger and the Pointer Merger, and determined that the terms and provisions of the Agreements and the Transactions, including the I.D. Systems Merger and the Pointer Merger, are fair to, advisable and in the best interests of I.D. Systems and its stockholders.

 

The I.D. Systems board of directors unanimously recommends that I.D. Systems stockholders vote:

 

  FOR the adoption of the Investment Agreement and approval of the I.D. Systems Merger;
     
  FOR the approval of the issuance of the Investment Shares, pursuant to the terms of the Investment Agreement and the issuance of the shares of Parent Common Stock issuable upon conversion of the Investment Shares;
     
  FOR the approval of the issuance of the Acquisition Shares, pursuant to the terms of the Merger Agreement;
     
  FOR the approval of the authorized shares of Parent capital stock, as described in the Parent Charter;
     
  FOR the approval of certain provisions set forth in Article ELEVENTH of the Parent Charter, which contains certain mandatory indemnification provisions for the directors and officers of Parent;
     
  FOR the approval of certain provisions set forth in Article TWELFTH of the Parent Charter, which provides that certain transactions are not “corporate opportunities” of Parent;

 

 

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  FOR the approval of certain provisions set forth in Article SIXTEENTH of the Parent Charter, which designates the Chancery Court of the State of Delaware as the exclusive forum for certain legal actions;
     
  FOR the approval of an amendment to the I.D. Systems 2018 Plan;
     
  FOR the approval on an advisory (non-binding) basis of the compensation that may become payable to certain named executive officers of I.D. Systems in connection with, or following, the consummation of the Transactions; and
     
  FOR the approval to adjourn the I.D. Systems special meeting, or any adjournments thereof, to another time or place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the I.D. Systems special meeting to approve and adopt Proposals 1, 2, 3 and 4.

 

The I.D. Systems board of directors considered many factors in making its determination that the terms of the Agreements and the Transactions, including the I.D. Systems Merger and the Pointer Merger, are advisable and in the best interests of I.D. Systems and the I.D. Systems stockholders and recommending the adoption of the Investment Agreement and the I.D. Systems Merger by the I.D. Systems stockholders, including each of the other proposals described in this joint proxy statement/prospectus.

 

In considering the recommendation of the board of directors of I.D. Systems, you should be aware that certain directors and executive officers of I.D. Systems may have interests in the Transactions that may be different from, or in addition to, the interests of I.D. Systems’ stockholders generally. The members of the I.D. Systems board of directors were aware of these interests in evaluating and negotiating the Agreements and in making their recommendations to the stockholders of I.D. Systems.

 

Opinion of I.D. Systems’ Financial Advisor (Page 97)

 

In connection with the I.D. Systems board of directors’ consideration of the Merger Agreement, Canaccord Genuity LLC (“Canaccord”) rendered to the I.D. Systems board of directors its oral opinion, subsequently confirmed in writing (the “Canaccord Fairness Opinion”) that, as of March 13, 2019, and based upon and subject to certain assumptions, factors and qualifications set forth in the Canaccord Fairness Opinion, the Pointer Merger Consideration to be paid by Parent and Pointer Holdco was fair, from a financial point of view, to I.D. Systems.

 

The full text of Canaccord’s opinion is attached to this joint proxy statement/prospectus as Annex E and is incorporated into this joint proxy statement/prospectus by reference. The description of the Canaccord Fairness Opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Holders of shares of I.D. Systems Common Stock are encouraged to read the Canaccord Fairness Opinion carefully and in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Canaccord in connection with the Canaccord Fairness Opinion. The Canaccord Fairness Opinion was addressed to the board of directors of I.D. Systems, was only one of many factors considered by the board of directors of I.D. Systems in its evaluation of the Transactions and only addresses the fairness, from a financial point of view and as of the date of the Canaccord Fairness Opinion, of the consideration to be paid by Parent and Pointer Holdco pursuant to the Merger Agreement. The Canaccord Fairness Opinion does not address the relative merits of the Transactions as compared to other business strategies or transactions that might be available to I.D. Systems, nor does it address the underlying business decision of I.D. Systems to proceed with the Transactions. The Canaccord Fairness Opinion is not intended to, and does not, constitute advice or a recommendation to any stockholder as to how such stockholder vote with respect to the Transactions or any other aspect of the Transactions or how such stockholders should otherwise act on any other matter with respect to the Transactions. The Canaccord Fairness Opinion was necessarily based on securities, economic, monetary, market and other conditions as in effect on, and the information made available to Canaccord as of, March 13, 2019, the date of the Canaccord Fairness Opinion. Subsequent developments may affect the conclusions expressed in the Canaccord Fairness Opinion if such opinion were rendered as of a later date. Canaccord assumes no responsibility for updating, revising or reaffirming the Canaccord Fairness Opinion based on circumstances or events occurring after the date of the Canaccord Fairness Opinion.

 

Recommendation of the Pointer Board of Directors and Pointer’s Reasons for the Transactions (Page 91)

 

The Pointer board of directors has unanimously approved the Merger Agreement and determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Pointer Merger, are in the best interests of Pointer and its shareholders.

 

The Pointer board of directors unanimously recommends that Pointer shareholders vote:

 

FOR the approval and adoption of the Pointer Merger, the Merger Agreement and other matters relating to the consummation of the Transactions, including the purchase by Pointer of a run-off directors’ and officers’ liability insurance policy; and
   
FOR the approval of the grant of bonuses to certain executives of Pointer in connection with the consummation of the Transactions, in an aggregate amount of $750,000, payable in a combination of Pointer RSUs and cash.

 

 

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The Pointer board of directors considered many factors in making its determination that the terms of the Merger Agreement and the transactions contemplated thereby, including the Pointer Merger, were in the best interests of Pointer and its shareholders.

 

In considering the recommendation of the Pointer board of directors, you should be aware that certain directors and executive officers of Pointer may have interests in the Transactions that may be different from, or in addition to, the interests of Pointer’s shareholders generally. The members of the Pointer board of directors were aware of the interests of these executives and directors in evaluating and negotiating the Merger Agreement and in making their recommendations to the shareholders of Pointer.

 

Opinion of Pointer’s Financial Advisor (Page 103)

 

In connection with the Pointer board of directors’ consideration of the Merger Agreement and the Investment Agreement, Roth Capital Partners, LLC (“Roth Capital”) rendered to the Pointer board of directors its oral opinion, subsequently confirmed in writing, that as of March 13, 2019, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Roth Capital, as set forth in the written opinion, the Pointer Merger Consideration to be received by the shareholders of Pointer was fair, from a financial point of view, to such holders.

 

The full text of Roth Capital’s written opinion, dated March 13, 2019 (the “Roth Fairness Opinion”), is attached to this joint proxy statement/prospectus as Annex F and is incorporated by reference herein. Pointer’s shareholders are urged to read the entire Roth Fairness Opinion carefully and in its entirety to learn about the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Roth Capital in rendering such opinion. The analysis performed by Roth Capital should be viewed in its entirety; none of the methods of analysis should be viewed in isolation when reaching a conclusion on whether the Pointer Merger Consideration was fair, from a financial point of view. The Roth Fairness Opinion addresses only the fairness of the Pointer Merger Consideration to be received by the shareholders of Pointer, from a financial point of view, as of the date of the Roth Fairness Opinion, and does not address the merits of Pointer’s underlying business decision to proceed with or effect the Pointer Merger or the likelihood of consummation of the Pointer Merger or any other Transaction contemplated pursuant to the Merger Agreement or the Investment Agreement. Roth Capital expressed no opinion or recommendation to the Pointer board of directors whether Pointer should proceed with the Pointer Merger. The Roth Fairness Opinion was directed to the Pointer board of directors in connection with its consideration of the Merger Agreement and the Investment Agreement and was not intended to be, and does not constitute, a recommendation to any shareholder of Pointer (or stockholder of I.D. Systems) as to how such shareholder or stockholder should vote with respect to the Pointer Merger or any other matter.

 

Interests of Certain Persons in the Transactions

 

I.D. Systems (Page 115)

 

In considering the recommendation of the board of directors of I.D. Systems, I.D. Systems stockholders should be aware that I.D. Systems’ directors and executive officers may have interests in the Transactions that may be different from, or in addition to, the interests of I.D. Systems stockholders generally. The I.D. Systems board of directors was aware of these interests and considered them, among other matters, in evaluating and negotiating the Agreements, in reaching its decision to adopt the Agreements and approve the Transactions and in recommending to I.D. Systems stockholders that I.D. Systems Proposals 1, 2, 3 and 4 relating to the I.D. Systems special meeting be approved.

 

These interests are described in further detail in “Interests of I.D. Systems Directors and Executive Officers in the Transactions” beginning on page 115 of this joint proxy statement/prospectus.

 

Pointer (Page 119)

 

In considering the recommendation of the Pointer board of directors, Pointer shareholders should be aware that certain Pointer directors and executive officers may have interests in the Transactions that may be different from, or in addition to, the interests of Pointer shareholders generally. The Pointer board of directors was aware of these interests and considered them, among other matters, in evaluating and negotiating the Agreements, in reaching its decision to adopt the Merger Agreement and approve the Pointer Merger and in recommending to Pointer shareholders that the Merger Agreement be adopted.

 

These interests are described in further detail in “Interests of Pointer Directors and Executive Officers in the Transactions” beginning on page 119 of this joint proxy statement/prospectus.

 

 

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Certain Governance Matters Following the Transactions (Page 119)

 

Following the consummation of the Transactions, Parent’s board of directors will consist of seven members, comprised of two representatives from the Investors, Anders Bjork and John Hunt, and Chris Wolfe, Michael Brodsky, Michael Casey, Charles Frumberg, and David Mahlab. The executive officers of Parent will be: Chris Wolfe - Chief Executive Officer, David Mahlab - Chief Executive Officer International, Ned Mavrommatis - Chief Financial Officer and Yaniv Dorani – Deputy to Chief Executive Officer International.

 

Certain Tax Consequences of the Transactions (Page 120)

 

For U.S. federal income tax purposes, it is the opinion (as set forth in Exhibit 8.1 to the registration statement of which this joint proxy statement/prospectus forms a part) of Olshan Frome Wolosky LLP, counsel to I.D. Systems, that, with respect solely to the holders of I.D. Systems Common Stock, (1) the I.D. Systems Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, and (2) the I.D. Systems Merger, taken together with the Pointer Merger and the Preferred Investment, qualifies as a transaction described in Section 351 of the Code. Based on the foregoing, it is the opinion (as set forth in Exhibit 8.1 to the registration statement of which this joint proxy statement/prospectus forms a part) of Olshan Frome Wolosky LLP that, with respect solely to the holders of I.D. Systems Common Stock, a U.S. holder (as defined in “Material U.S. Federal Income Tax Consequences of the Transactions” beginning on page 120 of this joint proxy statement/prospectus) of I.D. Systems Common Stock will not recognize gain or loss for U.S. federal income tax purposes as a result of the exchange of its I.D. Systems Common Stock for Parent Common Stock in the I.D. Systems Merger.

 

For U.S. federal income tax purposes, with respect to the holders of Pointer Ordinary Shares, the Pointer Merger, taken together with the I.D. Systems Merger and the Preferred Investment, is intended to qualify as a transaction described in Section 351 of the Code. In such case, a U.S. holder of Pointer Ordinary Shares will recognize gain, but not loss, for U.S. federal income tax purposes as a result of the exchange of its Pointer Ordinary Shares for Parent Common Stock and cash consideration in the Pointer Merger in an amount equal to the lesser of (1) the amount by which the sum of the fair market value of the Parent Common Stock and cash received by such U.S. holder exceeds such U.S. holder’s tax basis in its Pointer Ordinary Shares surrendered in exchange therefor, and (2) the amount of cash received by such U.S. holder in the Pointer Merger.

 

For a more complete discussion of the U.S. federal income tax consequences of the Transactions, including tax consequences relating to tax basis and holding periods, see “Material U.S. Federal Income Tax Consequences of the Transactions” beginning on page 120 of this joint proxy statement/prospectus. Tax matters relating to the Transactions can be complicated, and the tax consequences of the Transactions to a particular holder will depend on such holder’s particular facts and circumstances. All holders should consult with their own tax advisors to determine the specific U.S. federal, state or local or foreign income or other tax consequences of the Transactions to them.

 

No Appraisal Rights

 

Appraisal rights are not available to holders of I.D. Systems Common Stock or holders of Pointer Ordinary Shares in connection with the Transactions.

 

Listing of Parent Common Stock on Stock Exchange (Page 182)

 

Parent Common Stock is currently not traded or quoted on a stock exchange or quotation system. Parent expects that, as of the effective time of the Transactions, Parent Common Stock will be listed for trading under the symbol “PWFL” on Nasdaq and the TASE. However, if a holder of Series A Preferred Stock activates voting rights for the Series A Preferred Stock at any time, Parent will be required to delist the Parent Common Stock from the TASE upon three months’ notice. See the risk factor entitled “While the Parent Common Stock is expected to be listed on the TASE, there is no guarantee as to how long such listing will be maintained” beginning on page 35 of this joint proxy statement/prospectus. Following the consummation of the Transactions, shares of I.D. Systems Common Stock will be delisted from Nasdaq and deregistered under the Exchange Act and Pointer Ordinary Shares will be delisted from TASE and the Nasdaq Capital Market and deregistered under the Exchange Act.

