KIT Digital announced that it entered into a standstill agreement with Seth Hamot, Managing Member of Roark, Rearden & Hamot, LLC, the General Partner of Costa Brava Partnership III L.P., and K. Peter Heiland, Managing Director of JEC Capital Partners, LLC.
As part of the deal, both Hamot and Heiland will join KIT digital’s Board as new directors. KIT also said that Joseph E. Mullin III has resigned from the company’s board.
Hamot owns approximately 7% of the outstanding shares of KIT digital. Heiland who was also an activist shareholder in Miranda Technology prior to its sale to Belden, owns approximately 8% of the outstanding shares of KIT digital.
In connection with Hamot and Heiland joining the KIT digital Board, KIT digital, Mr. Hamot, Costa Brava, Mr. Heiland, JEC, and their related parties have entered into a standstill agreement. Under the agreement, the Costa Brava parties and JEC parties will support KIT digital’s Board nominees for the 2012 annual meeting of shareholders and they will refrain from taking “certain adverse actions” against KIT digital’s Board.
According to the agreement, these “adverse actions” include the following:
(i) nominate or propose any candidates for the Board or seek to change or alter the composition or size or membership of the Board or the removal or replacement of any director or call or seek the call of any meeting of stockholders;
(ii) submit a shareholder proposal under Rule 14a-8 of the Securities Exchange Act of 1934, directly or indirectly, to the Company or seek any referendum or the like by the shareholders of the Company;
(iii) file a proxy or consent statement in opposition to the Company or otherwise obtain or solicit proxies or consents from any shareholders of the Company or be a participant in or make any solicitation for a matter relating to the Board;
(iv) enter into any contract, arrangement or understanding with any person (other than an Affiliate or Associate, subject to the percentage ownership limitation below, for which K. Peter Heiland (in the event of an Affiliate or Associate of a JEC member), or for which Seth Hamot (in the event of an Affiliate or Associate of a Costa Brava member), has and maintains all voting and investment and other applicable authority or which Affiliate or Associate signs a joinder to this Agreement agreeing to be bound by all the terms and conditions hereof as a JEC member or a Costa Brava member as applicable) with respect to any securities of KIT, including but not limited to any acquisition of any securities (or beneficial ownership thereof), joint venture, loan or option agreement, put or call, guarantee of loans, guarantee of profits or division of losses or profits, it being understood that Costa Brava members’ and JEC members’ aggregate holdings in KIT’s securities shall not exceed 9.9% and 9.9% beneficial ownership under Section 13(d) of the Exchange Act, respectively, of the common stock of the Company;
(v) commence or enter into any tender offer or exchange offer, merger, acquisition or other business combination or extraordinary transaction involving the Company or any of its subsidiaries;
(vi) form, join or in any way participate in a “group” (as defined under the Exchange Act) with respect to the Company or its securities;
(vii) otherwise act, alone or in concert with others, to seek to influence the management, Board or policies of KIT or take any action to seek the removal of any member of the Board, change the size of the Board, obtain additional representation on the Board, or take any other action related to the management or the Board;
(viii) disclose any intention, plan, proposal or arrangement or other matter inconsistent with its obligations under this Section 8(a) (provided that this clause (viii) shall not prohibit a confidential, non-public disclosure with respect to the matters for which a waiver may be sought under clause (xi) below);
(ix) effect or seek (including, without limitation, entering into any discussions, negotiations, agreements or understandings with any third person), offer or propose (whether publicly or otherwise) to effect, or cause or participate in, or in any way, advise, assist or encourage any other person or entity in connection with any action which it is prohibited from taking under this Section 8(a) or which is inconsistent with its obligations under this Section 8(a) (including via any supporting public statement with respect thereto or any adverse public statement regarding the Company or the Board or any of its members);
(x) knowingly take any action which would, or would reasonably be expected to, force the Company to make a public announcement (or result in the Company making a public announcement) regarding any of the types of the foregoing matters; or
(xi) request, directly or indirectly, any amendment or waiver or modification of, or deviation from, any provision of this Section 8 (including this sentence) or any other provision of this Agreement by the Company or any of its agents or representatives (provided that this clause (xi) shall not prohibit a JEC member or a Costa Brava member from confidentially requesting from the Board of the Company an amendment, waiver or modification, or deviation, from this Section 8 to permit the JEC members or the Costa Brava members (respectively) to engage in a transaction subject to clause (v) above or for them to exceed the ownership limitation set forth in clause (iv) above).
KIT digital also said its Board will nominate and support each of Mr. Hamot and Mr. Heiland for the 2012 annual meeting of shareholders. The restrictions and nomination provisions will run at least through KIT digital’s 2012 annual meeting of shareholders and will potentially apply through the 2013 annual meeting. The standstill agreement itself will terminate following the 2013 annual meeting of shareholders and is subject to various other terms and conditions.
Press Release: KIT digital Adds Shareholder Representation to Board of Directors
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