 

Conditions to the Completion of the Transactions

 

Merger Agreement (Page 139)

 

The obligations of each of Parent, Pointer Holdco, Pointer Merger Sub, and Pointer to complete the Pointer Merger are subject to the satisfaction (or waiver to the extent permissible under the Merger Agreement or applicable law) on or prior to the Pointer Merger Effective Time of various conditions, including the following:

 

  Pointer having obtained the Pointer Shareholder Approval;
     
  I.D. Systems obtaining the I.D. Systems Specified Stockholder Approval;

 

 

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  the closing of the transactions contemplated by the Investment Agreement;
     
  the Parent Common Stock to be issued in the Pointer Merger having been approved for listing on Nasdaq, subject to official notice of issuance;
     
  no law or order having been promulgated, entered, enforced, enacted or issued or made applicable to the Pointer Merger or the issuance of the Parent Common Stock as part of the Pointer Merger Consideration by any governmental entity that prohibits, restrains or makes illegal the consummation of the Pointer Merger or such issuance of the Parent Common Stock;
     
  the registration statement of which this joint proxy statement/prospectus forms a part having become effective, and not subject to any stop order or any proceeding seeking a stop order;
     
  the parties having made any material filing required to obtain all material governmental authorizations applicable to the Pointer Merger and the transactions contemplated by the Merger Agreement and obtaining all such governmental authorizations, including the lapse of any applicable waiting period; and
     
  obtaining the applicable exemptions under the Israeli Securities Laws.

 

In addition, the obligations of Parent, Pointer Holdco and Pointer Merger Sub to complete the Pointer Merger are also subject to the satisfaction (or waiver to the extent permissible under the Merger Agreement or applicable law) on or prior to the Pointer Merger Effective Time of certain additional conditions on or prior to the Pointer Merger Effective Time, including (i) as of the Pointer Merger Effective Time, Pointer having not less than $3,000,000 in cash and cash equivalents (net of indebtedness of Pointer and its subsidiaries); (ii) Pointer delivering to Parent evidence reasonably satisfactory to Parent of the termination of that certain Management Services Agreement, dated as of June 29, 2017, by and between Pointer and DBSI; (iii) Pointer delivering to Parent the consent of the Ministry of Communications of the State of Israel to the Pointer Merger; and (iv) Pointer delivering to Parent evidence satisfactory to Parent that Pointer owns at least 99.99% of the issued and outstanding shares of each of Pointer Recuperación de México, S.A. de C.V. and Pointer Logistica y Monitoreo, each, a company organized under the laws of Mexico (collectively, the “Mexican Subsidiaries”), and that each Mexican Subsidiary maintains all of the corporate books that it is required to maintain under Mexican law.

 

The parties to the Merger Agreement cannot be certain when, or if, the conditions to the Pointer Merger will be satisfied or waived, or that the Pointer Merger will be completed.

 

See “The Merger Agreement—Conditions to the Pointer Merger” beginning on page 139 of this joint proxy statement/prospectus.

 

Investment Agreement (Page 158)

 

Conditions to the Investors’ Obligations

 

The obligations of each of the Investors to purchase the Investment Shares are subject to the satisfaction (or waiver to the extent permissible under the Investment Agreement or applicable law) of various conditions, including the following:

 

  I.D. Systems obtaining the I.D. Systems Specified Stockholder Approval;
     
  the Parent Common Stock to be issued in the I.D. Systems Merger having been approved for listing on Nasdaq, subject to official notice of issuance;
     
  no law or order having been promulgated, entered, enforced, enacted or issued or made applicable to the I.D. Systems Merger, the issuance of the Investment Shares or any of the other transactions contemplated by the Investment Agreement by any governmental authority that prohibits, restrains or makes illegal the consummation of the I.D. Systems Merger, the issuance of the Investment Shares or any of the other transactions contemplated by the Investment Agreement;
     
  the Investors having received a duly executed counterpart of the Registration Rights Agreement from Parent;
     
  the registration statement of which this joint proxy statement/prospectus forms a part having become effective, and not subject to any stop order or any proceeding seeking a stop order;

 

 

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  the parties having made any material filing required to obtain all material governmental authorizations applicable to the Transactions and obtaining all such governmental authorizations, including the lapse of any applicable waiting period;
     
  a $1,000,000 facility fee having been paid by Parent or I.D. Systems to the Investors;
     
  the fees and expenses of Investors having been paid by Parent or I.D. Systems;
     
  I.D. Systems and the subsidiaries of I.D. Systems having cash and cash equivalents of less than $8,500,000 prior to giving effect of the issuance and sale of the Investment Shares and the receipt of the purchase price, therefor; and
     
  the closing of the Pointer Merger and the other transactions contemplated by the Merger Agreement.

 

Conditions to I.D. Systems’ and Parent’s Obligations

 

In addition, the obligations of I.D. Systems and Parent to issue the Investment Shares and to consummate the other transactions contemplated by the Investment Agreement is subject to the satisfaction (or waiver to the extent permissible under the Investment Agreement or applicable law) of various conditions, including the following:

 

  Parent having received a duly executed counterpart of the Registration Rights Agreement from each of the Investors;
     
  no law or order having been promulgated, entered, enforced, enacted or issued or made applicable to the I.D. Systems Merger, the issuance of the Investment Shares or any of the other transactions contemplated by the Investment Agreement by any governmental authority that prohibits, restrains or makes illegal the consummation of the I.D. Systems Merger, the issuance of the Investment Shares or any of the other transactions contemplated by the Investment Agreement;
     
  I.D. Systems having obtained the I.D. Systems Specified Stockholder Approval;
     
  the Parent Common Stock to be issued in the I.D. Systems Merger having been approved for listing on Nasdaq, subject to official notice of issuance;
     
  the registration statement of which this joint proxy statement/prospectus forms a part having become effective, and not subject to any stop order or any proceeding seeking a stop order;
     
  the parties having made any material filing required to obtain all material governmental authorizations applicable to the Transactions and obtaining all such governmental authorizations, including the lapse of any applicable waiting period; and
     
  the closing of the Pointer Merger and the other transactions contemplated by the Merger Agreement.

 

The parties to the Investment Agreement cannot be certain when, or if, the conditions to the Investment Agreement will be satisfied or waived, or that such transactions contemplated by the Investment Agreement will be completed. The conditions set forth in the first, fourth, sixth (except to the extent that the failure to obtain any governmental authorization would prohibit the consummation of the Transactions) and seventh bullet points above may be waived by I.D. Systems or Parent (however, since there are corresponding conditions to the Investors’ obligations to close, they would also need to be waived by the Investors). Any determination whether to waive any condition to the Transactions, whether stockholder approval would be re-solicited as a result of any such waiver or whether this joint proxy statement/prospectus would be amended as a result of any waiver will be made by I.D. Systems or Parent, as applicable, at the time of such waiver based on the facts and circumstances as they exist at that time. The receipt of a tax opinion by I.D. Systems regarding the tax consequences of the Transactions is not a condition to the consummation of the Transactions.

 

See “The Investment Agreement—Conditions to the Investment Agreement” beginning on page 158 of this joint proxy statement/prospectus.

 

Termination of the Agreements

 

Merger Agreement (Page 141)

 

As more fully described in this joint proxy statement/prospectus and the Merger Agreement, and subject to the terms and conditions set forth in the Merger Agreement, the Merger Agreement may be terminated in any of the following ways:

 

  by mutual written consent of Parent and Pointer at any time prior to the Pointer Merger Effective Time (notwithstanding receipt of the Pointer Shareholder Approval and/or the I.D. Systems Stockholder Approval);

 

 

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  by either Parent or Pointer, if:

 

  at any time prior to the Pointer Merger Effective Time (notwithstanding receipt of the Pointer Shareholder Approval and/or the I.D. Systems Stockholder Approval), any court or governmental authority of competent jurisdiction has issued a final and non-appealable order or enacted a law permanently restraining, enjoining or otherwise prohibiting or making illegal the Pointer Merger or the issuance of shares of Parent Common Stock as part of the Pointer Merger Consideration; provided, that this right to terminate will not be available to any party whose breach of any provision of the Merger Agreement results in the issuance of such final and non-appealable order or the enactment of such law;
     
  the Pointer Merger has not been completed by October 31, 2019 (the “Outside Date”); provided, that this right to terminate will not be available to any party whose breach of any provision of the Merger Agreement results in the failure of the Pointer Merger to be completed by such time;
     
  the Pointer Shareholder Approval is not obtained at the Pointer extraordinary general meeting or at any adjournment or postponement thereof; provided, that this right to terminate will not be available to Pointer if the breach of any provision of the Merger Agreement by Pointer results in the failure to obtain the Pointer Shareholder Approval; or
     
  the Investment Agreement is terminated in accordance with its terms.

 

  by Pointer, if:

 

  prior to the receipt of the Pointer Shareholder Approval, (i) the Pointer board of directors authorizes Pointer to enter into an acquisition agreement with a third party with respect to a superior proposal in accordance with the terms of the Merger Agreement, (ii) substantially concurrent with the termination of the Merger Agreement, Pointer enters into the acquisition agreement with such third party, and (iii) prior to or concurrently with such termination, Pointer pays to Parent, in immediately available funds, a termination fee of $3,000,000;
     
  Parent, I.D. Systems, Pointer Holdco or Pointer Merger Sub breaches or fails to perform any of their respective representations, warranties, covenants or agreements set forth in the Merger Agreement, or if any representations or warranties of Parent, I.D. Systems, Pointer Holdco or Pointer Merger Sub become untrue, which breach or failure to perform or to be true would result in the failure of certain conditions to closing regarding accuracy of representations and warranties and performance of obligations to be satisfied, and cannot be cured by the Outside Date, or if curable prior to the Outside Date, is not cured by the earlier of the Outside Date and 30 days after the giving of written notice by Pointer to Parent of such breach or failure to perform or to be true; provided, that Pointer will not have the right to terminate the Merger Agreement under these circumstances if Pointer is then in breach of any of its representations, warranties, covenants or agreements set forth in the Merger Agreement such that certain conditions to closing set forth in the Merger Agreement would not be satisfied; or
     
  (i) all of the conditions to the obligations of each party and the conditions to the obligations of Parent, Pointer Holdco and Pointer Merger Sub to consummate the Pointer Merger (other than the closing of the Preferred Investment and any conditions that by their nature can only be satisfied on the closing date and that were, at the time of termination, capable of being satisfied) have been satisfied, (ii) Pointer confirmed to Parent in writing that all conditions to the obligations of Pointer to consummate the Pointer Merger have been satisfied and that it stands ready, willing and able to consummate the Pointer Merger, and (iii) Parent, Pointer Holdco and Pointer Merger Sub have failed to consummate the Pointer Merger because of a failure to consummate the Preferred Investment or obtain the debt financing or alternative financing by two business days before the Outside Date (the “Parent Closing Failure Termination”).

 

  by Parent:

 

  prior to the receipt of the Pointer Shareholder Approval, if the Pointer board of directors or any committee thereof makes an adverse recommendation change;
     
  upon a willful and intentional breach by Pointer of its obligations pursuant to the no solicitation provisions set forth in the Merger Agreement;

 

 

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  upon a breach of Pointer’s obligation to hold the Pointer extraordinary general meeting and use its reasonable best efforts to solicit from its shareholders proxies in favor of the adoption of the Merger Agreement;
     
  if Pointer breaches or fails to perform any of its representations, warranties, covenants or agreements set forth in the Merger Agreement, other than certain limited exceptions, or if any representation or warranty of Pointer becomes untrue, which breach or failure to perform or to be true would result in the failure of certain conditions to closing regarding accuracy of representations and warranties and performance of obligations to be satisfied, and cannot be cured by the Outside Date, or if curable prior to the Outside Date, is not cured by the earlier of the Outside Date and 30 days after the giving of written notice by Parent to Pointer of such breach or failure to perform or to be true; provided, that Parent will not have the right to terminate the Merger Agreement under these circumstances if Parent or I.D. Systems is then in breach of any of its representations, warranties, covenants or agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement would not be satisfied; or
     
  upon the occurrence of, or if there shall have occurred any effect, change, condition, fact, development, occurrence or event that could reasonably be likely to result in a material adverse effect to Pointer.

 

See “The Merger Agreement—Termination” beginning on page 141 of this joint proxy statement/prospectus.

 

Investment Agreement (Page 160)

 

As more fully described in this joint proxy statement/prospectus and the Investment Agreement, and subject to the terms and conditions set forth in the Investment Agreement, the Investment Agreement may be terminated in any of the following ways:

 

  by the mutual written consent of I.D. Systems and the Investors at any time prior to the I.D. Systems Merger Effective Time;
     
  by either I.D. Systems or the Investors if:

 

  at any time prior to the I.D. Systems Merger Effective Time, any court or governmental authority of competent jurisdiction has issued a final and non-appealable order or enacted a law permanently restraining, enjoining or otherwise prohibiting or making illegal the Transactions; provided, that this right to terminate will not be available to any party whose breach of any provision of the Investment Documents and, in the case of I.D. Systems, the Merger Agreement and the other agreements entered into in connection therewith, results in the issuance of such final and non-appealable order or the enactment of such law;
     
  the closing of the transactions contemplated under the Investment Agreement has not been completed by the Outside Date; provided, that this right to terminate will not be available to any party whose breach of any provision of the Investment Documents, and in the case of I.D. Systems, the Merger Agreement and the other agreements entered into in connection therewith, results in the failure of the closing of the transactions contemplated by the Investment Agreement to have occurred by such time;
     
  the I.D. Systems Specified Stockholder Approval is not obtained at the I.D. Systems special meeting or any adjournment or postponement thereof; provided, that this right to terminate will not be available to I.D. Systems if its breach of any provision of the Investment Documents or the Merger Agreement and the other agreements entered into in connection therewith results in the failure of the I.D. Systems Specified Stockholder Approval to be obtained; or
     
  the Merger Agreement is terminated in accordance with its terms.

 

  by I.D. Systems:

 

  if the Investors breach or fail to perform any of their respective representations, warranties, covenants or agreements set forth in the Investment Agreement, or if any representation or warranty of the Investors becomes untrue, which breach or failure to perform or to be true results in the failure of certain conditions to closing regarding accuracy of representations and warranties and performance of obligations to be satisfied, and cannot be cured by the Outside Date, or if curable prior to the Outside Date, is not cured by the earlier of the Outside Date and 30 days after the giving of written notice by I.D. Systems to the Investors of such breach or failure to perform or to be true; provided, that I.D. Systems will not have the right to terminate the Investment Agreement under these circumstances if I.D. Systems is then in breach of any of its representations, warranties, covenants or agreements set forth in the Investment Agreement such that certain conditions to closing set forth in the Investment Agreement would not be satisfied.

 

 

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  by the Investors:

 

  if the I.D. Systems board of directors or any committee thereof makes an adverse recommendation change;
     
  upon a material breach by I.D. Systems of its obligations pursuant to the no solicitation provisions set forth in the Investment Agreement;
     
  if I.D. Systems, Parent or I.D. Systems Merger Sub breaches or fails to perform any of its representations, warranties, covenants or agreements set forth in the Investment Agreement, other than certain limited exceptions, or if any representation or warranty of I.D. Systems, Parent or I.D. Systems Merger Sub becomes untrue, which breach or failure to perform or to be true would result in the failure of certain conditions to closing regarding accuracy of representations and warranties and performance of obligations to be satisfied, and cannot be cured by the Outside Date, or if curable prior to the Outside Date, is not cured by the earlier of the Outside Date and 30 days after the giving of written notice by the Investors to I.D. Systems of such breach or failure to perform or to be true; provided, that the Investors will not have the right to terminate the Investment Agreement under these circumstances if the Investors are then in breach of any of their representations, warranties, covenants or agreements set forth in the Investment Agreement such that certain conditions to closing set forth in the Investment Agreement would not be satisfied;
     
  if Parent, Pointer Holdco or Pointer Merger Sub breaches or fails to perform any of its representations, warranties, covenants or agreements set forth in the Merger Agreement, or if any representation or warranty of Parent, Pointer Holdco or Pointer Merger Sub under the Merger Agreement becomes untrue, which breach or failure to perform or to be true would result in a failure of certain conditions to closing set forth in the Merger Agreement regarding accuracy of representations and warranties and performance of obligations to be satisfied, and cannot be cured by the Outside Date, or if curable prior to the Outside Date, is not cured in accordance with the terms of the Merger Agreement; provided, that the Investors will not have the right to terminate the Investment Agreement under these circumstances if the Investors are then in breach of any of their representations, warranties, covenants or agreements set forth in the Investment Agreement such that certain conditions to closing set forth in the Investment Agreement would not be satisfied;
     
  upon a breach of any voting agreement contemplated under the Investment Agreement or the Merger Agreement at any time after its execution and delivery, or if any such voting agreement ceases to be in full force and effect and enforceable against the parties thereto in accordance with its terms, as a result of which the I.D. Systems Specified Stockholder Approval or the Pointer Shareholder Approval is not obtained at the I.D. Systems special meeting or the Pointer extraordinary general meeting, respectively, or at any adjournment or postponement thereof; or
     
  upon the occurrence of, or if there shall have occurred any effect, change, condition, fact, development, occurrence or event that would reasonably be likely to result in a material adverse effect on I.D. Systems or Pointer.

 

See “The Investment Agreement—Termination” beginning on page 160 of this joint proxy statement/prospectus.

 

Termination Fees

 

Merger Agreement (Page 142)

 

As more fully described in this joint proxy statement/prospectus and in the Merger Agreement, and subject to the terms and conditions of the Merger Agreement, Pointer has agreed to pay Parent a termination fee of $3,000,000 if the Merger Agreement is terminated under any of the following circumstances:

 

  by Pointer or Parent, if the Pointer Merger has not been completed by the Outside Date or if the Pointer Shareholder Approval is not obtained at the Pointer extraordinary general meeting or any adjournment or postponement thereof, or by Parent upon Pointer’s willful and intentional breach of any of its obligations described in “The Merger Agreement—No Solicitation” beginning on page 134 of this joint proxy statement/prospectus or upon a breach of any of Pointer’s obligation to call and hold a Pointer shareholders’ meeting described in “The Merger Agreement—Pointer Shareholders’ Meeting” beginning on page 136 of this joint proxy statement/prospectus, and at or prior to such termination, an acquisition proposal for Pointer has been made and within 12 months after the date of such termination, Pointer enters into a definitive agreement, or completes a transaction, relating to an acquisition proposal for Pointer (regardless of whether it is the same acquisition proposal);

 

 

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  by Parent, prior to receipt of the Pointer Shareholder Approval, if the Pointer board of directors or any committee thereof makes an adverse recommendation change;
     
  by Pointer, prior to the receipt of the Pointer Shareholder Approval, if the Pointer board of directors authorizes Pointer to enter into an acquisition agreement with a third party with respect to a superior proposal in accordance with the terms of the Merger Agreement and substantially concurrent with the termination of the Merger Agreement, Pointer enters into the acquisition agreement with such third party; and
     
  by Pointer, if the Pointer Merger has not been completed by the Outside Date and the Pointer board of directors or any committee thereof makes an adverse recommendation change, unless the Pointer Shareholder Approval was received prior to such termination.

 

As more fully described in this joint proxy statement/prospectus and in the Merger Agreement, and subject to the terms and conditions of the Merger Agreement, Parent has agreed to pay Pointer a termination fee of $2,000,000 if the Merger Agreement is terminated under any of the following circumstances:

 

  by Pointer, if a Parent Closing Failure Termination is effected;
     
  by Pointer or Parent, as a result of the termination of the Investment Agreement due to the I.D. Systems Specified Stockholder Approval not being obtained at the I.D. Systems special meeting held therefor, (or at any adjournment or postponement thereof) if, following the date of the Merger Agreement, the I.D. Systems board of directors effects an adverse recommendation change that remains in effect until the time of such I.D. Systems special meeting; or
     
  by Pointer or Parent as a result of the termination of the Investment Agreement by the Investors due to I.D. Systems effecting an adverse recommendation change thereunder or due to a material breach by I.D. Systems of any of its obligations described in “The Merger Agreement—No Solicitation” beginning on page 134 of this joint proxy statement/prospectus.

 

See “The Merger Agreement—Termination Fees” beginning on page 142 of this joint proxy statement/prospectus.

 

Investment Agreement (Page 162)

 

As more fully described in this joint proxy statement/prospectus and in the Investment Agreement, and subject to the terms and conditions of the Investment Agreement, I.D. Systems is required to pay to the Investors their reasonable costs and expenses, including reasonable attorneys’ fees, incurred in connection with the Transactions, subject to a maximum reimbursement of $250,000 in certain circumstances upon termination or unless the Investment Agreement is terminated due to the Investors’ breach.

 

Notwithstanding the termination of the Investment Agreement, in the event that Parent or any affiliate of Parent receives the termination fee from Pointer set forth in the Merger Agreement, after payment of all reasonable and documented out-of-pocket fees and expenses incurred in connection with the Transactions), Parent will pay 50% of the remaining amount of such termination fee to the Investors. If Parent does not pay such amount in full in a timely manner to the Investors, and in order to obtain such payment, any of the Investors commences a suit that results in a judgment against Parent or any of Parent’s affiliates for the payment of the termination fee or any portion thereof, Parent will pay the Investors their reasonable costs and expenses in connection with such suit, together with interest, on the amount payable to the Investors.

 

See “The Investment Agreement—Termination Fees” beginning on page 162 of this joint proxy statement/prospectus.

 

Certain Regulatory Approvals (Page 163)

 

Subject to the terms of the Agreements, I.D. Systems, Pointer and the other parties to the Agreements have agreed to cooperate with each other and use reasonable best efforts to promptly prepare and file all documentation to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and governmental entities which are necessary or advisable to consummate the Transactions contemplated by the Agreements (including the Pointer Merger and the I.D. Systems Merger), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such governmental entities. These approvals include, among others, the consent of the Ministry of Communications in Israel and the approval of the Israel Securities Authority to list the Parent Common Stock on the TASE pursuant to the dual-listing arrangement under Israeli law, which would enable Parent to apply for an exemption to use its registration statement on Form S-4 in Israel in lieu of an Israeli prospectus.

 

 

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Although none of the parties to the Agreements knows of any reason why they cannot obtain these regulatory approvals in a timely manner, the parties cannot be certain when or if they will be obtained.

 

See “Certain Regulatory Approvals” beginning on page 163 of this joint proxy statement/prospectus.

 

Additional Financing Relating to the Transactions (Page 164)

 

In connection with the entry into the Agreements, on March 13, 2019, I.D. Systems entered into a commitment letter (the “Debt Commitment Letter”) pursuant to which Bank Hapoalim B.M. (“Hapoalim”) has committed to provide Pointer Holdco with two senior secured term loan facilities in an aggregate principal amount of $30 million (comprised of two facilities in the aggregate principal amount of $20 million and $10 million, respectively (the “Term A Facility” and “Term B Facility”, respectively, and collectively, the “Term Facilities”)) and a five-year revolving credit facility to Pointer in an aggregate principal amount of $10 million (the “Revolving Facility” and together with the Term Facilities, the “Credit Facilities”). The Term Facilities will be used to finance a portion of the Cash Consideration payable in the Pointer Merger and the Revolving Facility will be used by Pointer for general working capital purposes, or, at Pointer’s discretion, to finance a portion of the Cash Consideration payable in the Pointer Merger. The Credit Facilities are subject to customary closing conditions.

 

Pursuant to the terms of the Investment Agreement, Parent is required to, immediately following the sale of the Investment Shares, (i) make certain loans to Pointer Holdco pursuant to one or more capital notes, (ii) contribute all or a portion of the proceeds from the sale of the Investment Shares to Pointer Holdco and (iii) contribute the shares of Parent Common Stock to be issued as consideration to Pointer shareholders pursuant to the Merger Agreement to Pointer Holdco, in each case, to facilitate the consummation of the Pointer Merger.

 

See “Additional Financing Relating to the Transactions” beginning on page 164 of this joint proxy statement/prospectus.

 

Voting and Support Agreements

 

Merger Agreement (Page 165)

 

In connection with the Merger Agreement, Pointer, together with I.D. Systems and the Investors, entered into the Pointer Voting Agreement with DBSI, pursuant to which DBSI has agreed to vote in favor of (i) granting the Pointer Shareholder Approval and (ii) any proposal to adjourn a meeting of Pointer’s shareholders at which the Pointer Shareholder Approval is sought which Pointer supports. The Pointer Voting Agreement will terminate upon the earliest to occur of (i) the mutual written consent of the parties, (ii) the Pointer Merger Effective Time, (iii) the termination of the Merger Agreement in accordance with its terms, (iv) the occurrence of an adverse recommendation change made by Pointer’s board of directors in compliance with the terms of the Merger Agreement, and (v) the effectiveness of any amendment to the Merger Agreement that would decrease or change the form of the Pointer Merger Consideration.

 

Investment Agreement (Page 165)

 

In connection with the Investment Agreement, I.D. Systems, together with the Investors and Pointer, entered into the I.D. Systems Voting Agreement with Emancipation Capital, pursuant to which Emancipation Capital has agreed to vote in favor of (i) granting the I.D. Systems Stockholder Approval and (ii) any proposal to adjourn a meeting of the I.D. Systems’ stockholders at which the I.D. Systems Stockholder Approval is sought which I.D. Systems supports. The I.D. Systems Voting Agreement will terminate upon the earliest to occur of (i) the mutual written consent of the parties, (ii) the Pointer Merger Effective Time, (iii) the termination of the Investment Agreement and the Merger Agreement in accordance with their respective terms, (iv) the occurrence of an adverse recommendation change made by I.D. Systems’ board of directors in compliance with the terms of the Investment Agreement, and (v) the effectiveness of any amendment to the Investment Agreement that would change the conversion of each share of I.D. Systems Common Stock into the right to receive one share of Parent Common Stock.

 

See “Voting and Support Agreements” beginning on page 165 of this joint proxy statement/prospectus.

 

Registration Rights Agreement (Page 166)

 

Simultaneously with the closing of the Transactions, the Investors will enter into the Registration Rights Agreement with Parent, pursuant to which Investors will have certain customary registration rights with respect to the shares of Parent Common Stock issued or issuable upon conversion of any shares of Series A Preferred Stock. The Registration Rights Agreement, among other things, grants certain registration rights to the Investors, including demand registration rights and piggyback registration rights.

 

See “Registration Rights Agreement” beginning on page 166 of this joint proxy statement/prospectus.

 

 

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Accounting Treatment (Page 119)

 

The Pointer Merger and the I.D. Systems Merger, taken together, will be accounted for by applying the acquisition method, which requires the determination of the accounting acquirer, the acquisition date, the fair value of the purchase consideration to be transferred, the fair value of assets and liabilities of the acquiree and the measurement of goodwill.

 

I.D. Systems will be considered the accounting acquirer and Pointer will be considered the accounting acquiree since I.D. Systems’ stockholders will have a majority of the voting power of the combined company following the Transactions, I.D. Systems’ management team will represent a majority of the senior leadership roles in the combined company and its board members will have larger proportional representation. The ultimate determination of the accounting acquirer is a qualitative and quantitative assessment that requires careful consideration, of which the final determination will occur after the consummation of the Pointer Merger and the I.D. Systems Merger. Under the acquisition method of accounting, I.D. Systems will allocate the purchase price of this acquisition to tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated acquisition-date fair values. These estimates will be determined through established and generally accepted valuation techniques. Transaction costs will be expensed as incurred.

 

See “Accounting Treatment” beginning on page 119 of this joint proxy statement/prospectus.

 

Comparison of the Rights of Holders of Pointer Ordinary Shares and Parent Common Stock (Page 190)

 

As a result of the Transactions, the holders of Pointer Ordinary Shares will become holders of Parent Common Stock and their rights will be governed by Delaware law (and by the Parent Charter and Parent Bylaws (instead of the Pointer Articles of Association)). The current certificate of incorporation of Parent will be amended and restated prior to the effective time of the Transactions in the form of the Parent Charter, which is included as Annex C to this joint proxy statement/prospectus. Following the Transactions, former Pointer shareholders may have different rights as Parent stockholders than they had as Pointer shareholders.

 

See “Comparison of the Rights of Holders of Pointer Ordinary Shares and Parent Common Stock” beginning on page 190 of this joint proxy statement/prospectus.

 

Comparison of the Rights of Holders of I.D. Systems Common Stock and Parent Common Stock (Page 195)

 

As a result of the Transactions, the holders of shares of I.D. Systems Common Stock will become holders of Parent Common Stock and their rights will be governed by Delaware law (and by the Parent Charter and Parent Bylaws (instead of the I.D. Systems Charter and the I.D. Systems Bylaws)). The current certificate of incorporation of Parent will be amended and restated prior to the effective time of the Transactions in the form of the Parent Charter, which is included as Annex C to this joint proxy statement/prospectus. Following the Transactions, former I.D. Systems stockholders may have different rights as Parent stockholders than they had as I.D. Systems stockholders.

 

See “Comparison of the Rights of Holders of I.D. Systems Common Stock and Parent Common Stock” beginning on page 195 of this joint proxy statement/prospectus.

 

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

Statements contained in this joint proxy statement/prospectus and the documents incorporated into it by reference that refer to I.D. Systems’, Pointer’s and/or Parent’s estimated or anticipated future results or other nonhistorical facts are forward-looking statements that reflect I.D. Systems’, Pointer’s and/or Parent’s perspective of existing trends and information as of the date made. Forward- looking statements generally will be accompanied by words such as “anticipate”, “believe”, “plan”, “could”, “should”, “estimate”, “expect”, “forecast”, “outlook”, “guidance”, “intend”, “may”, “might”, “will”, “possible”, “potential”, “predict”, “project”, or other similar words, phrases or expressions. It is important to note that I.D. Systems’, Pointer’s and/or Parent’s goals and expectations are not predictions of actual performance. Actual results may differ materially from I.D. Systems’, Pointer’s or Parent’s current expectations depending upon a number of factors affecting I.D. Systems’ business, Pointer’s business and risks associated with the Transactions. These factors include, among others:

 

  the inherent uncertainty associated with financial projections, restructuring in connection with, and successful consummation of, the Transactions;
     
  subsequent integration of I.D. Systems’ and Pointer’s businesses and the ability to recognize the anticipated synergies and benefits of the Transactions;
     
   the inability to consummate the Transactions due to the failure to obtain the I.D. Systems Specified Stockholder Approval or Pointer Shareholder Approval, or other conditions to closing in the Merger Agreement and the Investment Agreement;
   
  the outcome of any legal proceedings that may be instituted against I.D. Systems or Pointer following announcement of the Transactions;
     
  the receipt of required regulatory approvals for the Transactions;
     
  the diversion of management time on Transaction-related issues;
     
  access to available financing (including financing in connection with the Transactions) on a timely basis and on reasonable terms;
     
  the inability to obtain or maintain the listing of Parent Common Stock on Nasdaq following the Transactions;
     
  the failure of the markets for products of I.D. Systems and Pointer to continue to develop;
     
  the competitive conditions within our markets will not change materially or adversely;
     
  the loss of any key customers of I.D. Systems or Pointer or reduction in the purchase of I.D. Systems or Pointer products by any such customers;
     
  the risks of fluctuations in foreign currency exchange rates and their effect on the financial results of Pointer;
     
  changes in tax laws or interpretations that could increase Parent’s consolidated tax liabilities following the Transactions;
     
  the effects of competition from a wide variety of local, regional, national and other providers of wireless solutions;
     
  changes in laws and regulations, domestically, in Israel, or in another territory where Pointer or I.D. Systems are operating, or changes in generally accepted accounting principles;
     
  results of legal proceedings to which Pointer is a party;
     
  the inability to adequately protect our intellectual property;
     
  the loss of key senior management or technical staff;
     
  that the forecasts prepared by I.D. Systems and Pointer will accurately anticipate market demand; and
     
  such other risks and uncertainties detailed in “Risk Factors” beginning on page 34 of this joint proxy statement/prospectus, and in I.D. Systems’ and Pointer’s periodic public filings with the SEC, including but not limited to I.D. Systems’ Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as amended by the Form 10-K/A filed on April 30, 2019, and Pointer’s Annual Report on Form 20-F for the fiscal year ended December 31, 2018, each of which is incorporated by reference into this joint proxy statement/prospectus, and as updated by the I.D. Systems Quarterly Reports on Form 10-Q and future filings after the date of this joint proxy statement/prospectus with the SEC by I.D. Systems and Pointer.

 

Except as expressly required by law, including the securities laws of the United States, Parent, I.D. Systems and Pointer disclaim any intent or obligation to update or revise these forward-looking statements.

 

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RISK FACTORS

 

In addition to the other information contained or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 33 of this joint proxy statement/prospectus, you should carefully consider the following risk factors before deciding how to vote. You also should read and consider the risk factors associated with each of the businesses of I.D. Systems and Pointer because these risk factors may affect the operations and financial results of the combined company. These risk factors may be found under Part I, Item 1A, “Risk Factors” in I.D. Systems’ Annual Report on Form 10-K for the year ended December 31, 2018 and Part I, Item 3.D, “Risk Factors” in Pointer’s Annual Report on Form 20-F for the year ended December 31, 2018, each of which is on file with the SEC and incorporated by reference into this joint proxy statement/prospectus.

 

Risk Factors Relating to the Transactions

 

The number of shares of Parent Common Stock that Pointer shareholders and I.D. Systems stockholders will receive under the Agreements is based on a fixed exchange ratio. The market value of the shares of Parent Common Stock to be issued upon completion of the Transactions is unknown, and therefore, Pointer shareholders and I.D. Systems stockholders cannot be certain, at the time they are being asked to vote, of the value of the portion of the merger consideration to be paid in Parent Common Stock.

 

I.D. Systems stockholders and Pointer shareholders will receive a fixed number of shares of Parent Common Stock in the Transactions rather than a number of shares with a particular fixed market value. The market values of I.D. Systems Common Stock and Pointer Ordinary Shares have fluctuated since the date of the announcement of the Transactions and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the I.D. Systems special meeting, the date of the Pointer extraordinary general meeting and the closing date of the Transactions, which could occur a considerable amount of time after the date of the I.D. Systems special meeting and the date of the Pointer extraordinary general meeting. The market values of I.D. Systems Common Stock and Pointer Ordinary Shares at the time of the closing of the Transactions may vary significantly from their prices on the date of the Agreements, the date of this joint proxy statement/prospectus or the date of the I.D. Systems special meeting or the Pointer extraordinary general meeting. Because the exchange ratio will not be adjusted to reflect any changes in the market prices of I.D. Systems Common Stock or Pointer Ordinary Shares, the market value of the Parent Common Stock issued in the Transactions and the I.D. Systems Common Stock or Pointer Ordinary Shares surrendered in the Transactions may be higher or lower than the values of such stock on earlier dates. The merger consideration to be received by I.D. Systems stockholders will be solely shares of Parent Common Stock. Although the consideration to be received by Pointer shareholders is set, the percentage of the value of the Pointer Merger Consideration to be received by Pointer shareholders that is comprised of Parent Common Stock will fluctuate. This percentage was 48.3% of the total value of the merger consideration on March 12, 2019, the last trading day prior to the announcement of the Transactions, and was approximately 47.5% of the total value of the merger consideration based on $6.05, the closing price of I.D. Systems Common Stock on July 22, 2019, the last practicable day before the date of this joint proxy statement/prospectus. As such, at the time of the Pointer extraordinary general meeting and the I.D. Systems special meeting, Pointer shareholders and I.D. Systems stockholders will not know or be able to determine with certainty the value of the merger consideration that they will receive pursuant to the Agreements.

 

Changes in the market prices of I.D. Systems Common Stock and Pointer Ordinary Shares may result from a variety of factors that are beyond the control of I.D. Systems or Pointer, including changes in their businesses, operations and prospects, regulatory considerations, governmental actions, and legal proceedings and developments. You are urged to obtain up-to-date prices for I.D. Systems Common Stock and Pointer Ordinary Shares.

 

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While the Parent Common Stock is expected to be listed on the TASE, there is no guarantee as to how long such listing will be maintained.

 

Certain holders of Pointer Ordinary Shares are located in Israel and hold their shares through the TASE. Some of such holders of Pointer Ordinary Shares have indicated that they are either unable or unwilling to hold Parent Common Stock, which they stand to receive as consideration upon consummation of the Transactions, if the Parent Common Stock will not be listed on the TASE. While Parent expects to list the Parent Common Stock on the TASE pursuant to Chapter E’3 of the Israeli Securities Law, 1968, Parent shall have the exclusive right to delist its stock from the TASE, provided it furnishes notice thereof three months in advance of such delisting, or the Parent Common Stock may become subject to delisting in the event an Investor activates voting rights for the Series A Preferred Stock. The Investors have not undertaken to refrain from activating their voting rights for any minimum period of time. If the Parent Common Stock is delisted under one of the above scenarios, some holders of Parent Common Stock that is traded on the TASE will be required or choose to sell their stock, which could result in a decline in the market price of the Parent Common Stock and could have a material adverse effect on the combined company. Furthermore, uncertainty as to how long the Parent Common Stock will be listed on the TASE might impact the likelihood of obtaining Pointer shareholder approval of the Pointer Merger. Although the ISA has proposed amending the provision in the Israeli Securities Law that prohibits the listing on the TASE of a company with more than one class of voting shares, there is no assurance when or if any such amendment will be enacted into law by the Israeli parliament.

 

Holders of the Series A Preferred Stock can exercise significant control over the combined company, which could limit the ability of I.D. Systems’ stockholders and Pointer’s shareholders to influence the outcome of key transactions, including a change of control.

 

Following completion of the Transactions, the Series A Preferred Stock will represent a significant percentage of the aggregate voting power of Parent. Based on an initial conversion price of $7.319, it is expected that the Investors, who will be the initial holders of the Series A Preferred Stock, will own approximately 17.4% of Parent immediately after consummation of the Transactions on a fully-diluted basis. Except as required by applicable law or as otherwise specifically set forth in the Parent Charter, the holders of Series A Preferred Stock will not be entitled to vote on any matter presented to the stockholders of Parent unless and until any holder of Series A Preferred Stock provides written notification to Parent that such holder is electing, on behalf of all holders of Series A Preferred Stock, to activate their voting rights and in doing so rendering the Series A Preferred Stock voting capital stock of Parent (such notice, a “Series A Voting Activation Notice”). From and after the delivery of Series A Voting Activation Notice, all holders of the Series A Preferred Stock will be entitled to vote with the holders of Parent Common Stock as a single class on an as-converted basis unless and until such time as the holders of at least a majority of the outstanding shares of Series A Preferred Stock provide further written notice to Parent that they elect to deactivate their voting rights. In addition, the aggregate voting power of the Series A Preferred Stock may increase further in connection with the accrual of dividends at an initial minimum rate of 7.5% per annum, which may be payable, at Parent’s election, in kind through the issuance of additional shares of Series A Preferred Stock. However, to the extent voting rights of the Series A Preferred Stock have been activated, any holder of Series A Preferred Stock shall not be entitled to cast votes for the number of shares of Parent Common Stock issuable upon conversion of shares of Series A Preferred Stock held by such holder that exceeds the quotient of (i) the aggregate Series A Issue Price for such shares of Series A Preferred Stock divided by (ii) the closing bid price of the I.D. Systems Common Stock on the last trading day immediately prior to the consummation date of the Transactions (subject to adjustment for stock splits, stock dividends, combinations, reclassifications and similar events, as applicable). As a result, the holders of shares of the Series A Preferred Stock have the ability to significantly influence the outcome of any matter submitted for the vote of Parent’s stockholders.

 

In addition, the Series A Preferred Stock will have representation on the Parent board of directors and will have significant control over the management and affairs of Parent. So long as shares of Series A Preferred Stock remain outstanding and represent 15% or more, on an as-converted basis, of the voting power of the Parent Common Stock (irrespective of whether or not a Series A Voting Activation Notice has been delivered to Parent), the holders of at least a majority of the outstanding shares of Series A Preferred Stock, voting as a separate class, will be entitled to elect two directors to the Parent board of directors as the Series A Directors and any committee or subcommittee thereof (subject to the application of SEC and Nasdaq independence requirements). So long as any shares of Series A Preferred Stock remain outstanding and represent less than 15% but not less than 5%, on an as-converted basis, of the voting power of the Parent Common Stock (irrespective of whether or not a Series A Voting Activation Notice has been delivered to Parent), the holders of at least a majority of the outstanding shares of Series A Preferred Stock, voting as a separate class, will be entitled to elect one Series A Director to the board of directors of Parent. For so long as any shares of Series A Preferred Stock remain outstanding and there are no Series A Directors on the board of directors of Parent, the holders of at least a majority of the outstanding shares of Series A Preferred Stock, voting as a separate class, will be entitled to designate one non-voting observer to attend all meetings of the board of directors of Parent and committees and subcommittees thereof, although the observer may be excluded from executive sessions of any committee at the discretion of such committee.

 

Further, the Series A Preferred Stock will have consent rights over certain significant corporate transactions. So long as shares of Series A Preferred Stock are outstanding and convertible into shares of Parent Common Stock that represent at least 10% of the voting power of the Parent Common Stock, or the Investors or their affiliates continue to hold at least 33% of the aggregate amount of Series A Preferred Stock issued to the Investors on the date on which any shares of Series A Preferred Stock are first issued (the “Original Issuance Date”), the consent of the holders of at least a majority of the outstanding shares of Series A Preferred Stock will be necessary for Parent to, among other things, (i) liquidate Parent or any operating subsidiary or effect any Deemed Liquidation Event (as defined in the Parent Charter), except for a Deemed Liquidation Event in which the holders of Series A Preferred Stock receive an amount in cash not less than the Redemption Price (as defined below), (ii) amend Parent’s organizational documents in a manner that adversely affects the Series A Preferred Stock, (iii) issue any securities that are senior to, or equal in priority with, the Series A Preferred Stock or issue additional shares of Series A Preferred Stock to any person other than the Investors or their affiliates, (iv) incur indebtedness above the agreed-upon threshold, (v) change the size of the board of directors of Parent to a number other than seven, or (vi) enter into certain affiliated arrangements or transactions.

 

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The parties may not realize the anticipated benefits and cost savings of the Transactions.

 

While I.D. Systems and Pointer will continue to operate independently until the completion of the Transactions, the success of the Transactions will depend, in part, on I.D. Systems’ and Pointer’s ability to realize the anticipated benefits and cost savings from combining I.D. Systems’ and Pointer’s businesses. The parties’ ability to realize these anticipated benefits and cost savings is subject to certain risks, including, among others:

 

  the parties’ ability to successfully combine their respective businesses;
     
  the risk that the combined businesses will not perform as expected;
     
  the extent to which the parties will be able to realize the expected synergies, which include realizing potential savings from re-assessing priority assets and aligning investments, eliminating duplication and redundancy, adopting an optimized operating model between both companies and leveraging scale, and creating value resulting from the combination of I.D. Systems’ and Pointer’s businesses;
     
  the possibility that the aggregate consideration being paid for Pointer is greater than the value I.D. Systems will derive from the Transactions;
     
  the possibility that the combined company will not achieve the free cash flow that the parties have projected;
     
  the reduction of cash available for operations and other uses and the incurrence of indebtedness to finance the Transactions;
     
  the assumption of known and unknown liabilities of Pointer, including potential tax and employee-related liabilities; and
     
  the possibility of costly litigation challenging the Transactions.

 

If I.D. Systems and Pointer are not able to successfully integrate their businesses within the anticipated time frame, or at all, the anticipated cost savings, synergies operational efficiencies and other benefits of the Transactions may not be realized fully or may take longer to realize than expected, and the combined company may not perform as expected.

 

Integrating I.D. Systems’ and Pointer’s businesses may be more difficult, time-consuming or costly than expected.

 

I.D. Systems and Pointer have operated and, until completion of the Transactions will continue to operate, independently, and there can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s or both companies’ ongoing businesses or unexpected integration issues, such as higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, issues that must be addressed in integrating the operations of I.D. Systems and Pointer in order to realize the anticipated benefits of the Transactions so the combined business performs as expected include, among others:

 

  combining the companies’ separate operational, financial, reporting and corporate functions;
     
  integrating the companies’ technologies, products and services;
     
  identifying and eliminating redundant and underperforming operations and assets;
     
  harmonizing the companies’ operating practices, employee development, compensation and benefit programs, internal controls and other policies, procedures and processes;
     
  addressing possible differences in corporate cultures and management philosophies;
     
  maintaining employee morale and retaining key management and other employees;
     
  attracting and recruiting prospective employees;
     
  consolidating the companies’ corporate, administrative and information technology infrastructure;
     
  coordinating sales, distribution and marketing efforts;
     
  managing the movement of certain businesses and positions to different locations;
     
  maintaining existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers and vendors;
     
  coordinating geographically dispersed organizations; and
     
  effecting potential actions that may be required in connection with obtaining regulatory approvals.

 

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In addition, at times, the attention of certain members of each company’s management and each company’s resources may be focused on completion of the Transactions and the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt each company’s ongoing business and, consequently, the business of the combined company.

 

Failure to complete the Transactions could negatively impact the stock price and the future business and financial results of I.D. Systems and Pointer.

 

The parties’ respective obligations to complete the Transactions are subject to the satisfaction or waiver of a number of conditions set forth in the Agreements. There can be no assurance that the conditions to completion of the Transactions will be satisfied or waived or that the Transactions will be completed. If the Transactions are not completed for any reason, the ongoing businesses of I.D. Systems and Pointer may be materially and adversely affected and, without realizing any of the benefits of having completed the Transactions, I.D. Systems and Pointer would be subject to a number of risks, including the following:

 

  I.D. Systems and Pointer may experience negative reactions from the financial markets, including negative impacts on trading prices of I.D. Systems Common Stock and Pointer Ordinary Shares and from their respective customers, vendors, regulators and employees;
     
  Pointer may be required to pay I.D. Systems a termination fee of $3,000,000 if Pointer fails to consummate the Pointer Merger under specified circumstances;
     
  I.D. Systems may be required to pay Pointer a termination fee of $2,000,000 if I.D. Systems fails to consummate the Pointer Merger under specified circumstances;
     
  I.D. Systems and Pointer will be required to pay certain expenses incurred in connection with the Transactions, whether or not the Transactions are completed;
     
  the Agreements place certain restrictions on the operation of each of I.D. Systems’ and Pointer’s respective businesses prior to the closing of the Transactions, and such restrictions, the waiver of which is subject to the consent of the other parties, may prevent I.D. Systems or Pointer, as applicable, from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the Transactions that I.D. Systems or Pointer would have made, taken or pursued if these restrictions were not in place; and
     
  matters relating to the Transactions (including integration planning) will require substantial commitments of time and resources by I.D. Systems and Pointer management and the expenditure of significant funds in the form of fees and expenses, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to either I.D. Systems or Pointer as an independent company.

 

In addition, each of I.D. Systems and Pointer could be subject to litigation related to any failure to complete the Transactions or related to any proceeding to specifically enforce I.D. Systems’ or Pointer’s obligations under the Agreements.

 

If any of these risks materialize, they may materially and adversely affect I.D. Systems’ or Pointer’s business, financial condition, financial results and stock prices.

 

For a description of the circumstances under which a termination fee is payable, see “The Merger Agreement—Termination Fees” and “The Investment Agreement—Termination Fees” beginning on pages 142 and 162, respectively, of this joint proxy statement/prospectus.

 

I.D. Systems and Pointer will be subject to business uncertainties and contractual restrictions while the Transactions are pending.

 

Uncertainty about the effect of the Transactions on employees, vendors and customers may have an adverse effect on I.D. Systems or Pointer and consequently on the combined company after the closing of the Transactions. These uncertainties may impair I.D. Systems’ or Pointer’s ability to retain and motivate key personnel and could cause customers and others that deal with I.D. Systems or Pointer, as applicable, to defer or decline entering into contracts with I.D. Systems or Pointer, as applicable, or making other decisions concerning I.D. Systems or Pointer, as applicable, or seek to change existing business relationships with I.D. Systems or Pointer, as applicable. In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of the Transactions, I.D. Systems’ and Pointer’s businesses could be harmed. Furthermore, the Agreements place certain restrictions on the operation of I.D. Systems’ and Pointer’s businesses prior to the closing of the Transactions, which may delay or prevent I.D. Systems and Pointer from undertaking certain actions or business opportunities that may arise prior to the consummation of the Transactions. See “The Merger Agreement—Conduct of Business of Pointer” and “The Investment Agreement—Conduct of Business of I.D. Systems” beginning on pages 132 and 149, respectively, of this joint proxy statement/prospectus for a description of the restrictive covenants applicable to I.D. Systems and Pointer.

 

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Third parties may terminate or alter existing contracts or relationships with I.D. Systems or Pointer.

 

Each of I.D. Systems and Pointer has contracts with customers, vendors and other business partners which may require I.D. Systems or Pointer, as applicable, to obtain consents from these other parties in connection with the Transactions. If these consents cannot be obtained, the counterparties to these contracts and other third parties with which I.D. Systems and/or Pointer currently have relationships may have the ability to terminate, reduce the scope of or otherwise materially adversely alter their relationships with either party in anticipation of the Transactions, or with Parent following the Transactions. The pursuit of such rights may result in I.D. Systems, Pointer or Parent suffering a loss of potential future revenue, incurring liabilities in connection with a breach of such agreements or losing rights that are material to its business. Any such disruptions could limit Parent’s ability to achieve the anticipated benefits of the Transactions. The adverse effect of such disruptions could also be exacerbated by a delay in the completion of the Transactions or the termination of the Transactions.

 

In order to complete the Transactions, the parties must obtain certain governmental approvals, and if such approvals are not granted or are granted with conditions that become applicable to the parties, completion of the Transactions may be jeopardized or prevented or the anticipated benefits of the Transactions could be reduced.

 

Consummation of the Transactions is conditioned upon, among other things, the receipt of certain governmental approvals, including approvals required under Israeli law. Although the parties have agreed in the Merger Agreement to use their reasonable best efforts to make certain governmental filings and obtain the required governmental approvals, there can be no assurance that the required approvals will be obtained and no assurance that the Transactions will be completed.

 

In addition, the governmental authorities from which these approvals are required have broad discretion in administering the governing laws and regulations, and may take into account various facts and circumstances in their consideration of the Transactions. These governmental authorities may initiate proceedings seeking to prevent, or otherwise seek to prevent, the Transactions. As a condition to the approval of the Transactions, these governmental authorities also may impose requirements, limitations or costs, require divestitures or place restrictions on the conduct of I.D. Systems’ business or Pointer’s business after completion of the Transactions. One of the required Israeli regulatory approvals is the approval of the ISA to list the Parent Common Stock on the TASE pursuant to the dual-listing arrangement under Israeli law, which would enable Parent to apply for an exemption to use its registration statement on Form S-4 in Israel in lieu of an Israeli prospectus. A condition to the initial listing of the Parent Common Stock on the TASE is a total market capitalization of Parent on Nasdaq of at least $150 million, which is outside the control of the parties to the Transactions. See “The Merger Agreement—Conditions to the Pointer Merger” beginning on page 139 for a discussion of the conditions to the consummation of the Pointer Merger and “The Merger Agreement—Reasonable Best Efforts and Regulatory Filings” and “Certain Regulatory Approvals” beginning on pages 138 and 163, respectively, of this joint proxy statement/prospectus for a discussion of the regulatory approvals required in connection with the consummation of the Transactions.

 

The Transactions are subject to a number of closing conditions and, if these conditions are not satisfied, the Agreements may be terminated in accordance with their respective terms and the Transactions may not be completed. In addition, the parties have the right to terminate the Merger Agreement and the Investment Agreement under other specified circumstances, in which case the Transactions would not be completed.

 

The Transactions are subject to a number of closing conditions and, if these conditions are not satisfied or waived (to the extent permitted by law), the Transactions will not be completed. These conditions include, among others: (i) the absence of certain legal impediments, (ii) effectiveness of the registration statement on Form S-4 relating to the Transactions, (iii) obtaining all governmental authorizations, including the lapse of any applicable waiting period, (iv) obtaining the Pointer Shareholder Approval, (v) obtaining the I.D. Systems Specified Stockholder Approval, and (vi) the listing of Parent Common Stock on Nasdaq. In addition, each party’s obligation to complete the Transactions is subject to the accuracy of the other parties’ representations and warranties in the Agreements (subject in most cases to “material adverse effect” qualifications), the other parties’ compliance, in all material respects, with their respective covenants and agreements in the Agreements, and the maintenance by the parties of certain minimum cash levels.

 

The conditions to the closing may not be fulfilled and, accordingly, the Transactions may not be completed. In addition, if the Transactions are not completed by October 31, 2019, any party may choose not to proceed with the Transactions. Moreover, the parties can mutually decide to terminate the Merger Agreement or the Investment Agreement at any time prior to the consummation of the Transactions, before or after receipt of the Pointer Shareholder Approval and the I.D. Systems Specified Stockholder Approval and each party may elect to terminate the Merger Agreement or Investment Agreement in certain other circumstances, as described in “The Merger Agreement—Termination” and “The Investment Agreement—Termination.” If either Agreement is terminated, I.D. Systems or Pointer, as applicable, may incur substantial fees and expenses in connection with termination of such Agreement and neither of them will realize the anticipated benefits of the Transactions. For a description of the circumstances under which a termination fee is payable, see “The Merger Agreement—Termination Fees” and “The Investment Agreement—Termination Fees” beginning on pages 142 and 162, respectively of this joint proxy statement/prospectus.

 

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I.D. Systems or Pointer may waive one or more of the closing conditions to the Transactions without re-soliciting stockholder approval.

 

Each of I.D. Systems and Pointer has the right to waive certain of the closing conditions to the Transactions. Any such waiver may not require re-solicitation of stockholders, in which case stockholders of I.D. Systems and shareholders of Pointer will not have the chance to change their votes as a result of any such waiver and I.D. Systems and Pointer will have the ability to complete the Transactions without seeking further stockholder approval. Any determination whether to waive any condition to the Transactions, whether stockholder approval would be re-solicited as a result of any such waiver or whether this joint proxy statement/prospectus would be amended as a result of any waiver will be made by I.D. Systems or Pointer, as applicable, at the time of such waiver based on the facts and circumstances as they exist at that time, and any such waiver could have an adverse effect on Parent.

 

Both I.D. Systems’ stockholders and Pointer’s shareholders will have a reduced ownership and voting interest after the Transactions and will exercise less influence over management.

 

After the completion of the Transactions, I.D. Systems’ stockholders and Pointer’s shareholders will own a smaller percentage of Parent than they currently own of I.D. Systems and Pointer, respectively. Based on the estimated number of shares of I.D. Systems Common Stock and Pointer Ordinary Shares that are expected to be outstanding immediately prior to the consummation of the Transactions on a fully-diluted basis, and after giving effect to the issuance of the Series A Preferred Stock in the Transactions (at an initial conversion price of $7.319), it is expected that I.D. Systems stockholders will own approximately 54.0%, and Pointer shareholders will own approximately 28.6%, of Parent immediately after consummation of the Transactions on a fully-diluted basis. Consequently, I.D. Systems stockholders, as a group, and Pointer shareholders, as a group, will each have reduced ownership and voting power in the combined company compared to their current ownership and voting power in I.D. Systems and Pointer, respectively. In particular, Pointer shareholders, as a group, will have less than a majority of the ownership and voting power of the Parent and, therefore, will be able to exercise less collective influence over the management and policies of Parent than they currently exercise over the management and policies of Pointer. While I.D. Systems’ stockholders will continue to own a majority of Parent Common Stock immediately after consummation of the Transactions, their collective ownership percentage is likewise going to be reduced compared to their current level, as will be their ability to influence management and policies.

 

There can be no assurance that I.D. Systems will be able to secure the funds necessary to pay the Cash Consideration payable in the Pointer Merger.

 

I.D. Systems intends to fund a portion the Cash Consideration payable in the Pointer Merger with a combination of the net proceeds it receives from the sale of the Series A Preferred Stock pursuant to the terms of the Investment Agreement and debt financing contemplated by the Debt Commitment Letter.

 

The obligations of the lender to provide the loans contemplated by the Debt Commitment Letter are subject to a number of conditions. In addition, if binding finance documents have not been executed by August 12, 2019, the Debt Commitment Letter will expire by its terms. There is no assurance the lender will continue to honor the Debt Commitment Letter after that date or that the Debt Commitment Letter can be extended on acceptable terms or at all. Accordingly, there can be no assurance that I.D. Systems will be able to secure the debt financing pursuant to the Debt Commitment Letter. See “Additional Financing Relating to the Transactions” beginning on page 164 of this joint proxy statement/prospectus.

 

In the event that the debt financing contemplated by the Debt Commitment Letter is not available, other financing may not be available on acceptable terms, in a timely manner or at all. If I.D. Systems is unable to secure debt financing, the Transactions may be delayed or not be completed. In addition, I.D. Systems may be required, pursuant to the terms of the Merger Agreement, to pay Pointer a termination fee of $2,000,000 if it fails to consummate the Pointer Merger related to a failure by I.D. Systems to obtain financing. See “The Merger Agreement—Termination Fees” beginning on page 142 of this joint proxy statement/prospectus.

 

The Agreements limit I.D. Systems’ and Pointer’s ability to pursue alternatives to the Transactions.

 

The Merger Agreement contains provisions that make it more difficult for Pointer to enter into alternative transactions. The Merger Agreement contains certain provisions that restrict Pointer’s ability to solicit or facilitate proposals from third parties with respect to transactions involving the financing or sale of Pointer, or provide non-public information to, or otherwise participate or engage in discussions or negotiations with, third parties or take certain other actions that would reasonably be expected to lead to a third-party acquisition proposal. Further, there are only limited exceptions to Pointer’s agreement that its board of directors will not change its recommendation in favor of the adoption of the Merger Agreement. However, at any time prior to the receipt of the Pointer Shareholder Approval, in response to an unsolicited superior proposal made by a third party, Pointer’s board of directors may make an adverse recommendation change, and terminate the Merger Agreement to enter into an alternative acquisition agreement, if it concludes in good faith, after consultation with Pointer’s outside financial advisors and outside legal counsel, that the failure to take such action would be inconsistent with the fiduciary duties of Pointer’s board of directors under the circumstances and under applicable law. See “The Merger Agreement—No Solicitation” beginning on page 134 of this joint proxy statement/prospectus.

 

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In addition, Pointer may be required to pay a termination fee of $3,000,000 to I.D. Systems if the Pointer Merger is not consummated under specified circumstances. See “The Merger Agreement—Termination Fees” beginning on page 142 of this joint proxy statement/prospectus, including as described above, for a description of the circumstances under which such a termination fee is payable. Upon adoption of the Merger Agreement by Pointer shareholders, Pointer’s right to terminate the Merger Agreement in response to a superior proposal will cease.

 

The Investment Agreement contains provisions that make it more difficult for I.D. Systems to enter into alternative transactions. The Investment Agreement contains certain provisions that restrict I.D. Systems’ ability to solicit or facilitate proposals from third parties with respect to transactions involving the financing or sale of I.D. Systems, or provide non-public information to, or otherwise participate or engage in discussions or negotiations with, third parties or take certain other actions that would reasonably be expected to lead to a third-party acquisition proposal. Further, there are only limited exceptions to I.D. Systems’ agreement that the I.D. Systems board of directors will not change its recommendation in favor of the adoption of the Investment Agreement and certain other stockholder approvals required in connection with the Transactions. However, at any time prior to the receipt of the required stockholder approvals, including in response to an unsolicited superior proposal made by a third party, I.D. Systems’ board of directors may make an adverse recommendation change if it concludes in good faith, based on the advice of I.D. Systems’ outside financial advisors and outside legal counsel, that the failure to take such action would result in a violation of the fiduciary duties of I.D. Systems’ board of directors under applicable law. Regardless of whether I.D. Systems’ board of directors has made an adverse recommendation change, I.D. Systems may still be compelled to hold a special meeting of its stockholders relating to the Transactions and to seek the I.D. Systems Stockholder Approval. See “The Investment Agreement—No Solicitation” beginning on page 152 of this joint proxy statement/prospectus.

 

In addition, I.D. Systems may be required to pay Pointer a termination fee of $2,000,000 if it fails to consummate the Pointer Merger related to a failure by I.D. Systems to obtain financing. See “The Merger Agreement—Termination Fees” beginning on page 142 of this joint proxy statement/prospectus.

 

While I.D. Systems and Pointer believe these provisions are reasonable, customary and not preclusive of other offers, the provisions might discourage a third party that has an interest in acquiring all or a significant part of Pointer or I.D. Systems from considering or proposing such an acquisition, even if such party were prepared to pay consideration with a higher per-share value than the currently proposed merger consideration or if such party were prepared to enter into an agreement that may be more favorable to I.D. Systems or Pointer or their respective stockholders.

 

The financial analyses and forecasts considered by I.D. Systems and Pointer and their respective financial advisors may not be realized, which may adversely affect the market price of Parent Common Stock following the completion of the Transactions.

 

In performing their financial analyses and rendering their opinions related to the Transactions, each of the respective financial advisors to I.D. Systems and Pointer relied on, among other things, certain information, including financial forecasts and projections of I.D. Systems and Pointer provided by I.D. Systems and Pointer. See “Opinion of I.D. Systems’ Financial Advisor” and “Opinion of Pointer’s Financial Advisor” beginning on page 97 and 103, respectively, of this joint proxy statement/prospectus. These projections and forecasts were prepared by, or at the direction of, the management of I.D. Systems or the management of Pointer, as applicable. None of these projections or forecasts were prepared with a view towards public disclosure or compliance with the published guidelines of the SEC, U.S. generally accepted accounting principles (“GAAP”) or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts. These projections and forecasts are inherently based on various estimates and assumptions that are subject to the judgment of those preparing them. These projections and forecasts are also subject to significant economic, competitive, industry and other uncertainties and contingencies, all of which are difficult or impossible to predict and many of which are beyond the control of I.D. Systems and Pointer. There can be no assurance that I.D. Systems’ or Pointer’s financial condition or results of operations will be consistent with those set forth in such projections and forecasts, which could have an adverse impact on the market price of Parent Common Stock or the financial position of Parent following the Transactions.

 

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Executive officers and directors of I.D. Systems and Pointer may have interests in the Transactions that are different from, or in addition to, the rights of their respective stockholders.

 

Executive officers of I.D. Systems and Pointer negotiated the terms of the Agreements and the I.D. Systems board of directors and the Pointer board of directors each approved the Agreements and the Transactions and recommend that you vote in favor of the proposals at each respective meeting. These executive officers and directors may have interests in the Transactions that are different from, or in addition to, yours. These interests include the continued employment of certain executive officers of I.D. Systems and Pointer by Parent, the continued service of certain directors of I.D. Systems as directors of Parent, and the indemnification of I.D. Systems and Pointer executive officers and directors by Parent and the surviving corporations. With respect to certain Pointer executive officers, these interests also include full acceleration of vesting of equity grants and transaction bonuses payable in Pointer RSUs or cash. With respect to I.D. Systems executive officers, these interests also include transaction-related grants of I.D. Systems equity awards and severance payments upon qualifying terminations of employment. Stockholders should be aware of these interests when they consider their board of directors’ recommendation that stockholders vote in favor of the Transactions. For a description of the interests of I.D. Systems executive officers and directors in the Transactions, see “Interests of I.D. Systems Directors and Executive Officers in the Transactions” beginning on page 115 of this joint proxy statement/prospectus. For a description of the interests of Pointer executive officers and directors in the Transactions, see “Interests of Pointer Directors and Executive Officers in the Transactions” beginning on page 119 of this joint proxy statement/prospectus.

 

The shares of Parent Common Stock to be received by I.D. Systems stockholders and Pointer shareholders as a result of the Transactions will have rights that are different from the rights of shares of I.D. Systems Common Stock and the rights of Pointer Ordinary Shares, respectively.

 

Following completion of the Transactions, I.D. Systems stockholders and Pointer shareholders will no longer be I.D. Systems stockholders and Pointer shareholders, respectively, but will instead be Parent stockholders governed by Delaware law, the Parent Charter and Parent Bylaws. There will be important differences between your current rights as an I.D. Systems stockholder or a Pointer shareholder and your rights as a Parent stockholder. See “Comparison of the Rights of Holders of Pointer Ordinary Shares and Parent Common Stock” and “Comparison of the Rights of Holders of I.D. Systems Common Stock and Parent Common Stock” beginning on pages 190 and 195, respectively, of this joint proxy statement/prospectus for a description of the different rights of Parent Common Stock, on the one hand, and I.D. Systems Common Stock and Pointer Ordinary Shares, on the other hand.

 

The Series A Preferred Stock will have rights, preferences and privileges that will not be held by, and will be preferential to, the rights of holders of Parent Common Stock, which could adversely affect the liquidity and financial condition of Parent, and may result in the interests of the holders of Series A Preferred Stock differing from those of the holders of Parent Common Stock.

 

The Series A Preferred Stock will rank senior to the shares of Parent Common Stock, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of Parent or upon a Deemed Liquidation Event. The Series A Preferred Stock will have a liquidation preference equal to the greater of (i) $1,000 (subject to ratable adjustment in the case of stock dividends (other than preferred dividends), stock splits, reverse stock splits, combinations, divisions and reclassifications affecting the Series A Preferred Stock) (the “Series A Issue Price”) per share plus all accrued and unpaid dividends thereon (except in the case of a Deemed Liquidation Event, then 150% of such amount) and (ii) the amount such holder would have received if the Series A Preferred Stock had converted into Parent Common Stock immediately prior to such event.

 

In addition, holders of Series A Preferred Stock will be entitled to cumulative dividends at a minimum rate of 7.5% per annum, quarterly in arrears, as set forth in the Parent Charter. Commencing on the 66-month anniversary of the Original Issuance Date, and on each monthly anniversary thereafter, the dividend rate will increase by 100 basis points, until the dividend rate reaches 17.5% per annum, subject to Parent’s right to defer the increase for up to three consecutive months on the terms set forth in the Parent Charter. The dividends are payable at Parent’s election in kind, through the issuance of additional shares of Series A Preferred Stock, or in cash, provided no dividend payment failure has occurred and is continuing and that there have not previously occurred two or more dividend payment failures.

 

Further, at any time after (i) the 66-month anniversary of the Original Issuance Date, (ii) following delivery of a mandatory conversion notice by Parent, or (iii) upon a Deemed Liquidation Event, subject to Delaware law governing distributions to stockholders, the holders of the Series A Preferred Stock may elect to require Parent to redeem all or any portion of its outstanding shares of Series A Preferred Stock for an amount per share equal to the greater of (i) the product of (x) 1.5 multiplied by (y) the sum of the Series A Issue Price, plus all accrued and unpaid dividends and (ii) the product of (x) the number of shares of Parent Common Stock issuable upon conversion of such Series A Preferred Stock multiplied by (y) the volume weighted average price of the Parent Common Stock during the 30 consecutive trading day period ending on the trading date immediately prior to the date of such redemption notice or, if calculated in connection with a Deemed Liquidation Event, the value ascribed to a share of Parent Common Stock in such Deemed Liquidation Event (the “Redemption Price”). If the holders of Series A Preferred Stock elect to redeem all outstanding shares of Series A Preferred Stock and Parent has not redeemed all such shares on the applicable date on which the redemption should occur, and such redemption has not been completed on the six month anniversary thereof, the holders of at least a majority of the outstanding shares of Series A Preferred Stock will have the right to initiate, conduct and direct, subject to the approval of the board of directors of Parent, a customary sale process regarding the sale of Parent and/or its subsidiaries.

 

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Finally, at any time after the third anniversary of the Original Issuance Date, provided that (i) Parent is not then in material breach of (or has previously on no more than two occasions materially breached) any of provisions of the Parent Charter, (ii) the terms of any other indebtedness or agreement would not prohibit such redemption, and (iii) Parent has not previously exercised such redemption right, Parent may elect to redeem all (but not less than all) shares of Series A Preferred Stock for an amount per share equal to the Redemption Price.

 

These dividend and redemption payment obligations could significantly impact Parent’s liquidity and reduce the amount of Parent’s cash flows that are available for working capital, capital expenditures, growth opportunities, acquisitions, and other general corporate purposes. Parent’s obligations to the holders of Series A Preferred Stock could also limit its ability to obtain additional financing or increase its borrowing costs, which could have an adverse effect on its financial condition. The preferential rights described above could also result in divergent interests between the holders of shares of Series A Preferred Stock and the holders of Parent Common Stock.

 

Any issuance of Parent Common Stock upon conversion of the Series A Preferred Stock will cause dilution to then existing Parent stockholders and may depress the market price of Parent Common Stock.

 

The Series A Preferred Stock accrues dividends at an initial minimum rate of 7.5% per annum and following the 66-month anniversary of the Original Issuance Date, such dividend rate could increase to as high as 17.5% per annum. Each share of Series A Preferred Stock is convertible, at the option of the holders, into the number of shares of Parent Common Stock equal to the quotient (rounded up to the nearest whole number) of (i) the Series A Issue Price, plus any accrued and unpaid dividends, divided by (ii) the Series A Conversion Price, subject to adjustment and certain anti-dilution adjustments. The Series A Conversion Price shall initially be equal to $7.319.

 

The issuance of Parent Common Stock upon conversion of the Series A Preferred Stock will result in immediate and substantial dilution to the interests of holders of Parent Common Stock, and such dilution will increase over time in connection with the accrual of dividends on the Series A Preferred Stock.

 

I.D. Systems, Pointer and, subsequently, Parent may have difficulty attracting, motivating and retaining executives and other key employees in light of the proposed Transactions.

 

The combined company’s success after the Transactions will depend in part on each of I.D. Systems’ and Pointer’s ability to retain key executives and other employees. Uncertainty about the effect of the Transactions on I.D. Systems’ and Pointer’s employees may have an adverse effect on each company separately and consequently, the combined business. This uncertainty may impair I.D. Systems’ and/or Pointer’s ability to attract, retain and motivate key personnel. Employee retention may be particularly challenging during the pendency of the Transactions, as I.D. Systems’ and Pointer’s employees may experience uncertainty about their future roles in the combined business.

 

Additionally, Pointer’s officers and employees hold Pointer Ordinary Shares and vested options to purchase Pointer Ordinary Shares, and, if the Transactions are completed, these officers and employees will be entitled to the Pointer Merger Consideration in respect of such shares and vested options (in the case of options, net of the exercise price). Certain officers will also hold options and Pointer RSUs that are subject to accelerated vesting upon completion of the Transactions. Because the vesting and exercise of these options and Pointer RSUs will no longer be subject to the continued employment of these officers and employees of Pointer, it could make their retention more difficult.

 

Furthermore, if any of I.D. Systems’ or Pointer’s key employees depart or are at risk of departing, including because of issues relating to the uncertainty and difficulty of integration, financial security or a desire not to become employees of the combined business, I.D. Systems or Pointer, as applicable, may have to incur significant costs in retaining such individuals or in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent, and the combined company’s ability to realize the anticipated benefits of the Transactions may be materially and adversely affected. No assurance can be given that the combined company will be able to attract or retain key employees to the same extent that I.D. Systems or Pointer has been able to attract or retain employees in the past.

 

It is expected that, as a result of the Transactions, the ability to use I.D. Systems’ net operating loss carryovers will be significantly limited, which may result in Parent’s being subject to higher effective tax rates.

 

It is expected that, as a result of the Transactions, I.D. Systems will undergo an ownership change under Section 382 of the Code. As a result, the ability to use I.D. Systems’ net operating loss carryovers incurred prior to the ownership change against income arising after the ownership change will be significantly limited under Section 382 of the Code and under similar provisions of state and local law. Accordingly, Parent may have to report higher taxable income and may be subject to higher effective tax rates than it otherwise would have in the absence of this limitation. In addition, as a result of this limitation, some of I.D. Systems’ net operating losses may actually expire unused.

 

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I.D. Systems, Pointer and Parent will incur significant transaction and merger-related transition costs in connection with the Transactions.

 

I.D. Systems and Pointer expect that they and Parent will incur significant, non-recurring costs in connection with consummating the Transactions and integrating the operations of the two companies post-closing. I.D. Systems and/or Pointer may incur additional costs to retain key employees. I.D. Systems and/or Pointer will also incur significant fees and expenses relating to financing arrangements and legal services (including any costs that would be incurred in defending against any potential class action lawsuits and derivative lawsuits in connection with the Transactions if any such proceedings are brought), accounting and other fees and costs, which are currently estimated to be approximately $9,000,000 in the aggregate, associated with consummating the Transactions. Some of these costs are payable regardless of whether the Transactions are completed. In addition, Pointer may be required to pay a termination fee of $3,000,000 and I.D. Systems may be required to pay a termination fee of $2,000,000 if the Merger Agreement is terminated under specified circumstances described in this joint proxy statement/prospectus. Though I.D. Systems and Pointer continue to assess the magnitude of these costs, additional unanticipated costs may be incurred in the Transactions and the integration of the businesses of I.D. Systems and Pointer.

 

The unaudited pro forma financial information included in this joint proxy statement/prospectus is preliminary and Parent’s actual financial position or results of operations after the Transactions may differ materially.

 

The unaudited pro forma financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Parent’s actual financial position or results of operations would have been had the Transactions been completed on the dates indicated. The unaudited pro forma financial information reflects adjustments, which are based upon preliminary estimates, to allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated acquisition-date fair values. The purchase price allocation reflected in this document is preliminary, and a final determination of the fair value of assets acquired and liabilities assumed will be based on the actual net tangible and intangible assets and liabilities of Pointer that existed as of the date of the completion of the Transactions. In addition, subsequent to the closing date, there may be further refinements of the purchase price allocation as additional information becomes available. Accordingly, the final purchase accounting adjustments may differ materially from the pro forma information reflected in this joint proxy statement/prospectus. For more information, see “Unaudited Pro Forma Combined Financial Information” beginning on page 50 of this joint proxy statement/prospectus.

 

The opinions of I.D. Systems’ and Pointer’s financial advisors will not be updated to reflect changes in circumstances between the signing of the Agreements in March 2019 and the completion of the Transactions.

 

I.D. Systems and Pointer have not obtained updated opinions from their respective financial advisors as of the date of this joint proxy statement/prospectus, and I.D. Systems and Pointer do not anticipate asking their respective financial advisors to update their opinions. Changes in the operations and prospects of I.D. Systems or Pointer, general market and economic conditions and other factors that may be beyond the control of I.D. Systems or Pointer, and on which I.D. Systems’ and Pointer’s financial advisors’ opinions were based in part, may significantly alter the prices of the shares of I.D. Systems Common Stock or Pointer Ordinary Shares by the closing date. The opinions do not speak as of the time the Transactions will be completed or as of any date other than the date of such opinions. Because I.D. Systems’ and Pointer’s financial advisors will not be updating their opinions, which were issued in connection with the signing of the Agreements on March 13, 2019, the opinions will not address the fairness, from a financial point of view, of the Pointer Merger Consideration to be received by holders of Pointer Ordinary Shares at the closing date. The I.D. Systems board of directors’ recommendation that I.D. Systems stockholders vote “FOR” the proposals included herein and the Pointer board of directors’ recommendation that Pointer shareholders vote “FOR” the proposal to adopt the Merger Agreement, however, are made as of the date of this joint proxy statement/prospectus. For a description of the opinions that I.D. Systems and Pointer received from their respective financial advisors, see “Opinion of I.D. Systems’ Financial Advisor” and “Opinion of Pointer’s Financial Advisor” beginning on pages 97 and 103, respectively, of this joint proxy statement/prospectus.

 

I.D. Systems and Pointer may be the target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Transactions from being completed.

 

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on I.D. Systems’ or Pointer’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Transactions, then that injunction may delay or prevent the Transactions from being completed, which may adversely affect I.D. Systems’ or Pointer’s or, if the Transactions are completed but delayed, the combined company’s business, financial position and results of operations. As of July 22, 2019, the last practicable day before the date of this joint proxy statement/prospectus, no such lawsuits have been filed in connection with the Transactions and we cannot predict whether any will be filed.

 

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Additional Risks Relating to Parent after Completion of the Transactions

 

The combined company will be an international company and may be susceptible to a number of political, economic and geographic risks that could harm its business.

 

The combined company will be dependent on sales to customers outside the U.S. The combined company’s international sales are likely to account for a significant percentage of its products and services revenue for the foreseeable future. As a result, the occurrence of any international, political, economic or geographic event could result in a significant decline in the combined company’s revenue. In addition, compliance with complex foreign and U.S. laws and regulations that will apply to the combined company’s international operations will increase its cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy and filtering requirements, anti-corruption laws, such as the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations, among others. Violations of these laws and regulations could result in fines and penalties, criminal sanctions against the combined company, its officers, or employees, prohibitions on the conduct of the combined company’s business and on its ability to offer its products and services in one or more countries, and could also materially affect the combined company’s brand, international expansion efforts, ability to attract and retain employees, business, and operating results. Although the combined company will implement policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that the combined companies employees, contractors, or agents will not violate its policies.

 

Some of the risks and challenges of doing business internationally include:

 

  unexpected changes in regulatory requirements;
     
  fluctuations in international currency exchange rates including its impact on unhedgeable currencies and our forecast variations for hedgeable currencies;
     
  imposition of tariffs and other barriers and restrictions;
     
  management and operation of an enterprise spread over various countries;
     
  the burden of complying with a variety of laws and regulations in various countries;
     
  application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and uncertainty;
     
  the conduct of unethical business practices in developing countries;
     
  general economic and geopolitical conditions, including inflation and trade relationships;
     
  war and acts of terrorism;
     
  kidnapping and high crime rate;
     
  natural disasters;
     
  availability of U.S. dollars especially in countries with economies highly dependent on resource exports, particularly oil; and
     
  changes in export regulations.

 

While these factors and the impacts of these factors are difficult to predict, any one or more of them could adversely affect the combined company’s business, financial condition and results of operations in the future.

 

In connection with the Transactions, Pointer and Pointer Holdco will incur significant indebtedness to finance the Pointer Merger as well as other transaction-related costs.

 

On March 13, 2019, I.D. Systems entered into the Debt Commitment Letter with Hapoalim providing for two five-year senior secured term loan facilities to Pointer Holdco in an aggregate principal amount of $30 million and a five-year revolving credit facility to Pointer in an aggregate principal amount of $10 million. The term loan facilities will be used to finance a portion of the Cash Consideration payable in the Pointer Merger and the revolving credit facility will be used by Pointer for general working capital purposes, or, at Pointer’s discretion, to finance a portion of the Cash Consideration payable in the Pointer Merger. Such indebtedness will have the effect, among other things, of reducing Pointer’s flexibility to respond to changing business and economic conditions, will increase the combined company’s borrowing costs and, to the extent that such indebtedness is subject to floating interest rates, may increase Pointer’s vulnerability to fluctuations in market interest rates. The definitive documents relating to such indebtedness will require Pointer and Pointer Holdco to satisfy various covenants, including negative covenants that directly or indirectly restrict the combined company’s ability to engage in certain transactions without the consent of the lender. The indebtedness will be secured by first ranking and exclusive fixed and floating charges, including by Pointer Holdco over the entire share capital of Pointer and by Pointer over all of its assets, as well as cross guarantees between Pointer Holdco and Pointer. This may also make it more difficult for the combined company to engage in future transactions without the consent of the lender. The increased levels of indebtedness could also reduce funds available to fund efforts to combine I.D. Systems’ and Pointer’s businesses and realize expected benefits of the Transactions and/or engage in investments in product development, capital expenditures and other activities and may create competitive disadvantages for I.D. Systems or Pointer relative to other companies with lower debt levels. Each of I.D. Systems, Pointer and Parent may be required to raise additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes. Each company’s ability to arrange additional financing will depend on, among other factors, its financial position and performance, as well as prevailing market conditions and other factors beyond its control. I.D. Systems and Pointer cannot assure you that they will be able to obtain additional financing on terms acceptable to them or at all. See “Additional Financing Relating to the Transactions” beginning on page 164 of this joint proxy statement/prospectus.

 

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The terms of Pointer Holdco’s and Pointer’s new indebtedness restrict their current and future operations, particularly their ability to respond to changes or to take certain actions.

 

The Credit Facilities contain a number of restrictive covenants that impose significant operating and financial restrictions on Pointer Holdco and Pointer and limit their ability to engage in acts that may be in their long-term best interest, including restrictions on their ability to:

 

  incur or guarantee additional indebtedness;
     
  incur liens;
     
  sell or otherwise dispose of assets;
     
  enter into transactions with affiliates; and
     
  enter into new lines of business.

 

The Credit Facilities also limit the ability of Pointer Holdco and Pointer to consolidate or merge with or into another person.

 

In addition, the covenants in the Credit Facilities require Pointer Holdco and Pointer to maintain specified financial ratios, tested quarterly. Their ability to meet those financial ratios can be affected by events beyond their control, and they may be unable to meet them.

 

A breach of the covenants or restrictions under the Credit Facilities could result in an event of default, which may allow the lender to accelerate the indebtedness thereunder. In addition, an event of default under the Credit Facilities would permit the lender to terminate all commitments to extend further credit pursuant to the Revolving Facility. Furthermore, if Pointer Holdco and Pointer are unable to repay the amounts due and payable under the Credit Facilities, the lender could proceed against the collateral granted to it to secure the Credit Facilities. In the event the lender accelerates the repayment of borrowings, Pointer Holdco and Pointer may not have sufficient assets to repay that indebtedness.

 

As a result of these restrictions, we may be:

 

  limited in our flexibility in planning for, or reacting to, changes in our business and the markets we serve;
     
  unable to raise additional debt or equity financing to fund working capital, capital expenditures, new product development expenses and other general corporate requirements; or
     
  unable to compete effectively or to take advantage of new business or strategic acquisition opportunities.

 

These restrictions may affect our ability to grow in accordance with our strategy.

 

The combined company will be subject to the risks that each of I.D. Systems and Pointer faces.

 

Following completion of the Transactions, the combined company will be subject to numerous risks and uncertainties, including the risks faced by each of I.D. Systems and Pointer, which are described in the documents that each company has filed with the SEC, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 of I.D. Systems filed with the SEC on April 1, as amended by the Form 10-K/A filed on April 30, 2019, and the Annual Report for the fiscal year ended December 31, 2018 of Pointer on Form 20-F filed with the SEC on April 1, 2019, which are incorporated by reference into this joint proxy statement/prospectus, as updated by Quarterly Reports on Form 10-Q of I.D. Systems and future filings after the date of this joint proxy statement/prospectus with the SEC by I.D. Systems and Pointer. If any such risks actually occur, the business, financial condition, results of operations or cash flows of the combined company could be materially adversely affected. See “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus.

 

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Parent has no operating or financial history and the unaudited pro forma combined financial statements included in this joint proxy statement/prospectus are preliminary and the actual financial condition and results of operations of Parent after the Transactions may differ materially.

 

Parent has been recently incorporated to effectuate with the proposed Transactions and has no operating history or revenues. This joint proxy statement/prospectus includes unaudited pro forma condensed combined financial statements for Parent. The unaudited pro forma combined statements of comprehensive income (loss) for the year ended December 31, 2018 and the three months ended March 31, 2019 combine the historical consolidated statements of comprehensive income (loss) of I.D. Systems and Pointer, giving effect to the Transactions as if they had occurred on January 1, 2018, and the unaudited pro forma condensed combined balance sheet as of March 31, 2019 combines the historical consolidated balance sheets of I.D. Systems and Pointer, giving effect to the Transactions as if they had occurred on March 31, 2019. Both the unaudited pro forma combined statements of income and the unaudited pro forma combined balance sheet of Parent should be read in conjunction with the financial statements and accompanying notes of each of I.D. Systems and Pointer, which are incorporated by reference into this joint proxy statement/prospectus. The unaudited pro forma financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. The unaudited pro forma financial statements do not include, among other things, estimated cost or growth synergies, adjustments related to restructuring or integration activities, future acquisitions or disposals not yet known or probable or impacts of transaction related change in control provisions that are currently not factually supportable and/or probable of occurring. Therefore, the unaudited pro forma financial statements are presented for informational purposes only and are not necessarily indicative of what Parent’s actual financial condition or results of operations would have been had the Transactions been completed on the dates indicated. Accordingly, Parent’s business, assets, results of operations and financial condition may differ significantly from those indicated by the pro forma financial statements included in this joint proxy statement/prospectus. For more information, see “Unaudited Pro Forma Combined Financial Information” and “Where You Can Find More Information” beginning on page 50 and 201, respectively, of this joint proxy statement/prospectus.

 

The market price for shares of Parent Common Stock may be affected by factors different from those affecting the market price for Pointer Ordinary Shares and shares of I.D. Systems Common Stock.

 

Upon completion of the Transactions, holders of Pointer Ordinary Shares and I.D. Systems Common Stock will become holders of Parent Common Stock. I.D. Systems’ and Pointer’s respective business differ, and accordingly the results of operations of the combined company will be affected by factors different from those currently affecting the results of operations of Pointer and I.D. Systems. For a discussion of the businesses of I.D. Systems and Pointer and of certain factors to consider in connection with those businesses, see the documents incorporated by reference into this joint proxy statement/prospectus, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 of I.D. Systems filed with the SEC on April 1, 2019, as amended by the Form 10-K/A filed on April 30, 2019, and the Annual Report for the fiscal year ended December 31, 2018 of Pointer on Form 20-F filed with the SEC on April 1, 2019 and referred to in “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus, as updated by Quarterly Reports on Form 10-Q of I.D. Systems and future filings after the date of this joint proxy statement/prospectus with the SEC by I.D. Systems and Pointer.

 

The market price for shares of Parent Common Stock may decline as a result of the Transactions, including as a result of some Parent stockholders adjusting their portfolios.

 

Prior to consummation of the Transactions, there is not and will not be a public market for the Parent Common Stock. The market value of Parent Common Stock at the time of consummation of the Transactions may vary significantly from the prices of the I.D. Systems Common Stock and Pointer Ordinary Shares on the date the Agreements were executed, the date of this joint proxy statement/prospectus and the dates of the I.D. Systems Special Meeting and Pointer Extraordinary Meeting. Following consummation of the Transactions, the market price of Parent Common Stock may decline if, among other things, the operational cost savings estimates in connection with the integration of I.D. Systems’ and Pointer’s businesses are not realized, or if the costs related to the Transactions are greater than expected, or if the financing related to the Transactions is on unfavorable terms. The market price also may decline if Parent does not achieve the perceived benefits of the Transactions as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the Transactions on Parent’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.

 

In addition, sales of Parent Common Stock by Parent’s stockholders after the completion of the Transactions may cause the market price of Parent Common Stock to decrease. Based on the number of shares of I.D. Systems Common Stock and Pointer Ordinary Shares outstanding as of July 22, 2019, the latest practicable date before the date of this joint proxy statement/prospectus, approximately 29,400,377 shares of Parent Common Stock are expected to be issued and outstanding immediately after the effective time of the Transactions (including 595,220 shares of Parent Common Stock reserved for issuance pursuant to outstanding restricted stock awards of Parent). Many I.D. Systems stockholders and Pointer shareholders may decide not to hold the shares of Parent Common Stock that they receive in the Transactions. Other Parent stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of Parent Common Stock that they receive in the Transactions. Such sales of Parent Common Stock could have the effect of depressing the market price for Parent Common Stock and may take place promptly following the Transactions.

 

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Any of these events may make it more difficult for Parent to sell equity or equity-related securities, dilute your ownership interest in Parent and have an adverse impact on the price of Parent Common Stock.

 

The Transactions may not be accretive, and may be dilutive, to the combined company’s earnings per share, which may negatively affect the market price of shares of Parent Common Stock.

 

I.D. Systems and Pointer currently believe the Transactions will result in a number of benefits, including cost savings, operating efficiencies, and stronger demand for their respective products and services, and that the Transactions will be accretive to Parent’s earnings. This belief is based, in part, on preliminary current estimates that may materially change. In addition, future events and conditions, including adverse changes in market conditions, additional transaction and integration-related costs and other factors such as the failure to realize some or all of the anticipated benefits of the Transactions, could decrease or delay the accretion that is currently anticipated or could result in dilution. Any dilution of, or decrease in or delay of any accretion to, the combined company’s earnings per share could cause the price of shares of Parent Common Stock to decline or grow at a reduced rate.

 

The Parent Charter will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between Parent and its stockholders, which could limit Parent stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with Parent or its directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty.

 

Article SIXTEENTH of the Parent Charter provides, subject to certain exceptions enumerated in Article SIXTEENTH, that, unless Parent consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder to bring (i) any derivative action brought on behalf of Parent, (ii) any action asserting a claim of breach of fiduciary duty owed by any current or former director, officer or other employee or stockholder of Parent, (iii) any action asserting a claim arising pursuant to the General Corporation Law of Delaware (the “DGCL”) or the Parent Charter or the Parent Bylaws or as to which the DGCL confers jurisdiction on such court or (iv) any action asserting a claim governed by the internal affairs doctrine, except for, in each of the aforementioned actions, among other things, any claims which are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware or for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction. Accordingly, the exclusive forum provision will not apply to claims arising under the Securities Act, the Exchange Act or other federal securities laws for which there is exclusive federal or concurrent federal and state jurisdiction. Article SIXTEENTH provides that any person or entity who acquires an interest in the capital stock of Parent will be deemed to have notice of and consented to the provisions of Article SIXTEENTH. Stockholders will not be deemed to have waived Parent’s compliance with the federal securities laws and the rules and regulations thereunder. Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, this exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Further, in the event a court finds the exclusive forum provision contained in the Parent Charter to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

 

The Parent Charter will contain a provision renouncing Parent’s interest and expectancy in certain corporate opportunities which may prevent Parent from receiving the benefit of certain corporate opportunities.

 

The “corporate opportunity” doctrine provides that corporate fiduciaries, as part of their duty of loyalty to the corporation and its stockholders, may not take for themselves an opportunity that in fairness should belong to the corporation. As such, a corporate fiduciary may generally not pursue a business opportunity which the corporation is financially able to undertake and which, by its nature, falls into the line of the corporation’s business and is of practical advantage to it, or in which the corporation has an actual or expectant interest, unless the opportunity is disclosed to the corporation and the corporation determines that it is not going to pursue such opportunity. Section 122(17) of the DGCL, however, expressly permits a Delaware corporation to renounce in its certificate of incorporation any interest or expectancy of the corporation in, or in being offered an opportunity to participate in, specified business opportunities or specified classes or categories of business opportunities that are presented to the corporation or its officers, directors or stockholders.

 

Article TWELFTH of the Parent Charter contains a provision that, to the maximum extent permitted under the law of the State of Delaware, Parent renounces any interest or expectancy of Parent in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to the Series A Directors, any holder of Series A Preferred Stock (or Parent Common Stock issuable upon the conversion of Series A Preferred Stock) or any partner, manager, member, director, officer, stockholder, employee or agent or affiliate of any such holder. The board of directors of I.D. Systems believes that this provision, which is intended to provide that certain business opportunities are not subject to the “corporate opportunity” doctrine, is appropriate, as the Investors, who will be the initial holders of the Series A Preferred Stock, and their affiliates invest in a wide array of companies, including companies with businesses similar to Parent, and without such assurances, the Investors would be unwilling or unable to enter into the Investment Agreement.

 

As a result of this provision, Parent may be not be offered certain corporate opportunities which could be beneficial to our company and our stockholders. While we are unable at this time to predict how this provision may adversely impact Parent’s stockholders, it is possible that Parent would not be offered the opportunity to participate in a future transaction which might have resulted in a financial benefit to Parent, which could, in turn, result in a material adverse effect on its business, financial condition, results of operations, or prospects.

 

Provisions of Delaware law or the Parent Charter could delay or prevent an acquisition of Parent, even if the acquisition would be beneficial to its stockholders, and could make it more difficult for stockholders to change Parent’s management.

 

Assuming the approval of the Transactions and the I.D. Systems Charter Proposals, the Parent Charter will contain provisions that may discourage an unsolicited takeover proposal that stockholders may consider to be in their best interests. Parent is also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include: the right of the holders of Parent’s Series A Preferred Stock to appoint up to two directors; the absence of cumulative voting in the election of directors; the ability of the Parent board of directors to issue up to 50,000 shares of currently undesignated and unissued preferred stock without prior stockholder approval; the consent rights of the holders of Series A Preferred Stock to certain corporate actions and transactions; advance notice requirements for stockholder proposals or nominations of directors; limitations on the ability of stockholders to call special meetings or act by written consent; preemptive rights of the holders of the Series A Preferred Stock to participate in future securities offerings of Parent; the requirement that certain amendments to the Parent Charter be approved by 75% of the voting power of the outstanding shares of Parent capital stock; and the ability of the Parent board of directors to amend the bylaws of Parent without stockholder approval. For more information, see “Description of Parent Capital Stock–Anti-Takeover Effect of Delaware Law and Certain Parent Charter Provisions.”

 

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Additional Risks Relating to I.D. Systems, Pointer and Parent after the Transactions

 

I.D. Systems’ and Pointer’s businesses are, and will continue to be, subject to the risks described in (i) Part I, Item 1A in I.D. Systems’ Annual Report on Form 10-K for the year ended December 31, 2018, and (ii) Part I, Item 3.D in Pointer’s Annual Report on Form 20-F for the year ended December 31, 2018, in each case, as filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

SELECTED HISTORICAL FINANCIAL DATA OF I.D. Systems

 

The following table presents selected historical consolidated financial data of I.D. Systems. The selected historical consolidated financial data of I.D. Systems for each of the years ended December 31, 2018, 2017 and 2016, and as of December 31, 2018 and 2017, are derived from I.D. Systems’ audited consolidated financial statements and related notes contained in its Annual Report on Form 10-K for the year ended December 31, 2018, which is incorporated by reference into this joint proxy statement/prospectus. The selected historical consolidated financial data of I.D. Systems for each of the years ended December 31, 2015 and 2014, and as of December 31, 2016, 2015 and 2014, are derived from I.D. Systems’ audited consolidated financial statements for such years, which have not been incorporated by reference into this joint proxy statement/prospectus. The selected historical consolidated financial data of I.D. Systems for the three months ended March 31, 2019 are derived from I.D. Systems’ unaudited consolidated financial statements and related notes contained in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, which is incorporated by reference into this joint proxy statement/prospectus.

 

The following selected historical consolidated financial data of I.D. Systems is only a summary and is not necessarily indicative of the results of future operations of I.D. Systems or Parent, following the completion of the Transactions, and you should read such information in conjunction with I.D. Systems’ audited consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in its Annual Report on Form 10-K for the year ended December 31, 2018, which are incorporated by reference into this joint proxy statement/prospectus. In particular, please refer to the notes to I.D. Systems’ audited consolidated financial statements for significant events affecting the comparability of results as well as material uncertainties regarding I.D. Systems’ future financial condition and results of operations. For more information, see the section entitled “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus.

 

(in thousands, except per share data)

 

   Year Ended December 31,  

Three Months Ended

March 31,

 
   2014   2015   2016   2017   2018  

2018

   2019 
Statement of Operations Data:                                   
Revenues  $45,633   $41,784   $36,822   $40,958   $53,064   $13,379   $13,611 
Cost of revenues   25,627    24,761    18,528    20,031    27,266    6,917    6,593 
                                    
Gross profit   20,006    17,023    18,294    20,927    25,798    6,462    7,018 
Operating expenses:                                   
Selling, general and administrative expenses   25,094    22,041    19,427    20,480    24,671    5,696    7,559 
Research and development expenses   6,649    5,265    5,235    4,538    6,863    1,743    1,660 
Loss on settlement of finance receivable   441    -    -    -    -    -    - 
                                    
Loss from operations   (12,178)   (10,283)   (6,368)   (4,091)   (5,736)   (977)   (2,201)
Interest income   595    360    285    253    262    77    65 
Interest expense   (29)   (18)   (293)   (342)   (173)   (57)   (20)
Other income (loss), net   37    (11)   6    (1)   (165)   (33)   (38)
                                    
Net loss before income taxes   (11,575)   (9,952)   (6,370)   (4,181)   (5,812)   (990)   (2,194)
Income tax benefit - sale of NJ net operating losses and R&D tax credits   -    -    -    311    -    -    -